Executive Summary of Recent COVID-19 Legislation from the Office of Missional Engagement and Outreach
NOTE: This web page is updated constantly as new information is made available.
The latest updates, found at the bottom of this page, include:
4/4: Updated UMC Support CARES Act Q&A
4/4: New UMC Support Payroll Protection Program document
4/6: Help Available for SBA Loans and Unemployment Insurance
4/7: Interim Final Rule addressing affiliation
4/7: Faith-Based Organizations FAQ
4/9: Wespath CARES Act Update
4/10: Payment Protection Plan
4/10: Wespath Loan Applications Guidance
Congress has recently passed major legislation designed to reduce the economic impact of the COVID-19 pandemic. Some of the provisions impose new requirements on employers regarding paid sick leave, expanded family and medical leave and unemployment benefits. Other provisions of this legislation provide payroll tax credits and offer SBA loans which may be partially or fully forgivable.
Wespath, GCFA and others have provided excellent guidance summarizing this legislation. We have included links to some of those resources below and will add more as they become available. We have also prepared the following executive summary of those resources.
As with any new legislation, there are many unanswered questions and provisions that lack clarity.
Representatives of GCFA and Wespath are seeking to resolve these issues as soon as possible.
We will update this summary as guidance become available.
Note this checklist for the Louisiana Conference regarding applying for an SBA loan:
- Contact your District Superintendent
- Read this Executive Summary
- Consider seeking advice from both legal and financial professionals where appropriate.
Also, as the SBA and the U.S. Treasury issue guidelines on this legislation, the information provided in these resources may change.
This summary does not provide legal advice.
We are simply curating the guidance provided by others.
We urge you to consult a CPA or an attorney for more information.
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The Families First Coronavirus Response Act, Enacted March 18, 2020
Bottom Line: Certain employers, including churches, may be temporarily required to provide employees with up to 80 hours of paid sick leave and up to 12 weeks of family and medical leave related to COVID-19.
Under normal circumstances, employers are required to post-employment law notices at their place of business. However, in this age of social distancing, the notice required under this Act should also be mailed or emailed to each employee at their address of record.
Employee Rights Poster
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Enacted March 27, 2020
The CARES Act provides approximately $2 trillion of economic relief through Federal loan programs, rebate payments, income tax benefits, and funding programs for health care and other industries, states, and municipalities. The provisions most relevant to churches are briefly described below.
Tax Provisions
The guidance provided by the GCFA entitled “UMC SUPPORT: Coronavirus Aid, Relief, and Economic Security ACT” has an excellent discussion of the CARES Act.
Extended Tax Deposit Deadlines
The 6.2% employer portion of Social Security taxes for wages paid from the date of enactment through December 31, 2020 may be deferred and paid during the subsequent two tax years. Half of the deferred payment is due on December 31, 2021 and the remaining half is due on December 31, 2022.
It is important to note that employers are still liable for their payroll tax liability, but may defer payment until the dates established in the Act.
Employee Retention Tax Credit
The Act provides a payroll tax credit for employers who have had to close or reduce operations because governmental orders limiting commerce, travel or group meetings etc. due to the coronavirus, or who have experienced a decrease in gross receipts of more than 50% in a calendar quarter in 2020 when compared to the same calendar quarter in 2019. It is designed to prevent layoffs and keep people on the job.
The credit is equal to 50% of the qualified wages (including health benefits) paid or incurred from March 13, 2020 to December 31, 2020, limited to $5,000 per eligible employee. An employer may take either the Employee Retention Tax Credit, OR the loan under the Paycheck Protection Plan described below, but not both.
Paycheck Protection Program Loan Provisions
Purpose of the loan: to keep employees on payroll, rehire employees you laid off, and pay for specific expenses that keep the doors open.
Bottom Line: Eligible churches and non-profits may be eligible for a short-term loan from the SBA equal to 2.5 times the average of their monthly payroll and benefits. If the loan proceeds are used to pay qualifying expenses incurred within 8 weeks of the loan origination, some or all of the loan may be forgiven. Payments of interest and principal on the portion of the loan not eligible for forgiveness are deferred for 6 months. These are unsecured loans and do not require a personal guarantee.
The SBA has issued interim Final Rules for these loans, a link to which is found below. These interim rules provide very helpful guidance and examples of how to make the required calculations.
