CARES Act Q&A

Working with Connexus Group and their ministry and non-profit arm, we have available a webinar available that walks you through the process of applying for the Payroll Protection as well as answer any questions you may have. Connexus Group CARES Act Webinar

The forms and more information have been released. They are available at the Treasury Department website. You may also go to the Small Business Association website. They will be able to answer any other questions you may have regarding the Payroll Protection Program or any other small business loan or disaster relief loan for which you may qualify. Remember, this is a whole new animal to be dealt with – it is going to take time for everyone to have all the guidance they need in order to provide the help.

At the same time, contact your bank to set an appointment to go in and apply for the loan. There are limited funds; the sooner you get in line, the better off you will be. The CARES Act has provided for all FDIC banks to process loans for the Payroll Protection Program. This is a major change as normally there are only a handful of banks who process SBA loans. For this reason, we strongly recommend you contact the SBA first. As always, read the fine print. If you have any questions or concerns at all go back to the SBA for guidance.

Payroll Protection Program – Financial Help for Churches

Q: Can churches apply for financial help under the CARES Act?

A: Yes. Any 501c3 non-profit (religious or secular) may file for financial help as described in the CARES Act. Starting April 3, 2020, small businesses and sole proprietorship scan apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.

Q: Are evangelists, mission boards, missionaries, Christian singing groups or other itinerant ministries eligible to apply for financial assistance under the CARES Act?

A: Yes, if they are organized as a 501c3 non-profit corporation. If you fall under this category, then you may file for financial help under the CARES Act.

Q: Does the financial aid come directly from the government to the churches?

A: No. The money is coming from lending institutions such as banks, credit unions, and lending brokers who are FDIC insured through loans under the Small Business Association’s guidelines and regulations.

Q: Is there a potential for government interference with our churches in the future if we receive financial assistance through the CARES Act?

A: No. Religious organizations do not forfeit first amendment rights of freedom of speech or freedom of religion under any circumstances. Religious organizations were added into the CARES Act when it was noted that leaving them out was a discriminatory act based on religion.

Q: What expenses does the CARES Act cover?

A: The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.

Q: What are the qualifications to receive a CARES Act loan?

A: Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—are eligible. Businesses with more than 500 employees are eligible in certain industries.

Q: What are the terms of the loan?

A: Funds are provided in the form of loans (grants when forgiven) that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

For more information:  https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

Q: What exactly is forgiven with the loan?

A: Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

Q: How do I apply?

A: You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. All loans will have the same terms regardless of lender or borrower. A list of participating lenders as well as additional information and full terms can be found at http://www.sba.gov.

Q: What do I need for the forms?

A: The form is only 2 pages. You will be asked for your average monthly payroll. This total will be multiplied by 2.5. This will be the amount of your loan/grant. There will also be several other questions to answer, none of which require pulling together any other information.

Q: Are there other loans available to cover other expenses?

A: Yes. However, these loans are not forgivable, but they are very low interest which can be paid back over 10 years. Contact the Small Business Association (SBA) for more details.

Q: In addition to including 501c3’s, who else qualifies for assistance under the CARES Act who normally would not?

A: Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—are eligible. Businesses with more than 500 employees are eligible in certain industries. Pastors let your congregations know that the CARES Act may benefit them as well. They will need to contact the Small Business Association in order to acquire the proper forms and help.

The Charitable Giving Incentive (part of the CARES ACT)

Q: What is the giving incentive? (The information is found in Section 2204 of the CARES Act.)

A: On next year’s tax forms there will be an above the line charitable giving deduction for contributions of up to $300 for anyone who does not itemize. This means that anyone who gives up to $300 for the year will not have to itemize in order to receive a tax deduction.

Q: Is this only for the tax year 2020?

A: No. The giving incentive included in this bill amends the Tax Code of 1986. This will be a permanent change and amendment (at least until they change it again).

Q: Are there any other charitable giving changes? (This information is found in Section 2205 of the CARES Act.)

A: Yes. The CARES Act also lifts the existing cap on annual contributions for those who itemize, raising it from 60% of the adjusted gross income to 100% of the adjusted gross income. For corporations, the law raises the annual limit from 10% to 25%. Food donations from corporations would be available to 25%, up from the current 15% cap. (We have consulted with several people regarding these new charitable giving guidelines. The prevailing though at this time is that this particular portion of the charitable giving changes will only be for the tax year 2020. Speak to your tax accountant for more information.)

*Please Note: This is not a comprehensive reflection of the entire CARES Act and there may be additional requirements or guidelines not listed above. This is not legal or tax advice and organizations are advised to review this material with internal and/or external counsel.

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