Can Religious Organizations Accept Government Funding and Maintain Their Religious Freedom?


Recently, due to the COVID-19 crisis, federal financial assistance became available to churches and other religious organizations that have experienced economic hardship as well as to businesses. Many church leaders are wondering whether churches can accept this government funding and still maintain their religious liberty? The short answer is “yes” for now. This post will examine the new law, discuss religious liberty concerns, and provide information on how to apply for this loan.


On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law. The bill provides $2 trillion in stimulus funding to assist individuals and businesses adversely affected by COVID-19. Perhaps the most substantial program in the Act is the Paycheck Protection Program (PPP). The PPP is available to all businesses, non-profits, and veterans’ organizations that employ 500 people or less. For this program alone, Congress has authorized up to $349 billion in forgivable loans.

The loan applicant can request up to 2.5 times the organization’s monthly payroll cost or $10 million, whichever is less. Eligible payroll costs include salaries, cash tips, payment for vacation, parental, family, medical or sick leave, health care benefits, insurance premiums, retirement benefits, and state or local tax assessments on employee compensation. Loan funds may also be used on mortgage interest, interest on other debt obligations, rent, and utilities. Borrowers are eligible to have 100% of their loan forgiven if they use the loan on payroll and other eligible operating expenses. At a minimum, at least 75% of the loan must go to payroll. The program is meant to incentivize employee retention. Loan forgiveness will be less robust for organizations that reduce their workforce or where there is an overall reduction of more than 25% of wages.

In order to qualify, the small employer must have been economically harmed by the COVID-19 pandemic between February 15, 2020, and June 30, 2020. Borrowers must be able to make a good-faith certification that the loan is necessary because of uncertain economic conditions created by COVID-19 and that they will use the funds to retain workers, maintain payroll, lease property, and pay utility payments.

Once the funds have been received, and in order to qualify for forgiveness, the borrower must use all of the loan money in the following eight weeks for payroll and other qualified operating expenses described above. The borrower must apply for forgiveness through the lender. Any part of the loan that is not forgiven must be repaid within two years at one percent interest.

Religious Liberty Concerns

The stimulus package permits churches and other religious organizations to apply for financial relief through the loan forgiveness program, but should religious organizations apply? Some leaders of faith-based organizations have expressed concern that government money will come with strings attached, which may require the organization to act in a way that is inconsistent with their religious beliefs.

The Small Business Administration (SBA), responsible for implementing and overseeing this program, has released initial guidance and a frequently asked questions (FAQ) document specifically for faith-based organizations addressing this very issue. SBA loans typically have conditions on them, including complying with federal laws like Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination. These typical conditions, however, do not apply to this program.

The SBA clarified in its initial guidance that “all loans guaranteed by the SBA pursuant to the CARES Act will be made consistent with constitutional, statutory, and regulatory protections for religious liberty.” Of particular concern to many faith-based organizations is their freedom to hire like-minded employees. To this point, the guidance specifically provides that “nothing in [SBA nondiscrimination regulations] shall apply to a religious corporation, association, educational institution or society with respect to the membership or the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution or society of its religious activities.”

The SBA’s FAQ document also provides additional reassurance to faith-based organizations that there are no unique limitations on how religious organizations can use the money. In particular, the SBA clarified that the Establishment Clause “does not place any additional restrictions on how faith-based organizations may use the loan proceeds received” through the public health emergency funding in the CARES Act. SBA explicitly affirmed that “loans under the program can be used to pay the salaries of ministers and other staff engaged in the religious mission of the institutions.”

Regarding religious liberty, the SBA clarified that nothing in the loan program will limit the authority of religious organizations to determine “standards, responsibilities, and duties of members,” limit the freedom of organizations to hire, or constitute a waiver of any rights protecting religious freedom and exercise. According to the SBA’s FAQ document, a faith-based organization that receives a loan will “retain its independence, autonomy, right of expression, religious character, and authority over its governance, and no faith-based organization will be excluded from receiving funding because leadership with, membership in, or employment by that organization is limited to persons who share its religious faith and practice.”

Applying for the Paycheck Protection Program

Religious organizations interested in applying for the loan program should connect with an existing SBA lender. Here is a list of the most active SBA lenders from the SBA website. Organizations must complete a Paycheck Protection Program Application and submit it with all the necessary documentation to an approved lender by June 30, 2020.

Lenders began accepting applications for these loans on April 3, 2020. According to SBA officials, on the first day alone, lenders received approximately 10,000 applications for more than $3.3 billion. If your organization is interested in applying for funding, SBA recommends getting your application submitted as soon as possible. The funding cap will naturally limit the number of organizations that can receive funding. Congress may re-up this funding amount, but that is not guaranteed.

To request loan forgiveness, organizations should submit a request to the lender servicing the loan. The request should include documentation that verifies payroll payments as well as receipts for other eligible operating expenses. The borrower must certify that the documents are true and that the loan amount was used on eligible expenses. The lender has 60 days to make a decision on loan forgiveness.

For additional information on this process, review the Department of Treasury’s Paycheck Protection Program (PPP) Information Sheet: Borrowers. Other helpful information can be found on the Department of Treasury’s website and the Small Business Administration’s website.


All available information seems to suggest that there are currently no strings attached for religious organizations under this program. At this time, there is no real reason to believe that participating in the program will adversely affect the religious autonomy of the organization. In its guidance, the SBA has reserved the right to issue additional guidance regarding religious liberty protections in the future. Faith-based organizations should be attentive to any new guidance issued by SBA on this issue for changes or other relevant developments. And as always, consult legal counsel with organization-specific questions regarding compliance.  


Featured Image by Rebecca Sidebotham.

Because of the generality of the information on this site, it may not apply to a given place, time, or set of facts. It is not intended to be legal advice, and should not be acted upon without specific legal advice based on particular situations