The CARES Act and Faith-based Organizations

Please note: This blog is current to the date of its publication, Monday, April 13. For additional updates or assistance navigating these uncertain times, please contact us or visit our SST COVID-19 resource page.


The Coronavirus Aid, Relief and Economic Security (CARES) Act includes assistance provisions for small businesses, individuals and nonprofit organizations, among others. So where do faith-based organizations fit in?

Below, SST’s experts outline what faith-based organizations should know about the legislation and the aid it can potentially provide.

Faith-based organizations are eligible for several loan programs.

Faith-based organizations are not disqualified from receiving a loan because of the religious identity of the organization. In fact, faith-based organizations are eligible to receive Small Business Administration (SBA) loans regardless of whether they provide secular social services. The CARES Act explicitly makes nonprofit entities eligible for the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL).

The separation of church and state remains.

A recent FAQ issued by the SBA states:

“A faith-based organization that receives a loan will retain its independence, autonomy, right of expression, religious character and authority over its governance, and no faith-based organization will be excluded from receiving funding because leadership with, membership in or employment by that organization is limited to persons who share its religious faith and practice.”

Churches are not required to have a tax exemption letter from the IRS.

Churches are eligible to participate in loan programs even if they do not possess an IRS-provided tax exemption letter. According to the SBA, houses of worship, integrated auxiliaries of churches and conventions or associations of churches quality for PPP and EIDL loans as long as they meet the requirements of Section 501(c)(3) of the Internal Revenue Code, in addition to meeting all other PPP and EIDL requirements. These organizations are not required to apply with the IRS to receive tax-exempt status.

Lenders are not required to verify calculations.

Lenders are expected to perform a good faith review, but the loan calculations are the responsibility of the borrower. It is reasonable for lenders to perform a “minimal review of calculations.”

Exclusion of compensation in excess of $100,000 does not include benefits.

The exclusion of compensation in excess of $100,000 annually applies when calculating loan amounts, but only to cash compensation. Contributions to retirement plans and the cost of group health insurance premiums may still be included.

The CARES Act does not address the issue of ministers’ housing allowance, but SST experts recommend including housing allowances as wages and, therefore, including the amount in the calculation of compensation in excess of $100,000.

Cost of independent contractors is excluded.

The SBA has made it clear that costs for independent contractors should be excluded when calculating loan amounts.

Organizations have a choice of time periods for calculations.

Borrowers may calculate their aggregate payroll costs using either the full 2019 calendar year or the previous twelve months leading up to the application date.

For additional information on the most recent pieces of financial legislation and how they could impact your organization, visit SST’s COVID-19 resource page or connect with a trusted SST advisor today.

Thanks to SST team member Simeon May for providing the content for this blog post.