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Faith Leaders Product Features & Updates Resources 41min read

Everything Your Church Should Know About Accessing $310B Available From the U.S. Govt

Currently, there are $310 billion dollars available in the Paycheck Protection Program offered by the Small Business Administration. 

Our job here at Givelify is to help you keep the giving going so you can focus on caring for the community. That’s why we’ve done an informative webinar about all the coronavirus protection options available to your place of worship.  

We’re honored to present this information to you in partnership with Frank Sommerville, a tax attorney and a CPA at Weycer, Kaplan, Pulaski and Zuber. Frank brings 40 years of CPA and legal advice to help you make the best decision for your staff. 

In this webinar, we’ll discuss the following COVID-19 programs available right now through the federal government:  

  • The Paid Emergency Family Leave Act – applies for 10 weeks after the two weeks of the paid sick leave. Total compensation lasts for a total of 12 weeks. 
  • The Payroll Protection Program – Places of worship can borrow up to two and half times their monthly payroll costsrent and utilities, and interest payments on loans that existed prior to February 15th. 
  • The Economic Injury Disaster Loan – a loan (not a grant) that is typically 3.5% – 4% interest paid back over ten years. 
  • Employee Retention Credits – receive credit for up to $5000 per employee. To qualify for the retention credit, your organization must be located in an area that the government has an isolation order or a shelter in place order oyou must have experienced a 50% drop in revenue when compared to the same quarter of 2019. 
  • Deferring Social Security Taxes – 50% of the deferred FICA is due December 312021with the remainder due December 31, 2022.

To understand how these programs work, what organizations are eligible, and how to apply, watch the on-demand webinar below. 

[embedyt] https://www.youtube.com/watch?v=X67yzHu1LGA[/embedyt]

 

To ask questions or learn more about the Small Business Administration programs discussed in this webinar, we invite you to join our Facebook group. 

hands interlocking and fading to white with the words crisis faith leadership

No time to watch the on-demand webinar? We’ve provided a transcript of the webinar below for your convenience.

Doug DeLor:

Good afternoon everyone. My name is Doug DeLor, Vice President of Sales at Givelify. And we’re pleased to share important information about the government’s COVID-19 second round of financing through the Small Business Administration’s program. And this also includes the Paycheck Protection Program also known as PPP.

Doug DeLor:

At a time when you guys see the news and the despair, we all need our faith communities more than ever. Churches, houses of worship, they’re a place of comfort, refuge and a beacon of hope. Especially during this historic event. Our job here at Givelify is to help you keep the giving going so you can focus on caring for the community. So I want to take this opportunity. Thank you for trusting us as your giving platform. And for making Givelify the highest rated and the most used giving platform by over 40,000 churches, places of worship, and nonprofit organizations.

Doug DeLor:

For those guests watching today’s webinar who are looking for an online and mobile giving platform, please visit givelify.com and sign up today. And it also has information for any questions you may have.

Doug DeLor:

So as we get started for the webinar, as we go through, please type your questions to the right. And we’ll do our best to answer as many as possible at the end of the presentation. For those questions, we’re not able to answer here, I’ll have information at the end. We’ll ask you to join our Facebook group. It’s called Givelify community for faith leaders. And we’ll be able to address unanswered questions there.

Doug DeLor:

I’d like to now introduce each of you to our featured speaker, Frank Sommerville. And Frank is a tax attorney and a CPA at Weycer, Kaplan, Pulaski and Zuber. Frank brings about 40 years of CPA and legal advice. And we were talking earlier, his first presentation was to a church seminar in 1980 with about 100 members. So he has a wealth of knowledge on this and with that, Frank, I’m going to turn it over to you. Thank you.

Frank Sommerville:

Thank you, Doug. And welcome everyone. Thank you for spending a little time with us. This is really important and timely information. We’re going to talk about all of the COVID-19 programs that the government has created. And let you know that when churches are available. Today, we’re going to talk about all of the stimulus packages that are currently out there and available, including the paid leave that is mandatory for everyone with more than one employee. The Paid Emergency Family Leave Act. We’re also going to talk about the PPP forgivable loans which can turn into a grant. EIDL which is an economic entry disaster loans also available from the SBA.

Frank Sommerville:

And we’re going to talk about employee retention credits. And then we’re going to talk about deferring the employer portion of the social security taxes. So let’s get started with the paid leave.

Frank Sommerville:

First of all, all of these programs that we’re talking about are for 500 or fewer employees. This morning we got new guidance from SBA that says it’s headcount as of the date that you apply for the loan, it is part-time, full time, everyone that may be employed is how you determine the 500. If you have more than one employee, you’re required to provide paid leave if the employee has 30 days of tenure or not.

Frank Sommerville:

Now if you had to lay somebody off prior to March 1 and you’re bringing them back, then it’s the first time that you get a cumulative total of 30 days of tenure. If the employee is absent for a qualifying reason, the employer must pay up to 80 hours or we call it two weeks because that’s normally what most people work is 40 hour a week. If they’re part-time employees, then you must pay them what their usual average number of hours over a two week period of time.

