COVID-19 Relief Act, Round Two Highlights

A coronavirus aid package Congress passed in December 2020 continues to benefit Christian ministries. We are posting updates as additional details become available.

Overview

On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (“Supplemental Relief Act”) was signed in to law. The act provides for additional financial aid to small businesses, nonprofits, individuals, schools, and other organizations. The Supplemental Relief Act includes some enhanced unemployment benefits, small business loans, support for vaccine distribution, and other benefits. 

Eligibility for religious organizations

In a 2020 publication, the Small Business Administration (SBA) clarified that faith-based organizations are eligible for its loans provided under the CARES Act (March 2020). The new Supplemental Relief Act affirms that the SBA properly clarified that churches and religious organizations, including Christian schools and camps, are eligible for loans made under the CARES Act. 

Supplemental Relief Act Benefits

Some highlights of the Supplemental Relief Act that may apply to Christian ministries, nonprofits, schools, camps, colleges, and universities include:  

Additional PPP Loans 

The Supplemental Relief Act revives the Paycheck Protection Program (PPP) from the 2020 CARES Act. About $284 billion has been earmarked for this round of PPP loans, which are available until May 31, 2021, or until all of the allocated funds have been disbursed. The SBA began accepting loan applications the week of January 11. 2021.

PPP Loan Application Deadline Extended

The deadline to apply for a PPP loan was extended from March 31 to  May 31 by the PPP Extension Act of 2021. The law also gives the SBA until June 30, 2021, to process PPP loan applications.

Small Businesses Targeted

In order to reach the smallest businesses, SBA offered a two-week period during which it processed PPP loan applications only from nonprofits and businesses with fewer than 20 employees. This period ran from February 24 through March 9, 2021. It was one of several program changes President Joe Biden announced on February 22, 2021.

Larger PPP Loans for Camps 

Overnight camps may qualify for larger PPP loans than other organizations, thanks to a measure benefiting the hard-hit restaurant and hotel industry. All businesses whose NAICS code starts with 72 may obtain PPP loans worth up to 3.5 times their monthly average payroll costs, if they meet the other requirements for first and second draw loans outlined below. This category includes children’s camps, family camps, and outdoor adventure retreats. It excludes day camps and instructional camps. If a ministry runs several overnight camps, and each location operates as a separate legal entity, each of the camps may seek PPP funding individually.

• First Draw PPP Loans. Employers with under 500 employees who did not take full advantage of funds available through the first round of PPP loans can now ask for the remaining balance, using a revised application. Download the PPP First Draw Loan application form.
• Second Draw PPP Loans. The Supplemental Relief Act creates a second PPP loan for employers with under 300 employees. To qualify, employers must have:
  • Spent all of their first PPP loan amount for the proper purposes.
  • Sustained at least a 25% loss of income in the first, second, third, or fourth quarter of 2020.
• Second Draw PPP Loans are capped at the lesser of $2 million or 2.5 times the monthly average payroll costs incurred in a 12-month period (2019, 2020, or 12 months before seeking the loan). As noted above, camps may qualify for loans worth 3.5 times their monthly average payroll costs. Download the PPP Second Draw Loan application form.

Under this retroactive legislation, employers have more flexibility on how they can spend PPP funds for non-payroll expenses. For example, covered expenses now include money spent on software, cloud computing expenses, accounting, and human resources costs. The act also simplifies the application and forgiveness process for loans under $150,000.

Guidance and rules regarding the revived PPP loan program continue to evolve. Visit sba.gov or treasury.gov for the latest information.   

Emergency Paid Sick Leave Benefits

The Supplemental Relief Act removed for eligible employers the mandatory component of the Emergency Paid Sick Leave (EPSL) and the Emergency Family Medical Leave Act (EFMLA). Eligible employers in the original legislation were defined as those with under 500 employees.

Any employee who hasn’t used up the 80 hours of EPSL or up to 12 weeks of EFMLA before December 31, 2020, will forfeit that paid sick leave benefit. 

