Late Friday night, the Small Business Administration published a helpful and comprehensive set of Frequently Asked Questions about the Payroll Protection Program (PPP) and how it will affect religious liberty. Here is a summary of the main points and a few key takeaways:
Ministries Will Not Waive Their First Amendment Rights by Participating.
The FAQs include this question and answer: “4. Will my organization be sacrificing its autonomy or its First Amendment or statutory rights if it requests and receives a loan?”
Here’s the answer, “No. Receipt of a loan through any SBA program does not (1) limit the authority of religious organizations to define the standards, responsibilities, and duties of membership; (2) limit the freedom of religious organizations to select individuals to perform work connected to that organization’s religious exercise; nor (3) constitute waiver of any rights under federal law, including rights protecting religious autonomy and exercise under the Religious Freedom Restoration Act of 1993 (RFRA), 42 U.S.C. § 2000b et seq., Section 702 of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-1(a), or the First Amendment.”
In sum, ministries that participate in the PPP are not surrendering their autonomy or their rights to make employment and membership decisions based on their Scriptural beliefs.
Churches without a Formal IRS Tax Exempt Letter May Apply.
Most churches are tax exempt entities under Section 501(c)(3) by virtue of being a “church” as defined by the Internal Revenue Code (this is a 14-point test, but most churches meet this test if they hold worship services, host Sunday school or small group Bible studies, evangelize, maintain a church membership roll, etc.). The FAQs clarify that churches do not need to apply for formal recognition (by filing Form 1023) to qualify for aid under the PPP.
The FAQs Address Most but Not All Religious Liberty Concerns.
Many observers and attorneys (including this one) hoped that PPP participants would not be classified as recipients of “Federal Financial Assistance.” However, according to the FAQs, participant will be considered recipients of FFA. Here’s part of the answer to FAQ #5, “Receipt of a loan through any SBA program constitutes Federal financial assistance and carries with it the application of certain nondiscrimination obligations. Any legal obligations that you incur through your receipt of this loan are not permanent, and once the loan is paid or forgiven, those nondiscrimination obligations will no longer apply…SBA will not apply its nondiscrimination regulations in a way that imposes substantial burdens on the religious exercise of faith-based loan recipients, such as by applying those regulations to the performance of church ordinances, sacraments, or religious practices, unless such application is the least restrictive means of furthering a compelling governmental interest.”
So, what does that mean? A few key thoughts:
Every church I know already serves its community without discrimination. According to SBA regulations, a “…recipient may not discriminate on the basis of race, color, religion, sex, handicap, age, or national origin with regard to goods, services, or accommodations offered.” See 13 C.F.R. § 113.3(a). The churches I know already serve their communities without distinction or discrimination. For example, all people (regardless of race, color, religion, sex, handicap, age, or national origin) are welcome to receive food from food drives and participate in other community service events. The FAQs clarify that this does not affect a church’s ministry to it own congregants or its employment and membership decisions. This only affects services offered to the general public. That said, I will note one concern–the “accommodations offered” provision. This provision could arguably require a church to comply with a local nondiscrimination ordinance in providing space to the general public if it does so on a regular basis. Most ministries do not rent our their facilities for general public events, most of these events are currently cancelled anyway and a Supreme Court case (Masterpiece Cakeshop) prevents ministries from being forces to perform marriages that contradict their Statements of Faith. So, I do not see this as a serious concern for most ministries; however, it is worth noting.
This could affect Christian schools with “open” or “missional” enrollment policies. If a school opens its enrollment to the general public and participates in the PPP, then it may not discriminate on the basis of race, color, religion, sex, handicap, age, or national origin. The primary concerns here are “religion” and “sex” (for the reasons stated below). If your school has open enrollment but does not accept students of a different religion, receipt of PPP funds could affect your school’s ability to exclude such students during the life of the loan/grant. But, many “open” or “missional” schools I know consider that the point of being “open” or “missional”–reaching students and families outside their own faith community. Also, note that the receipt of PPP funds does not affect employment decisions.
The definition of “sex” could change to include “gender identity.” This is the key issue from my review of the FAQs. The Obama administration interpreted the term “sex” in Title IX to include “gender identity,” but the Trump Administration revised this rule and interpreted the term according to its traditional meaning of male and female. Future administrations could amend this rule again, and a closely related issue (whether “sexual orientation” or “gender identity” are protected classes under Title VII, which covers employment discrimination) is pending before the U.S. Supreme Court. Note that the law, as currently written and interpreted, does not include “gender identity.” But, the law could change and could impact school admission policies (see above) and public accommodation requirements. According to the FAQs, employment and membership requirements are not affected.
The receipt of federal financial assistance could produce additional legal concerns, but these three issues are apparent right now.
In Summary, Ministries Should Consider the Following:
- These FAQs address the primary religious liberty concerns (related to employment, membership and autonomy) and reflect the general policy of Congress and now the SBA to accommodate the religious belief and practice of ministries that wish to participate in the PPP.
- Ministries and especially Christian schools should weigh the need for these funds against the remaining religious liberty concerns as applied to their specific situation.
- If your ministry applies and receives PPP funds, apply for forgiveness or pay them off as soon as possible. These FAQs clarify that any SBA requirements that accompany the PPP are extinguished once the loan is forgiven or paid.
- Ministries that wish to apply for the program need to do so now because these funds will be depleted quickly.
This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It is being provided to church and ministry leaders with the understanding that The Good Citizen Project is not engaged in rendering legal, accounting, tax, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Laws vary by jurisdiction, and the specific application of laws to particular facts requires the advice of an attorney.