Revised PPP Loan Forgiveness Applications and Related Instructions

The SBA and US Treasury has released revised PPP loan forgiveness applications and related instructions.  Please see links below for the current versions as of June 16, 2020 (this form is subject to change).  Below is a summary of the changes made with this new released guidance, as of June 16, 2020:

  • There are two applications, an EZ form and the full form
    • The EZ form can be filled out if you meet one of 3 exceptions:
      1. Self-employed individual with no employees (e.g. Schedule C)
      2. No >25% reduction to rate of pay to any employee & no reduction of full time equivalents (FTEs)
      3. No >25% reduction of pay to any employee & application for FTE safe harbor due to new Federal compliance regulations nor permitting the Company to operate at former level of activity
    • We suggest only the businesses that qualify under option 1. above consider filing the EZ form since the other two still require businesses to provide documentation that they meet the stated criteria and that is best conveyed by the full form
  • Currently businesses must use either the 24-week covered period or elect to use the 8-week covered period if the loan was funded prior to 6/5/20
    • There is no option to choose a covered period between 8- and 24-weeks at present
  • The compensation cap for employees is either $15,385 for the 8-week period or $46,154 for the 24-week period
  • The compensation cap for self-employed individuals, partners, members and owner-employees (e.g. S-Corporation owners) is as follows:
    • For the 8-week period – the lower of $15,385 or 8/52 of 2019 self-employment income
    • For the 24-week period – the lower of $20,833 or 2.5/12 of 2019 self-employment income
  • Clarifies that self-employed individuals, partners, members and owner-employees (e.g. S-Corporation owners) health insurance is excluded from payroll costs; owner-employees was added in this latest version
  • FTE reduction safe harbor indicates that if after your 8-week or 24-week period you have a reduction in FTE’s compared to your reference period, your employment decreased between 2/15/20 & 4/26/20, you reinstate FTE’s to the 2/15/20 level by the earlier of 12/31/20 or the date the forgiveness application is submitted, then no FTE forgiveness reduction will be incurred
    • The same is true for >25% reduction of pay safe harbor

Planning points to consider based on the latest guidance:

  • Since there is currently no apparent option to choose a covered period other than 8-weeks and 24-weeks, businesses should consider using the 8-week period if they are able to generate complete or nearly complete forgiveness.  This will enable the forgiveness approval to generate up to 4 months quicker and thus enable companies to plan accordingly and avoid tracking of expenses, rates of pay and FTE’s for 4 additional months. A cost benefit analysis may be warranted.
  • If a business is considering using the 8-week period but is forecasting some FTE forgiveness reduction, consider not submitting your forgiveness application until a future date where additional new-hires might come on board.  This future date could still be well in advance of the end of the 24-week period.
  • Congress is still indicating that they will overturn the IRS’ position that expenses leading to forgiveness are not deductible.  We are hopeful these expenses will be deductible, thus making the loan forgiveness truly non-taxable as the original bill indicated.  There is no change on the IRS position as of this latest guidance.

PPP Full Form Forgiveness Application

PPP Full Form Forgiveness Application Instructions

PPP Forgiveness Application EZ

PPP Forgiveness Application EZ Instructions