COVID-19 Federal Assistance

Summary of Benefits for Churches and Individuals

By David Heywood, Retired Senior Tax Counsel, Lockheed Martin
April 3, 2020 – Video at wp.me/p8LyEI-8v3

Note: The following summary is based on preliminary review of the legislation and administrative guidance as of
April 2, 2020. There has been very limited guidance from the agencies responsible for administering these
programs, and whatever guidance has been issued may change. Therefore, this outline should not be relied upon,
and it is recommended you consult your own legal advisors.

Paycheck Protection Program

 $350B in loans available

 Administered by Small Business Administration via qualifying local banks
 Eligible if < 500 full- or part-time employees
o Including religious organizations
 Loans up to 250% of average monthly payroll
o Excluding salary over $100K for any employee
o $10M cap on loan
 Loan term is 2 years, 0.5% interest rate
o No payments required during first 6 months
o May be prepaid without penalty
o No collateral or personal guaranties required
 Funds must be used for
o Payroll ($100K limit for any employee)
o Health insurance
o Vacation, family, or sick leave
o Severance payments
o Rent expense (if lease entered into before 2/15/20)
o Utilities (electricity, gas, water, telephone, internet)
o Interest on mortgage or other debt (if entered into before 2/15/20)
 Not including principal payments

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  Forgiveness is available
o Amount of forgiveness is up to spending over 8 weeks following loan date
 Payroll ($100K limit for any employee)
 Health insurance
 Vacation, family, or sick leave
 Severance payments
 Mortgage interest (not principal), but apparently not interest on other debt
 Rent
 Utilities
o Forgiveness reduced to the extent
 Reductions in average number of full-time equivalent employees
 Reductions in salaries or wages for any employee in excess of 25%
 Unless employees are rehired or pay is restored by June 30, 2020
o Process to apply for forgiveness not yet fully defined by SBA

Employee Retention RefundableTax Credit

 Not available if PPP loan is received (even if the loan is not forgiven)
 Credit against any employer’s employment taxes
o Applies to for-profit and tax-exempt employers
o IRS will issue a refund if the credit exceeds employment tax liability
 Available in each calendar quarter that either
o There is a full or partial suspension of operations because of a governmental order
limiting commerce, travel, or group (including religious) meetings due to
Coronavirus, or
o Gross receipts are <50% of the same quarter in the prior year
 this qualification ends for the quarter after the quarter in which gross
receipts rise above 80% of the comparable quarter in the prior year).
o Credit is available in first quarter after 12/31/2019 in which one of the tests is met
 Applies only to wages paid from 3/13/2020 until12/31/2020
 Credit is equal to 50% of wages (taxable compensation plus group health plan expenses)
paid employees during the applicable quarter
o Credit is capped at a total of $5,000 per employee
o Payments to independent contractors do not qualify (i.e., only W-2 employees)
o If organization has an average of >100 employees, the only wages that qualify are
those paid to employees while they are not performing work due to the
governmental suspension or revenue reduction (e.g., paid furlough).
 No application is required
o IRS will provide guidance soon on how to claim the credit when employment
taxes are normally paid

Payroll Tax Deferral

 Deferral is not available to employers whose PPP loan is forgiven
 Employers may defer all payroll taxes due from 3/27/2020 to 12/31/2020
o 50% to 12/31/2021 and 50% to 12/31/2022
o No interest or penalty will be due
 Applies only to employer portion of FICA (or SECA)
 No application is necessary
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o IRS will provide guidance on how to defer

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2020 Recovery Rebates for Individuals
 Cash payments
o $1,200 to individuals with adjusted gross income (AGI) <$75,000
 Phased out between $75,000 and $99,000 for individual filers
 Phased out between $112,500 and $146,000 for head of household
o $2,400 to married couples filing jointly with AGI <$150,000
 Phased out between $150,000 and $198,000
o $500 for each dependent child under age 17
 These payments are not taxable income
 IRS will send payment automatically to most eligible individuals
o Based on 2019 or 2018 tax return
o Will direct deposit if taxpayer already provided bank information on return
 IRS plans to create an app (available at www.IRS.gov) so individuals can
provide bank information for direct deposit
o If no tax return filed, IRS will obtain information from Social Security
 Eligible individuals and qualifying children must have a Social Security Number
 Not available to nonresident aliens or dependents of another taxpayer

Expanded Unemployment Benefits

 One-week waiting period eliminated
 $600/week for up to 4 months in extra benefits over the regular formula for your state
 Benefits extended to cover 39 weeks
 Benefits now cover self-employed, independent contractors, and gig economy workers

Other Relief
 Payroll credit for employers who pay required sick leave or family leave
https://www.irs.gov/coronavirus
 Tax returns normally due April 15, 2020 are extended to July 15, 2020
o Payment of tax also delayed to July 15 without penalty or interest
o Payment delay also applies to 1st quarter estimated tax due April 15, 2020
 Second quarter estimated tax payment is still due on June 15, 2020
o Both extensions apply automatically without any action by taxpayer
 IRA and 401(k) withdrawals in 2020, up to $100K, are not subject to the usual 10%
penalty tax for early withdrawals
o Income inclusion is spread over 3 years
o Amount withdrawn may be repaid into account within 3 years
 Employer plans may increase permitted plan loans from $50,000 to $100,000
o Until 9/23/2020
 Required minimum distributions from IRAs or 401(k)s are not required in 2020
 Cash charitable contributions in 2020 up to $300 may be deducted even if the taxpayer
does not itemize (i.e., “above the line”)
 Certain upper limits on the charitable contribution deduction are relaxed in 2020
 Payments and interest on certain federal student loans are suspended