The COVID-19 pandemic continues to present churches with new challenges and new opportunities.

Over the course of the last 15 months there have been many different pieces of legislation passed that have provided financial assistance to churches. One of the pieces of legislation included the Employee Retention Credit (ERC) which was easily overlooked by many churches in favor of the Payroll Protection Program (PPP) loans.

Since ERC was initially established under the CARES Act in 2020, it has undergone a number of changes and expansions, first under the Consolidated Appropriations Act 2021 (CAA) and then again under the American Rescue Plan Act (ARPA). The most significant change from the CAA was that the ERC became available to Paycheck Protection Program (PPP) borrowers and due to ARPA the program was extended through December 31, 2021.

The ERC is essentially stimulus money paid by the government to eligible employers as a credit against certain employer payroll taxes on their Form 941. The credit has no relationship to the employer-paid payroll taxes against which it is claimed. This is simply the government’s chosen delivery method for transferring the funds to eligible employers.

So, if your church experienced a significant decline in revenues or was subject to a government-mandated shutdown of any significant part of its operations during any calendar quarter since the COVID-19 pandemic was first recognized in the U.S., then your church may be eligible.

It is important to note that churches still seem to be eligible for the ERC, regardless of whether they were able to continue carrying on certain of their activities via remote participation such as virtual worship services. Due to mandatory full or partial suspension of operations, most churches stopped other significant aspects of their operation such as children’s ministries, youth ministries, small groups, fellowship events, and more. Assuming that the suspended operations are more than a nominal portion of the church’s business operations, and the fact that virtual worship services are not comparable to regular in-person worship services, it is believed, until and unless additional official contrary guidance is published, that many churches would qualify under the provision of having a significant part of its operations suspended.

The ERC could be a sizeable source of financial relief for your church which you do not want to overlook. For more information, check out this summary of the ERC by Batts Morrison Wales and Lee as well as the  ECFA webinar The Employee Retention Credit – A Sizeable Federal Aid for Qualifying Nonprofits.