Questions Regarding Second Round of PPP Funding:
What constitutes revenue for the 25% drop in quarterly revenue. My question concerns the income from the various Church investment Funds.
In short, interest/dividends are included but unrealized gains are not.
The Interim Final Rule issued specifically for second draw loans seems to speak to this. The last paragraph on the bottom of page 22 details what is included in “gross receipts.” Both interest and dividends are included, but net capital gains/losses are explicitly excluded. The last sentence of that paragraph also makes mention that “investment income” cannot be excluded from gross receipts. Investment income can be interpreted as only the sale of any stocks/funds/bonds, not just the change in value of the portfolio. In other words, include any interest or dividends earned, plus any sales of stocks/funds/bonds, but include no figures from the fluctuation of value in the market. (CFO West Ohio)
More information can be found here.
What percentage of the funding must be used on payroll?
What is the maximum loan amount allowed?
Second-Draw loans up to $2 million are available for businesses that have used funds in their Round 1 or Round 2 loan.
What are the restrictions to apply for this funding?
- You have received and used (or will use) all proceeds from a first-draw loan by the time you receive (or expect to receive) second-draw loan proceeds.
- You have 300 or fewer employees.
- You can demonstrate that you experienced a loss of at least 25% of gross receipts in any quarter during 2020 compared to the same quarter in 2019.
- You spend all proceeds from your first-draw loan on eligible expenses.
What is the application deadline?
May 31, 2021, or until funds are depleted.
My bank has indicated that our church may be eligible to wait and use the loan forgiveness application form 3908S instead of the EZ. Can you please tell me: will individual churches be allowed to use the S form, or does the amount of money obtained by all the churches in the Conference force us over some sort of limit?
See the below link. I don’t know the amount of your loan , but assuming it was less than $150,000 you can use 3508S.
Form 3508S is the simplest PPP loan application form available. Only borrowers who took out loans that were $150,000 or less can use the form.
The Consolidated Appropriations Act expanded who can use this version of Form 3508. Originally, only borrowers who took out loans of $50,000 or less could use it. Now, borrowers who took out loans of $150,000 or less can use it.
Affiliate businesses (e.g., businesses with common management, stock ownership, and identity of interest) that took out a combined total of PPP loans of $2 million or more cannot use Form 3508S.
Form 3508S requires fewer calculations and less documentation than Forms 3508 and 3508EZ. If you took out a loan of less than $150,000, your forgiveness amount won’t be reduced if you decreased your FTE employee levels or wages.
We did have a reduction of revenues 25% in one quarter and the entire year unless we count the first PPP loan as part of our gross receipts! Would the loan/grant be included or not? (section 6033 of the Internal Revenue Code of 1986). Can we correctly apply or not?
First PPP Loan – if you used the full amount on eligible expenses in the eight weeks, you should be fine. The 24 week extension was not required to be used.
• Second PPP Loan – the first loan should not count provided you used the full amount as authorized; see below “targeted eligibility” from the SBA sight
Targeted Eligibility A borrower is generally eligible for a Second Draw PPP Loan if the borrower:
• Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
• Has no more than 300 employees; and • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
In 2020, we had to transfer $2000.00 from our Trustees account in April to be able to pay our bills until we were approved for the loan, which was not until the end of April. Does that $2000.00 transfer have to be accounted for in our gross receipts, which would then disqualify us for the loan?
No, an internal transfer of funds is not factored into your receipts. You should be fine.
Does a church have to have a special charge conference to receive funding?
Churches do not have to wait for a special charge conference before they can apply, but they must have a conference to receive the money. Contact your Regional Administrator for details.
Are housing allowances included in the definition of “payroll costs”?
Yes. Payroll costs includes all cash compensation paid to employees, subject to the $100,000 annual compensation per employee limitation.
The CARES Act refers to payroll as a permitted expense in disbursing a Paycheck Protection Program loan. It defines “payroll” to include “the sum of payments of any compensation with respect to employees that is a . . . salary, wage, commission, or similar compensation.”
What is the NAICS code needed for the PPP forgiveness application?
The number for churches is 813110.
