How Christian Organizations Can Use EZ Form for 100% Forgiveness of PPP Loans

This week, the SBA released an EZ PPP Loan Forgiveness Application that is truly easy. Within this form, we clearly see an opportunity for churches and Christian schools who had to lay off staff or had a decrease in Full-Time Employee Equivalents (FTEs) will be eligible for full forgiveness of their Paycheck Protection Program (PPP) loan.

On March 15th, the CDC restricted gatherings over 50 people, which directly affected churches, Christian schools and nonprofits. On March 19, our team at Vanderbloemen began to watch the legislation in the Senate to help small business, and if it would include faith-based organizations. We were uncertain of what these packages would look like for Christian organizations, but as of April 3, we found out that the SBA extended the Paycheck Protection Program (PPP) to churches and faith-based organizations.

Over the course of time, the government has continuously made changes in regard to PPP loan forgiveness that has made it easier for churches to apply and qualify for forgiveness. Many faith-based organizations had worries about the PPP, but these questions have since been addressed. The most recent update to the PPP, including the release of the EZ PPP Application, calls out that any organization that has not been able to return to business activities prior to Feb. 15, 2020 because of CDC guidelines can still obtain full forgiveness of their loan. This is an amazing development for these organizations. Along with the increase from 8 to 24 weeks in the covered period, most Christian organizations will not be left with a loan.

How can you know if your organization qualifies to use the EZ PPP Loan Forgiveness Application? You must meet one of the three categories below:

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1. You are self-employed, an independent contractor or the sole proprietor.

2. You did not reduce the annual salary or hourly wages of any employee by more than 25% during the Covered Period or Alternative Covered Period compared to Jan. 1, 2020, to March 31, 2020. No payroll was used for the forgiveness calculation with an annualized amount of more than $100,000.

And, you did not reduce the number of employees for the average paid hours of employees between Jan. 1, 2020, and the end of the Covered Period. Ignoring the inability to rehire individuals with similar qualifications and ignoring reductions in an employee's hours that the borrower offered to restore and the employee refused.

3. You did not reduce the annual salary or hourly wages of any employee by more than 25% during the Covered Period or Alternative Covered Period compared to the period between January 1, 2020 and March 31, 2020. No payroll was used for the forgiveness calculation with an annualized amount of more than $100,000.

And, the borrower was unable to operate during the Covered Period at the same level of business activity as before Feb. 15, 2020, due to compliance with requirements or guidance issues between March 1, 2020, and December 31, 2020 by:

—secretary of Health and Human Services.

—director of CDC.

—OSHA.

Note: If you have an employee who was paid more than $100,000 during the covered period, that is fine, you just cannot use the amounts over $15,385 for eight weeks or $46,154 for 24 weeks in the forgiveness amount. So be sure to exclude that amount from your 60% of PPP that is payroll costs. Many organizations that have people paid over $100,000 will probably need to move from eight weeks to 24 weeks covered period to make sure you have more payrolls to be included (capped at $46,154 for any employee) to use up 60% of the loan.

How Do I Fill Out The EZ Form?

3508EZ example:

Line 1 = Payroll Cost of $60,000

Line 2 = $10,000 mortgage interest

Line 3 = $20,000 rent

Line 4 = $10,000 utilities

Line 5 = (Sum of lines 1, 2, 3 & 4) = $60,000 of payroll costs plus $10,000 mortgage interest plus $20,000 rent plus $10,000 of utilities = $100,000

Line 6 = PPP Loan amount was $100,000

Line 7 to DIVIDE payroll costs by 60% or $60,0000/.60 = $100,000

So line 8 is taking the lowest amount of line 5, 6, and 7, which will probably all be the same or $100,000

The key is to divide the payroll costs by .60 (Be sure you are not multiplying instead).

Where Can I Find Your Other Resources as I Work Through the Forgiveness Application?

New PPP Loan Forgiveness Application Form 3508EZ.

Instructions to Form 3508EZ.

Details of the Cares Act.

Sutton's PPP Loan Forgiveness Slides.

PPP Loan Forgiveness Spreadsheet.

PPP Funds Still Available to Christian Organizations Until June 30.

At Vanderbloemen, are excited that we have gotten to be a resource to you as you navigate the various aspects of the Cares Act. We encourage you to stay connected with us and updated on all our latest resources by subscribing to our blog.

Sutton Turner is the chief operating officer at Vanderbloemen, which serves teams with a greater purpose by aligning their people solutions for growth: hiring, compensation, succession and culture. Through its retained executive search and consulting services, Vanderbloemen serves churches, schools, nonprofits, family offices and Christian businesses in all parts of the United States and internationally.

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