 So, this update today is about the PPP loans. My name is Christy Drenner. I am the new director of the Center for Connectional Resources, the treasurer, and the Chief Justice Officer for the North Texas Annual Conference. It is my pleasure to serve in this capacity. For those who don't know, I'm also married to a United Methodist minister. Frank is appointed to Grace United Methodist Church, and we've served this conference for over 20 years. So some familiar faces on the call and it's great to see you. I want to start by saying a big thank you to Tracy Everson for helping me put the webinar and registration together, and to Matt Jacobs, the director of communications, who's done a great job of keeping our conference up to date on all kinds of resources to help the local church in all different ways of response from media to finances to everything. So thank you both for helping me today. I wanted to give a little bit of background on the sources that I used for the presentation. One is the American Institute of Certified Public Accountants. Since March, almost weekly, there have been webinars that have been talking about the most recent legislation that's come through, how practices can support people, how the banks are reacting, how lending institutions in the SBA are proceeding with them. It is a free resource I have included the link. So if you're just anxious to hear the hot gossip in the accounting world, feel free to click on that link. And then another great resource that if you're unfamiliar with it is the church law and tax group. Not all of their resources are free, but it is, they have so much good information that applies directly to our churches that if you haven't had a chance to check them out, I would highly recommend it. And just to let you know, the slide deck will be sent out to all participants after the call, so you don't need to worry about copying down anything that you see today because you're only receiving it. So I thought it would be helpful to give you a little overview of what's happened in the last few weeks regarding the Consolidated Appropriations Act. So this act was the second largest stimulus program ever passed by Congress, the first being the CARES Act that passed in the spring. You know, a lot of frenzy and flurry came around with the first CARES Act, it was the first of its kind, and there was so many unknowns about how the loan process was going to go, who would be eligible, what were the rules related to it, and I'm sure you all remember reading in the paper that it was quite a frenzy and it was almost like a run for the bank when it opened up. That first week that the program was opened in the spring, it was $200 billion worth of loans was processed. In comparison, the first week that this program has been opened, we've only seen $10 billion worth of loans that are processed. So a lot of people have been asking, you know, do I need to worry about hurrying up and getting my application in because I don't want the window to shut again. The overriding message has been that they think that with the stimulus package being $285 billion and the requirements that are placed on getting a second PPP loan, there won't be such a run on the bank as there was the last time. But it's important to remember, although it feels a little bit smoother this time, guidance is still very fluid just last week. On the Thursday call, they said that there were seven new pieces of guidance that had been issued on the different forms that were issued and how forgiveness works and different requirements to apply. So we are still kind of, as Matt likes to say, building the plane as we're still learning how to fly. So it's kind of still that situation, but nowhere near what how it was in the spring. There are about 5,700 eligible SBA lenders, but as of last week, only 3,000 of them has started that processing loan. There's a difference. Each lender is able to tailor make their experience a little bit. I mean, there are several standards that they have to follow, but the documents requested to originate the loan and our forgive the loan will be specific to each individual bank. So as I will probably say a number of times during this call, it's important that you speak to your specific banker to see and understand what their requirements are for applying for a loan and for applying for forgiveness. Based on the feedback that you all gave me when you registered for the class, it seems like the majority of you are familiar with the PPP loan program and have gone through the first round of application. I've tried to tailor this presentation with that in mind, so I'll primarily be focusing on what's the difference between PPP1 and PPP2. So the act that passed in the spring and then what just recently passed. A better way to think about it instead of the two loans, one and two, is the question, is this the first time I'm applying for the loan or is this the second time, the second draw that I'm applying for? Because that's really what lends itself to the similarities and the differences between the two different. So both of the loan programs are very similar. The calculation of the loan request is based on about two and a half times your payroll. Your covered period can either be eight or 24 weeks, which is the amount of time that you have to spend the fund on the allowable expenses to receive full forgiveness. The loan term is still five years at 1% interest. The difference between the first and the second draw is if you have already received the first round of funding and you go to make a second application, most that you can receive is up to $2 million. And the only organizations that qualify to make a second loan application are those organizations that are 300 or fewer employees. There's also a requirement that we'll talk about in a little bit later of 25% gross receipt decline. So in order to be eligible for a second draw PPP loan, you have to be able to prove that you have had a decrease in your total receipt by 25%. Now you can use one quarter, or you can use your total annual revenue. So we'll get into that in a little bit. So the million dollar question people keep asking are am I allowed to apply for a second PPP loan if I have not used all of my first draw or my first loan? So I thought this was a great slide that I couldn't do any better than what they had prepared at that town hall meeting. It says that before your second draw is dispersed, you must certify that you have used all of the loan funds from your first loan. So you can go ahead and apply for your second PPP loan, but you need to make sure that you have used all those funds before that you receive the second portion. You do not have to have forgiveness in order to apply for a second PPP loan. One thing to note on this is that the SBA has said you are not required to have applied for forgiveness from your first PPP loan before you are eligible to apply for your second PPP loan. But the word on the street is that there are banks that are saying no, you must apply for forgiveness for the first one