The U.S. Small Business Administration (SBA) released an application form Friday for Paycheck Protection Program (PPP) loan forgiveness along with instructions for completing the form. The form and instructions offer borrowers details on how to apply for forgiveness of their PPP loans, consistent with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136 and additional guidance such as FAQs and interim final rules. The team at A&C has worked to simplify the key attributes of PPP forgiveness, helping clients understand the process and requirements without missing the key factors to be alert about.

Updated as of May 15, 2020 
 Key Loan Attributes Paycheck Protection Program (PPP) & Its Forgiveness
When does the 8-week period begin? The 8-week period begins on the date the lender makes the first disbursement of the loan.
What is the loan used for? 


  1. Payroll Costs
  2. Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  3. Interest on mortgage obligations, incurred before February 15, 2020;
  4. Rent, under lease agreements in force before February 15, 2020; and
  5. Utilities, for which service began before February 15, 2020.
What counts as payroll costs?
  1. Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  2. Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
  3. State and local taxes assessed on compensation; and
  4. For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
Payroll cost exclusion for loan forgiveness The employer federal payroll taxes (i.e. FICA and Medicare taxes) imposed on the gross payroll are not eligible payroll costs for the loan forgiveness calculation.
Loan Forgiveness Restrictions
  1. Minimum Payroll: > 75% of the loan proceeds must be used for payroll costs.
  2. Level of Payroll: Salaries cannot be reduced by > 25% for any employee who made less than $100,000 annualized in 2019.
  3. Number of Staff: The number of full-time employees (FETs) cannot be reduced.
  4. Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
Loan Forgiven Amount  (B): average number of FTEs per month for the 8-weeks beginning on loan origination

(C): average number of FTEs per month from 2/15/19-6/30/19 or 1/1/20-2/29/20

(D): the amount of salary decreased by > 25% for any employee making less than $100,000 annualized in 2019

(E): other costs – 25% of PPP Loan

If employees are not fully retained: 

  • Loan Forgiven Amount = (A) x (B) / (C)

If salaries are reduced by > 25%:

  • Loan Forgiven Amount = (A)(D)

If other costs exceed 25% of the loan, the above forgiven amount will be reduced further by item (E).

Who accesses loan forgiveness? The lender that was used to obtain the PPP loan will process your loan forgiveness. Once the request is submitted, the lender must make a decision on the forgiveness within 60 days.
Required documents for loan forgiveness request
  1. Documents verifying the number of full-time equivalent employees on payroll and their pay rates, for the periods used to verify you met the staffing and pay requirements:
    • Payroll reports from your payroll provider
    • Payroll tax filings (Form 941)
    • Income, payroll, and unemployment insurance filings from your state
    • Documents verifying any retirement and health insurance contributions
  2. Documents verifying your eligible interest, rent, and utility payments (canceled checks, payment receipts, account statements)
Taxability/Deductibility of PPP loan forgiveness The forgiveness of a PPP loan is not taxable income, in return, no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan.

*This information is continuously being updated by the SBA and the IRS, please check with us for specific questions.

For more information about PPP forgiveness application and SBA guidelines, please find attached the PPP Loan Forgiveness Application form and the SBA Guidance as of May 13, 2020 (FAQs #1 – 47).