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.


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