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New Guidance Issued on PPP Loan Forgiveness

ppp-loan-forgiveness

Great news! More guidance has been released this week regarding PPP Loan forgiveness.

The AICPA (Association of International Certified Professional Accountants) released a concise summary of the information:

  • Interim Final Rule on Additional Revisions to First Interim Final Rule (6/12/2020)
    • The original First Interim Final Rule (IFR) disqualified an applicant if an owner of 20% or more had been convicted of a felony within the last five years.
    • This revision reduced the requirement to one year for felonies that do not include fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance.
    • Interim Final Rule on Revisions to the Third and Sixth Interim Final Rules (6/17/2020)
    • Updated to reflect the PPP Flexibility Act
      • Covered period updated to 24 weeks
      • 60% to be spent on payroll costs
    • Eligible payroll costs per employee
      • Capped at $46,154 for 24-week covered period borrowers
      • Remains capped at $15,385 for 8-week covered period borrowers
    • Owner Compensation Replacement
      • Capped at the lesser of $20,833 or 2.5 months’ worth of 2019 net profit for 24-week covered period borrowers
        • $100k / 12 months * 2.5 months = $20,833
      • Remains capped at $15,385 for 8-week covered period borrowers
      • Note: Instructions to loan forgiveness application indicate all owners are capped at these amounts (including S Corp and C Corp owners)
      • An EZ Loan Forgiveness Application is available
    • Applies to borrowers that
      • Are self-employed and have no employees; OR
      • Did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
      • Experienced reduction in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.
    • A simplified one-page form plus certifications and representations
      • Requires fewer calculations
      • Documentation still required to be submitted / maintained including full time employees at 1/1/2020 and end of covered period
      • The full Loan Forgiveness Application has been revised
    • A borrower can choose an 8 or 24 week covered period if loan funds were received prior to June 5
    • New certifications regarding FTE reduction safe harbor related to operating restrictions
    • Non-cash compensation costs clarified to “paid or incurred”
    • FTE and salary/hourly wage calculation for reduction are basically the same
    • Health insurance for S Corp owners, self-employed, and general partners is not allowed
    • Retirement contributions for S Corp owners is allowed. It is not allowed for self-employed and general partners.

Please reach out to us if you have any questions on how to maximize forgiveness. We can help determine whether to elect for an 8 week or 24 week covered period. We are also available to track expenses and complete the Forgiveness Application.

 

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