What just happened?

On Friday, March 27, Congress passed and President Trump signed into law the 247-page Coronavirus Aid, Relief, and Economic Security (CARES) Act. This is the third of five emergency supplemental bills that Congress has passed or is preparing in response to the COVID-19 pandemic.

This relief bill is the biggest fiscal stimulus package in modern American history.

How does this legislation affect individuals?

The most noticeable effect for most Americans will be a rebate on their taxes that will come in the form of a direct payment.

Individuals who earn $75,000 in adjusted gross income or less would get direct payments of $1,200 each, with married couples earning up to $150,000 receiving $2,400, and an additional $500 per each child younger than 17. The payment would scale down by income, phasing out entirely at $99,000 for singles and $198,000 for couples without children.

Individual workers who have been fired or furloughed (i.e., put on temporary leave due to special needs of a company or employer), would qualify for an expansion of unemployment benefits that would expand unemployment insurance by 13 weeks and include a four-month enhancement of benefits of $600 per week, on top of what state unemployment programs pay. The maximum duration of unemployment benefits has also been set to 39 weeks

Last month state programs paid an average $385 weekly to unemployed workers. So with the added benefits, the average unemployed worker would receive $985 per week for 16 weeks, and then $385 for up to 23 more weeks.

Also qualifying are freelancers and gig workers, such as Lyft or Uber drivers, as well people seeking part-time work who have been furloughed. People who quit their job as a “direct result of COVID-19” would also qualify (states typically do not allow workers who quit to receive unemployment benefits).

[NB: A previous supplemental bill passed earlier this month expanded access to emergency paid sick leave to employees at companies with fewer than 500 employees.

Eligible full-time employees are entitled to two weeks (80 hours) of fully paid time off (up to $511 per day) to self-quarantine, seek a diagnosis or preventive care, or receive treatment for COVID-19. They are also entitled to two weeks (80 hours) paid time off at two-thirds of their regular pay (up to $200 per day) to care for a family member or to care for a child whose school has closed, or if their child-care provider is unavailable due to COVID-19.

Eligible part-time employees are entitled to fully paid time off (up to $511 per day) for the typical number of hours that they work in a typical two-week period, and to the typical number of hours that they work in a typical two-week period at two-thirds of their typical pay (up to $200 per day).

Next week TGC will publish an explainer article on unemployment and unemployment benefits.]

How does this legislation affect churches and small nonprofits?

Churches, nonprofits, and Christian schools that are 501c3 (as well as most small businesses) with fewer than 500 employees are eligible for the $367 billion in Small Business Administration (SBA) loan guarantees and subsidies. This legislation increases the maximum 7(a) loan (i.e., the SBA loan program for providing financial assistance) amount to $10 million and would expand allowable uses for such loans to include employee salaries, insurance premiums, mortgage payments, payroll support (including paid sick or medical leave), and other debt obligations.

For almost all churches, the loan amount they can receive will be equal to their total average monthly payroll costs for the preceding 12 months (March 2019 to February 2020) multiplied by 2.5. For example, a church that has an average monthly payroll cost of $50,000 would be eligible for a loan of $125,000.

The loan requires a “good faith” certification that the funds will be used to support ongoing operations, retain workers, and/or maintain payroll or make mortgage, lease, and utility payments. The loan is forgivable (i.e., doesn’t require repayment) if the church employed the same number of people (or more) during the loan period as they did in 2019. Funds that are not forgiven have a loan maturity of 2 years, and loan payments under this program are not due for six months No fees are included for the loan, and no collateral or personal guarantees will be required.

Since the loan comes from the SBA, most churches will want to contact the bank they currently use for information on how to apply for this program. This loan program ends on December 31, 2020.