06 April 2020

New Exception for Faith-Based Organizations in SBA Paycheck Protection Program (PPP) “Affiliation” Rules

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The Small Business Administration (SBA) recently issued guidance through an interim final rule that creates a new exception to the SBA’s otherwise broad “affiliation” rules in the context of faith-based organizations applying to its Paycheck Protection Program (PPP).  This development is noteworthy for those faith-based organizations with 500 employees or fewer, but which might otherwise be considered “affiliates” of a network or consortium of similar faith-based organizations that collectively have more than 500 employees.  In short, more faith-based organizations are now eligible to receive PPP loans from the SBA.

Citing considerations under the First Amendment and the Religious Freedom Restoration Act, the SBA concluded that the relationship of a faith-based organization to another organization is not considered an affiliation with the other organization if the relationship is based on a sincere religious teaching or belief or otherwise constitutes a part of the exercise of religion.

Notably, the SBA has provided that a faith-based organization seeking a PPP loan may rely on a reasonable, good faith interpretation in determining whether its relationship to any other person, group, organization or entity is exempt from the SBA’s “affiliation” rules.  The SBA will not assess, and will not require participating PPP lenders to assess, the reasonableness of the faith-based organization’s determination.