Frank Sommerville:

Also mandatory that the employers must notify the employees of the availability of this paid leave. And the Department of Labor has posters put out. You also can email that all of your employees as well. And it’s effective from April 1 until December 31st and that’s the only time that this paid leave will apply.

Frank Sommerville:

Now the qualifying reasons. If the employee is sick with COVID-19 or they are ordered to quarantine by a health professional, this is the stay in place order or the isolation orders that the government, both state and local have been putting into place.

Frank Sommerville:

The other qualifying reason is if they must care for someone with COVID-19. Now under these three reasons, the employer must pay the employee at their regular rate of pay. And so, that’s what they normally would have earned for the two weeks that are required. Now if an employee must stay home to care for children because the school or daycare is closed due to the government order to isolate, you also must pay for the two weeks. But we’ll talk about that in a minute.

Frank Sommerville:

The employee must represent to the employer that no one else is available to care for the children. There is, the SBA and Department of Labor have put out the requirements for the documentation that you must have under these circumstances. The employee must give you the name of the child, the age of the child, and the school or child care that they are attending. And that those facilities are closed due to a government order.

Frank Sommerville:

For these reasons, if you’re staying home because of a child, you must, the employers must pay, two-thirds of the employee’s regular rate of pay. So that’s the paid leave program.

Frank Sommerville:

The Emergency Family Medical Leave is similar and it applies to all employers. Normally Family Medical Leave Act does not apply with less than 50 employees. But because of COVID, it applies to all employers with more than one employee. Now the Act says that employers with fewer than 50 employees may ask the Department of Labor for an excuse on why they cannot provide it to their employees. They have not offered any guidance. The only guidance is in the statute itself which says that paying these employees for the Emergency Family Medical Leave Act would threaten the ability of the employer to continue as a going concern or continue in business.

Frank Sommerville:

Now the Emergency Family Medical Leave Act applies if the employee has a child and schools or daycares are closed so that they cannot attend. The Family Medical Leave Act applies for 10 weeks after the two weeks of the paid sick leave. It’s a total of 12 weeks but the first two weeks are uncompensated under the Emergency Family Medical Leave Act because they’re compensated under the paid leave.

Frank Sommerville:

If an employee is sick or caring for someone who is sick, or ordered to isolate, the sick leave is capped at $511.00 per day. If the Emergency Family Medical Leave is capped at $200 per day with a maximum of $10,000. [inaudible 00:08:34] dollars per employee. Both as a credit. And the IRS is just now putting out those forms. So it’s really the church, the employer is basically fronting the money and then getting it back. In theory, it’s supposed to be a zero cost to the church. We all know that that’s not entirely true.

Frank Sommerville:

Okay, what most of you have signed on for is the PPP loans. And basically, the PPP loans is Payroll Protection Program loans. And this morning, we had a new round of funding. That means that there was another $310 billion dollars available to loan. Houses of worship can borrow up to two and half times their monthly payroll costs plus rent and utilities. And interest payments on loans that existed prior to February 15th.

Frank Sommerville:

The SBA looks at the average monthly payroll for the last 12 months or 2019 which is what most employers are using as the number. It includes cash compensation up to $100,000 per employee plus employer-paid health insurance premiums and employer contributions to retirement plans above the $100,000.

Frank Sommerville:

In addition to the payroll costs, you get rent, utilities and interest on the mortgages. Utilities includes electricity, gas, water, telephone, internet and transportation. I don’t know how transportation got included in the definition, but that’s what the SBA has said.

Frank Sommerville:

The rent also includes rent on equipment such as copier leases and phone equipment and stuff like that. And then, plus state or local employment taxes that are imposed on an employer. In certain states, you have a disability, a state disability payment. There could be other types of employment such as unemployment that would apply in certain nonprofits and certain states.

Frank Sommerville:

The other requirement is you had to have employees as of February 15th of 2020. And the leases and mortgages had to exist on February 15th. So it does not include independent contractors. We get that question a whole lot. And that one, the SBA and Department of Labor said no. Independent contractors do not count so you have to have W-2 income.

Frank Sommerville:

The loan may be forgiven based on payroll, rent, utilities, interest for eight weeks. 56 days after the receipt of the loan proceeds. The date of the receipt of the loan proceeds is day one of the 56 days. Timing issue because eight weeks does not correspond to two months. So you could end up with a circumstance where the loan is greater than what you can spend in qualifying expenses.

Frank Sommerville:

For example, if your loan is given on the 14th of the month. Then eight weeks later, your payroll that you normally make semi-monthly would be payable on the 15th. So that 15th payroll would not be included. You also get to include health care premiums and retirement plan contributions that are employer-paid.

