Important Update 6/23 – EZ PPP Loan Forgiveness Application – A simplified reporting form.  
The SBA announced a loan recipient can use the Form 3508 EZ if any one of three criteria are met:

  1. The recipient is self-employed and does not have any employees.
  2. The recipient did not reduce employees’ hours or did not reduce salaries or wages by more than 25%.
  3. The recipient experienced reductions in business as a result of health directives related to the Coronavirus (COVID-19) AND did not reduce the salaries or wages of your employees more than 25%.

A model EZ loan forgiveness form is available here. 

A checklist for eligibility to use the EZ form is available here.

GNJ-related organizations are reminded to maintain good communication with their banks, to whom all loan forgiveness reports must be forwarded. Banks may require forms slightly different from the model report produced by SBA, most likely to be filled out online.

Questions my be directed to GNJ at caresact@gnjumc.org . If possible, questions be directed by this Friday, June 26.

Important Update 6/8/20

Last week U.S. Congress passed the Payroll Protection Flexibility Act which amends the rules for loans under the CARES Act PPP program.  The loan forgiveness will happen only if organizations properly account for their expenses. Churches should prepare to compile their PPP reports by June 28.  The sooner information is compiled and filed, the sooner a church’s loan can be forgiven, and the more a church can breathe easily.

A sample of the original U.S. Small Business Administration’s PPP loan forgiveness application is available here and can still be used to fulfill requirements.  Churches should communicate with your bank to find what form they will require you to use, which may be a different version of the SBA application.

The new requirements include the following:

  • Longer period. Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but in no case can the covered period extend beyond December 31, 2020. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
  • Payroll percentage requirement. Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a “cliff,” meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness is not eliminated if the 75% threshold is not met. Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by December 31, a change from the previous deadline of June 30.
  • New exceptions. The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they do not fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good-faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
  • Loan repayment extension. New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.
  • Payroll taxes. The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.

Important Update 6/1/20

Reporting is due for the Payroll Protection Program (CARES Act) for churches that received funding in early April. GNJ is committed to help PPP funding become grants and not loans and are willing to pay interest accrued as long as the following conditions are met:
• The church files its report four days following the 56 days allotted to spend the funds.
• You consult with us or ask us to review reports by June 28.
• You send any questions or needs to us at CARESact@gnjumc.org.

Important Update:  5/21/20

The U.S. Small Business Administration offered clarifications about two important issues regarding applications for loan forgiveness in the agency’s PPP (Paycheck Protection Program). The issues involve payroll costs and the calculation of FTEs (full-time equivalent employees). GNJ is forwarding this information so that churches can be prepared when they have to apply through their banks at the end of the eight-week PPP period.

View this week’s SBA webinar on PPP forgiveness  or the Q-and-A section.

Important Update:   5/19/20
Just released!  Payroll Protection Program Loan Forgiveness Application.  Each institution will adapt this application to meet the requirements of their systems.  The application contains some instructions and definitions.  SBA will be issuing further guidance within the next two weeks.

Important Update: 5/13/20
The Small Business Association who administers the PPP program has just indicated that the stringent liquidity requirement will only be required for loans of $2 million or more. This means our churches will not have to be concerned about the liquidity requirement.

Important Update: 4/24/20
In an FAQ just released Friday, the U.S. Small Business Administration (SBA) states that it has approved the inclusion of the minister’s housing allowance in payroll costs for purposes of applying for a Paycheck Protection Program (PPP) loan and seeking forgiveness of that loan. Here is the text from the FAQ:

32. Question: Does the cost of a housing stipend or allowance provided to an employee as part of compensation count toward payroll costs?
Answer: Yes. Payroll costs includes all cash compensation paid to employees, subject to the $100,000 annual compensation per employee limitation.
Please make this adjustment when applying for the new round of funding.

Reporting Guidance

A conference call was hosted on May 7 to answer questions.  You can listen to the recording here.

If you have received funding, now begins the requirement to keep careful track of the money, in preparation for a report back to your bank and the SBA. Just as each bank had variation in its application process, we expect each will have variation in its reporting process. Your attention to tracking and reporting is critical, so it is important to begin preparation now.

Churches applied for funds from two programs: the PPP (Paycheck Protection Program) and the EIDL (Economic Injury Disaster Loan) emergency advance. The EIDL reporting is relatively straightforward.  The following applies to PPP reporting.

PPP loans will be converted into a grant only if the funds were used as required and the reporting process is completed successfully. You must have the materials needed prior to completing your report. A number of sites provide instruction on how to keep track of the PPP funding. The Paychex site assists with the process most clearly. It includes a calculator to assist.

