UPDATE: Latest in regulations and government changes prompted by COVID-19
On June 17, the Small Business Administration 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 the earlier 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:
1. Introduced an EZ form, to be used only by borrowers with any of the following:
a. No employees included in their original loan application.
b. 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 January 1, 2020, to the end of the Covered Period. (This is a brand new calculation and no guidance is given on the comparison period for the “average paid hours” test or for what constitutes a reduction; for instance, if one employee is paid for only 38 hours in one pay period, is that a reduction?)
c. No salary reductions >25% AND they were unable to restore to the February 15, 2020, 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.
2. 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.