Frank Sommerville:

Forgiveness is based primarily on two components. First of all cash that’s spent on qualifying expenses. Those are payroll expenses. Those are rent and utilities. You have to look at the statute says that you had to have incurred and paid the expenses during the eight weeks. We don’t have any guidance on what that means at this point. The other component is full-time equivalent employees. Again, we do not have any guidance on what is a full-time equivalent employee.

Frank Sommerville:

You have some sources within the SBA and Department of Labor that say it’s a 40 hour week. Some people have said that it’s the Affordable Care Act equivalence which is 30 hours per week. We just don’t know how to measure it at this point in time. So you create a fraction and you multiply your qualifying expenses by this fraction.

Frank Sommerville:

The top of the fraction is the average number of full-time equivalents during the eight weeks after loan funding. The denominator is one of two numbers. It’s either the full time equivalents on a monthly basis from February 15th through June 30th. The average number of full-time equivalents on a monthly basis of January 1 through February 29. The employer gets to pick one of those two numbers.

Frank Sommerville:

Now the other third component that can come into play is if you have had layoffs since February the 15th, if you rehire all those employees at their full compensation by June 30th, then the loan can be forgiven up to 100% of the qualifying expenses.

Frank Sommerville:

Another forgiveness reduction factor is if an employer reduces an employee’s compensation by more than 25%. Now we exclude everyone over $100,000 from that calculation. But that can also reduce the amount that’s qualified. The amount over the 25% is not forgiven. Now in addition to the PPP loans, the SBA has Economic Injury Disaster loans and grants. And that’s still another type of program. Houses of worship may apply for $10,000 economic injury disaster loan/grant. Now that will reduce the amount that can be forgiven of the PPP loans if you also get that.

Frank Sommerville:

You can also apply for up to a two million dollar EIDL. Now the difference between the EIDLs and the PPPs, the PPP loans are one percent interest and have to be either forgiven or paid within two years. And it’s a one percent interest. The EIDL loans are typically three and a half or four percent and you can get up to 10 years. But that loan can never be forgiven. You have to pay it back. It’s just over a long period of time.

Frank Sommerville:

The employee retention credit. This is another option if you don’t have a PPP loan or an EIDL loan or grant. Then the employer can receive a credit for up to $5000 per employee. Basically, to qualify for the retention credit, you must be located in an area that the government has an isolation order or a shelter in place order. Or have experienced a 50% drop in revenue when compared to the last same quarter of 2019.

Frank Sommerville:

Now the biggest issue for houses of worship is it does not include minister compensation in the definition of an employee. So you don’t get anything for the ministers on your staff. But you get the up to $5000 for each employee that is a non-ministerial employee. And this minister compensation is solely for tax purposes. We’re not including those who may qualify as a minister for Department of Labor purposes.

Frank Sommerville:

Now the credit is up to 50% of each employee’s compensation up to $10,000. That’s how we get to the $5000. Now it only applies during isolation orders unless the 50% drop in revenue applies. In that case, if you have a 50% drop in revenue, the credit will apply to each quarter until the revenues equal 80% of the revenues from the same quarter last year. And then it will not apply to that quarter.

Frank Sommerville:

The $10,000 is cumulative over multiple quarters so you can’t get more than that for any one employee. If you have more than 100 employees, you only get the employee retention credit for employees who are not performing any services for the employer. So if they’re telecommuting, if they’re working from home, then the credit would not apply. If it’s below 100 employees, you don’t have that same requirement.

Frank Sommerville:

And finally, the employer FICA deferral program is another way the government is willing to provide you with some relief without interest. If you don’t receive a PPP loan or EIDL loan, then the employer may elect to defer payment of the employer portion of the Social Security and Medicare taxes.

Frank Sommerville:

Basically 50% of the deferred FICA is due December 31st of 2021. And the remainder is due December 31st of 2022. Again, this is going to be effective April 1 of 2020. And it does not apply at all if the employer has a PPP loan. If you have already made this election while your PPP loan is being processed. You haven’t received the funding yet. You may still do the deferred FICA until your loan is funded. And then whatever that accrual is is when you will pay, you will start and pay the 50% on those employees on December 31st of 2021 or December 31st of 2022.

Frank Sommerville:

And you may not claim the FICA deferral to the paid leave and the Emergency FMLA because you’re not paying employer portion of the FICA and Medicare taxes on those compensations.

Frank Sommerville:

Doug, I think I ran through those pretty quickly, but I’m sure there’s a lot of questions over there and I want to make sure we have plenty of time for those.

Doug DeLor:

Yeah, thank you so much, Frank. I’ve been looking through the questions. First of all, for everybody on the webinar, we will be sending you a recorded version on this presentation through your registration provided in the email. So that will be sent to you. As well as the presentation slides. We’ll put those into a PDF version so they’re scalable.