In order to use the Paychex calculator efficiently, you should be sure to keep track of the following:

  1. What is the total loan amount?
  2. What are your payroll costs for the covered period (the eight weeks following the loan award)? (Remember that payroll costs include all full-time and part-time staff but not contractors. It includes current salaries, pensions, health insurance, the state share of all taxes, and cash housing allowances.)
  3. What are your utilities, mortgage interest and rent costs for the eight-week period? (By mortgage interest and rent costs, we mean for any property that you pay to rent.)
  4. What were your average FTEs (full-time equivalent employees from the period January 1, 2020, to February 29, 2020, or the period February 15, 2019, to June 30, 2019)?
  5. What are your average FTEs for the period from the day you receive the loan until eight weeks later?
  6. If you received EIDL funding, for what amount?

Form a “budget” of these factors now and track your actual expenses against this budget.

Some important points:

  1. The eight-week period begins as soon as the funds are disbursed.
    There is no penalty for prepayment, so any funds that you believe cannot be converted into a grant, can be returned immediately after the eight-week period or in 20% percent intervals plus accrued interest.
  2. FTE- There is no guidance on how FTE is going to be calculated for loan forgiveness. We await a ruling from SBA. Loan recipients should use common sense but ultimately inquire from their lending bank.
  3. Borrowers should follow up with their financial institution to access their forgiveness and reporting requirements as soon as possible after the loan is funded.

Information on the liquidity requirement can be found in the FAQs here.

Please direct any relevant questions to caresact@gnjumc.org .

CARES Act Resources for PPP and EIDL

Partial List of Banks Accepting PPP Applications

As of April 24, the following banks may be accepting loan applications for SBA’s PPP (Paycheck Protection Program). The banks are listed alphabetically. Please understand the application process is a fluid situation and availability may change.

We continue to recommend that a church should contact a bank with which it already has an account. If that bank currently is not accepting applications, please continue to check. If a local branch gives what you consider to be an insufficient answer, please contact a supervisor or manager or officer.

Application for Payroll Protection Program

Easy Worksheet (Excel) to Calculate Loan Request

  • CARES Act Worksheet

    CARES Act Worksheet

    Easy Worksheet (Excel) to Calculate Loan Request. Use this easy calculator to plug in your payroll expenses to find how much you are eligible for under the CARES Act. (updated 4/2/20)

Requests for IRS Form 940

Many local churches applying for funding from the PPP Loan Program have run into a snag when their banks have asked them to produce an IRS Form 940 regarding federal unemployment taxes. The IRS has previously ruled that all United Methodist organizations, including local churches, are not liable for federal unemployment taxes and, therefore, are not required to file such a form.

In place of a form 940, GNJ suggests that a church go to apply for a group fuling letter following the instructions below.  The church will receive a letter from GCFA along with attachments stating the local church is included in the denomination’s group exemption ruling. The local church should specify that it is exempt and include the letter and attachments in its application.

How to Get a Church Group Ruling Letter from GCFA:

To provide evidence of its 501(c)(3) status as part of the application process for a Paycheck Protection Program loan made available by the CARES Act, churches can obtain a letter from GCFA stating the local church is included in the denomination’s group exemption ruling. If a local church does not have such an inclusion letter from GCFA, the local church can quickly obtain one via the group ruling website, which is available here:

www.umgroupruling.org

If all of the information generated through the site is accurate, a local church can obtain a letter in about 5 minutes. If some information is incorrect, a local church can submit a comment to have that information corrected. (Unless a change is needed, a local church should leave the comment field blank, so as to not delay receiving a letter.)

The inclusion letter from GCFA verifies that a local church is a 501(c)(3) organization, however, some banks will ask for different supporting documentation or may not understand the significance of the documentation they are being provided by the local church. IRS Publication 4573 provides important information about the meaning of an organization being included in a group exemption ruling. If a local church runs into a problem, providing a copy of Publication 4573 may be helpful in educating the bank, or other relevant entity. That publication is available here: www.irs.gov/charities-non-profits/group-exemption-resources

Questions on obtaining a group ruling letter can be addressed to GCFA at: gcfa@gcfa.org.

Sample Language to Use for Charge Conference Motion

Motion
Whereas our nation and world are under extreme spiritual, physical, and financial strain and the Federal Government has provided funds to assist church employees and, including church employees to stay in their jobs and continue earning their salary and benefits at least through June 30, 2020;

We approve receiving funding through (both) the US -CARES Act (EIDL and) Payroll Protection Program for payroll of all clergy and lay employees of our congregation, including but not limited to pastoral, administrative, worship, childcare, maintenance and any other types of paid staff or other permitted expenditures by the program and the funds will be deposited through the church treasurer and overseen and administered by the finance committee according to the guidelines of the program.