The Treasury Department and the Small Business Administration have announced two interim final rules (IFRs) for loan forgiveness under the Paycheck Protection Program, both of which add additional clarity to the program designed to help small businesses meet payroll and certain operational costs during the coronavirus pandemic.
The first IFR provides new clarification regarding requirements and instructions for completing the PPP Loan Forgiveness Application. The second IFR describes the SBA procedure for reviewing PPP loan applications and loan forgiveness applications. It also details borrower and lender responsibilities for responding to the review of those applications.
The new guidelines are widely expected to be modified before they’re finalized.
The loan forgiveness requirements guidance mostly reflect the instructions to the PPP loan forgiveness application released May 15 but also adds some additional insight, including:
- an alternative method for determining when the eight-week period starts for businesses with pay cycles of biweekly or more frequent
- bonuses and hazard pay are eligible for loan forgiveness, as are salary, wages, and commission payments to furloughed employees (payments cannot exceed the pro-rated amount of a $100,000 annual salary)
- caps the amount of loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation
- clarifies when non-payroll costs must be incurred or be paid to qualify for loan forgiveness
- clarifies earlier guidance that set rules for when employers can exclude from loan forgiveness calculations employees who refuse to be rehired
- restores forgiveness for borrowers who rehire employees by June 30 and reverse reductions to salaries and wages for FTE employees by June 30
The interim rule on PPP review procedures and related borrow and lender responsibilities includes a few new points and clarifications:
- the SBA may review any PPP loan, regardless of size, to determine if the borrower is eligible for PPP loans under the CARES Act, whether the borrower calculated the loan amount correctly and used the funds for eligible costs, and whether the borrower is eligible for the amount of loan forgiveness it requests
- borrowers may appeal SBA determinations within 30 days of receipt. The guidance also says an appeal process will be established, with the specifics coming in a later interim final rule.
- lenders must decide on loan forgiveness within 60 days of receipt of the complete application from the borrower (the SBA then has 90 days to review the loan forgiveness application)
- borrowers may be asked questions by lenders and the SBA
- lenders will not be paid their fees for any PPP loans the SBA deems ineligible
If you have questions about PPP loan forgiveness requirements and how they could impact your business, reach out to us at KraftCPAs.