Doug DeLor:

As a treasurer for my church for seven years, I know the importance of sharing this with your finance committees and the people involved to make sure that you’re well prepared so we will get that out that you. No worries whatsoever. Frank, I’m going to go through, I’ve been capturing these questions. And I’m also going to address some of the questions we had through our Facebook group.

Doug DeLor:

So the first question. Someone has asked, “If I had a COVID-19 in March, is there no required employee pay?”

Frank Sommerville:

That’s correct because the law was not effective until April 1. Now there is an open question on whether or not if you got COVID-19 on March 30th, whether you would get two weeks as of April 1. We don’t know the answer to that. If that lead period. That 14 days overlaps into April. My suggestion would be to pay. If there is some of those 14 days after April 1, I think you need to pay it.

Doug DeLor:

Okay, very good. The next question. Can an employee receive unemployment on top of the paid leave?

Frank Sommerville:

They cannot receive employment while they are being compensated. So if their pay is continued on at full rates, but once you get to the reduced rates of the two-thirds pay and stuff like that, we have the Pandemic Unemployment Program which is available to employees of churches and ministries that did not pay into the unemployment system. This is different from the unemployment compensation that is normally administered by the states.

Doug DeLor:

Did the PPP change as it was only two and a half times the average monthly payroll? You can pay for those additional items, but only up to 25% of the loan unless that changed as well?

Frank Sommerville:

That’s correct. Payroll has to be 75% of the amount to be forgiven. And so the other 25 can be rent, lease payments, qualifying interest payments, stuff like that.

Doug DeLor:

Got it. There’s a question on the rent. Does this include leasing a meeting room?

Frank Sommerville:

Yes, that would include renting a meeting room. So if you’re meeting in a hotel or a school or someplace like that, that would qualify.

Doug DeLor:

Great. And another rent question, actually a couple here. Does rent include mortgage on the church or is that separate?

Frank Sommerville:

The interest payment on the mortgage qualifies, but not the principal payment. So you’ll have to document how much of your payment is interest and that part will qualify for the loan forgiveness.

Doug DeLor:

Very good. Does rent include common area fees?

Frank Sommerville:

Yes, it does it include common area fees.

Doug DeLor:

Okay.

Frank Sommerville:

Whatever you’re obligated to pay under the lease.

Doug DeLor:

Yep. And I think we answered this one. “I was told 75% of the PPP loan received must be spent on employee pay.”

Frank Sommerville:

Yes.

Doug DeLor:

Is there a separate loan for 1099? And I’m actually going to dove tail because I know we had a question on Facebook, Frank, to explain the eligibility requirements between W-2 churches and 1099 churches. Can you address that?

Frank Sommerville:

Sure. First of all, if you’re issuing 1099s to anyone, those do not qualify for the PPP loan base nor do they qualify for the forgiveness. But if you have ministers on a W-2, which is the proper way to report minister compensation, you can include those ministers in the PPP loan base, including the housing allowance. And the amount that’s paid to the ministers, including the housing allowance, is eligible for forgiveness.

Doug DeLor:

Great.

Frank Sommerville:

Now after the eight weeks are up, the 56 days, you will submit documentation to your lender and the lender will have 60 days to determine how much is forgiven. And I’m sure we’ll have some sort of process after that if you disagree with a lender. But you’ll go back to the lender and apply for the forgiveness and then you’ll get a decision from that lender.

Doug DeLor:

Very good. The next question, Frank, it’s a statement and then a question. “EIDL grant is based on the number of FTEs. This was clarified by the SBA prior to the first round being depleted. So is it up to $10,000 not, $10,000 total. Did that change in the latest round of funding as well?”

Frank Sommerville:

There is more money included in the new bill for the EIDL grants and for their loans. But it is $10,000 total. It has nothing to do with FTEs.

Doug DeLor:

Okay.

Frank Sommerville:

The EIDL loan is based … You have to qualify for that one with a maximum number of FTEs, depending on the type of industry that you’re in. And it could also be on revenue base.

Doug DeLor:

Got it. And the I think we know the answer but just to address this, is the EIDL a loan or a grant? And if there’s a grant, why would it need to be paid back?

Frank Sommerville:

Well, the $10,000 is a grant that does not have to be paid back. But if you go ahead and get an EIDL loan, then you have to repay all of it, including the $10,000 grant.

Doug DeLor:

Great. And there were several questions, “Can we still apply for an EIDL?”

Frank Sommerville:

Yes. There was additional funding provided in this latest round to allow new applicants for the EIDL grants and loans.

Doug DeLor:

Okay. Another question, “Is there a revenue reduction rate or amount, qualifying factor, in the PPP program?”

Frank Sommerville:

As of today, there is not. But there are people in Congress that are upset. Some rather large, publicly traded companies qualified under the PPP loan on round one. And they are proposing some changes to the forgiveness provisions. And some of those changes include revenue reduction. Now those are not law yet. Those have not been approved. They haven’t been presented even for a vote. So we don’t know if there will be any changes or not in the program.