before we will allow you to apply for the second one. If you run into this situation and happen to have relationship with multiple banks in your town, it's fully within your right to go talk to another bank to see if you can do a second PPP loan application with them. Again, the standard is not that you have to have applied for forgiveness, but some banks might require it. As it says, some lenders are setting their own policies and requirements. And you also are going to have to attest that all of the first draw was spent on eligible expenses to be able to apply for. One thing that you need to the second PPP loan act, whether it's your first draw or your second draw, is that you are allowed to apply and use the money for additional allowable expenses than you were the first time that the legislation was passed. So under both pieces of legislation, the allowable expenses are your payroll, your mortgage interest, your rent, and utilities. But with this act, they also included the following five categories. Now, if you receive a PPP loan in the first round, but you have not yet applied for forgiveness in the second, applied for forgiveness yet, as of today, all of these covered expenses are still allowable. If you have already applied for forgiveness, then you cannot use any of the new categories. It just applies to new applications for forgiveness. So those additional allowable expenses are the cost of PPP, the cost of expenditures to a supplier that are essential to current operations. So that might be IT upgrades that you had to do because you're now doing online worship. Those are an example of the fire costs that's been covered under that. If you've had any property damage as it states that is uninsured, that can be an allowable expense. Yes, so it applies to both. If you have not asked for forgiveness yet. There's more detail in specifics, some more guidance on specific questions you might have and a couple of slides down from here where it is linked to the SBA to give you more information. Sorry. So one of the questions that's asked is, how do we document the gross receipts decline? There's a couple of ways to do that. You can use your quarterly financial statements that you're already producing for your church. And if they do not have to be certified by a CPA as an audited or reviewed or compiled financial statement, you can also use your bank statements to show, these are the total receipts that have come in. That's kind of an easy way because cash is cash, right? It's not a financial statement that we produce inside of our churches. What you want to be mindful of is if you decide to use your bank statements that you make note of, if there are any transfers, you know, a lot of churches will have different banks that, excuse me, bank accounts for restricted funds versus operating funds. You'll want to make sure that if you decide to use your bank statements that you just delineate that these were transfers between the accounts and not additional revenue. Again, I would talk to your bank if you decide to apply for a second PPP loan to ask them what types of documentation they are looking for. They will be, basically the bank is the front line to these loans. They are kind of the deciding factor before then it is sent to the SBA because if there's any type of issues, it's going to be the SBA that goes back to the bank based on the documentation that opens really back to you. So they're going to be your best resource. And with all of them having different standards that's going to be very important. One thing that applies to businesses, but not usually for churches, but if you happen to sit on the board of a not-for-profit is that you can use your annual IRS filings like your 990 to prove a decrease in gross receipts. The term gross receipts mean and how do we calculate it? So all means all. Calculation is based on all revenue in whatever form received in accordance with the church's accounting method. So what does that mean? A lot of churches don't work on an accrual basis, some do. So this slide is basically saying that however you have always accounted for the cash that walks into the church, it's how you should continue to do so when you're showing what receipts you've had over the period that you're trying to compare. One thing that hooks up some churches is well, how do I think about restricted cash or how do I think about designated cash that comes in the door? That is considered gross receipts. So the fact that the donor said, you know, I want to donate $500 to the Children's Ministry, that's still $500 that came into your church. So it has to be counted as your total. Another question that churches have asked is, well, if I use some of my endowed funds or I had operating reserves that over this period that I'm trying to compare, you know, we had to borrow, not borrow, but we moved $30,000 from our operating reserves into our regular bank account to that count as gross receipts. No, the easiest way to think about what are gross receipts is that every dollar that walked into the door during that time is kind of the rule of thumb, the easiest way to think about it. So any movements you make between your restricted funds and your operating funds do not count as receipts because you already recognize those. You already have those from a previous period. And one important question that a lot of people also ask is, does the money, if I'm applying for my second PPP loan, does the money I receive from the first loan count towards my gross receipts? No, it does not. It is not part of the calculation at all. So as I mentioned, there is extensive guidance on maybe some specific questions you have. You're welcome to raise them at the end of the presentation, but these two websites are probably going to be really helpful for answering some of your outline questions about what specific types of expenses might or might not be allowable for forgiveness and for calculating how much you can apply for your loan. About forgiveness. You have from 10 months after the last day of your covered period to apply for forgiveness. So if you decide to take the eight-week period or the 24-week period, the clock serves at the end of that time and goes for the full 10 months after that before the loan starts growing interest. Part of the new legislation allows for a simplified loan forgiveness form and process. So if your PPP loan, whether you do it in the first or whether this is your second one, if it's less than $150,000, there is less documentation required, but it is still very important for you to keep the documentation and to be able to prove that you've used the funds as they are stipulated for forgiveness. So while it might not require as many and much proof, you want to make sure that you do have it and that you do keep it. Much with the first draw and the first time that it went through to be eligible for forgiveness, 60% of your cost, that is 60% of what you use the funds for must be used for payroll and then the 40% can be split across the other allowable categories. If you go past