SBA Affiliation Rules Waived for Faith-Based Organizations

The U.S. Small Business Administration (“SBA”) issued an Interim Final Rule on Affiliation on April 3, 2020, providing guidance on affiliation rules for purposes of determining the number of employees of an applicant to the Paycheck Protection Program (“PPP”). The PPP is a critical component of the CARES Act, offering potentially forgivable loans to eligible small businesses, nonprofits, sole proprietors, independent contractors and self-employed individuals to fund payroll and other expenses during the COVID-19 pandemic.

According to the Interim Final Rule on Affiliation and the summary Affiliation Rules Applicable to U.S. Small Business Administration Paycheck Protection Program guidance posted on the U.S. Treasury Department’s website, the SBA is waiving affiliation rules for faith-based organizations. 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 religious teaching or belief or otherwise constitutes a part of the exercise of religion.

According to Faith-Based Organization FAQ issued by the SBA, faith-based organizations can participate in the PPP, as well as the Economic Injury Disaster Loan program (EIDL). THE FAQs provide (in part) the following information:

  • Faith-based organizations are eligible to receive SBA loans regardless of whether they provide secular social services. No otherwise eligible organization will be disqualified from receiving a loan because of the religious nature, religious identity, or religious speech of the organization.
  • The same limitations that apply to all other recipients of these loans shall also apply to faith-based organizations. The PPP and EIDL loan programs are neutral, generally applicable loan programs that provide support for nonprofit organizations without regard to whether they are religious or secular.
  • Churches (including temples, mosques, synagogues, and other houses of worship), integrated auxiliaries of churches, and conventions or associations of churches qualify for PPP and EIDL loans as long as they meet the requirements of Section 501(c)(3) of the Internal Revenue Code, and all other PPP and EIDL requirements.
  • Some faith-based organizations likely would qualify as “affiliated” with other entities under the applicable affiliation rules. Entities that are affiliated according to SBA’s affiliation rules must add up their employee numbers in determining whether they have 500 or fewer employees. However, if the connection between a faith-based organization and another entity that would constitute an affiliation is based on a religious teaching or belief, or is otherwise a part of the exercise of religion, your organization qualifies for an exemption from the affiliation rules.

For example, if your faith-based organization affiliates with another organization because of your organization’s religious beliefs about church authority or internal constitution, or because the legal, financial, or other structural relationships between your organization and other organizations reflect an expression of such beliefs, your organization would qualify for the exemption. If, however, your faith-based organization is affiliated with other organizations solely for non-religious reasons, such as administrative convenience, then your organization would be subject to the affiliation rules. SBA will not assess, and will not permit participating lenders to assess, the reasonableness of the faith-based organization’s good-faith determination that this exception applies.

  • Under the CARES Act, a nonprofit organization qualifies as small, and is eligible for assistance, if (1) it has no more than 500 employees or (2) the NAICS code associated with its primary industry has a higher employee-based size standard.

Some industries – including “religious organizations” – are currently listed in the SBA’s size standards table with a monetary cap on annual receipts rather than an employee-based cap. For those nonprofit organizations whose primary industry is listed with a monetary cap on annual receipts, the size standards table cannot be used to determine eligibility for a PPP loan. Faith-based nonprofit organizations that do not fall under a primary industry that is listed with an employee-based size standard must have 500 employees or fewer to be considered small.

Please review the Interim Final Rule on Affiliation and the Faith-Based Organizations FAQ in detail to determine if your organization is eligible to participate in SBA lending programs.


For additional information on the Paycheck Protection Program and other Federal, state and local relief measures, please visit our COVID-19 Resource Center at and refer to the “Small Business Loans” section featured under our CARES Act section of the website. If you have any questions, please contact your Tronconi Segarra & Associates advisor or a member of our response team at


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