AuthorTotzke, Elizabeth


In the middle of March 2020, as the world grappled with arguably the most serious public health crisis in recent history, economic and social activity came to a halt. (1) Faced with growing unemployment and an impending recession, the United States government enacted the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, a broad relief bill that included the Paycheck Protection Program (PPP). (2) The PPP was designed to assist with common costs like payroll and rent; it encouraged private lenders to issue loans to struggling organizations on favorable terms. (3) Coordinated through the Small Business Administration (SBA), the federal government promised to guarantee--and ultimately forgive--those private loans if used for an enumerated list of expenses. (4)

Despite its longstanding policy to the contrary, the SBA deemed principally religious organizations eligible for PPP loan consideration. (5) Accordingly, Catholic parishes, the focus of this Note, and other houses of worship applied for and received PPP assistance. (6) But, controversy quickly ensued. Some scholars viewed religious inclusion as merely an extension of an otherwise secular disaster relief plan that transcended obvious constitutional inquiry. (7) From this perspective, the minimization of the pandemic's overall economic impact required broad, all-encompassing employment protections. (8) A contingent of legal academics, however, penned a more fashionable response. Heeding concern that PPP funding could be used to directly maintain houses of worship and pay clergy salaries, these scholars decried the SBA's inclusionary policy and contended that such federally backed loans implicated and ran afoul of the Establishment Clause. (9) A piece in the Associated Press, which garnered national attention, assumed this argument. (10)

However, this Note argues the inclusion of houses of worship and the subsequent dispersal of PPP funds to the Catholic Church was explicitly constitutional. Applying the lens of the Supreme Court's recently announced non-discrimination principle, this Note considers the ramifications of the SBA's official policy and explores the constitutional justification for the SBA's ad hoc PPP policy. In fact, under the nondiscrimination principle, this Note concludes that the SBA's policy shift was not just constitutionally permissible, but probably constitutionally required.

Litigants have yet to challenge the inclusion of religious organizations in the PPP, but the "dust" of COVID-19 also has yet to settle. Instead, litigants are turning to the (virtual) courtroom to dispute limitations on public gatherings and the corresponding First Amendment implications. That, of course, is the subject of another note. (11) This Note, however, raises broader questions than those merely surrounding COVID-19 and the PPP: though pandemics are rare, disasters are not. Assuredly, the government again will be called upon to respond to some future crisis, be it natural or man-made. The SBA, as well as other federal agencies, should now act to make permanent the administrative structure of the PPP for future government assistance programs. As Bishop Lawrence Persico of Erie, Pennsylvania noted: while "some people may react with surprise that government funding help[s] support faith-based schools, parishes[,] and dioceses,... [t]he separation of church and state does not mean that those motivated by their faith have no place in the public square." (12)

The analysis of this Note proceeds in four parts. Part I provides a background of the COVID-19 pandemic, as well as an overview of the PPP. Part II examines the evolution of the Religion Clauses' jurisprudence in the context of religious organizations' receipt of government benefits, including the Court's modern doctrine: nondiscrimination. Part III highlights other instances in which the Catholic Church and other religious organizations have been eligible for government assistance in periods of disaster. Finally, Part IV evaluates the constitutionality of the PPP under the First Amendment when applied to religious organizations and, more specifically, the Catholic Church. This Part also contemplates the permissibility of the PPP under the Equal Protection Clause, since this Clause is the most frequent basis for litigation involving discrimination.


