Are Arizona Churches Eligible for the Employee Retention Credit (ERC)?

  1. Church & Nonprofit
  2. Are Arizona Churches Eligible for the Employee Retention Credit (ERC)?
Church & Nonprofit

Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), companies or organizations that were shut down or suffered a 50% reduction in revenue due to a COVID-19-related federal, state, or local government order are eligible for a refundable payroll tax credit of up to $5,000 per employee. This includes monies spent to maintain group health plan coverage. Organizations that receive a Paycheck Protection Program (PPP) loan or Economic Injury Disaster Loan (EIDL) are ineligible for the ERC.

The American Rescue Plan Act, signed into law on March 11, 2021, expanded the availability of the ERC during all four quarters of 2021. Churches in Arizona that shut down voluntarily or suffered a 50% decrease in revenue because of the COVID-19 pandemic may be wondering if they are eligible for the ERC. The short answer is: probably not.

On March 30, 2020, Arizona Governor Doug Ducey issued Executive Order 2020-18, instituting a “Stay Home, Stay Healthy, Stay Connected” policy that limited Arizonans to participating only in essential activities or functions. The policy specifically exempted “constitutionally protected activities such as speech and religion” from these restrictions.

On April 30, 2020, the Arizona Attorney General issued an Opinion Letter reiterating that the Executive Order did not apply to places of worship. The Attorney General’s Opinion Letter stated, “Attendance at a place of worship is clearly an ‘essential activity’ under Executive Order 2020-18. The Executive Order expressly provides that essential activities include ‘[e]ngaging in constitutionally protected activities such as speech and religion.’”

Therefore, because there was no federal, state, or local government order in Arizona that restricted or closed places of worship, churches and ministries would not meet this basic requirement of eligibility for the ERC.

Provident’s nonprofit attorneys can help churches and religious organizations with risk management. We stand ready to counsel and serve churches, charities, and foundations, as well as private schools, colleges, universities, and other types of nonprofit organizations—providing broad transactional and general counsel services in Arizona and surrounding areas. Contact us to learn more.

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