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Churches and federal financial aid during the coronavirus crisis

Holly Hollman

May 20, 2020

Should congregations seek government money to meet payroll costs during the COVID-19 crisis? Three months ago, I could not have imagined the question. Today, it is one of many new issues facing houses of worship as they meet challenges stemming from the coronavirus pandemic.

Despite urgent needs, the question strikes some as an affront to basic principles. There are valid reasons for hesitation. The idea of tax-supported churches was firmly rejected during the Founding Era. Baptists and other religious dissenters fought against religious establishments. They fought for the separation of the institutions of religion and government. That separation is the legal foundation for our country’s commitment to religious liberty, and its benefits for both religion and government are undeniable.

For more than 80 years, the Baptist Joint Committee for Religious Liberty (BJC) has served in the historic Baptist tradition to protect faith freedom for all, guarding our religious liberty legacy carefully and zealously. We believe the risks of eroding separation are significant. Government has no business funding religious activities, which should be voluntary and funded by those who choose them. With government funds come government rules. For these and other reasons, BJC has consistently argued that direct government funding of churches threatens religious liberty.

In normal times, the government does not offer general economic aid to religious institutions. But these are not normal times. Government directives have caused severe distress throughout the economy that is having a ripple effect. Likewise, government directives have severely restrained religious gatherings. Many churches rely on in-person contributions or tuition payments for childcare centers, and they now face laying off employees. 

In response to urgent economic needs and in order to keep as many people employed as possible during these days of extreme social distancing, Congress passed and President Donald Trump signed new laws providing various kinds of federal relief. Among the most significant programs for employers is the Paycheck Protection Program, which is part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). It is a temporary expansion of a small business loan program to help businesses and nonprofit organizations (including churches) with 500 or fewer employees (Section 1102). In general, the legislation provides government-backed loans of up to $10 million to cover expenses such as payroll, mortgage payments, rent, and utilities for up to two months. These loans will be forgiven, in whole or in part, for employers who keep their employees on the payroll or rehire by June 30 (Section 1106). Payroll expenses must be at least 75% of the loan that is forgiven. Of course, the details are important and will not suit every situation. The Small Business Administration has resources, including a sample application form and a Frequently Asked Questions resource for faith-based organizations. The Treasury Department has created a short overview of the Paycheck Protection Program as well as this information sheet for borrowers. 

BJC recognizes the harsh economic circumstances many are facing now and many more will face as the crisis continues. BJC is not encouraging or discouraging churches to apply for federal assistance. Whether it is right for any given church will depend on the church’s circumstances and the details of the program for which they apply. We are gathering and sharing information among partners about the costs and benefits of various sources of aid. In addition to government resources provided through the Small Business Administration, BJC partners like the National Council of Nonprofits have produced several helpful resources.

So, what about separation of church and state concerns? Not every involvement with government threatens our core principles. At the same time, just because a government program is available does not mean churches should participate. Churches should look at the big picture to assess whether it is right for them. A government-backed loan to a religious organization that is provided on the same terms as loans to other non-religious entities is not likely to raise constitutional concerns. At times, equal treatment of religious institutions is what the law requires and does not pose any particular risk to church or state. Assuming the loan terms do not conflict with the organization’s religious commitments, such programs may be helpful without risking harm to religious liberty. The Paycheck Protection Program’s loan forgiveness feature, however, provides tax-support for a church’s ministerial payroll and mortgage expenses, which are significant points for determining whether this would be unconstitutional aid to religion. That presents a novel issue and will influence some churches to avoid the program or apply in limited ways to protect their principles.

As Baptists, we don’t and shouldn’t look first to the government for how to overcome most difficulties. Our commitment to the separation of church and state is rooted in our theology and our history, neither of which is changed by government efforts to provide relief in a time of crisis or shifting standards of constitutional law.

Until recently, the “no aid to churches” principle was firmly ingrained in federal constitutional law and reflected more explicitly in the religious liberty provisions of many state constitutions. After the Supreme Court’s 2017 decision in Trinity Lutheran v. Comer, the constitutional boundary on funding has become less clear. The Court has shifted in personnel and perspective toward a greater acceptance of neutral funding for religious institutions, including churches, at least where there is no intended religious purpose or effect. With the information available now, we think it unlikely that the federal assistance provided in the program is an unconstitutional establishment of religion. The purpose of the Paycheck Protection Program is to maintain employment during an economic and health crisis in the country, not to advance or prefer religion. Nor are churches preferred over other nonprofits, at least on the face of the program. The assistance is not provided through a government process that picks among religious entities, but rather through banks that serve a wide range of potential customers.

Apart from constitutional concerns, what should churches do?  Each church should consider the practical and ethical considerations. Some will seek the money as easily as calling the fire department in case of emergency, but others will choose to avoid the administrative work or insist on relying on the voluntary support of the congregants. Government requirements to ensure accountability may conflict with a church’s mission. For example, the Paycheck Protection Program application includes two pages of boilerplate language that applicants agree to, including references to requirements that prohibit religious discrimination in how the applicant provides goods, services, and accommodations. Qualifying for a government-backed loan requires a certification regarding the church’s financial condition and need, as well as accounting for the proper use of taxpayer funds. Some will debate the application of those requirements and raise ethical questions about who should receive money when even billions of dollars will fall short of meeting the needs of all affected employers.

Whatever its promise, the program got off to a rough start and has been criticized for failing to work as planned. Not all banks that were eligible to participate chose to do so, and the reported distribution of funds has been uneven. The $349 billion for the program was depleted within two weeks, leaving frustration and a waiting list even before an additional amount was appropriated. While the money has certainly helped many employers avoid layoffs as intended, questions over equity and fairness arose quickly and continue.

For us, what seems clear is that churches that apply for these programs should not allow this short-term relief to distract from longer-term assessments, planning and necessary reforms, occasioned by the crisis. Voluntary contributions to support each church’s ongoing operations and mission will continue to provide the vast majority of support for houses of worship. In the CARES Act, Congress also increased charitable giving incentives for 2020, creating a new deduction of up to $300 for all taxpayers, including those who take the standard deduction rather than itemizing deductions. For the minority of taxpayers who itemize their deductions, they will be able to deduct contributions up to 100% of their adjusted gross income. 

As Baptists, we don’t and shouldn’t look first to the government for how to overcome most difficulties. Our commitment to the separation of church and state is rooted in our theology and our history, neither of which is changed by government efforts to provide relief in a time of crisis or shifting standards of constitutional law.

The coronavirus crisis and the federal legislative response are without precedent and the implications for churches are unclear.  Church leaders should be wary of government promises and make their own assessment about any claims of “no strings attached.”  As every church responds to the crisis, decisions should be made in prayerful consideration, relying on the best information available, consistent with each congregation’s needs and theological commitments. 

At the same time, we pray that individuals will remain generous in supporting their houses of worship during this time of public health and economic crisis. We pray that churches, synagogues, mosques, and other houses of worship will continue to support their communities in this time of need. Though uncertainties abound, we trust churches to make thoughtful decisions that protect their mission and ability to serve faithfully and prophetically.

Holly Hollman is general counsel of Baptist Joint Committee for Religious Liberty. She and BJC Executive Director Amanda Tyler also discussed this on the April 2, 2020 episode of the Respecting Religion podcast series. You can subscribe to the BJC Podcast on your favorite podcasting platform.

The views expressed are those of the author and not necessarily those of American Baptist Home Mission Societies.

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