If Churches have a payroll of $50,000 or less, they should go online to the SBA and apply for an Emergency Economic Disaster Loan & Emergency Injury Grant (EIDL) for at least $10,000. (they can apply for more if they need it, but the maximum amount that can be forgiven is $10,000. The 10,000 is not guaranteed…it is subject to reduction if there are so many applications that the total amount set aside for the program is exceeded.
If they have a payroll of more than $50,000, but they are shut down and do not see rehiring or reopening their church in the next 60 days, they should go online to the SBA and apply for an Emergency Economic Disaster Loan & Emergency Injury Grant (EIDL) for at least $10,000, also. They will also have the opportunity to participate in the Employee Retention Credit when they resume their operations and start hiring up. Information regarding that program is attached also (page 11 of the Small Business Owners Guide to the CARES Act). Please note that some of the information in that guide has been changed since it was published, but it is still a good summary of the CARES Act.
If they have a larger payroll, they are not shut down and they can see themselves clear to keep on at least 75% of their employees, with this assistance, they should call their current banker immediately and verify if their bank is able to file the application for the Paycheck Protection Program (PPP) for them. If their bank is able to file the application, they should ‘get on the bank’s list’ of applications that will need to be filed and find out what documentation the bank is going to require (some banks are asking for all documents to verify everything on the application, including copies of drivers licenses of all principles, incorporation documents, federal tax returns and payroll tax returns), other banks are not being so stringent. It looks like it will be essential that they do this as soon as possible.
We are attaching two spreadsheets that they can fill out to give to their bank if the bank does not already have one that they want their clients to use. They should also go online and complete the application so that it is clear and concise (it is a fill in the blank type of form.) They should attempt to get all of their information to their bank as soon as possible. Most of the banks have set up portals to allow their clients to transmit the data. They should not send tax returns or payroll records by email.
They will need to provide, at a minimum, the following for the Paycheck Protection Program:
- Borrower Application (available in a text fill in version on the Department of Treasury website.) Be sure to complete both spreadsheets before filling out the Application.
- Payroll data for 2019 (complete the spreadsheet attached). Allowed payroll costs include gross wages, housing, employer paid Health and Accident Insurance, employer paid pension payments, state unemployment insurance payments. Payroll costs must be reduced for any amount in excess of $100,000 paid to any employee.
- 2019 Quarterly payroll tax documentation submitted to the IRS (ex. Form 940 or 941) for all four quarters
- 2019 Year End Income Statement
- List of employees by position and corresponding salaries as of February 15, 2020 (You can also use 2019 year end payroll reports if there have been not changes in personnel between 12/31/19 and 2/15/20.)
- Calculation of the loan amount for the application (complete the spreadsheet attached)
Many of the payroll services have the ability to furnish a summary report for the PPP application process. Ask your payroll service representative if they can do that for you. The summaries that we have seen are helpful, but not always correct. We recommend using the template we have attached. What we have found is that the summary reports the payroll companies have prepared are summaries of the employee records and the H&A deductions and Retirement deductions are the employee deductions, not the employer deductions; and they include federal income tax withholding which is not a part of the calculation. So be sure to check that before using all the numbers provided.
Under the PPP program, they will be allowed to request loan forgiveness for all payroll costs (including group health insurance, retirement benefit costs and state unemployment taxes on payroll), interest on mortgages, rent, and utilities. However, the amount for the non payroll items cannot exceed 25% of the total requested loan forgiveness.
It is also important to note that the loan forgiveness will be reduced on failure to maintain the average number of full time equivalent employees during the loan forgiveness period. You have eight weeks after the loan is received to incur the appropriate costs of payroll and other allowed expenses. After that time, any amount remaining will be a loan and will bear interest of 1% (currently, and that is subject to change since it has changed twice in the last week.) The resulting loan can then be paid off with no prepayment penalty, or they will have up to two years to repay the loan after the loan forgiveness is determined. Payments on the PPP loan may be deferred for 6-12 months, depending upon guidance from the SBA….which has not yet been written.
This information was current as of 4/3/20. It has been changing daily, sometimes several times per day! If you run into anything that conflicts with the above information, you have my apologies in advance!