Image of a computer keyboard with a key that reads "PPP Paycheck Protection Program"

SBA and Treasury Provide PPP Forgiveness Application…FINALLY!

Filed under:

Affordable Housing, Construction, COVID Updates, Dental, Family Business, FQHC, Healthcare, Nonprofit, Private Companies, Small Business Services

At 5:00 p.m. (PDT) on Friday, May 15th, the SBA and Treasury Department provided the first version of the PPP Loan Forgiveness Application. The application provides answers to many questions and here are some of the more important aspects of the loan forgiveness application:

  • Borrowers with bi-weekly (or more frequent) payroll are eligible to use an “Alternative Payroll Covered Period”. This must be elected by the borrower and aligns the borrowers covered period with their payroll period. The application provides the following example: “if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.”
  • Payroll costs include all salaries and wages, which appears to include bonuses and separation pay. The maximum per employee is $15,385 ($1,923 per week).
  • Eligible payroll costs: The application explains that both payroll costs paid and payroll costs incurred are eligible for forgiveness. Eligible payroll costs paid beyond the Covered Period will qualify if paid on or before the next regular payroll date.
  • Eligible non-payroll costs 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. Eligible non-payroll costs cannot exceed 25% of the total forgiveness amount.
  • Lease payments include real estate or personal property, pursuant to a lease agreement in force before February 15, 2020.
  • Covered mortgage obligations include interest on real estate or personal property. It does not include the payment of principle or prepayment of interest.
  • It is clear from the application that if you do not spend all of your PPP funds as it relates to the 75% payroll cost rule, the eligible forgiveness amount is reduced rather than requiring the entire PPP loan amount be repaid.
  • A full-time equivalent (FTE) is considered to be working 40 hours per week.
  • Borrowers have been given safe harbor if they cannot return all employees to full-time at the start of the Covered Period. Borrowers are exempt if both are met; “(1) the Borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; and (2) the Borrower then restored its FTE employee levels by no later than June 30, 2020 to its FTE employee levels in the Borrower’s pay period that included February 15, 2020.
  • The SBA will deduct the EIDL Advance from the forgiveness amount.

Here is a link to the PPP Loan Forgiveness Application.

It is our opinion that full loan forgiveness will be difficult. However, achieving a prorated forgiveness is possible, but only with proper planning. We also anticipate that more guidance is coming and you should consult your tax advisor for any questions you might have in regard to the PPP Loan and your eligibility for forgiveness. Our team at Jones & Roth is also happy to help with any questions or concerns.

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