Paycheck Protection Program Loan Forgiveness Updates
June 30, 2020
On June 16th, 2020, the SBA released a revised Loan Forgiveness Application for Paycheck Protection Program (PPP) loans to reflect changes from the Paycheck Protection Flexibility Act of 2020. In addition to this application, the SBA also released an EZ application for forgiveness of PPP loans. The SBA has continued to provide updated guidance based on new legislation and to address many of the questions and concerns Borrowers have as they move closer to applying for loan forgiveness.
PPP Standard Loan Forgiveness Application
The Standard Loan Forgiveness Application provides a few updates and some clarity for borrowers in its instructions.
- Covered Period: For borrowers that received their PPP loans prior to June 5, 2020, they may elect to use either the eight or 24-week Covered Period. If received after June 5, 2020, the Covered Period defaults to 24-weeks. The Covered Period shall not extend beyond December 31, 2020.
- S Corporation owners: Employer health insurance contributions for S Corporation owners should not be included in health insurance costs on the Loan Forgiveness Application because these payments are already included in compensation. However, employer retirement plan contributions for S Corporation owners should be included in retirement plan costs on the application.
- Safe harbors: The SBA clarified that any Borrowers wishing to use the safe harbor exceptions for excluding wage reductions and reductions of full-time employees from loan forgiveness calculations can be applied at the date the loan forgiveness application is submitted. Borrowers do not need to wait until December 31, 2020 to apply for forgiveness under safe harbors.
- Supporting documentation: The SBA Loan Forgiveness Application Instructions include a list of documents that each Borrower must submit with its application. There is also a list of documents the Borrower should maintain but is not required to submit (unless questions arise upon review of the application). All documents should be kept on file for six years after the loan has been forgiven or repaid in full.
PPP EZ Loan Forgiveness Application
The EZ Loan Forgiveness Application is available to borrowers who meet at least one of the following conditions, detailed in the form’s instructions:
- The Borrower is a self-employed individual, independent contractor or sole proprietor with no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll on the application.
- The Borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the Covered Period compared to January 1 through March 31, 2020 AND the Borrower did not reduce the number of employees or average paid hours of employees between January 1, 2020 and the end of the Covered Period. Reductions in hours not restored due to employee refusal should not be included in this calculation. Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
- The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period compared to January 1 through March 31, 2020 AND the Borrower was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with requirements or guidance issued between March 1 and December 31, 2020 by the CDC, or other authority due to COVID-19.
By meeting one of the conditions above, some of the detail on the Standard Application is not applicable, which allows for the EZ Application to be condensed and simpler for the Borrower to complete.
The SBA is continually updating and providing additional guidance as legislation changes and additional concerns arise. We will continue to provide updates as we learn more.
Contact the professionals at Gilliam Bell Moser if you have any questions.