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COVID-19 Financial Assistance for Churches

The Coronavirus pandemic has created a financial crisis for the U.S. The stock market, marked in recent years by unprecedented growth, entered a period of correction and recently incurred the largest one-day drop in history. Individuals who filed for unemployment in March is up to 9.9 million. Businesses that were hiring last month are now laying off employees or forced to closed.

 

In response, Congress has passed three legislative packages to try to help stimulate the economy, put cash in the hands of taxpayers and provide assistance to American workers, employers and businesses. This includes economic assistance for churches, their employees and church members. To help you better serve your community, here is a summary of these legislative actions and links to where you can find more information.

 

Coronavirus Supplemental Funding Bill

The first package, signed into law on March 6, 2020, included $8.3 billion to help the health care industry prepare for and combat COVID-19.

 

Families First Coronavirus Response Act (FFCRA)

The FFCRA is the second legislative package, signed into law on March 18, 2020, which included $150 billion to provide free testing for COVID-19 and paid sick leave for employees, including church employees. It is mandated for employers with less than 500 employees.

 

Two new benefits for paid leave include the Emergency Paid Sick Leave Act which provides paid leave for an employee that is seeking medical care for Covid-19 or is required to stay at home in isolation or quarantine. The employee is entitled to a maximum of $511 per day, or $5,110 in total. The Emergency Paid Sick Leave Act also covers an employee who has to care for (i) an individual that is sick or in quarantine, or (ii) a child whose school or daycare is closed. In this case, the employee is entitled to a maximum of $200 per day, or $2,000 over a two-week period.

 

The second benefit is the Emergency Family and Medical Leave Expansion Act which provides paid leave for an employee to take care of their child if a daycare or school has been closed due to a public health emergency like Covid-19. The employee is entitled to an additional ten weeks at $200 per day. The total maximum for both childcare benefits will be $12,000 or twelve weeks.

 

All of this mandated paid leave can be reimbursed under this act as a refundable payroll tax credit when the employer files their quarterly payroll tax return (Form 941). 

 

Every covered employer must post a notice about the FFCRA requirements on its premises. This notice can be emailed to employees or posted on a company website. The notice can be downloaded here.

For more information and examples of obtaining the credit, visit these resources:

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

The $2.2 trillion CARES Act signed into law on March 27 provides direct benefits to American workers, families and businesses, including churches. This economic assistance program for employers, employees and taxpayers includes small business loans to employers to help cover payroll and other operating expenses, deferred payroll taxes, unemployment assistance, and cash rebates/stimulus checks to taxpayers.

Here is a summary of 8 benefits that are applicable to churches, ministries and their employees.

  • Payroll Protection. The act provides low interest, low fee, loans up to $10 million through the Small Business Administration to help employers cover wages, health care, paid leave, rent and utilities. These loans are available to employers, including churches, with fewer than 500 employees. The maximum loan amount is equal to 2.5x your average monthly payroll and up to 100% of the loan can be forgiven if the employer maintains the same number of staff as last year. The amount forgiven is equal to 8-weeks of expenses for payroll costs, mortgage interest, rent and utilities. Your local lender will most likely be able to offer these SBA loans, so check with your bank or credit union right now to let them know you are interested. They will know the specifics on how to get qualified to get the loan. Access to emergency SBA grants and disaster loans have also been expanded.
  • Unemployment Assistance. Provides temporary unemployment assistance through December 31, 2020 to provide payments to those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency. This would include employees of churches who have opted out of paying into their state unemployment program. The act provides an additional $600 per week payment to each recipient for up to four months (over and above what the state benefits are) and an additional 13 weeks of unemployment benefits to help those who remain unemployed after state unemployment benefits run out. The act also provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers. The reduced hours would be covered as an unemployment benefit.
  • Cash Rebates. The act provides stimulus checks or rebates up to $1,200 to U.S. residents with adjusted gross income up to $75,000 ($150,000 married) and an additional $500 per dependent child. The rebate will be based on your 2019 or 2018 adjusted gross income. The rebate will be reduced for higher incomes and completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.
  • Special Rules for Use of Retirement Funds. The act waives the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes such as an individual: (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, reduced hours, or unable to work due to lack of child care due to COVID-19. These distributions, which can be repaid over three years, will be subject to income tax, which can also be paid over three years. The act also waives the required minimum distribution rules for calendar year 2020.
  • Universal Charitable Contribution Deduction. The act encourages Americans to contribute to churches and charitable organizations in 2020 by permitting them to deduct up to $300 of cash contributions, whether they itemize their deductions or not.Further, for individuals who itemize, the 60-percent of adjusted gross income limitation on charitable contributions is suspended for 2020. For corporations, the 10-percent limitation is increased to 25 percent of taxable income.
  • Employer Payments of Student Loans. The act allows employers to provide a student loan repayment benefit to employees on a tax-free basis. An employer may contribute up to $5,250 in calendar year 2020 toward an employee’s student loans which will be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. 
  • Employee Retention Credit for Employers. The act provides a payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. Rules exist to determine total wages and eligible employees. The credit is provided for the first $10,000 of compensation, including health benefits, incurred or paid to an eligible employee between March 13, 2020 through December 31, 2020. 
  • Deferring Employer Payroll Taxes. The act allows employers and self-employed individuals to defer payment of the 6.2% employer share of Social Security tax. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. Important note: employers who have loans forgiven under the Small Business Act are not eligible to defer their payroll taxes.

For more information about the CARES Act, visit these resources:

As you can imagine, there are probably more questions than answers regarding these legislative actions. Congress, the IRS and the Department of Labor may have to provide additional clarification or guidance. For this reason, be sure to contact your attorney or tax accountant for more advice regarding your specific circumstances.