The Small Business Administration (SBA) responded favorably to faith-based organizations’ concerns about Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) loan funding by issuing a new regulation which includes an express commitment to protect religious liberty in the administration of these loans. Additionally, over the weekend, the SBA issued a set of FAQs for faith-based organizations about the SBA loan programs.
The guidance states that religious organizations will maintain independence with respect to employment and membership.
However, during the period the loan is outstanding, religious organizations must observe broad SBA nondiscrimination requirements with respect to the goods, services, and accommodations that the religious organization provides to the general public. For PPP loans, the outstanding period theoretically could be as short as eight weeks plus the period it takes the SBA to process a loan forgiveness request (which is to occur within 90 days of receipt of a request for forgiveness by the borrower per the new regulation); for EIDL loans, by contrast, the outstanding period may be as long as 30 years.
Religious organizations should evaluate their planned activities during the period in which the loan will be outstanding to determine whether the restrictions will impact the organization’s ability to pursue its religious mission.
Faith-based organizations which are otherwise eligible for these loans will need to do a cost-benefit analysis and risk assessment to evaluate whether acceptance of these funds would be consistent with their religious mission and religious liberty protections.
On April 3, 2020, the Small Business Administration (SBA) issued an interim final rule and additional guidance implementing the Paycheck Protection Program (PPP) and the EIDL program. In the rule and related guidance, the SBA addressed the religious liberty issues and questions that face faith-based organizations which could otherwise benefit from the PPP.
The guidance states that “[a]ll loans guaranteed by the SBA pursuant to the CARES Act will be made consistent with constitutional, statutory, and regulatory protections for religious liberty.”
Notably, the language used in the section on religious liberty references “all loans guaranteed by the CARES Act.” This means both the PPP and the Economic Injury Disaster Loan program should benefit from these religious liberty protections.
The guidance explained that religious organizations will continue to protect their freedom with respect to employment and membership, even during the period that the loan is outstanding.
However, during the period the loan is outstanding, borrowers must comply with SBA nondiscrimination regulations with respect to goods, services, and accommodations offered to the public. See question 5 of the FAQs for more information.
Organizations should consult with their counsel to determine the extent to which this nondiscrimination requirement could impact their ability to provide certain services to the general public in furtherance of their religious purpose and in a manner consistent with their religious mission.
With respect to the Paycheck Protection Program, organizations should evaluate their planned activities during the period that they anticipate the loan will be outstanding (which could be up to 2 years if a portion is not forgiven) to evaluate whether the nondiscrimination provisions would inhibit the organization’s religious mission.
With respect to participation in the EIDL, recipient organizations are likewise subject to nondiscrimination during the period the loan is outstanding. With EIDL, the terms of each loan are different, and the maturity can be up to thirty years. Organizations seeking EIDL should evaluate their planned activities during the entire lifespan of the loan to determine whether the restrictions will interfere with the organization’s religious mission.
The SBA and Department of the Treasury are providing updates daily on these matters.
Check back frequently for updates. New posts on this topic will be added to this blog as quickly as possible when additional information becomes available.
January 16, 2023 | Faith-based nonprofit organizations should recognize whether they are obligated to follow the requirements under the Fair Labor Standards Act (“FLSA”).
December 13, 2022 | Faith-based nonprofits will likely face more lawsuits and government actions challenging religious freedom after Congress passed the Respect for Marriage Act (RMA) repealing the Defense of Marriage Act of 1996. The RMA impacts faith-based organizations in two specific situations. Both relate to interactions between the faith-based organizations’ work and the state and federal government. The threats to faith-based organizations remain despite language in the RMA purporting to protect religious freedom. Both supporters and skeptics of the RMA agree that the RMA’s religious freedom language has no “meaningful effect.” Below are key questions and “known unknowns” related to the RMA’s impact on faith-based nonprofits.
November 22, 2022 | At first glance, the voting requirements in a nonprofit’s bylaws may not seem an exciting topic. Most nonprofits have not seriously considered their bylaws, perhaps because they have inherited old bylaws, copied the bylaws of another company, or even originated their bylaws from a quick internet search! If any of these scenarios applies to your organization, your organizations’ bylaws may include director voting requirements not tailor-made to your preferences or the specific needs of your organization.