    On March 11, 2020, the World Health Organization announced that it had categorized COVID-19 as a pandemic, (13) meaning the virus had crossed international boundaries and was "affecting a large number of people." (14) Within a matter of days, public and private institutions closed their doors, Americans retreated to their homes, and economic activity collapsed. (15) Despite national and local leaders' promises of quick containment and recovery, by the end of the year, the virus was anything but contained; the United States had surpassed nineteen million confirmed cases and 300,000 deaths. (16) Among the many tactics employed to "[s]low the [s]pread" of the virus, (17) experts especially urged limitations on large public gatherings deemed "superspreading events." (18) In the religious context, these events earned a particularly infamous reputation after, for example, an infected pastor and his wife spread the virus to at least thirty church members, resulting in at least three deaths. (19) Thus, while restrictions fluctuated between capacity limitations and complete closures, churches, synagogues, mosques, and the like were, for the foreseeable future, unable to proceed with business--or worship--as usual. (20)

    The Catholic Church--the focus of this Note--responded accordingly. The vast majority of parishes or, colloquially, churches, indefinitely suspended public Masses to comply with state and local government orders. (21) Though many transitioned to online services, (22) parishes lost a substantial source of revenue in the form of weekly collections. (23) Bishops, who supervise parishes within a defined ecclesiastical district (diocese), consequently reported concerns about paying the salaries and wages of parish staff, and the financial impact was felt on a diocesan level as well. (24) With COVID-19 affecting family incomes, bishops also worried that low future enrollments at Catholic schools would gradually reduce the schools' financial solvency. (25) The financial future for the Catholic Church was uncertain, but deteriorating.

    Meanwhile, on March 27, 2020, President Trump signed into law the CARES Act. (26) Encompassing numerous financial relief measures, the CARES Act contained the PPP, (27) a loan administered through the SBA "designed to provide a direct incentive for small businesses to keep their workers on the payroll." (28) But, while administered through the SBA, the PPP actually entailed the issuance of loans from private lenders. (29) Any small business or nonprofit organization with fewer than five hundred employees was eligible. (30)

    Through the PPP, small businesses were eligible for a loan amount derived from a multiplier of average monthly payroll costs, and the use of the funding was limited to select costs including payroll, health care benefits, salaries, mortgage interest, rent, and utilities. (31) These "loans" also were eligible for full forgiveness, so long as businesses used at least sixty percent of loan proceeds for payroll costs. (32) Such loans were thus, in practice, grants. (33) With such favorable terms, the PPP was open to a broad range of businesses, for a broad range of reasons. In fact, Senator Marco Rubio, one of the primary drafters of the CARES Act, noted that the PPP had been designed to "cover as many people as possible"; loans were not limited to typical "mom and pop"-type businesses. (34)

    Despite the broad coverage of the PPP, the eligibility of religious institutions was not immediately clear. Traditionally, SBA regulation dictates that businesses "principally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs"--churches--are ineligible for SBA business loans. (35) In 1996, when this regulation was enacted, the SBA defended religious ineligibility on the basis of Establishment Clause concerns. (36) The narrative shifted for the PPP, however. Shortly after the passage of the CARES Act, the SBA posited that religious ineligibility (rather than eligibility) violated the Constitution and announced that faith-based organizations were eligible to receive loans. (37)

    Importantly, the SBA did not accompany its decision with a new regulation. The SBA instead "hid the elephant in the mousehole" and inconspicuously noted its PPP policy in an FAQ publication. (38) This is not to imply that the SBA was hasty or deceitful; the SBA's brevity was likely a reaction to external pressures for expediency as entities began loan applications. Yet, the SBA's PPP policy promulgation remains problematically informal and temporary--the 1996 regulation is still the law for all instances but the PPP. (39)

    The SBA also made clear that the Catholic Church, like most faith-based organizations, was exempt from the "affiliation rule." (40) This rule generally groups affiliates, or those entities that share some aspect of control (like franchises), when ascertaining the number of employees within an organization. (41) Absent exemption, application of the affiliation rule to the hierarchal structure of the Catholic Church likely would group all dioceses within the United States as a single entity. (42) The ramifications are substantial. As of 2010, the average parish had an estimated staff count of only 9.5 members; slightly more than half occupied ministerial positions. (43) But, when combined with all other parishes, the employee count of the Catholic Church in the United States totaled over 160,000 individuals. (44) Include employees of Catholic hospitals, schools, nursing homes, and other charitable institutions, and the number likely exceeded one...

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