Questions from First Round of PPP Funding:
What is the proper accounting for payroll costs related to PPP?
Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period (or Alternative Payroll Covered Period) (“payroll costs”). Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period). For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period. Count payroll costs that were both paid and incurred only once. The Alternative Payroll Covered Period is defined as Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”).
How do you calculate Average FTE per employee for the PPP loan forgiveness section?
For each employee enter the average number of hours worked per week,divide by 40, and round the total to the nearest tenth. The maximum for each employee is capped at 1.0. A simplified method that assigns 1.0 for employees who work forty hours or more and 0.5 for employees who work fewer hours may be used at the election of the borrower.
Since, the conference has reserves, do churches qualify for next round of PPP funding?
Yes, churches qualify for the next round of funding and are urged to apply. The conference and local churches have limited reserves and many of these assets have restrictions. The shared ministry grace the conference provided the churches for two months translates into a loss of revenue of $1.7 million. To compensate for this loss of revenue, GNJ had to use reserve funds. The drop in the stock market means that our reserves are down 12% year to date and unlike public companies, we cannot issue stocks to regain resources.
What is the CARES Act?
The $2 trillion Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) (“CARES” or “Act”) is an unprecedented aid package that will fund public health programs, provide tax benefits for employers and individuals, increase government support for coronavirus relief efforts and other items to help stabilize the economy. It does the following:
- Creates new small business government-backed lending programs;
- Funds loans for Federal Reserve credit facilities;
- Expands unemployment assistance significantly to those unemployed because of COVID-19, including assistance for many individuals who might not otherwise be covered;
- Expands access to retirement plan funds; and
- Creates payroll tax incentives for employers, including tax-exempts, to retain employees; among other relief.
Does the CARES Act benefit churches?
Yes. Churches and any organization with a Tax Identification Number, which has 500 or fewer employees and was in business on February 15, 2020 are eligible for the loan.
Why should congregations apply?
The leadership at GNJ feels strongly that all churches should apply for Paycheck Protection Program (PPP) funding as a part of the CARES Act. United Methodists are a connectional ministry and together we support one another and we anticipate having to support a number of clergy salaries and congregations financially as the economic realities of this health crisis deepen. We anticipate that some congregations will not be able to sustain their ministries and salaries through this crisis. Funding is and will be needed. We want to see churches doing their part by applying for available resources. We support each other when we apply and use resources well.
Isn’t this a matter of church/state for our church?
We honor your convictions. This is a challenging season and there are unprecedented actions taking place. The government has provided funding for churches, because it recognizes that churches provide critical services, employ thousands of people and are economic drivers of the communities they serve. In Greater New Jersey alone, our 530 churches employ 4,000 people and have a combine budget of $100,000,000 annually. Keeping churches strong helps all people and helps the economy. The government also recognizes that churches provide spiritual, emotional and physical support to people that is critical for the US to get back on its feet.
Why should we apply when our church doesn’t need the help of PPP, we can sustain ourselves?
As the United Methodist family we believe what occurs for one happens for all. While there are churches who do not need the help, we have a lot of churches that do need it. Are there ways you can help other churches who really need it during this time of crisis. Some of our churches has lost half their income because of Covid-19. They have members who are ill or who will die. Many people are being laid off and with no income will not be able to maintain giving to their churches. Some churches have lost rental income. These impacts are magnified in urban areas, rural communities and ethnic congregations. Can your congregations help a congregation near you in this situation, particularly urban, rural and ethnic congregations that are impacted significantly by the pandemic? These resources offered by the government can help you expand your ministries in this time of great need.
When was the CARES Act approved?
On March 27. The House of Representatives joined the Senate in approving a “Phase III” response and economic stimulus package aimed at countering some of the economic impacts of the coronavirus disease (“COVID-19”) pandemic in the United States. The President signed it into law the same day.
How does a church apply for a Payroll Protection Loan?
Apply with your 2019 and first quarter 2020 financial statements and payroll information.
What happens if I need to layoff staff during April, May and June?
If you terminate or lay off or decrease staff salaries during this period, you will be required to pay back the funds that did not go toward payroll. Interest for payback will be .05%. with a two year payback period which can be deferred for six months.
