CARES ACT and Religious Institutions

The CARES Act expands and provides funding for several U.S. Small Business Administration (SBA) programs that primarily are intended for "small business concerns." A small business concern for SBA purposes generally only includes for-profit entities that are independently owned and operated, unless specific provisions are carved out for nonprofits. However, some programs in the new CARES Act permit certain nonprofit organizations to participate.

Starting with Mid Size institutions
The CARES Act provides funding and liquidity in the Federal Reserve System for a new program to provide financing to banks and other lenders that make loans – with no higher than 2 percent interest and no principal or interest payments due for the first six months – directly to nonprofit organizations. To be eligible, a religious institution must have between 500 and 10,000 employees and must be a U.S. entity with significant operations in the U.S. and a majority of its employees located in the U.S. A religious institution seeking such a loan must certify that it will use the funds to retain at least 90 percent of its workforce at full compensation and benefits until Sept. 30, 2020, and that, within four months of the end of the COVID-19 emergency, it intends to restore at least 90 percent of the workforce that it had as of Feb. 1, 2020. In addition, the religious institution must agree to certain limitations on compensation paid to highly compensated employees.

....And for smaller churches 

Under the SBA's existing 7(b)(2) program, most religious institutions of any size were already eligible for a disaster assistance loan of up to $25,000 unsecured or up to $2 million with collateral at 2.75 percent interest. To be eligible for disaster assistance under the existing 7(b)(2) program, the religious institution had to be located in an area affected by a disaster or emergency, and it had to suffer a substantial economic injury as the result of such disaster. The CARES Act expressly includes the COVID-19 pandemic as an applicable disaster. A substantial economic injury is an injury that results in the inability of the religious institution to meet its obligations as they mature; to pay its ordinary and necessary operating expenses; or to market, produce, or provide a product or service ordinarily marketed, produced or provided by the religious institution.

The CARES Act adds that, for a "small" religious institution that applies for a disaster loan, the SBA may provide an advance on such loan in amount of up to $10,000 within three days of application for the loan. A nonprofit must be "small" under the SBA's standards, according to the number of employees it has or its annual receipts. To receive an advance, a religious institution must certify under penalties of perjury that it meets the requirements for being eligible. The religious institution would not be required to repay such advance, even if subsequently denied the loan.

Employees of 501 charities and other Not For Profit Corporations 

For those religious institutions that are exempt from unemployment laws, such as churches, affiliated religious organizations, religious schools and charities with fewer than four employees, the employees of such charities are not eligible for receiving unemployment benefits; thus, these charities would not receive any reimbursement unless they voluntarily elect to self-insure. If a religious institution self-insures, the CARES Act reimburses the religious institution for half of its costs of unemployment benefits provided to laid-off employees.