The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law and enacted on March 27, 2020. The CARES Act is the third of three stimulus bills to address the growing economic distress being caused by COVID-19, particularly on small businesses. There is the potential for more stimulus bills to be passed in the coming months as Congress discusses what to do as the distress deepens. Specific to pastors, ministerial employees, and the wider church community, the CARES Act makes accommodations for religious groups that past economic stimulus actions did not include.
Recognizing that churches often operate like small businesses akin to more traditional private sector organizations, the CARES Act allows church organizations to benefit from some of its more powerful provisions. For example, pastors will be able to receive cash rebates like any other taxpayer for themselves and their families. Also, unemployment benefits not typically permitted to the church community may now also be received by church or ministry employees under certain circumstances.
The Pension Boards has created the following FAQ to provide some general information on the CARES Act for members. The answers below are based on the language of the CARES Act and current industry interpretations. The IRS and other government agencies may move to further elaborate on the Act’s provisions in the future. The Pension Boards recommends that individuals complement this general information with more tailored guidance from a personal accountant or attorney familiar with your unique tax situation.
As a pastor or an employee of a ministry, am I eligible for a recovery rebate?
If you are a U.S. resident with an adjusted gross income under $75,000 (or $112,500 for Head of Household filings, or $150,000 for Married filings) and you are not the dependent of another taxpayer, you are eligible for the full $1,200 (or $2,400 for Married filings) rebate. If you have children, you are also eligible for an additional $500 per dependent child.
If I earned more than $75,000 (or $112,500 for Head of Household filings, or $150,000 for Married filings), am I still eligible for a rebate?
Yes. Depending on how much you earned over these amounts, the rebate amount is reduced by $5 for each $100 your income exceeds the phase-out threshold. The amount is completely phased out if your income exceeds $99,000 (or $146,500 for Head of Household filings with one child, or $198,000 for Married filings with no children).
If my income was above the threshold in 2019, but I've lost my job due to the coronavirus pandemic, can I still get a rebate?
Yes. If your income in 2019 was inside the phase-out range, you would still receive a partial rebate based on your 2019 tax returns. Since the rebate is an advance on a tax credit that you may claim on your 2020 tax returns, any additional credit you are eligible for will be refunded or will reduce your tax liability when you file your 2020 tax returns next year.
Is the rebate taxable or will I have to pay back any amount?
The rebate is not considered income.
Who qualifies as a child for purposes of the rebate?
Any child who is a qualifying child for the purposes of the Child Tax Credit is also a qualifying child for the purposes of the recovery rebate.
Do dependents other than children under 17 qualify a taxpayer for an additional $500 per dependent?
If I have little to no income, or receive federal benefits, such as SSI, am I still eligible for a recovery rebate?
I opted out of Social Security years ago. Am I eligible for a recovery rebate?
Yes, but only if you are not the dependent of another taxpayer.
Are my college-aged children eligible for a recovery rebate?
Yes, but only if they are not considered your dependents. Generally, a full-time college student under the age of 24 is considered a dependent if their parent(s) provide more than half of their support.
What do I have to do to receive the recovery rebate?
There is no action to take for most persons. The IRS will use your 2019 tax returns, or your 2018 returns absent 2019, to either deposit the money into an account you authorized to receive a refund or to send you a check.
Is unemployment insurance available to pastors or ministry staff that lost their jobs due to the coronavirus pandemic?
Yes. The stimulus package provides specific provisions that will allow pastors or ministry staff who have lost their jobs to apply for unemployment benefits. The law creates a temporary program through December 31, 2020 to provide payment to those not traditionally eligible for unemployment benefits unable to work due to the COVID-19 pandemic.
How much is this benefit?
The amount of the benefit is established by the unemployment insurance program in the state in which you live. The law provides for an additional $600 per week to each recipient of unemployment insurance for up to four months and eliminates the requirement that unemployed individuals incur one week of unemployment before becoming eligible. In addition, the law provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after state unemployment benefits are no longer available.
Is there a partial benefit for a reduced work schedule due to coronavirus?
Yes. The law allows employees whose hours were reduced by employers to avoid layoffs to receive a pro-rated unemployment benefit.
How do I apply for these benefits?
