In June 2020, the U.S. Small Business Administration (SBA) issued forgiveness applications, instructions and guidance to incorporate the changes from the Paycheck Protection Program Flexibility Act:
The key takeaways are:
- Loan Forgiveness Application Form EZ Instructions and Loan Forgiveness Application Form EZ applies to the following borrowers:
- A self-employed individual, independent contractor, or sole proprietor who had no employees and did not include employee salaries in the computation of average monthly payroll in the original application
- A borrower that did not reduce annual salary or hourly wages by 25% and did not reduce number of employees or average paid hours
- A borrower that did not reduce annual salary or hourly wages by 25% and was unable to operate at the same level of business activity due to compliance with requirements established by various federal agencies
- Applicants utilizing Loan Forgiveness Application Form EZ must maintain documentation supporting their eligibility to utilize the Form EZ. Applicants still need to perform and maintain the calculations internally, since the SBA can review any loan within six years of the loan forgiveness or repayment date.
- Covered period options are 24 weeks or 8 weeks; there does not appear to be option at this point to pick a period between 8 to 24 weeks. There may be a frequently asked question (FAQ) issued in the future to address this.
- 24-week maximum cash compensation is $46,154 for employees (non-owners).
- Owner-employees, a self-employed individual, or general partners 24-week compensation is capped at the lower of $20,833 or the 2.5-month equivalent of their applicable compensation in 2019 for the 24-week period. For the 8-week Covered Period, this amount is capped at 8/52 of compensation up to $15,385.
- Employee Benefit Clarifications for owners:
- Self-employed individuals, general partners, or owner-employees of an S-corporation health insurance contributions are excluded, since they are already included in their compensation (i.e. this item is subject to the cash compensation limit)
- Self-employed individuals or general partners’ employer retirement contributions are excluded, since they are already included in their compensation (i.e. this item is subject to the cash compensation limit)
- Full Time Equivalent (FTE) Reduction Exceptions
- A good-faith, written offer to rehire an individual who was an employee on February 15, 2020 was rejected by the employee and the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020;
- A good-faith, written offer to restore any reduction in hours, at the same salary or wages was rejected by the employee
- Any employees who (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours.
- FTE Reduction Safe Harbors
- The Borrower is exempt from the reduction in loan forgiveness based on a reduction in FTE employees if the Borrower, in good faith, is able to document that it was unable to operate at the same level of business activity due to compliance with requirements established or guidance by various federal agencies. It appears that no documentation is required to be submitted with the application regarding this safe harbor. However, the application requires the applicant to maintain documentation supporting their certification of reduced business activity due to compliance with requirements established or guidance by various federal agencies.
- Restoration of full-time equivalent employee levels by no later than December 31, 2020
Calculating Loan Forgiveness
We have developed the blumshapiro PPP Loan Forgiveness Toolkit & Calculator to assist you in making your calculations. We will continue to update the blumshapiro PPP Loan Forgiveness Toolkit & Calculator as additional guidance becomes available. We expect to issue an updated loan forgiveness tool kit as soon as additional FAQs are released related to loan forgiveness. As long as the blumshapiro PPP Loan Forgiveness Toolkit & Calculator is downloaded via blumshapiro.com, all downloaders will get notified of any changes to the PPP Loan Forgiveness Toolkit & Calculator.
PPP Loan Forgiveness Assistance
blum has been on the forefront of interpreting PPP guidance and providing trusted resources for clients to keep them apprised of constant changes and providing the most up-to-date information to assist in calculating loan forgiveness. Our team is working with clients to assist them with navigating through compliance requirements of the loan forgiveness program, to ensure forgiveness is received, help expedite the loan forgiveness process and provide a reliable and trusted source of information. Learn more about our loan forgiveness services >>
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Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statutes, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.
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.