- Eligibility: The employer must have been harmed by the pandemic between February 15, 2020 and June 30, 2020. Borrowers are required to make a good faith certification that the loan is necessary due to economic conditions caused by COVID-19 and that they will use the loan proceeds to retain employees and maintain payroll, make rent and utility payments AND are not receiving duplicate funds for the same purposes from another SBA program.
- Program Period: The SBA program begins February 15, 2020 and ends on June 30, 2020. The loan must be finalized on or before June 30, 2020.
- Maximum Loan Amount: The amount that may be borrowed through the program is determined under a formula based on payroll costs for the year preceding the loan date. It is not clear if a pastor’s housing allowance is included in the formula. However, some tax professionals have suggested that it likely is.
- Qualifying Expenses: The loan proceeds must be used for qualifying expenses such as employee compensation, (including paid sick or medical leave and employee insurance premiums), interest on a mortgage in place before February 15, 2020, rent on a lease in force before February 15, 2020, and utilities for services that originally began before February 15, 2020.
- Loan Forgiveness: The amount of the loan that may be forgiven is determined using a formula of the qualifying exenses compared to the previous year or time period, subject to adjustments for the number of employees and to compensation in those periods. To qualify for forgiveness, at least 75% of the loan proceeds must be used for payroll costs and the church or non-profit must meet the employee retention requirements. Employers that previously laid off employees due to COVID-19 related difficulties will receive a benefit in the determination of loan forgiveness for any of those employees that are quickly rehired.
- Terms of Unforgiven Loan: Any loan principal that is not eligible for forgiveness will be payable over 2 years at a 1% fixed interest rate.
How to Apply: Application can be submitted beginning April 3, 2020. Please note that there is a funding cap; once the funds are exhausted, no more loans will be made unless Congress authorizes additional funds. Because all banks may now issue these loans, we recommended that you work with your church's bank. Download the application here, fill it out and bring it to the bank to complete the application process.
Recommendation: Because you will have to apply for loan forgiveness, it is a good idea to open a separate checking account for purposes of receiving the loan proceeds and disbursing the funds for qualified expenses. Doing this makes your forgiveness application much simpler.
Unemployment Benefits
Bottom Line: Under Louisiana law, church employees are generally not eligible for unemployment benefits. However, the CARES act extends unemployment benefits to many employees who were not previously eligible. Church employees may now be eligible for temporary unemployment benefits, provided the employee is unemployed, partially unemployed or unable or unavailable to work because of COVID-19.. The CARES Act provides a partial reimbursement to certain employers for unemployment benefits paid to employees.
What Can You Do Now?
You can ask your bank for a list of the documentation they will require to apply for the loan. The application process for the Paycheck Protection Program loan begins April 3, 2020. Note that every bank may have unique loan documentation requirements.
You can ensure your 2019 Financial Statements are complete and your first-quarter financial statements are prepared as soon as possible.
You can ask your District Superintendent for guidance about the meetings and approvals that may be required to apply for and accept such a loan. If a Church Council vote is necessary, think about how you will accomplish that during social distancing using mailed ballots or online meetings (such as Zoom) that can accommodate large numbers of people. Most such meetings can be accomplished through Zoom or a similar electronic platform which allows participants to be heard simultaneously.
Notify your District Superintendent that you intend to apply for the loan.
If you need a copy of your 501c3 determination letter, you can find it here.
Finally, consult with a lawyer or CPA, if possible, about your eligibility for these tax credits and SBA loans and your obligations regarding the new employment benefit requirements.
If you still have questions after reviewing this Executive Summary and the guidance included on this page, you are encouraged to contact a CPA or attorney, if possible, for further guidance.
Questions submitted to Rev. Elaine Burleigh will be used to create a FAQ&A section on this page. Please check back frequently for answers to your questions.
More Resources
SBA:
UPDATED: 4/7:
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Interim Final Rule addressing affiliation
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Faith-Based Organizations FAQ
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Help Available for SBA Loans and Unemployment Insurance
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Interim Rules: Business Loan Program Temporary Changes; Paycheck Protection Program
Wespath:
UPDATED: 4/10:
Church Law:
UMC Support:
UPDATED: 4/10:
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Wespath Loan Application Guidance
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CARES Act, Questions and Answers
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Families First Questions and Answers
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UMC SUPPORT: Payroll Protection Program