Beginning on January 1, 2021, employers are not required to offer this benefit, but they may choose to offer the benefit. 

Tax credit reimbursement on quarterly federal payroll tax payments is extended through March 31, 2021, for those employers who voluntarily opt-in and provide to their employees the EPSL and/or the EFMLA beginning on January 1, 2021.

Economic Injury Disaster Loan 

The Supplemental Relief Act added additional funds for grants under the Economic Injury Disaster Loan program.  Under this program, eligible businesses, independent contractors, and self-employed individuals are eligible for up to $10,000 in grants which are not required to be repaid if recipients meet certain economic requirements. 

Unemployment Benefits

Many churches and related nonprofit ministries are exempt from paying into their state unemployment funds.  Accordingly, their employees may not qualify for state unemployment benefits.  The CARES Act (March 2020) addressed this issue by creating a new pandemic emergency unemployment assistance benefit which provided unemployment coverage to individuals, like many church employees, who did not qualify for state unemployment benefits. 

The Supplemental Relief Act extends by 11 weeks two of the pandemic unemployment programs. The Pandemic Unemployment Assistance program (PUA) and Federal Pandemic Emergency Unemployment Compensation program (PEUC) were initially created by the CARES Act and were set to expire on December 31, 2020.  The supplemental relief package also offers a $300 weekly federal enhancement in unemployment benefits through March 14, 2021.  

The Supplemental Relief Act increases the maximum number of weeks an individual may claim regular state unemployment benefits plus the PEUC or PUA to 50 weeks. 

Tax Considerations

Employers who elected to defer their workers’ payroll taxes under an August 2020 executive action will have until the end of 2021 to increase their employees’ withholding to pay back the taxes that are owed.  

The Supplemental Relief Act affects special charitable contributions initially put into place in 2020. The act extends the special charitable contribution provisions enacted for 2020 through 2021. 

Additional tax benefits are now extended into 2021 and include: 

• Above-the-line educator expense deduction for COVID-19-related expenses through 2021.

• Credit for paid sick and family leave enacted as part of the CARES Act through March 31, 2021.

• CARES Act employee retention credit through June 30, 2021.

Financial Relief for Schools, Colleges, and Universities

The Supplemental Relief Act also provides some emergency resources allocated to governors for educational institutions. The discretionary education funds will take the form of grants and apply to K-12 schools, colleges and universities.

A special reserve of funds is set aside for non-public schools. Emergency grants can be awarded to schools significantly impacted by COVID-19 for educational services, support, and ongoing functionality. It is up to the governor of each state to set up an application process. School leaders will need to reach out to their state governor’s office and state education department for details on how to obtain these funds. Be on the lookout for details about the application process in your state.   

Here’s an overview:

Governor’s Emergency Education Relief Fund (GEER II). The Supplemental Relief Act adds $4 billion to a governor-controlled emergency relief fund for education created by the CARES Act in March 2020. More than half of that amount is earmarked for non-public schools through the EANS program, described below. Governors must award the funds within one year of receiving them. Follow the GEER II link above for details.

Emergency Assistance for Non-Public Schools (EANS). The Supplemental Relief Act provides $2.75 billion for non-public schools through the EANS program, which is part of the GEER fund. To obtain EANS funds, state governors must submit a Certification and Agreement to provide services or assistance to eligible non-public schools. The deadline for governors to submit this agreement is currently February 22, 2021. Non-public schools must apply for funding through their state’s department of education. Follow the EANS link above for details.

Ministry leaders are encouraged to speak with local tax and legal professionals for guidance on how the new legislation impacts your organization. 

Additional Resources

From Brotherhood Mutual: The CARES Act: An Overview for Religious Organizations
From The National Law Review: COVID-19 Relief Bill—What Employers Need to Know Heading Into 2021
From Future Ed: What Congressional Covid Funding Means for K-12 Schools

 

Updated March 31, 2021
Updated February 26, 2021
Updated February 19, 2021
Updated January 29, 2021
Posted January 6, 2021

The information provided in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.