The US Small Business Administration (SBA) issued updated guidance late in the evening of April 2, 2020, indicating the agency will not enforce certain nondiscrimination requirements for the newly enacted CARES Act’s Paycheck Protection Program loans.
Acceptance for the loan applications by SBA-approved lenders is expected to begin on April 3, 2020. Employers with 500 or fewer employees—including tax-exempt organizations—are encouraged to apply as a way to assist with specific payroll and operational expenses during the economic fallout of the COVID-19 (coronavirus) outbreak.
In the days leading up to the launch date, initial versions of the SBA application contained a statement indicating applicants would need to abide by the agency’s nondiscrimination provisions. Those provisions prohibit discrimination on the basis of race, color, national origin, sex, or age.
As attorney and senior editor Richard Hammar noted in response to this development: “This raises the question of the eligibility of churches that discriminate on the basis of ‘employment standards’ including extramarital sexual relations, sexual orientation, and same-sex marriages to participate.”
The SBA’s newly updated guidance attempts to answer that question. On pages 27 and 28, the agency said “all loans guaranteed by the SBA pursuant to the CARES Act will be made consistent with constitutional, statutory, and regulatory protections for religious liberty, including the First Amendment to the Constitution, the Religious Freedom Restoration Act” and a SBA regulation that states:
Nothing in [SBA nondiscrimination regulations] shall apply to a religious corporation, association, educational institution or society with respect to the membership or the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution or society of its religious activities.”
Separately, the SBA later issued additional guidance confirming the eligibility of churches and nonprofits to participate in PPP and other CARES Act relief.
The $2.2 trillion CARES Act stimulus package was passed into law on March 27, 2020. Key provisions of the law include individual household help, tax deadline extensions, and the Paycheck Protection Program administered through the SBA. The Act’s language regarding the $349 billion program calls for a streamlined application process aimed to put funds into the hands of small employers quickly.
By providing some basic information about employee headcounts and payroll costs, employers can receive a loan over an eight-week period worth 2.5 times the amount of their average monthly payroll. At the end of the eight weeks, the employers can have the loans forgiven—effectively converting them into a nontaxable grant—if they show they spent funds on specific payroll and operational costs and maintained certain employment counts and compensation levels. If the loan is not forgiven, or only partially forgiven, it is carried forward as an ongoing loan with a term of two years at 1 percent interest.
Learn more about the program and its requirements in this free on-demand webinar featuring attorney and senior editor Richard Hammar.