June 17, 2020
SBA Issues New PPP Forgiveness Instructions
Posted by COVID-19 Rapid Response Team
Today, SBA and the Treasury Department released new guidance and application forms for PPP loan forgiveness. Fortunately, they cleared up a few big questions people have:
- Maximum total compensation if electing 24 weeks is now $46,154 (24/52 * $100,000)
- The safe harbor restoration date is now theearlier of the date the forgiveness application is submitted or December 31, 2020 for both reduction factors
- There is no provision for selecting a Covered Period between 8 and 24 weeks; it’s one or the other
Other important changes:
- Introduced an EZ form, to be used only by borrowers with any of the following:
- No employees included in their original loan application
- No salary reductions >25% (same calculation as originally instructed) AND no reductions in number of employees (not FTEs) or in average paid hours of employees from 1/1/20-End of Covered Period (this is a brand new calculation and no guidance is given on the comparison period for the “average paid hours” test nor for what constitutes a reduction; for instance, if one employee is paid for only 38 hours in one pay period, is that a reduction?)
- No salary reductions >25% AND they were unable to restore to the 2/15/20 level of business activity solely due to requirements set by HHS, CDCP or OSHA – note that state, county or city requirements do not meet this test
- In the EZ application, they now allow retirement insurance contributions on behalf of owner-employees “capped at 2.5 months’ worth of the 2019 contribution amount.” But in the main application, they do not indicate this is allowable or limited if allowable.
We anticipate that the majority of borrowers using the EZ form will be the ones who meet test 1a above. Many businesses will struggle with the “average paid hours” issue in test 1b, and we expect few will be impacted by test 1c all the way through the end of the year.
You can find more information in our detailed PPP FAQs.
These are unprecedented times. And we know you, your families and your organizations need support, now more than ever. Our top priority as your trusted advisor is to ensure we’re helping you through these tough times. Visit COVID-19 Rapid Response Resource Center for our crisis management resources and contact information for our COVID-19 Rapid Response Team Leaders.