The state in which you live administers the unemployment insurance program that provides these benefits.
Is there federal financial assistance available to churches and ministries?
Yes. Several options will be made available to your church or ministry by the law, including payroll tax credits, tax deferrals, encouraging charitable contributions, and small business loans.
What is the payroll tax credit?
The payroll tax credit will be a refund credit for 50% of wages paid by employers to employees during the COVID-19 crisis, available to employers whose operations were fully or partially suspended due to a COVID-19-related shutdown order or whose gross receipts declined by more than 50% when compared to the same quarter in the prior year.
What tax deferrals are available?
The stimulus package allows employers and self-employed individuals (which should include pastors) to defer payment of the employer share of Social Security taxes they otherwise are responsible for paying to the federal government. The provision requires that the deferred employment tax be paid over the following two years, with half the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
How does the law encourage charitable contributions?
The stimulus package allows charitable deductions of up to $300 to churches and charitable organizations in 2020, regardless of whether donors itemize their deductions or not. The law also increases the amount of deductions for charitable contributions by individuals who itemize, as well as for corporations. For individuals, the 50% of adjusted gross income ceiling is suspended for 2020. For corporations, the 10% ceiling is raised to 25% of taxable income. This provision also raises the ceiling on deductions for contributions of food inventory from 15% to 25%.
Why are small business loans being made available?
The purpose of these loans is to assist small businesses in keeping workers employed during the crisis. These loans are designed to give employers an incentive to keep their employees instead of laying them off and shutting down business.
How do the small business loans work for churches and ministries?
Churches and ministry organizations that are exempt from tax under Section 501(c)(3) of the Tax Code and that have fewer than 500 employees may apply for a Paycheck Protection Program (PPP) loan to cover payroll and related employee expenses for the period of February 15, 2020 through June 30, 2020 to help them sustain their ministries.
How can the loan proceeds be used?
The loan proceeds may be used to pay payroll costs, group health insurance benefits, paid sick leave, medical insurance premiums, mortgage interest payments, rent payments, utilities, and interest on other loans outstanding during the crisis period.
What costs are considered payroll costs?
Salary or wages, payments of a cash tip, vacation, parental leave, family leave, medical leave, sick leave, health benefits, retirement benefits, and state and local taxes are all considered payroll costs. Salary expenses above $100,000 per employee are not eligible for consideration as payroll costs for this stimulus package, and loan proceeds may not be used to pay salaries above $100,000 per employee.
How much can a church or ministry borrow?
The amount that may be borrowed is the total average monthly payroll costs for the preceding 12 months multiplied by 2.5.
Can a self-employed pastor apply for a Payroll Protection Program loan?
Yes, along with any other self-employed individuals.
How soon must the church, ministry or pastor repay the loan?
Payroll Protection Program loans may include a term of up to 10 years from the date of application.
What interest rate will these Payroll Protection Program loans bear?
The maximum interest rate for these loans is 4% per year.
Is a church, ministry, or pastor required to pledge collateral or a guarantor for the loan?
May payments under the loan be deferred?
Yes. Any deferment period may not be less than six months or exceed more than one year from the loan date.
May all or part of the Payroll Protection Program loan be forgiven?
Yes. The program is designed to encourage employers to retain employees and loan forgiveness is a key feature of these loans. A ministry under a covered loan can have all or a portion of the principal of the loan forgiven in an amount equal to payroll costs, mortgage interest, rent, and utility costs during the eight-week period following origination.
How can a church, ministry, or pastor apply for a Payroll Protection Program loan?
If you choose to pursue a Payroll Protection Loan, you will need to apply through an approved Small Business Administration (SBA) lender, which includes most local banks. Any loan documentation requirements and other traditional requirements to obtain a small business loan are substantially relaxed under this loan program.
Where can I find information and online application forms for loans/grants?
Churches that have experienced a loss of revenue due to COVID-19 are encouraged to apply simultaneously for both the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL). Applications forms for both are available from the SBA (see links below), and checks are to be mailed in three days from application.
NOTE: These loans do not need to be repaid and are effectively $10,000 grants available to churches.
Click here to apply for a Paycheck Protection Program loan.
Click here to apply for an Economic Injury Disaster Loan.