Doug DeLor:

Okay. Another question, Frank. When will the portal reopen for banks to submit applications to the SBA?

Frank Sommerville:

Okay, the portal reopened this morning at 10:30 Eastern time. And according to one report I read over the weekend, there were 700,000 applications queued up. So it’s open now.

Doug DeLor:

Okay. Thank you. The next question. Does the PPP loans and EIDL funds come from the same source? I’ve only heard about PPL funding. Not mention of the EIDL funds. Do those come from the same source or not?

Frank Sommerville:

No. Those are two separate allocations. They come from the same source in the SBA. But there are two different loan programs and they are administered entirely separate.

Doug DeLor:

Great. Can 1099 employees be counted as part of the payroll for the PPP loan?

Frank Sommerville:

No.

Doug DeLor:

Okay. Is there a separate church disaster relief for churches that is different from the SBA disaster relief?

Frank Sommerville:

No. All the funds are being administered through the SBA. You are with all other nonprofit organizations that qualify for the EIDL or the PPP loans.

Doug DeLor:

Okay. There’s a question, “May loan proceeds be used to pay compensation amounts designated as housing allowance?”

Frank Sommerville:

Yes, those count. We got that answer last Friday.

Doug DeLor:

Great.

Frank Sommerville:

Or a week ago Friday. So we’re in good shape on that.

Doug DeLor:

Are there any other forms of disaster relief instead of the PPP and the SBA disaster relief?

Frank Sommerville:

There may be other programs at the state level. There are several states that have disaster programs that you can apply for and receive funds from. This is the only federal version of assistance.

Doug DeLor:

Okay. This is a generic question but it might be important. “How do we apply for each type of loan?”

Frank Sommerville:

The PPP loan you apply through a local, through a bank. We’re strongly recommending that you apply through a smaller local bank or regional bank instead of the national banks. The large, national banks, in fact, Chase, Wells Fargo and Bank of America have all been sued because they favored large borrowers over the smaller ones. Remember, the average PPP loan on the first go round was a little under $150,000. And so, there were a lot of large banks that were holding on to PPP applications and they did not get it submitted in time.

Frank Sommerville:

So what you have to do is you have to apply. What we’re finding in part of the new statute is they reserve a percentage of the 310 billion dollars for smaller lenders. And so that part of, my experience, at least on round one, is that smaller, local banks were much more responsive to getting the PPP through and getting it approved. The larger national banks were not very good servicing the smaller accounts. And the smaller PPP requests.

Doug DeLor:

Thank you for that, Frank. And I believe they had earmarked roughly 60 billion of that to go through the smaller banks, is that correct?

Frank Sommerville:

Yes, that’s correct.

Doug DeLor:

Great. Another question. Does rent include virtual offices?

Frank Sommerville:

We don’t have an answer for that. We don’t have any guidance.

Doug DeLor:

Can the PPP loan be used to pay a church roof repair loan?

Frank Sommerville:

Probably. We don’t have any guidance on that, but if it is a secured mortgage on the property for the repair, then it would likely qualify if it existed on February 15th of 2020.

Doug DeLor:

Okay. Can employment back pay be made for payments missed since the beginning of COVID-19?

Frank Sommerville:

I’m not sure I understand the question. Could you repeat?

Doug DeLor:

So employment back pay, I think. Can employment back pay be made for payments missed? So it sounds like if you have an employee back pay and you’ve missed payments, can that be made if it went into the beginning of COVID-19, I think is the question on this, Frank?

Frank Sommerville:

Well, you’ve furloughed employees and did not [inaudible 00:35:12]. You need to catch those up and have the PPP loan forgiven. We don’t have any guidance on that because the statute says incurred in pay within the eight week period. So you would not have incurred those. I would think that you would have some difficulty restoring those paychecks because they were not incurred and paid during the eight weeks after the loan was funded.

Doug DeLor:

Okay. Another question. Does the loan affect the signature credit report?

Frank Sommerville:

I’m not sure what they mean [inaudible 00:35:57] report either. The loan will affect your credit report. It is a loan until it’s forgiven. It’s on your books. You owe it. And you’re going to have to pay it back if you don’t get it forgiven.

Doug DeLor:

Okay. Another question. Can you talk more definitively about the “necessary provision” of the Act? How is that going to be viewed by the government?

Frank Sommerville:

We don’t know. We’re expecting guidance by the end of the month so this week. We have no guidance on it one way or the other. I think it’s going to be interpreted, this is my guess. And you can’t hold me to it, because I’m just guessing at this point. I think it’s going to be a cash basis of what would be ordinary expenses, qualifying expenses that you would have incurred within those 56 days.

Doug DeLor:

Okay. What type of funding should we apply for if we are a nonprofit with no employee?

Frank Sommerville:

You may be eligible for the Economic Injury Disaster Loan. That would likely be the one that you would have to apply for. The others would not qualify.

