Paycheck Protection Loan

Morgan Malone recently spoke with Gary Crowell, who is employed by Tarrant Baptist Association and is a CPA. He asked him questions in regard to the legislation that has been enacted in recent days. Below is information from him in regard to financial options that churches and non-profits with a 501 (C3) have available to them at this time.

  1. The PAYCHECK PROTECTION LOAN  is available through the Small Business Administration at a maximum rate of 4% to cover payroll and various related employee expenses for the period February 15 through June 30, 2020.  It covers up to eight weeks of these expenses during this period after the origination of the loan. It is designed to encourage employers to retain employees and loan forgiveness is a key feature of these loans.  A significant portion of this loan may not have to be paid back which effectively means that the federal government is paying these expenses on your behalf in order to keep your employees working. Application is made through any certified SBA loan institution which means practically all banks.
  2. The Small Business Administration is offering 2.75% loans to nonprofits like churches to assist with payroll and other operating expenses.  The repayment terms are very favorable. These loans generally will not provide for forgiveness as the one discussed in #1.
  3. A payroll tax credit in the amount of 50% of the first $10,000 of each employee’s compensation, including health benefits between March 13, 2020 and December 31, 2020 is available under either one of two conditions: 1) Operations were fully or partially suspended due to a COVID-19 related shutdown order, 2) Gross receipts declined by more than 50% when compared to the same quarter in the prior year.
  4. An employer can defer payment of their 6.2% portion of the Social Security tax on employee wages.  It can be paid over the following two years with half due by December 31, 2021 and the other half by December, 2022. This is designed to create current cash flow for the employer.
  5. Starting April 1, 2020 paid emergency sick leave and expanded family and medical leave come into effect.  It provides for 100% compensation for up to 80 hours for those ill with COVID-19 or quarantined by government action or experiencing symptoms of the virus while seeking a medical diagnosis. There is also a provision for up to 80 hours at 2/3 compensation for those who are unable to work because of a bona fide need to care for an individual subject to quarantine or because their child’s school or child care provider is closed for reasons related to COVID-19.  Up to 10 additional weeks is available at 2/3 compensation if the need continues to care for their child. The 2/3 compensation option will not likely apply if they are able to telework and complete their job assignment at full compensation. Both the 100% compensation and the 2/3 compensation scenarios are entitled to 100% reimbursement (subject to certain limits) through payroll tax credits. The employer can also take a payroll tax credit for the 6.2% employer porton on this compensation plus qualified health plan expenses while the employee is receiving this benefit.
  6. Churches are exempt from paying federal and state unemployment tax so church employees do not generally receive this unemployment benefit when they would otherwise be entitled to it for work with a non-church employer.  However, the stimulus package makes provision for Pandemic Unemployment Assistance that does appear at this time will be available to church staff who have to be dismissed currently, primarily for economic reasons.  If a dismissed church employee does qualify for this, they would also likely qualify for the additional $600 per week for up to four months. The Texas Workforce Commission is the entity in our state which oversees this process but they are obviously swamped during these days with folks making unemployment claims.  If any of you have an employee who has to make application for this unemployment benefit, it would be of much interest to the rest of us to know if their claim was accepted and approved since this is still unproven territory where the federal government has given significant latitude to the state in the implementation of this previously unavailable benefit.


Notes:  The Care Act (stimulus package) does provide a cash payment of $1,200 per adult and $500 per dependent child under 17 years of age.  This is considered a tax refund for 2020 and is not subject to income tax. It should be received within the next five weeks or so. The majority of American households will qualify for this cash payment. Also, the Department of Education has suspended payments on direct student loans through September 30, 2020.

If you have further questions you can contact Gary at