Exclusive: Hawley Urges Small Business Administration to Treat Religious Nonprofits Equally in Coronavirus Aid

Yesterday evening, Senator Josh Hawley (R., Mo.) sent a letter to the Small Business Administration (SBA), urging its officials to adopt appropriate standards for nonprofit religious organizations when administering the loan program created by the coronavirus-relief legislation.

The letter, a copy of which was provided exclusively to National Review, concerns the Paycheck Protection Program, an emergency lending program created by the Coronavirus Aid, Relief, and Economic Security Act to provide small-business loans during this time of economic uncertainty.

Hawley notes that the program, as established by Congress, requires lenders to consider only the size of an organization when disbursing loans, as opposed to other loan programs administered by the SBA that explicitly exclude religious organizations. But the central point of the letter is to urge the SBA to consider the distinct nature of religious nonprofits when determining what loans they can receive during this crisis.

“The Paycheck Protection Program applies to ‘small’ organizations—by default, those with 500 or fewer employees,” Hawley writes. “But the definition of ‘small’ is not the same in every industry, so the program encourages the SBA to continue adopting regulations that alter that size standard for specific industries.”

In other words, the 500-employee standard is a one-size-fits-all default that doesn’t take into account the unique needs of specific sectors of the small-business economy. Hawley points out that the SBA has already chosen to alter the size standard applied to tire manufacturers under the loan program, considering those with up to 1,500 employees small businesses.

“The SBA should adopt a higher size standard for religious organizations to recognize the distinct set of roles these organizations perform,” Hawley says in the letter. “Unlike other small nonprofits, religious organizations often operate in more than one industry. For example, a single entity might operate a church, school, foster care center, publishing house, job training center, and soup kitchen.”

Hawley notes, too, that religious nonprofits often employ individuals at a much lower compensation rate than a normal employer, meaning that they use the same amount of money to employ a larger number of people. As a result, the 500-employee standard wouldn’t properly take into account a nonprofit’s need for payroll assistance.

“Indeed, it may be more appropriate to treat each segment of a religious nonprofit—for example, a foster care center, church, and school—as separate, distinct entities,” he suggests.

Citing the Supreme Court ruling in Trinity Lutheran v. Comer, Hawley writes, “Failure to consider an appropriate size standard for religious organizations after having already done so for hundreds of industries would be no different from targeting religious organizations for special disfavor.”

His letter concludes by stating that the SBA should not take into account a religious organization’s affiliates when determining whether it satisfies the size standard, saying doing so would raise “substantial constitutional concerns.”

“Religious organizations are diverse and affiliation decisions often are made for ecclesiastical, doctrinal, or congregational reasons,” the letter states. “Recognizing this problem, federal policy already exempts most religious organizations from having to identify their affiliates.”

Hawley’s full letter can be found here.