Revised PPP Loan Forgiveness Application Released by SBA

Yesterday, June 16, 2020, the SBA released the long-awaited revised PPP Loan Forgiveness Application. The purpose of the revised application is to incorporate the many changes brought forth by the PPP Flexibility Act which was signed into law on June 5^th.

The majority of changes in the revised application simply add or substitute language due to addressing technical issues surrounding the multiple covered periods. The Covered Period is either:

(1) the 24-week (168-day) period beginning on the PPP Loan Disbursement Date, or

(2) if the Borrower received its PPP loan before June 5, 2020, the Borrower may elect to use an eight-week (56-day) Covered Period.

While these technical modifications are to be expected, there were several significant clarifications provided by the SBA in the PPP Forgiveness Application that we have bulleted below:

• Borrowers electing a 24-week covered period will see the cash compensation cap rise from $15,385 to $46,154.
• Borrowers electing a 24-week covered period will see the cash compensation cap paid to owner-employee’s rise from $15,385 to $20,833 (2.5 monthly equivalent).
• Health insurance payments made on behalf of owners including S-Corporation Shareholders (includable in box 1 of form W2), general partners, and self-employed individuals are considered part of Cash Compensation and subject to either the $15,385 or $20,833 cash compensation cap. This is a bad development for business owners.
• Retirement plan contributions are considered part of Cash Compensation for general partners or self-employed individuals. NOTE: By excluding S-Corporation owners from this specific instruction, it is now obvious that owner retirement amounts paid by C and S-Corporation entities are treated as retirement payments and not cash compensation. This is a good development for corporation owners.
• The Loan application incorporated the various new FTE safe harbors including providing that borrowers who are unable to return to the pre-COVID level of business due to compliance requirements set forth by HHS, the CDC and OSHA will not face an FTE reduction. NOTE:Those borrowers who certify that compliance requirements were satisfied will NOT be required to submit any proof with their application but must simply maintain these documents.

To download a copy of the June 16, 2020, revised Loan Forgiveness Application, click here.

To download a copy of the June 16, 2020, revised Loan Forgiveness Application Instructions, click here.

To download a copy of the revised Loan Forgiveness Application Form 3508EZ, click here.

The largest unresolved issue now remaining is whether those borrowers electing the 24-week covered period will be able to submit PPP Forgiveness Applications early, or if they must maintain FTE levels for the full 24-week period.

 

 

 

DISCLAIMER: The WM Daily Update COVID-19, COVID-19 Business Resources and COVID-19 Client News Alerts and other related communications are 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.