On June 22, 2020, yet another interim rule was published by the SBA related to revisions to the PPP loan forgiveness process that stem from the Paycheck Protection Program Flexibility Act (“PPF”). The Interim Rule can be found here.
The current loan forgiveness applications published on June 16 included an updated full application and an EZ application, which were highlighted in this recent newsletter. Forgiveness applications must be filed with the lender within 10 months after the loan covered period ends, otherwise principal and interest payments start on the amount borrowed. The lender then has 60 days to issue their decision to the SBA on the amount of loan forgiveness, and the SBA has an additional 90 days to approve/disapprove the forgiveness amount.
Key highlights of the June 22 interim rule are as follows:
- Forgiveness applications can be submitted before the end of the elected covered period (8 weeks or 24 weeks) if all PPP loan proceeds have been used.
- If the borrower applies for loan forgiveness before the end of their elected covered period and has reduced employee wages in excess of 25%, the wage reduction limitation must be calculated over the entire 8-week or 24-week period, not just through the application date.
- Owner-employees and self-employed individuals are limited to the lesser of the calculated amounts listed below, or $15,385 for an 8-week covered period or $20,833 for a 24-week covered period as payroll costs for purposes of loan forgiveness :
- C corporation – 2019 cash compensation, the employer’s portion of owner’s retirement and health contributions
- S corporation – 2019 cash compensation and the employer’s portion of owner’s retirement contributions
- General partners – 2019 net earnings from self-employment (reduced by 179 expense deduction, unreimbursed partnership expense, and depletion from oil and gas properties) multiplied by 0.9235
- Schedule C or F filers – 2019 Schedule C or F reported net profit
If we can assist you in explaining the programs’ provisions, analyzing the potential benefits or helping you with gathering the needed information, please call any Sponsel CPA Group Team member or our colleagues listed below.
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.