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?
|What counts as payroll costs?||
|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||
|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:
If salaries are reduced by > 25%:
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||
|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).