What are the pros of churches participating?
- Provides operating funds for churches to continue providing ministry at reasonable rates and pay back terms (2 year payback at .05% interest)
- Enables low cost borrowing to churches with loan forgiveness opportunities
- Principal and interest if applicable deferred for six months to one year
- Loan is unsecured with no collateral required and no personal guarantees and is 100% federally guaranteed
What are the concerns of churches participating?
- Church’s ability to repay loan if not forgiven
- Filing of application for loan with required attachments
- Church polity requirements to be completed timely
- Only one loan per participant utilizing individual FEIN number
- Local church has to use SBA approved financial institution should their current institution not be enrolled
Are there issues concerning the separation of church and state that congregations must be aware of? What if the Supreme Court rules the CARES Act funding of churches unconstitutional after churches have received the money? Will they have to pay it back?
Yes, if this issue goes to Supreme Court and is ruled unconstitutional, churches will be required to pay back the loan. It is unclear to timing and pay back arrangements at this time.
What do you need to file?
- Year-end Financial Statements 2019
- First Quarter Financial Statements 2020
- Timely receipt of church group ruling letter from GCFA that church is a 501c3 organization for
loan approval proof of eligibility which contains required FEIN number
- Quarterly and final 941’s for 2019
- YTD payroll register for 2019 & 2020
- State quarterly tax returns 2019 and final form 927
Are all salaries to be included?
No. Employees’ salaries that are over $100,000 cannot be included.
Does this need the superintendent and charge conference approval?
Yes! But first file and we will work with you to set a charge conference if you are approved. It takes two weeks to set up and hold a charge conference, and we do not want you to miss out on the funding. Charge conferences will be held by conference call or an email vote. We will provide a standard charge conference motion that all churches will use.
Are there restrictions on the use of funds borrowed through the Program?
Yes. The borrowed funds may only be used for the following:
- Payroll costs
- Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
- Employee salaries, commissions, or similar compensations
- Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
- Rent (including rent under a lease agreement)
- Interest on any other debt obligations that were incurred before the covered period
What is the EIDL?
EIDL stands for the Economic Injury Disaster Loan, which provides financial assistance to small businesses and nonprofits like churches who have been impacted by the Covid-19 health crisis.
Who is eligible?
All the following entities that have suffered substantial economic injury caused by Covid-19:
- Businesses with fewer than 500 employees
- Cooperatives, ESOPs, and tribal small businesses with fewer than 500 employees
- Sole proprietors
- Independent contractors
- Private nonprofits like churches
Do I automatically receive this financial assistance?
No, you need to apply to the Small Business Administration (SBA). An application may be completed at the SBA website here. It is estimated to take about 10-15 minutes. A guide to complete the application can be found here. is available at the US Chamber of Commerce website. The SBA also provides local assistance here or you can watch a video tutorial.
What is the “emergency advance”?
An “emergency advance” of up to $10,000 is available to nonprofits like churches, which are all referred to as “business owners,” who have been impacted by the Covid-19 health crisis. The “emergency advance” effectively operates as a grant, as it need not be repaid.
What expenses can be covered with the advance?
It may be used for payroll, sick leave or other operating expenses including debts, rent and mortgage payments.
Can I apply for both the PPP and EIDL?
Yes. However, because it prohibits borrowers from taking out two loans for the same purpose, expenses need to be carefully tracked for both programs. If funding is granted for both, the $10,000 advance will be deducted from the Payroll Protection Program (PPP) forgiveness allotment.
How long do I have access to the application process?
The program, which will run through December 31, 2020, was designed to allow eligible applicants to receive a $10,000 emergency grant within three days of application. However, due to the heavy volume of applicants, the response may take longer.
What are the loan parameters?
The interest rates for this disaster are 3.75% for small businesses and 2.75% for nonprofit organizations for terms up to 30 years. Payments on Covid-19 EIDL loans are deferred for one year. There is no obligation to repay the grant. To receive the $10,000 emergency grant, it is not necessary to have an approved EIDL loan.
Is there an SBA hotline for more information?
Who do I contact with questions?
Questions can be addressed to firstname.lastname@example.org.