Doug DeLor:

Okay. And the next question is about that. Where can we find the EIDL application form? Is there a website link?

Frank Sommerville:

The EIDL loans and grants must be applied for directly with the SBA on their website. When I checked earlier, it was down. So I don’t know what they’re … They may have gotten overloaded and several times during the 10 days that the PPP loan was available, it was put offline for several hours. The longest one was about a day just because they were getting deluged with applications and their receiving end could not handle that many applications at one time.

Doug DeLor:

What is your advice, this is not a question, but if that happens again, do you have advice on what people should do? Just keep revisiting the site?

Frank Sommerville:

Yes, keep revisiting the site. There has to be some reprogramming because the statute signed by the President last Friday. And so it really wouldn’t surprise me for it to be down. They worked really hard to get the PPP loan up this morning. And now I think they’re going to be able to turn their attention to the EIDL.

Doug DeLor:

Okay. Another question. Is it gross compensation that is a qualified PPP expense? Or is the qualified comp determined net of withholding tax?

Frank Sommerville:

No. It is your gross pay before you take any deductions out of the employee’s paycheck.

Doug DeLor:

Okay. If you applied for EIDL and haven’t heard anything in a few weeks, should you reapply? So I think they’re talking about the first round.

Frank Sommerville:

You’re only eligible for one PPP loan. There are some banks that took the applications and have not been communicating with their applicants. And so it went into the black hole. One of the things I would recommend is if you haven’t heard from the bank that you applied through that you ought to go apply somewhere else and get something in process.

Doug DeLor:

Okay. And it looks someone had put they’re on the SBA site now and the EIDL application is not available. They’re having technical difficulties. “I’ve been trying for two weeks now. Where do I go to now?”

Frank Sommerville:

Well, you just monitor it until they bring it back up.

Doug DeLor:

Yeah, it’s challenging. “I’m confused now.” I’ve got another question. “I’m confused now, SBA is starting on April 6th, Massachusetts office and later confirmed in an email that on April 17th the EIDL grant is $1000 per employee. So only businesses 10 and up would get the full $10,000. Is there a grant and EIDL advance difference or where am I lost on this?”

Frank Sommerville:

There was a lot of confusion early on with different SBA offices giving out different guidance on that. The statute doesn’t make it per employee. It never has. But that’s, again, because this thing is so rapid. And for those of you that listen to this webinar after the fact, this is a moving target. I got new updates this morning that changed the rules one more time. I got one on Saturday. I got one on Friday. So you need to check to make sure that it’s up to date. Because everything is changing rapidly. And the individual SBA offices, those employees are having a hard time keeping up just like the rest of us. So it’s not, I’m talking as of today on April the 27th. And things could change again. As soon as I get off, I may have something else that changed this afternoon since I checked this morning.

Frank Sommerville:

So it’s a moving target and you guys have to think about staying on top of it. Because the rules could change overnight. And I think that that’s going to be really difficult for you to stay on top of, but work with your bankers. The bankers are trying to stay on top of it. They’re dealing with the SBA funders. They have to be an SBA approved lender. There are only about 10,000 of those out there. And they accepted a bunch new on top of that just for the PPP loans. So you’re going to have to just continue to monitor and go back to the SBA website periodically to find out what the latest versions are.

Doug DeLor:

Okay, great. We’re at about 15 minutes to the hour so we have still 15 minutes. We do have some more questions. Are you still okay, Frank?

Frank Sommerville:

You bet. Let’s roll with it.

Doug DeLor:

Great, thank you. A lot of good questions here. “You stated that independent contractors are not included. What would be the best loan to apply for that include utilities, telephone, internet, et cetera?”

Frank Sommerville:

Well, the only one you could apply for is the EIDL loan. That’s the only federal option. There may be state options that are also available.

Doug DeLor:

Another question, “Can the PPP be used to pay straight payment assessments?”

Frank Sommerville:

We don’t have any authority on that one way or the other. My guess is that that’s not going to qualify.

Doug DeLor:

Okay. Can you apply with a credit union?

Frank Sommerville:

Many credit unions have applied and got SBA lender approval within the last month. Specifically for the PPP loan. You need to check with the credit union to make sure that they have submitted their proper paperwork to be an authorized lender for the PPP loan.

Doug DeLor:

Okay. Please explain the difference again in applying for an EIDL grant and an EIDL loan?

Frank Sommerville:

Well, there are two separate applications on the SBA’s website. The EIDL grant is $10,000. And according to the statute, it’s supposed to be made available to you within three banking days after you’re approved. The EIDL loan is much more long term. It’s a much more traditional loan. You have to go through and show the economic injury. Typically, not necessarily with EIDL. But many of the SBA loans require that you show that you have applied and have been turned down for lending from other traditional sources. Because on an EIDL loan, you’re dealing directly with the SBA. You don’t have a bank involved.

