Financial Relief for Congregations During the COVID-19 Pandemic

As the financial impact of the coronavirus pandemic continues, congregations can seek financial relief from the federal government, the Church Pension Fund and the bishop’s office. Here are details about each form of relief currently available:

This page is being updated as new information becomes available. Last update 4/23/2020 8:59AM Added links to Department of Workforce Development unemployment insurance FAQs. Substantive updates made on 4/6/2020 include: a) link to new FAQ for faith-based organizations from SBA; b) clarification on how to handle the “owner” fields on the application form; c) additional information about the extension of unemployment benefits included in the CARES act. Substantive updates made on the morning of 4/3/2020 include: a) link to new application form, b) specification that housing allowance does appear to qualify as a payroll expense, c) link to Interim Final Rule issued by Department of the Treasury giving detailed guidance to lenders and borrowers, d) removal of any reference to 1099 contractors as Treasury has clarified they do not qualify as a payroll expenditure, e) update to the loan interest rate, now set at 1%. f) updated fact sheet for borrowers.


Payroll Protection Program – What churches need to do now

The two trillion-dollar federal economic stimulus bill known as the CARES Act was passed and signed last Friday. It includes a provision offering forgivable loans to small businesses, including non-profits, for the purpose of maintaining payroll and paying other qualified expenses, including mortgage interest, rent, and utilities. The maximum amount of the loan is 2.5 times the organization’s average monthly payroll expenditure over the previous twelve months, including most employee benefits, pension contributions, and employer 403(b) contributions. The application period opens on Friday, April 3. The application period ends on June 30, but because the amount available for these loans is capped, churches should apply as soon as possible.

The loans are backed by the Small Business Administration but are administered by banks. You may seek loans from any Small Business Administration-approved lender. Due to the size of the program, banks that have previously not worked with the Small Business Association are now doing so. Contact your bank to see if you can apply through them.

You can find the loan application here, and a FAQ document for faith-based organizations here. Here are some notes for completing your application:

  • We have received reports that banks are creating their own forms that are based on the loan application the treasury has published, but not identical. Filling out the form may turn out to be a useful exercise for pulling information together, but do not be surprised if your bank requires something different.
  • The application asks for information about and signatures of owners. Nonprofits, including churches, do not have owners, but some banks are not allowing these fields to be left blank. If that includes your bank, we recommend the guidance from the Diocese of California, namely “that incorporated congregations use ‘not applicable — nonprofit religious corporation that does not issue stock’.  If you are unincorporated, use ‘nonprofit religious organization.'” Some banks are requiring that an individual be identified as the owner. The risk of doing so is limited, since the loans do not require a personal guarantee.
  • The form asks for the number of employees you have. This should be your average headcount over the last 12 months. The count should be number of people – there is no differentiation between full-time and part-time employees and contractors for the purpose of this question. 1099 contractors should be excluded from this count (a change from previous guidance).
  • Special rules apply for any employees whose earnings (including salary and SECA reimbursement) exceed $100,000. See this fact sheet for details.
  • There is conflicting information about whether the portion of clergy compensation classified as housing or utility allowance should be included when calculating average monthly payroll. The Interim Final Rule released by the Treasury Department on April 2 defines payroll costs as “salary, wages, commissions, or similar compensation.” Housing allowance seems to fall under the “similar compensation” category. It would be wise to document housing allowance separately from salary and SECA reimbursement to make recalculation easier in the event an alternate interpretation prevails. Follow your lender’s instructions.

You can use this PPP Payroll Calculation Template (developed by Earl Pickett in the Diocese of Central Florida, and modified for the particular circumstances of the Diocese of Indianapolis) to calculate your average monthly payroll for the purposes of your loan.

While we are still awaiting specific guidance about exactly what documentation will be required alongside the application, congregations can begin preparing by assembling the following information. It is possible that not all of this information will be required. It is also possible that other information not listed here will be required. This list is based on the guidance we have at the moment, and additional information is emerging quickly.

  • IRS 501(c)3 letter
  • Vestry or bishop’s committee minutes documenting authorization to apply for the loan.
  • Copies of driver’s license, passport, or other proof of identity, of parish officers (rector/priest-in-charge, wardens, treasurer)
  • Proof of payroll for the last 12 months. Because it is not yet clear exactly what time frame will be requested, you should assemble payroll data beginning January 1, 2019 through the present. This documentation should include payroll summaries and bank statements from the same period. Quarterly IRS forms 940 and 941 may be required. If you do not have this information at hand, please contact your payroll provider.
  • Statements indicating a breakdown of payroll-associated benefits, including pension payments, employer 403(b) contributions, health insurance, and dental insurance (if paid by the employer). Specific to the Diocese of Indianapolis: Do not include clergy medical insurance premiums. Due to the particular way clergy health insurance is handled in this diocese, the expenditure will be difficult for congregations to document and is likely to significantly slow the processing of your loan.
  • Recent mortgage or rent statements (if applicable).
  • Recent utility bills.

