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Paycheck Protection Program Loan Forgiveness Application Released

On May 15, 2020, the U.S. Small Business Administration (SBA) finally released the much anticipated PPP Loan Forgiveness Application. The application clarified several points.

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On May 15, 2020, the U.S. Small Business Administration (SBA) finally released the much anticipated PPP Loan Forgiveness Application. The application clarified several points.

On May 15, 2020, the U.S. Small Business Administration (SBA) finally released the much anticipated PPP Loan Forgiveness Application. The application clarified the following:

Payroll Costs

  1. Payroll period options:
    • Covered Period – The eight-week (56-day) Covered Period of the borrower’s PPP loan. The first day of the Covered Period must be the same as the PPP Loan Disbursement Date.
    • Alternative Payroll Covered Period – Elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of the borrower’s first pay period following their PPP Loan Disbursement Date.
  2. Payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period or Alternative Payroll Covered Period are eligible for forgiveness.
  3. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period or Alternative Payroll Covered Period are eligible for forgiveness if paid on or before the next regular payroll date.
  4. The maximum payroll cost for an individual employee in the Covered Period is $15,385.
  5. Amounts paid to owners are capped at the lower of $15,385 or the eight-week equivalent of their applicable compensation in 2019.

Payroll Cost – Other

  1. Employer contributions for employee health insurance, including employer contributions to a self-insured, employer-sponsored group health plan are eligible.
  2. Employer retirement plan contributions are eligible.
  3. Employer state and local taxes assessed on employee compensation (e.g., state unemployment insurance tax) are eligible.

Payroll Reduction

  1. 40 hours are utilized to determine FTE.
  2. The comparison period for the 25% reduction is the average payroll from January 1, 2020 to March 31, 2020.

 Mortgage Interest Payments

  1. Mortgage interest payments covers both real and personal property.
  2. Prepayments are disallowed.

Rent or Lease Payments

  1. Rent payments covers both real and personal property pursuant to lease agreements.

Utility Payments

  1. Covered utilities are service for the distribution of electricity, gas, water, transportation, telephone, or internet access.

Non-payroll Cost

  1. Must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period

Borrowers should expect the SBA to issue an interim rule related to loan forgiveness and frequently asked questions in the coming weeks.

The blumshapiro Paycheck Protection Program Loan Forgiveness Toolkit will be updated to reflect these changes this week.

Also to note – on May 15, 2020, the House passed the HEROES Act, which, among other things, includes provisions to:

  • Extend the PPP program through the end of the year;
  • Guarantee access to PPP loans for small businesses with 10 or fewer employees;
  • Increase the eight-week loan use period to 24 weeks;
  • Create a safe harbor for borrowers who can’t rehire workers in the required time frame;
  • Repeal the requirement that 75% of the forgiven loan amount be used for payroll; and
  • Clarify that expenses paid with PPP loans that are forgiven are tax deductible.

While all the PPP enhancements contained in the HEROES Act won’t eventually become law, expect at least a few of the bill’s most significant PPP provisions to move forward.

 

COVID-19 Business Resources
Disclaimer:  The contents of this resource are for general informational purposes only. While every effort has been made to ensure its accuracy, the information is provided “as is” and no representations are made that the content is error-free. We have no obligation to update any content, comments or other information for retroactive or prospective interpretations or guidance provided by regulators, financial institutions or others. The information is not intended to constitute legal advice or replace the advice of a qualified professional. There are areas of the CARES Act where additional clarification from the Treasury Department and the SBA is needed. Your judgment and interpretation of the act may be needed. Users should consult with their legal counsel and representatives of the lending institution regarding the proper completion of their application and supporting documentation.

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