Federal Coronavirus Financial Relief: What Catholic Groups Need to Know

By Matt Hadro, Catholic News Agency, April 6, 2020

After the federal government clarified Friday that religious nonprofits are eligible for small business loans during the coronavirus pandemic, legal experts said the news could prove a welcome relief for Catholic dioceses and parishes short of money.

“At the end of the day, the Friday rule is very good news for religious organizations,” Eric Kniffin, partner in the religious institutions practice group at law firm Lewis Roca Rothgerber Christie, said of the new federal guidelines. on coronavirus relief for religious nonprofit organizations.

“Parishes should coordinate with their dioceses before moving forward, but it is a huge relief for religious organizations as they seek to support their employees in the midst of this pandemic,” he said. declared.

On March 27, Congress passed and President Trump enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act that provided relief to businesses, nonprofits, and workers affected by the novel coronavirus pandemic.

The law allows qualifying nonprofits to apply for small business loans. One of the requirements for loan applicants is that they have 500 or fewer employees, which made Planned Parenthood ineligible for relief.

As some Catholic parishes and institutions have already started cutting or laying off employees during the economic downturn due to the pandemic, the new federal relief was seen as a possible solution to help Catholic nonprofits keep their jobs. employees on the payroll, but many groups had questions about their eligibility. under the provisions of the law.

If the Small Business Administration viewed Catholic Dioceses and all of their related entities, such as parishes, schools, and charities, as one large, nonprofit entity governed by a bishop, then many, if not all, dioceses would overtake the limit of 500 employees. ask for relief.

However, if every Catholic parish, school, and charity were eligible to apply for a small business loan under the CARES Act, then it could dramatically enhance their ability to keep employees on the payroll as donations dried up. .

Over the weekend, the SBA released a document clarifying its new rule on the eligibility of religious groups for paycheck protection and loans for economic harm during the pandemic.

While not all questions have been answered, the updated rule summary is ultimately “deferential to religious groups,” Kniffin said, because “the government has no right to question the interpretation of the church of its own doctrine or ecclesiology ”.

New Affiliate Rules for the SBA Paycheck Protection Program issued by the Treasury Department specify that if a smaller entity, such as a parish, and a larger one, a diocese, are linked for religious reasons, they should not be seen as one big entity.

“If the link between your local entity and a larger entity is the result of your religious beliefs, then you don’t have to count that link when you count your employees,” Kniffin said.

The updated SBA guidelines are “a grace” to Catholic institutions, said Jeremy Reidy, partner at Barnes & Thornburg, LLP, who is also a member of the Fort Wayne-South Bend Diocesan Review Board.

Before the new rule was published, “I don’t think any diocese in the country would have qualified. [for small business loans]Reidy said. The bishop “has ultimate control over everything” in a diocese, including smaller entities such as parishes and Catholic charities, he said, and every diocese could have been considered by the government to be a large organization.

Yet the government now treats small entities as separate from dioceses “as long as they are tied together for religious purposes,” he said.

Not all dioceses are structured the same, warned Reidy. While in “the vast majority” of American dioceses, parishes and schools are separate nonprofit corporations, in some other cases the diocese is the only incorporated entity.

In these selected cases, Reidy said, a “potential obstacle” to a parish or school still receiving federal relief could be that they do not file payroll taxes and tax returns separately from the diocese, and would be therefore aggregated in the diocese.

A link between a parish and a diocese that is “practical” and not just religious in nature could also be a barrier to getting them, Kniffin said.

Still, said Kniffin and Reidy, Catholic institutions should consider applying for the loans under a “good faith interpretation” of eligibility.

As the rules are “respectful” of the eligibility of religious organizations, Kniffin said, lenders are also urged “to accept good faith representations from applicants at face value.”

As long as Catholic groups have their own Employer ID number and 500 or fewer employees, they can apply on their own.

“I think all dioceses, with this new regulation, can do this certification in good faith,” said Reidy.

In its guidelines, the SBA emphasized that recipients of nonprofit loans may have a religious mission and will not be penalized if they only employ people who respect the organization’s religious mission.

Each beneficiary “will retain its independence, autonomy, right of expression, religious character and authority over its governance,” said the SBA. The loans can be used to pay the salaries of ministers and staff.

The new rules require that loan recipients do not discriminate when providing goods and housing to the public. Depending on the interpretation of existing civil rights protections, certain charities could be declared ineligible for loans because they do not provide services in certain cases.

Examples could include a religious adoption agency refusing to place children with a same-sex couple, or a homeless shelter refusing to house a man who identifies as a woman with other women.

The SBA has stated that it “will not apply its nondiscrimination regulations in a way that imposes substantial burdens on the religious exercise of denominational loan recipients, for example by applying these regulations to the enforcement of ordinances. of church, sacraments, or religious practices, unless such enforcement is the least restrictive means of promoting a compelling government interest.

This question of upholding non-discrimination provisions is one that religious groups always ask themselves, Kniffin said.

Yet with a Catholic group providing social services, such as a soup kitchen or homeless shelter, they most likely received government funding and would therefore already be in compliance with federal regulations.

The ultimate goal of providing the loans, the SBA added, is to provide quick relief for many small businesses and nonprofits that have been severely affected by the recent coronavirus crisis.

The SBA loan is a “forgivable loan” that “can essentially become a stimulus check” if nonprofits adhere to certain provisions such as keeping the same number of employees on the payroll, Reidy said.

“It’s a lot,” he said. “I encourage every organization to do this.

This article first appeared HERE.