Late on Friday, April 3, the Small Business Administration (SBA), responsible for administering the Paycheck Protection Program under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES), issued interim final rules and published on its website FAQs that effectively clear the way for many religious organizations (churches and their integrated auxiliaries) to seek Paycheck Protection loans (PP Loans). Such organizations, including conventions and associations of churches, may qualify even if they provide secular social services.

The SBA advised that religious organizations do not need to be issued a determination letter from the IRS to qualify as a nonprofit eligible for PP Loan assistance. The SBA recognized that many churches do not obtain determination letters because they are deemed exempt under Section 509(a)(1) of the Internal Revenue Code (the Code) and stated that such organizations meet the nonprofit eligibility requirements for PP Loans under CARES because they otherwise engage in religious purposes as contemplated under Section 501(c)(3) of the Code.

Importantly, the SBA specifically addressed in the FAQs that obtaining a PP Loan does not subject a religious organization to regulation by the federal government citing the religious freedoms guaranteed under the First Amendment. SBA noted that nothing in the Paycheck Protection Program would restrict a religious organization from limiting membership, or those who work for it, to those who share its religious faith and practice.

Equally important, the SBA clarified that religious organizations affiliated with conferences or other churches based on religious beliefs are exempt from SBA affiliation rules otherwise applicable in determining whether applicants meet the requirement that they maintain 500 or fewer employees. Specifically, if an organization affiliates with another religious organization because of the organization’s religious beliefs or “because the legal, financial, or other structural relationships reflect an expression of such beliefs,” they will be exempt from affiliation rules otherwise applicable.