Paycheck Protection Program (PPP) Loan Forgiveness Application

Friday evening, May 15th, the SBA released its PPP loan forgiveness application.  The application also included clarification on how to calculate eligible costs during the 8-week period for expenditures, which begins on the date the funds have been received by the borrower.

Following are key highlights:

  • Alternative Payroll Covered Period – borrower can elect to use an 8-week period that starts with the 1st day of pay period that begins after loan was received
  • Eligible payroll costs are defined as paid and incurred, but payroll costs incurred during the last pay period of the 8-week period and paid after the 8-week period ends are eligible, if paid on or before the next regular payroll date
  • Eligible employer contributions for health insurance and retirement plans are payments (e.g. cash basis) during the 8-week period
  • Interest, rent and utilities paid during the 8-week period (e.g. cash basis) or incurred during the 8-week period and paid on or before the next regular billing date (e.g. within next month after 8-week period)
  • $100,000 compensation cap appears to be $15,385 for the entire 8-week period, not on a payroll period basis
  • Owner compensation (e.g. partners or members) is limited to the lower of $15,385 or 8/52 of 2019 self-employed income from their K-1
  • Full time equivalent (FTE) is based on 40 hours per week and are rounded to the nearest tenth.  The calculation is done on an employee by employee basis and takes the average number of hours paid per week during the 8-week period.  Alternatively, a simplified method may be elected whereby each employee is either 1.0 FTE if full-time or 0.5 FTE if not full time.
    • FTE reduction exceptions provide 2 instances where no FTE reduction is counted for an employee despite the fact that the position was not filled by a new employee:
      • If a written offer to re-hire during the 8-weeks was rejected by the employee
      • If during the 8-week period an employee was fired with cause, voluntarily resigned or voluntarily requested and received a reduction of their hours
    • FTE reduction safe harbor – no forgiveness reduction due to FTE’s if:
      • FTE reductions occurred between 2/15/20 and 4/26/20 and
      • FTE levels were restored back to 2/15/20 FTE count by 6/30/20
    • Salary/Hourly wage reduction
      • Compares average rate of pay for 8-week period to 1/1/20 – 3/31/20 on an employee by employee basis
      • Forgiveness reduction if rate pay was reduced by more than 25%
      • Salary/Hourly wage reduction safe harbor – no forgiveness reduction due to pay reduction if:
        • Rate of pay at 2/15/20 is restored by 6/30/20
      • Wage reduction for hourly employees is based upon average weekly hours worked during 1/1/20 – 3/31/20, not the 8-week period
      • Wage reduction for salaried employees is 8/52 of the average reduced annual salary
      • No wage reduction if EE received annualized rate of pay of more than $100,000 for any pay period in 2019 (e.g. consider a bonus payroll)

Please click here for PPP Loan Forgiveness Application

Information as of May 15, 2020