Five Unique Challenges for Religious Organizations in Applying for the Paycheck Protection Program

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Houses of worship and other religious institutions applying for the Paycheck Protection Program (“PPP”) present unique issues that many lenders and financial institutions may be ill equipped to answer. Proper guidance and advocacy can help religious institutions establish their eligibility and increase the amount of funding available to them under the PPP.

While PPP applications are relatively simple, there is confusion and inconsistency in lenders’ interpretation and application of the lengthy and convoluted statute. Here are five problems religious organizations may encounter while applying for PPP:

  1. Housing Allowance Inclusion – The statute does not specify whether parsonages or parsonage allowances are included in or excluded from payroll expenses. Exclusion of housing allowances can substantially diminish the loan size. Since most lenders will be unfamiliar with how housing allowances are calculated and reported, they may conclude that they are not part of payroll expenses. Our attorneys can advocate on your behalf to include a housing allowance, so your organization may receive the maximum funding for which it is eligible.
  1. Affiliation and Eligibility – The PPP applies to organizations with less than 500 employees. “Affiliation Rules” determine whether organizations and related entities are considered the same or separate, such as local churches and denominations. The applicability of these rules may help determine whether a religious organization qualifies for the PPP. Experienced counsel can advocate on your behalf to satisfy your organization’s needs.
  1. Authorization for the Application – State laws and organizational bylaws may require a congregational or board meeting to authorize the loan application. With social distancing rules in effect, virtual meetings may be a legally viable alternative, if allowable under local law and organizational documents. We can help ensure that your religious institution takes the proper steps to authorize a PPP application.
  1. Anti-Discrimination – In completing the PPP application, your organization must agree not to discriminate and that it will display the “Equal Employment Opportunity Poster” prescribed by SBA. A religious organization is exempt from certain laws that prohibit discrimination. We can advise religious organizations on how to complete the application without violating either law or religious convictions, and argue these points to the lender with convincing support for the organization’s position.
  1. Tax Exempt Status – Churches and other houses of worship are, as a matter of law, tax exempt, though many don’t obtain 501(c)(3) status. The SBA expressly recognizes this, but lenders are likely to be confused by a church with no formal recognition. We can help you present the law and facts in a way that satisfies your lender’s concerns.

 

New York Law Journal Religion Law Column on Security for Houses of Worship

In the March edition of the Religion Law column in the New York Law Journal, partner Barry Black and counsel Lane Paulsen discuss assistance for houses of worship from recent government regulations, the First Amendment implications of these government actions, and offer a guide for steps that institutions can take to protect themselves.

Read the full article here: “Security for Houses of Worship: The Law, and Practical Steps To Take”

New York Law Journal Religion Law Column by Barry Black and Jonathan Nelson

In their latest New York Law Journal Religion Law column, Barry Black and Jonathan Nelson tackle a subject that has led to decades of confusion in the legal system and woven a complex web of decisions to interpret: when can courts decide disputes between local churches and their denominations. Check out the full article as Barry and Jonathan review the law and suggest solutions to mitigate risk across the board.

New York Law Journal “When Can Courts Decide Disputes Between Local Churches and Their Denominations?”

Jonathan Robert Nelson Honored by Geeta and Divya Dham Temples

On June 15, 2019, partner Jonathan Robert Nelson was honored by the Geeta and the Divya Dham temples for the successful representation of the congregation in a dispute over ownership of the temple, the largest Hindi temple in Queens, that dragged on over a decade. The commemoration featured speeches from Swami Satyanandji, head of the denomination, as well as their chief administrator from India. The ceremony culminated in Mr. Nelson receiving a plaque displaying gratitude and thanks from Holy Geeta Temple.  

New York Law Journal Religion Law Column – Hiring and Firing Clergy

In the Friday, May 31, 2019 issue of the New York Law Journal, NMB partners Barry Black and Jonathan Nelson examine the differences of between hierarchical and congregational governing structures of religious institutions, and the understanding of the roles that trustees and congregations have authority over of hiring and firing affairs. Barry and Jonathan also outline practical considerations for congregations to be mindful of when making decisions about clergy.

Check out a link to the full New York Law Journal article here.

 

Senator Ted Cruz Begins Investigation of Yale Law School Over Alleged Religious Discrimination

On April 4, after Yale Law School announced that it “will not financially support employment positions unless they are open to all of our student body” and that it “will not fund the work of an employer that refuses to hire students because they are, for instance, Christian,
black, a veteran, or gay,” U.S. Sen. Ted Cruz (R-Texas) notified Yale Law School Dean Heather Gerken of his intention to investigate Yale’s policy.

On April 4, after Yale Law School announced that it “will not financially support employment positions unless they are open to all of our student body” and that it “will not fund the work of an employer that refuses to hire students because they are, for instance, Christian, black, a veteran, or gay,” U.S. Sen. Ted Cruz (R-Texas) notified Yale Law School Dean Heather Gerken of his intention to investigate Yale’s policy.

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Religious School Students’ Suit Challenging Vermont Program Gains Justice Department Support

The U.S. Department of Justice has filed a statement of interest in a case pending in the
U.S. District Court for the District of Vermont in support of parents and parochial high school
students who claim that Vermont has discriminated against them in violation of the Free Exercise
Clause of the First Amendment to the U.S. Constitution.

The plaintiffs in the case, A.M. v. French, assert that their Free Exercise rights have been
violated because the state does not permit them to participate in a state program that pays tuition
for high school students to take up to two college courses. 

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Federal Government Releases Final ‘Conscience Rule’

The U.S. Department of Health and Human Services (“HHS”) Office for Civil Rights (“OCR”) has issued its final “conscience rule.”

In a statement, the HHS said that the 440 page final rule “protects individuals and health care entities from discrimination on the basis of their exercise of conscience in HHS-funded programs.” The HHS added that the final rule implements “full and robust enforcement of approximately 25 provisions passed by Congress protecting longstanding conscience rights in healthcare.”

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7th Circuit Upholds ‘Parsonage Allowance’ Against First Amendment Challenge

The U.S. Court of Appeals for the Seventh Circuit, reversing a district court’s decision, has ruled that the Internal Revenue Code provision excluding housing allowances from ministers’ taxable income does not violate the First Amendment and is not unconstitutional.

The Parsonage Allowance

After the Sixteenth Amendment to the U.S. Constitution was ratified in 1913, authorizing Congress to levy an income tax, Congress enacted the federal income tax. Thereafter, the Treasury Department adopted the “convenience-of-the-employer” doctrine in connection with the definition of taxable “income.” Under that doctrine, housing provided to employees for the convenience of their employer is exempt from the employees’ taxable income.

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