PPP Interim Final Rule: Ownership and Nonpayroll Cost Clarification

On August 24, 2020, the SBA issued a new Interim Final Rule on the Paycheck Protection Program (PPP) loan program found here.

This Interim Final Rule was issued to provide clarification of forgiveness treatment related to owner compensation and expands on limitations of certain nonpayroll costs.

Key provisions of the document include:

  • Owners with less than a five percent ownership in C or S corporations are not subject to the owner-employee compensation rule. As a reminder, for owners with five percent or greater ownership, the forgiveness treatment by type of entity was summarized in this eblast.
  • Nonpayroll costs incurred by a tenant or subtenant cannot be included in the forgiveness calculation. Example — a company rents space for $5,000 a month and subleases a portion for $1,000 a month. Only $4,000 a month is eligible for loan forgiveness.
  • Rent payments to a related party are eligible for forgiveness if both of the following are true. Any common ownership between business owner and property owner is considered a related party in this instance.
    • The amount of rent or lease payments to the related party requested for forgiveness is not more than amount of mortgage interest owed on the property during the Covered Period.
    • The lease and mortgage were entered into prior to February 15, 2020.

If we can assist you with understanding the programs’ forgiveness provisions, analyzing your loan forgiveness opportunity and application or assisting you with gathering loan forgiveness information needed, please call any Sponsel CPA Group Team member or our colleagues listed below.

             Jason Thompson-Direct at 317-608-6694 or JThompson@sponselcpagroup.com

             Eric Woodruff-Direct at 317-613-7850 or EWoodruff@sponselcpagroup.com

             Lisa Blankman-Direct at 317-613-7856 or LBlankman@sponselcpagroup.com

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

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