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CARES Act 2020: Information for Congregations

Note: This post has been updated to reflect new information about the Payroll Protection Program released on the evening of April 2 and on April 5. It has also been updated on April 8 to include a downloadable copy of the Diocese of Vermont’s 501 (c) 3 letter and other relevant updates.

The “CARES Act” – S.3548 “Coronavirus Aid, Relief, and Economic Security Act” – was passed by Congress and signed by the President on Friday March 27, 2020.  The purpose of the Act is “to provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.

The Act offers an important opportunity for parishes and related institutions within the Episcopal Church in Vermont to obtain transition money to help bridge churches that may experience financial difficulties while they are closed to services.  This is a loan program primarily designed to continue salaries for workers that would otherwise be laid off, as well to provide funds for essential utilities, medical insurance premiums, and other expenses. The money may be paid out quickly, and if certain provisions are met (no employees terminated) the loans may be entirely or partially forgiven.

The loan program will be administered through local banks that participate in the Small Business Administration lending program, virtually all banks in Vermont.  Applications are being accepted now. The money available is capped at $349 Billion – a lot of money but potentially not enough to serve all borrowers.  Presumably it will be lent out on a “first come – first served” basis.  Thus, churches must move quickly to initiate the loan process immediately.

There are two forms of loans: the “Paycheck Protection Program” (PPP) and the “Economic Injury Disaster Loan” (EIDL) program; the former is the most relevant for our churches and related institutions.

The key elements of the “Paycheck Protection Program” are:

  • Churches and other nonprofit organizations (501 C3) are eligible for these loans.
  • Loans are applied for with a standardized application submitted to any federally insured depository (bank or credit union), presumably a local bank with which the borrower already has a financial relationship. Once the loan program is fully implemented, it is expected that loans will be funded the same day the application is completed.
  • Institutions may borrow up to 2.5 times their average monthly payroll (or a maximum of $10 million, not relevant for our institutions). For purposes of calculating “Average Monthly Payroll”, most Applicants will use the average monthly payroll, including most benefits, for 2019 (or 2020 January – March), excluding cash compensation over $100,000 on an annualized basis for each employee.
  • Most or all of this loan may be forgiven – not paid back at all – if institutions meet minimal criteria. The principal balance of the loan will be reduced by an amount equal to most expenses for payroll, utilities, and rent or mortgage interest, during the 8-week period after the loan is granted.  Any remaining principle balance will be amortized over a period of up to 2 years.  However, the first payment will be deferred for 6 months.
  • It is believed that management of the loan, documentation appropriate for forgiveness, and developing a payment plan for any remaining principal balance will be administered by the loan officer at the local bank. The exact details of this process are still in preparation.
  • The institution must attest that the COVID-19 virus epidemic has negatively impacted their business.


A parish church with 5 employees and an average monthly payroll (salary, benefits, state and local taxes, etc.) of $25,000 applies for a PPP loan with its local bank.  After attesting that the COVID-19 virus has impacted its business operations, the business receives a loan of $62,500.  Over the next 8 weeks it is determined that the business has incurred $55,500 in eligible payroll and utilities expenses.  This amount is forgiven.  The principal balance of the loan is reduced to $7,000 and amortized over 2 years at an interest rate of 1%. The first loan payment is due 6 months later. The program prohibits SBA from charging fees to the lender and the borrower.

More information about this loan program is available from the Small Business Administration website. An FAQ for faith-based organizations is also available from the SBA.

Churches and institutions considering applying for a CARES Act PPP Loan should:

  • Immediately convene their leadership, agree that a loan is appropriate, and identify who will be responsible for the application and management process. A sample vestry unanimous consent resolution is included below.
  • Contact the local bank(s) with whom they have existing relationships, confirm they will be processing PPP loan applications immediately, and identify which bank officer will be primarily responsible for this lending program.
  • Notify the responsible bank officer that an application will be forthcoming.
  • Assemble the records documenting the monthly payroll for 2019 and/or January – March 2020.
  • Complete the application. Detailed instructions about how to calculate and assemble the documents required in the loan application are provided on page 3 and 4 of the application. Please note that some banks may ask for additional information on their own PPP application forms.
  • Submit the application and payroll records to the local bank on April 3, or as soon as possible after that date.
  • Expect prompt loan approval and immediate payment.
  • Keep careful payroll, utilities, rent, and mortgage records spanning the 8 weeks after the loan was issued.

Here are some additional notes for completing your application:

  • 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. This should be a person who is authorized to sign official business-related documents for the parish.
  • The form asks for the number of employees you have. Please use your average number of employees over the last 12 months, not your average number of full-time equivalents. Contractors whose wages are reported on Form 1099 should be excluded from this count because they are eligible to apply for PPP loans on their own. This includes clergy paid as independent contractors.
  • 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. We advise documenting housing allowance separately from salary and SECA reimbursement to make recalculation easier in the that it must be removed. Do not include the value of housing for clergy who live in church-provided housing.
  • If your bank asks you to confirm 501(c)3 status, use the Diocese of Vermont’s IRS letter.

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