This updated loan forgiveness application supersedes the loan forgiveness application that was released on May 15, 2020. The updated application incorporates the changes to the PPP made by the Paycheck Protection Program Flexibility Act which was signed into law on June 5, 2020.
On June 17, 2020 the SBA released Revisions to the Third and Sixth Interim Final Rules. The release of the new loan forgiveness application in conjunction with the release of the revisions to the interim final rules has addressed some of the previously unanswered questions such as:
1. Covered Period: All PPP loan borrowers will now have a 24-week Covered Period, unless borrowers of loans originated prior to June 5, 2020 elect to use the 8-week Covered Period as originally designed. The application instructs the borrower to state their covered period on the application, either the 8- or 24-week period. These new instructions do not suggest that there is an additional form required for the 8-week election.
2. Maximum Cash Compensation Per Employee: PPP loan borrowers can obtain forgiveness for cash compensation in the maximum amount of $46,154 per non-owner employee, calculated as $100,000 prorated over the 24-week Covered Period. Those who elect the 8-week Covered Period are still limited to $15,385.
3. Owner Compensation: Prior to this latest guidance, owner compensation was limited to eight weeks’ worth (8/52) of 2019 Owner Compensation up to $15,385. PPP loan borrowers using the 24-week Covered Period can now include 2.5 months’ worth (2.5/12) of 2019 Owner Compensation up to $20,833. This limit applies to owner-employees, self-employed individuals and general partners.
4. Owner Benefits: Employer health insurance contributions made on behalf of self-employed individuals, general partners or owner-employees of an S corporation are not included in payroll costs eligible for forgiveness. Employer retirement plan contributions made on behalf of self-employed individuals or general partners are not included in payroll costs eligible for forgiveness.
The SBA also released the PPP Loan Forgiveness Application Form 3508EZ on June 16, 2020. The Form EZ is a simplified version of the loan forgiveness application and is applicable to PPP loan borrowers who are willing to certify they have met one of the following conditions:
1. Borrower Has No Employees: The borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the PPP loan application form.
2. No Salary or Hourly Wages Reductions or FTE Reductions: The borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or compared to the period between January 1, 2020 and March 31, 2020, AND did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period.
3. No Salary or Hourly Wages Reductions or Unable to Maintain Level of Business Activities: The borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or compared to the period between January 1, 2020 and March 31, 2020, AND was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, the Occupational Safety and Health Administration, or standards of sanitation, social distancing, and any other work or customer safety requirement related to COVID-19.
There is still approximately $140 billion available in PPP funds. The deadline for applying for these funds is June 30, 2020. If you have not yet applied for these funds we encourage you to contact us to discuss your situation.
KRD is continuously monitoring new guidance from the SBA, Treasury, Congress and the IRS, to ensure we have the latest information when advising our clients.