May 26, 2020
By Caity Witucki
Contributing Editor, Hot Topic Tuesday
Hot Topic Tuesday — SBA and Treasury Issue Additional Guidance on PPP Loan Forgiveness
On May 22, 2020 the Small Business Administration and Treasury Department quietly issued additional forgiveness guidance for the Paycheck Protection Program (PPP) in an interim final rule. The new interim final rule expands upon the loan forgiveness application and instructions which were released on May 15, 2020.
While much of the guidance is duplicative of what is found in the PPP loan forgiveness application and instructions, there are some significant new items of guidance, including:
- If only a portion of the loan is forgiven, or if the forgiveness request is denied, any remaining balance due on the loan must be repaid by the borrower on or before the two-year maturity of the loan.
- Payroll costs incurred at the end of the 8-week period but not paid until the first payroll issued outside the 8-week period count as payroll costs when calculating forgiveness.
- Unlike the self-employed, owner-employees can count retirement plan expenses and health plan expenses in their payroll costs, but all of these items in total are limited to the lesser of the 2019 amounts incurred or $100,000.
- For the forgiveness calculation, employers will have to report any employee’s refusal to return to work to the state unemployment agency within 30 days of rejection.
- A new set of safe harbors have been put in place to protect borrowers from a reduction in forgiveness due to an employee’s actions, including when an employee is fired for cause, voluntarily resigns or voluntarily requests a reduction in hours.
Many participating PPP leaders are disappointed that the latest guidance does not extend the amount of time a borrower has to use their funds beyond the current eight-week period or reduce the 75% payroll requirement. However, the Senate and the House have both introduced legislation to address those concerns. Therefore, additional guidance on forgiveness may be issued if one of the bills pass.