SBA Issues Interim Final Rules
On Friday, May 22nd, the SBA and the Department of the Treasury issued additional interim final rules for the Paycheck Protection Program (PPP) requirements for the loan forgiveness.
A couple of interesting takeaways from this document:
- The SBA has posted no less than 11 interim final rules as they relate to the PPP loans (and you may have wondered why you were having such a hard time keeping up with all the changes!?) on April 3, 14, 24, 28 and 30: May 5, 8, 13, 14, 18, and 20.
- This interim final rule is effective immediately without advance notice or public comment - even though they are requesting public comment for future consideration.
Clarifications of the loan forgiveness process includes:
- The lender (the bank - not the online financial service if applicable) has 60 days from the receipt of a completed loan forgiveness application to issue a decision. If they determine that all, or part, of the loan is eligible for forgiveness then the application is submitted to the SBA for reimbursement to the bank. The SBA may conduct its own review of the loan application in addition to the bank review.
- If applicable, any EIDL grant funds will be deducted from the forgiveness amount.
- Borrowers may seek forgiveness for payroll costs for the eight weeks beginning on either: 1) the date the funds are received by the business, or 2) the first day of the next regularly scheduled payroll (alternate payroll covered period).
- Payroll costs incurred during the loan forgiveness period but paid after the 8-week period may still be covered if paid on the next regular payroll date ("incurred and paid" guidance).
- Owner-employees are capped by the amount of their 2019 employee compensation and any retirement or health care benefits paid on their behalf.
- Schedule C filers are capped by the amount of their owner compensation "replacement", calculated based on their 2019 net profits. No additional forgiveness is allowed for adjustments on Schedule 1 such as health insurance or pension contributions.
- General partners are capped by the amount of their 2019 net earnings subject to FICA taxes reduced by Section 179, unreimbursed partnership expenses, or depletion. As with the Schedule C filers, no additional forgiveness is allowed for adjustments on Schedule 1 such as health insurance or pension contributions.
- Nonpayroll costs are eligible for forgiveness if it was: 1) paid during the covered period, or 2) incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.
- No advance payments are eligible for forgiveness
- The loan forgiveness portion will not be reduced if a written offer is extended to rehire employees and they either decline to return or do not respond. The employer must notify the state unemployment office of the offer to rehire and rejection by the employee.
- A full-time equivalent employee (FTEE) is one who works 40 hours or more, on average, each week.
- To calculate the FTEE for part-time employees, the employer has two options: 1) use the average hours worked by employee divided by 40 hours, or 2) use the simplified method of an FTEE of .50 for all part-time employees.
- If there is a reduction in FTEEs but the payroll is restored by June 30, 2020 then the borrower is exempt from the reduction in loan forgiveness.