that, there might be safe harbors that you can use, but that's kind of a detailed thing. I did want to make a note about safe harbors. If you have a significant reduction in full-time equivalence during this period when you receive the PPP loan, it can affect what your forgiveness rate is, but if you are required to close because of a local mandate that you may not have worship during this time because of how the pandemic is spread, that can be considered a safe harbor and you're not required to be held to that same standard if you do lose employees during that time. And I can go into more detail about that, but just want you to be mindful of that staff is an automatic thing, means that it's maximizability to have full forgiveness and no, it's not always. And then the most important thing, I think in this whole slide, is that the deadline to apply for either your first or your second loan is March 31st, 2021. So the portal opened a week ago and banks, as I mentioned, are starting to process them. So if you are interested in applying for the first or the second loan, I would encourage you to go ahead and talk to your banker now. It usually takes a couple weeks for them to, if they're already ready to accept application and all their forms are in place, it usually takes a couple of weeks to get that through the process. So you definitely want to find a head for it. And I did have a couple of questions that came up before the webinar. Do amounts received in December, but consistently accounted for in January, counted income in December or in January? So I would say that the way that you count contributions should be based on the postcard or the postmark rule. So if the envelope was postmarked before 1231, it should be revenue in the past year. If somebody postdates a check, but you don't receive it until January, then that doesn't count. If you have a human that's sitting in the building and you tell the whole church that you have to be here by noon on 1231, if you want your gift to count and somebody is writing down that Sarah brought $100 check-in and signs her name on it, then that's another solid form of did the gift count for last year or for this year. And so I don't know for specifics to that, but I would say when the receipt of cash comes in, that's the period in which it should be recorded. Do contributions for our Covenant Fund and for capital improvements count and then come? Yes, back to that rule of thumb. Every dollar that walks in the door is counted towards your total receipt during the period that you're looking at, regardless of if they are restricted, have a restricted purpose or not. Do contributions for restricted benevolent purposes count an income if they are dispersed to another nonprofit organization? Yes, I believe so. This would be something that I would talk to your bank about or receive guidance on because when you're trying to make the determination about if you have had gross receipt, there's no question about what you spent it on. So it's not a question of that income or how did we end the year. It's just about all the dollars that walked in the door. So I would think that that income would count towards that. And I'm happy to answer any questions that you might have. Christie, one that came through is eligibility requires a 25% revenue decline. Our largest decline for a quarter was 24.86%. Will that be rounded to 25% or will we be disqualified? That is a question for your individual banker. Because at the end of the day, they are ultimate. I would think that it would be rounded up and it would satisfy it, but I would talk to your banker. And if you have relation, as I mentioned earlier, if you have relationships with multiple bankers, I would talk to multiple bankers. It's not about trying to get around the rules. It's just there's not a tremendous amount of guidance on how the revenue is specific calculators or, you know, so it's going to be subject to the bank's interpretation. And so that's why I would say always defer to the banker. Great question. Can you share how many 1099s are treated with this new PPP legislation? I'm going to stop sharing my screen right now. Can we unmute Robert so I can get a little bit more information about what he's... Robert can unmute himself. Can you hear me? Yes, sir. Yeah, thank you very much for the presentation and the information that you've provided. It's been extremely helpful. We have also 1099 employees, well, not employees, but persons who serve. Can you speak to how the new legislation treats those? Does my question make sense? Yes, sir, it does. I think the question of... I think that it would be considered an allowable payroll expense and so that it would be part of your total calculation. I don't think there was any change from the first one to the second one. Thank you. Sure. Well... Oh, Robert, it looks like he's trying to talk or to somebody else. No, so I joined slightly maybe five minutes late and I don't know if you mentioned whether the slides were going to be shared. I know this has been recorded, but the power of point presentation, will that be shared so that we... Yes, sir. Okay, thank you. Sure. Will you send that out or will it come from our districts who pretended or Matt sends it out? Who's going to send it to us? I think Matt, Tracy or I on the call, one of us will send it out. Okay. We'll be looking forward. Thank you. Robert, one thing I'd like to do as well, and so we will send it directly via email to the participants on the call today, but I also want to make this slide deck and the presentation available on our COVID-19 resources page on the Texas conference website. And we'll also be sharing that information in our clergy update as well. Thanks, Matt. Appreciate it. You're welcome, sir. On our first PPP loan, we had some 1099 folks that are, you know, they work at the church, but they're 1099 and they were actually excluded because they weren't, I guess they're not considered employees, technically. So has that, you said that that hasn't changed from the first version to the second. There was no specific legislation there that says now you can include 1099 folks in there. I will have to do more research. I did not think that was an issue on the first one, but let me do more research and I will send an email out to this small group since it was one of the questions that came up for it. I did not. So let me do that. Okay. Yeah, I appreciate that. That will, well, thank you. Yeah, absolutely. I only promise to try to answer and then find a research and find the answer if I can't come to it all by now. So. Okay. Not the font of all knowledge. All right. Well, if there are no more questions, I think we'll end here. If you think of anything after the fact, you are welcome to reach out to me and I will do my best to try to offer you some guidance. One thing that you can also do if you have questions after the fact is submit them to our North Texas conference info box. That email is info. I N F O at N T C U M C. .org and we will pass them along to Christy. Thank you. Have a great day.