April 1, 2020

WASHINGTON—While federal measures designed to provide COVID-19 relief for nonprofits—presumably including churches—may not violate the U.S. Constitution, they could be of concern to Baptists who value religious liberty and church-state separation, a leading constitutional attorney reported.

“After the initial COVID-19 stimulus package was enacted March 4, two additional measures were passed to provide additional relief” for nonprofits, said Holly Hollman, general counsel for BJC, the Baptist Joint Committee for Religious Liberty.

The measures are the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Hollman said.

“Both statutes apply to nonprofit organizations, and several members of Congress have said they intended for churches to be included alongside all other nonprofits,” she explained. But crucial to their implementation will be guidance and regulations—mostly yet to be announced—“that should clarify if and how eligible nonprofit organizations will be treated.”

“Many Baptists are concerned about the constitutionality and advisability of financial entanglements with the government, and rightly so,” Hollman said of funds that could wind up in church coffers. “The benefits of separation between religion and government for religious liberty have been undeniable, and we believe the risks of eroding that separation are significant.”

So, the potential risk of congregations accepting government aid—even during a crisis such as the COVID-19 pandemic—should be taken seriously, she added.

“In general, the Constitution’s No Establishment Clause prohibits the government from funding religious activity,” she said. “While we support government partnerships with religious entities that are designed with safeguards in place to protect religious liberty, BJC has consistently argued that direct government funding of churches threatens to violate that constitutional rule.”

The COVID-19 Stimulus Package is unprecedented, but “many of the specific provisions seem to be within constitutional boundaries governing the relationship between church and state,” Hollman noted. “Even if they include churches, these programs are likely be held constitutional and seem unlikely to broadly undercut religious exemptions in other contexts or create excessive entanglement between government and religion.” She cited several examples:

• “A payroll tax credit to cover a new, quickly implemented government mandate of paid sick leave does not raise the same concerns as general economic assistance to a church.”
• “A government-backed loan to a religious organization that is provided on the same terms as to other nonreligious entities would not likely raise constitutional concerns.”

Still, congregations should be concerned about aspects of the stimulus that could further blur church-state boundaries or cause other challenges for churches, Hollman said. “Depending on the specific terms and application, a general loan-forgiveness program may raise constitutional or unintended practical problems for a church.”  For example:

• “Loan forgiveness for a church’s ministerial payroll and mortgage expenses perhaps come closest to the traditional concerns of taxpayers paying for clergy and building houses of worship.”
• “Qualifying for the payroll tax credit or government-backed loan will inevitably require some form of certification regarding the church’s financial conditions and accounting for proper use of taxpayer funds.”
• “The loan application includes two pages of boilerplate language that applicants are agreeing to, including referencing a requirement that prohibits religious discrimination in how the applicant provides goods, services, and accommodations.

In light of COVID-19, many church and denominational leaders have expressed concern about the financial well-being of church-related auxiliaries, such as preschool programs and day-care centers. Some are exploring whether aid is available without compromising the church’s separation from government. That is an area where constitutional interpretation has shifted, Hollman said.

“Until very 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,” she noted. But a 2017 Supreme Court decision, Trinity Lutheran v. Comer, blurred that boundary. “The court has shifted in personnel and perspective toward a greater acceptance for neutral funding for religious institutions, including churches, at least where there is no intended religious purpose or effect.”

Churches that participate in these programs should not allow this short-term relief to distract from longer-term assessments, planning, and necessary reforms, Hollman said.

BJC offered an overview of the two new statutes that may provide financial relief to nonprofits:

The Families First Coronavirus Response Act

FFCRA extends coverage of the Family Medical Leave Act (FMLA), she said. From April through the end of this year, it temporarily requires employers engaged in commerce with fewer than 500 employees to offer paid FMLA and paid sick leave for all employees for specified coronavirus-related reasons. The stipulation regarding “engaged in commerce” is a broad standard that could include many churches.

“Even if a church normally operates under a more stringent state-law standard or voluntarily provides benefits similar to FMLA, this could create a new mandate for churches,” Hollman reported. “This new government requirement on employers is intended to be refunded by a payroll tax credit in the amounts paid by the employer for paid FMLA and Paid Sick Leave.

“Due to the particular way that clergy pay is treated under the law, particularly in the Internal Revenue Code, some analysis suggests a minister’s compensation would not be ‘qualified wages’ under the FFCRA for purposes of the tax credit, although a minister may claim a credit under the self-employment provision of the FFCRA.”

Additional information can be found from the Department of Labor.

The United Church of Christ’s Office of General Counsel prepared an initial analysis. The memo is here and a simplified flowchart is here.

The Coronavirus Aid, Relief, and Economic Security Act

The CARES Act also includes provisions that offer some financial relief to nonprofit organizations, primarily in the form of loans, Hollman said. The Paycheck Protection Program will temporarily expand a small business loan program in order to cover expenses such as payroll, mortgage payments, rent and utilities.

A preliminary overview and analysis, along with resources that apply generally to nonprofits, is available from the National Council of Nonprofits and can be found here. A recording of their recent webinar describing how the FFCRA and CARES Act apply to nonprofits can be found here.

The Small Business Administration provides resources that can be found here.

The Treasury Department has created a short overview of the Paycheck Protection Program as well as this information sheet for borrowers. The application is here.

CBF Executive Coordinator Paul Baxley expressed his appreciation to the BJC for providing guidance to congregations regarding the CARES Act.

“Since the CARES Act became law last Friday and we learned that churches and other nonprofits might be eligible for small business loans through provisions of this new law, many congregational leaders have reached out to ask us for more information about those loans and some have raised questions about church-state separation,” Baxley said. “The Cooperative Baptist Fellowship website already features resources from CBF Church Benefits about multiple provisions of CARES. Today our partners at the Baptist Joint Committee for Religious Liberty have released initial guidance about the church-state separation questions and have also committed to monitor implementation of the legislation and provide additional guidance as appropriate.

“Across the Cooperative Baptist Fellowship, we are committed to providing congregations and their leaders access to the best possible information about these opportunities so that prayerful and well-informed decisions can be made. I commend BJC, CBF Church Benefits, our state and regional coordinators and my colleagues on the CBF staff in Decatur who have worked so hard to provide resources to congregations in this important season.”

You can read BJC’s analysis at this link. To keep up with this developing topic, visit BJC’s website and follow BJC on social media at @BJContheHill.