About loan forgiveness:

Most or all of the loan is forgivable, provided the following standards are met:

  • Loan proceeds must be spent on qualifying expenses: payroll and associated benefits, rent, utilities, and mortgage interest, within eight weeks following the issuance of the loan.
  • Staff and payroll must be maintained for the eight-week period after the loan is issued.
  • While not required, it is advisable that churches set up a separate account for administration of loan proceeds, to make it easier to document compliance with these standards.
  • For any portion of the loan not forgiven, payments may be deferred for six months, with a maximum 2-year term, an interest rate of 1.0%, and no prepayment penalty.

PPP loans are unsecured, so they may be applied for without the approval of the Standing Committee.


Other financial relief provisions in the CARES Act

Refundable payroll tax credits: This small-scale relief, which provides employers a 50% credit for their share of Social Security taxes while business operations are suspended, is not available to employers who receive a PPP loan. This provision is not likely to apply to congregations in the Diocese of Indianapolis.

Expansion of unemployment insurance: The CARES act temporarily expands unemployment benefits to displaced church workers, even though they don’t generally qualify, if they are displaced due to the pandemic. The eligibility expansion lasts through the end of the year. It also extends the maximum period of unemployment benefits from 26 weeks to 39 weeks, except that the extended benefits must terminate by 12/31/2020. For the period between now and July 31, an additional $600 per week will be provided on top of whatever state benefit the worker qualifies for. In Indiana, that amount is 47% of the weekly wage, subject to a maximum weekly benefit of $390. Indiana has waived the usual one-week waiting period to be eligible for benefits, but the minimum amount of time between application for benefits and the issuing of the first check is still 21 days. Displaced workers should file their unemployment claims as soon as possible. All unemployment benefits will be administered through the Indiana Department of Workforce Development. Processing takes a minimum of 21 days, and the current high volume means it may take longer.


Financial Relief Available through Church Pension Group

CPG is offering a two-month waiver for payment of clergy pension assessments to congregations who meet a strict set of requirements. Canon Brendan O’Sullivan-Hale is reaching out to eligible congregations directly.

For all congregations, CPG is providing a 90-day payment grace period, ending June 30, 2020, for the following payments:

  • Pension assessments;
  • Health and dental insurance premiums due to the Medical Trust;
  • Property & casualty insurance premiums and life insurance premiums due to the Church Insurance Company; and
  • Disability insurance premiums to companies administered through CPG.

Billing for medical and dental insurance premiums is handled through the diocesan office. We will continue to issue bills to congregations on the normal schedule, but congregations may elect to defer payment until June 30. Congregations that intend to defer payment should contact Kim Christopher.


Financial Relief Available through the Bishop’s Office

Apportionment Relief: At a special meeting of the Executive Council on March 28, the council voted that payment of April and May apportionments will be voluntary for congregations reporting less than $500,000 of combined cash and investment assets AND normal operating income of less than $250,000 on their 2019 parochial report. For congregations who have not yet filed their 2019 parochial report, eligibility will be based on the 2018 report. Congregations who qualify but are able to make their apportionment payments are encouraged to continue to do so.

The Bishop’s staff, the Investment & Finance Committee, Budget Formation Committee, and Executive Council are looking at ways to deliver broader-based apportionment relief. In the meantime, any congregation not meeting the eligibility requirements listed above but seeking a deferral of their apportionment payment to ease cash flow challenges should contact Canon Brendan O’Sullivan-Hale.

Revolving Loan Payment Holiday: At a special meeting of the Investment & Finance Committee on March 25, the committee voted to give congregations with loans issued by the revolving loan fund a deferral on April and May loan payments. No additional interest will accrue on loans during this period. Any congregation who has already issued their April payment may request a refund or defer its May and June payment. A congregation desiring a refund should contact Canon Brendan O’Sullivan-Hale.

Emergency Relief: At its regularly scheduled meeting on March 14, the Executive Council amended the 2020 budget to create a $150,000 pool of emergency funding. Bishop Jennifer has appointed a small subcommittee to respond swiftly to emergency funding needs, composed of Laurel Cornell, Brendan O’Sullivan-Hale, C. Davies Reed, and Greg Staab. Congregations wishing to apply for emergency assistance should contact Canon Brendan O’Sullivan-Hale.

Online giving service: Individuals may make gifts to congregations using the diocese’s online giving platform. The diocese will absorb payment processing fees while our churches remain closed. Contributions will be disbursed to congregations each Monday via ACH (preferred) or via check.

Bishop Jennifer, her staff, and the leadership of the diocese are working hard to be responsive to the resource needs, financial and otherwise, to enable on-the-ground ministry in a fast-changing situation, and you can expect future communications on this topic. Even with these relief provisions and government assistance, painful choices about how most faithfully to use limited financial resources will be unavoidable. Congregations should know that they are not alone in these challenges, and that Bishop Jennifer’s staff is available for consultation and assistance each step of the way.

© 2021 Episcopal Diocese of Indianapolis