Frank Sommerville:

And so you have to show the injury. It doesn’t necessarily have to be property. There’s another program for like hurricanes and tornadoes and stuff like that. This one is dealing with the economic injury so that you haven’t been able to operate or fully fund your operations. They’re going to be looking at your revenue. And looking at your revenue compared to prior years. It’s a much more involved and complicated process.

Doug DeLor:

Okay. A question. “Can a PPL loan be used to sanitize and fumigate a place of worship?”

Frank Sommerville:

No.

Doug DeLor:

Okay.

Frank Sommerville:

No place for that.

Doug DeLor:

The bank is asking for the applicant social security number and personal information so will the loan hit your personal credit report or just the church?

Frank Sommerville:

Great question. They are required to do background checks on the people who are applying for the loan. That’s because it’s restricted to US residents. It’s restricted to those who are in the United States without a visa. You can’t get the loan. So that’s the purpose of why they’re wanting that personal information. I am not, and I don’t represent credit reporting agencies. And the statute provides that the lender cannot require a personal guarantee. So I doubt that it’s going to hit your personal credit report. But again, somebody can, more knowledgeable than me, might answer that.

Doug DeLor:

Thank you for that. It looks like for now new applications are not being accepted until those submitted have been completed. What are the chances of those who are now trying to submit applications?

Frank Sommerville:

Well, on the first round, we had $349 billion dollars. There was 1.6 million loans that were granted during that period of time. That took 10 days to use up. So that would be 160,000, 170,000 per day. This time with 700,000 and a little bit lower amount, there’s a good chance that it could be used up within a few days. I doubt that it’s going to be available after this week.

Doug DeLor:

Okay. There was a question on a deadline to apply. Is there a deadline to apply for the EIDL grant?

Frank Sommerville:

No. It’s whenever they run out of money.

Doug DeLor:

Okay. “We applied for an EIDL grant with no reply yet. Are the EIDLs being funded yet?”

Frank Sommerville:

The new statutes signed on Friday provided more funds for the EIDL grants. Now whether or not the SBA is prepared to process them, I don’t know.

Doug DeLor:

Okay. Another, I think we asked this question earlier but there’s been so many I’m not sure, can a PPP be used for housing allowance?

Frank Sommerville:

Absolutely.

Doug DeLor:

Okay.

Frank Sommerville:

No problem.

Doug DeLor:

If all or part of the PP loan is forgiven, does that create a cancellation of debt issue? For example income that could somehow be taxable?

Frank Sommerville:

The statute requires, says that the debt cancellation portion of the Internal Revenue Code, that taxes debt cancellation does not apply to the forgiveness of the PPP loan. So if you are a nonprofit organization, a tax exempt organization under 501(c)3, it should not create any taxable income for you.

Doug DeLor:

Okay. A question just came in. “Are there any suggestions on when they will start taking applications again?”

Frank Sommerville:

Applications for PPP or EIDL? The PPP started this morning. The EIDL is not open yet so they’ll get that open probably in the next day or two.

Doug DeLor:

Okay. This is an interesting question. “My banker stopped receiving applications within three days. Can I apply directly to the SBA?”

Frank Sommerville:

Not for a PPP loan. You must go through a bank.

Doug DeLor:

What documentation is required for an EIDL grant?

Frank Sommerville:

Minimal documentation. But you still have to prove up that you’re qualifying. So there’s going to be some economic data. There’s going to be some payroll data. You’re going to have to prove that you have experienced a loss of at least $10,000 in order to … And whatever documentation is going to be related back to that loss that you are applying for the grant.

Doug DeLor:

Great. And a question just came in. “How do we check the status of the EIDL loan?”

Frank Sommerville:

That will be through the SBA. You need to have a loan number.

Doug DeLor:

Okay. The housing allowance you mentioned, does that refer to the pastor?

Frank Sommerville:

Well, the SBA requirements and frequently asked questions says that housing is included as a allowable payroll cost. They do not refer simply to the pastor’s. So it certainly includes the pastor’s, but you may have other employees that qualify for housing that might be included also.

Doug DeLor:

Great. I’m going to shift over to a couple of our Facebook group questions, Frank.

Frank Sommerville:

Okay.

Doug DeLor:

Which SBA loan programs, I’m sorry, we asked this one already. If a faith based organization receives an SBA loan, does that open the doors for external audits and operational mandates to be handed down through the federal government?

Frank Sommerville:

Yes and no. First of all, the SBA has said they will not require anyone to violate their sincerely held religious beliefs who receive the PPP loans. So that is not the type of thing that you would … They’re not imposing any additional restrictions on you other than what already exists. The second part of that is any time you’re accepting government funds, there’s a possibility that the government will come in to verify that the information you submitted on the application is accurate and true.

Frank Sommerville:

Now that’s not going into your operational information other than the financial data that you submitted. The reports that I’m reading saying that this program is fraught with fraud from people borrowing money that don’t qualify and falsifying information on applications. So I think it’s a reasonable supposition that an internal auditor from SBA or IRS or Department of Labor could come in to verify what you have put into your application. And then also to verify the information you submitted for the loan forgiveness.

