New Rule on Paycheck Protection Program Promises to Include Nonprofits and Respect Religious Freedom

Questions have been swirling in recent days surrounding nonprofit religious organizations and their participation in the Paycheck Protection Program (“PPP”) under the CARES Act stimulus passed by Congress.

Late on Thursday, April 2, the U.S. Small Business Administration issued an interim final rule that offers some clarity and hope to churches and ministries considering their participation in the PPP, which is scheduled to begin accepting applications on Friday, April 3.

In relevant part, the new interim final rule reiterates that tax-exempt nonprofit organizations described in section 501(c)(3) of the Internal Revenue Code (IRC) are in fact eligible for the program.

With respect to religious freedom, the rule explicitly states that all loans guaranteed by the SBA pursuant to the CARES Act will not violate “constitutional, statutory, and regulatory protections for religious liberty protections” under the First Amendment, the Religious Freedom Restoration Act, and other SBA regulations.

Administrator Jovita Carranza who authored the rule also announced the SBA’s intention to follow up with more detailed guidance regarding religious liberty protections under the Paycheck Protection Program.

In a special legal advisory also dated April 2, attorneys John Wylie and Stu Lark of Sherman & Howard commented, “Given the limited funds authorized for PPP loans and the anticipated demand, many religious organizations are planning to submit PPP loan applications on Friday, April 3rd, the first day such applications are accepted. In the event there is no further clarification regarding the religious restrictions prior to Friday, religious organizations submitting an application may consider discussing with their legal counsel whether to add a statement explaining how they are interpreting the regulatory restrictions in light of the purposes of the CARES Act (e.g., as being limited to otherwise applicable laws). Such a statement might also affirm that the organization complies with its interpretation of these restrictions.”

Attorneys Wylie and Lark joined ECFA for a free webinar to discuss navigating these and other legal and risk management topics in response to the Covid-19 crisis. View the FREE webinar-on-demand, Navigating Critical Legal Issues in the Covid-19 Crisis, here.

For additional resources from ECFA on the Paycheck Protection Program and other provisions under the new CARES Act, visit

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.