COVID-19: Canada Emergency Business Account (CEBA) Q&A

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This entry is part 18 of 45 in the series COVID-19.

Canada Emergency Business Account Defined

The federal government describes the Canada Emergency Business Account (CEBA) as a $25 billion program that provides interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced, due to the economic impacts of the COVID-19 virus. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000).

As churches and charities have looked at the eligibility criteria (listed below), it’s clear that the criteria aren’t so clear. Here we try to answer a few of your questions.

Questions & Answers

We are a charity. Does that mean we are excluded?

It is apparent from the name of the program that business are the primary target, and the starting point is that charities are excluded, subject to a narrow exception.

Charities that are “T3010 corporations” and that have revenue from the sale of goods and services may apply.

The term “T3010 corporation” is not commonly used but the wording suggests a charity needs to be incorporated, registered, and file an annual T3010.

Is there a minimum portion of revenue that must be generated from the sale of goods or services?

The criteria does not indicate a minimum threshold necessary. It simply notes that “a portion” of revenue must be generated from the sale of goods and services.

What is meant by the sale of “goods or services”?

The criteria does not define what is meant by revenue from the sales of “goods and services” and members have received different information from different financial institutions.

In the context of other federal programs, “revenue” is defined in broader terms; however, based on our understanding that CEBA is targeted toward small businesses carrying out commercial activities with a narrow expansion to incorporated charities, it is prudent to apply a similarly narrow definition to “goods and services.”

What is a narrow definition? Line 4640 on the T3010 asks charities for “total revenue from [the] sale of goods and services (except to any level of government in Canada).” These terms directly align.

Charity applicants who apply in good faith for CEBA in reliance on line 4640 revenues would, subject to other eligibility criteria, seem to be eligible.

We are aware that applicants with rental revenue but no line 4640 revenue, have been approved. We recommend that if you have questions or concerns about your specific application, you should speak with your financial institution and/or seek legal advice.

What about the anti-discrimination requirement? Does it limit churches from maintaining hiring practices on the basis of religious belief? Can charities require minimum educational qualifications for its employees?

**UPDATE** The CEBA borrowing requirements have been updated. Borrowers must confirm, among other things, that they do not “promote violence, incite hatred or discriminate on the basis of sex, gender identity or expression, sexual orientation, colour, race, ethnic or national origin, religion, age, or mental or physical disability, contrary to applicable laws.” This confirms our understanding of the wording in the confirmation when it was first released, as explained in the original blog, which continues below.

The anti-discrimination requirement ought to impliedly incorporate provincial human rights statutes and constitutional norms. In other words, the requirement should not be read in isolation; on its own it is seemingly unsustainable and presumably impossible to enforce.

Read on its face, a business or organization could not maintain educational minimums for specific positions, a special-interest organization could not require employees to agree with and pursue its mission or vision, a construction company could not require physical abilities as occupational requirements and special programs to ameliorate the conditions of particular groups of disadvantaged people could be prohibited.

Human rights exceptions and the Charter right to religious freedom underscore the scope for religious organizations to accomplish their charitable purpose; preaching and advancing the teachings of the Christian faith, offering programs, services and activities in accordance with applicable laws, including the exercise of conscience and religion in regard to marriage.[1]

Where there is a bona fide occupational requirement or an organization is subject to an exception within a human rights framework[2] those ought to be implied in the eligibility criteria for the limitation to make sense in the context of existing law.

Whether this is the approach that will be taken by government is unclear. One would reasonably expect that limitations would be interpreted with a view to existing law. There are similarities between the CEBA terminology with Canada Summer Jobs application requirements. For a full discussion on the latter, and to help frame and evaluate the CEBA questions, see our CSJ blog post series, and specifically the post on applications in 2019 and 2020.

Our denomination provides centralized payroll services, but each church functions as a separate employer. Our T4SUM exceeds the limit. What can our churches do?

We know that many denominations offer a centralized payroll under one payroll number, even while the local churches have their own employment contracts with staff, pay their compensation and are the employer. This means the T4Sum includes the payroll of all the churches, making the combined payroll higher than the small business limit of $1.5 million.

We understand that banks are using online applications that recognize only the total, leaving many individual churches facing rejections.

CCCC has raised this concern with the Finance Department. While a solution has not yet been created, Finance has expressed a willingness to look at potential solutions along with other CEBA implementation considerations.

As soon as any further information is available CCCC will provide an update.

Eligibility Criteria

  1. The Borrower is a Canadian operating business in operation as of March 1, 2020.
  2. The Borrower has a federal tax registration.
  3. The Borrower’s total employment income paid in the 2019 calendar year was between Cdn.$20,000 and Cdn.$1,500,000.
  4. The Borrower has an active business chequing/operating account with the Lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable, with the Lender by 90 days or more as at March 1, 2020.
  5. The Borrower has not previously used the Program and will not apply for support under the Program at any other financial institution.
  6. The Borrower acknowledges its intention to continue to operate its business or to resume operations.
  7. The Borrower agrees to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

Additional Exclusions

  1. It is not a government organization or body, or an entity owned by a government organization or body;
  2. It is not a union, charitable, religious or fraternal organization or entity owned by such an organization or if it is, it is a registered T2 or T3010 corporation that generates a portion of its revenue from the sales of goods or services;
  3. It is not an entity owned by individual(s) holding political office; and
  4. It does not promote violence, incite hatred or discriminate on the basis of sex, gender, sexual orientation, race, ethnicity, religion, culture, region, education, age or mental or physical disability contrary to applicable laws.

Permitted Use

The funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

Charity leaders are invited to share how they are responding to the COVID-19 pandemic within their organization in our online community forum, The Green: COVID-19 Response Room.

Revised May 25, 2020 @ 3:30 pm (EST)

[1] Civil Marriage Act, SC 2005, c 33 s 3.1

[2] See, for example, BC Human Rights Code, RSBC 1996, c 210, ss 41-42; Alberta Human Rights Act, RSA 2000, c A-25.5 s 10.1; Ontario Human Rights Code, RSO 1990, c H19 ss 18, 18.1, 24

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The content provided in this blog is for general information purposes and does not constitute legal or professional advice. Every organization’s circumstances are unique. Before acting on the basis of information contained in this blog, readers should consult with a qualified lawyer for advice specific to their situation.

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