Frank Sommerville:

Again, those would not be operational per se. If you fail to repay the money that is not forgiven, then the government will have the right to sue you if you don’t pay it and collect a judgment just like they can with anybody else. And like any other lender, your mortgage company or anyone else that [inaudible 00:54:02]

Doug DeLor:

I think we lost you again, Frank. Can you hear me, Frank? Okay. There were a couple of more questions.

Frank Sommerville:

Loans money to a church collections [inaudible 00:54:28].

Doug DeLor:

Are you there, Frank, can you hear me?

Frank Sommerville:

Yes. I can hear you. You froze for a second.

Doug DeLor:

Yeah. I don’t know if that was you or me. My apologies to our audience. A couple more questions came through here. If my church doesn’t get the chance this time around, what is next?

Frank Sommerville:

I don’t expect any future programs like this to be coming down the pike. I think the government has put as much funding as they think into it. But all things are possible. It depends on how long we have these shelter in place orders.

Frank Sommerville:

I think that it’s important that you continue to remember to trust God for your resources and not the federal government.

Doug DeLor:

That’s very good. Is there any governmental funding available for churches if you do not have any employees?

Frank Sommerville:

No.

Doug DeLor:

Okay. Let’s see here. I’m going to go back. When you froze there, some people thought you might have been raptured, Frank.

Frank Sommerville:

Well, they still wouldn’t be here.

Doug DeLor:

That’s right. Can musicians who worked for the church as independent contractors apply?

Frank Sommerville:

Yes. The PPP loan is available to sole proprietorships. And so they have to apply for that themselves. That’s why you can’t include the 1099 workers in your application. Because they have the right to go get their own application in and get their own PPP loan.

Doug DeLor:

Got it. Are Christian nonprofits eligible?

Frank Sommerville:

Yes, absolutely.

Doug DeLor:

Are there any legal requirements that will be put on my organization if I accept financial aid?

Frank Sommerville:

The only legal requirement will be to comply with the laws that apply to your church as they do today. They’re not imposing any additional compliance requirements.

Doug DeLor:

“Is my organization disqualified for funding if it’s associated with another faith based organization like a diocese?”

Frank Sommerville:

The SBA has come out with guidance on affiliation rules for nonprofits, especially for religious nonprofits. And most likely yes. You should be able to apply from your parish your church related school, even though you’re part of a diocese.

Doug DeLor:

Great. So we have one more question that just came in and we’ll have this as our last one because we have a couple minutes left here. What tax year documentations are required to apply for any of these loans or grants? Your 2018 or 2019, considering that tax year 2019 is not yet closed.

Frank Sommerville:

They are looking at 2019 calendar year because that’s where your payroll is based regardless of your fiscal year. Or they’re looking at the last 12 months of business. And so you will either do one or the other. If you’re doing it based on payroll, they’re going to look at 2019 W-2s which were due in January to determine the average monthly compensation. And your fiscal year is not really considered that important.

Doug DeLor:

Got it. Frank, you have been extremely helpful. I want to thank everybody who’s joined this webinar. One of the things that I would ask everybody joining to do. We have a Facebook group specifically for this. It’s a community for faith leaders that we have at Givelify. It’s called Community for Faith Leaders: Crisis, Leadership and Faith.

Doug DeLor:

And this is a place not only where we can address questions like that, but it’s for faith leaders to really give good advice on what you’re doing and how you’re handling the COVID-19 pandemic. What are you doing to uplift your communities? And to really help the faith communities and the parishioners and the nonprofits. We also, at Givelify, when you visit our Facebook, we have, for those of you that are looking for a truly uplifting experience. We have a program called Faith Responder. #faithresponder. And in times like this, we truly want to thank the spiritual communities and those leaders who are uplifting our communities. And we’re asking for members of congregations or parishioners or people who have been touched and have seen the incredible acts that our leaders are doing out there to share your stories.

Doug DeLor:

Too often we hear about some of the negative things going on in national news with faith leaders. And there’s not enough that’s shown on the local community faith leaders. So I ask you to do that. With that, Frank, thank you so much. And if you’re looking at these comments, everybody is so thrilled. One of the things that we’re also doing at Givelify, we might be doing another webinar this week. Because I know there’s, as Frank said, a lot of moving pieces.

Doug DeLor:

So be on the look out for a potential new webinar this week and potentially a follow up one next week around the subject. So with that, Frank, thank you.

Frank Sommerville:

Thank you for having me.

Doug DeLor:

And for everybody out there, yep, please be safe. God bless.

Frank Sommerville:

Thank you. Bye bye.

 

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About the Author

Basha shares the stories of our Givelify family by creating engaging content like videos and blog articles. She also runs a girls' mentoring group at a local YMCA.

Basha Coleman