PPP Updates as of May 19, 2020

21 May PPP Updates as of May 19, 2020

AS OF 5/19/2020

We have not been sending newsletters recently on stimulus, as the Federal government has not been issuing new stimulus packages for the past two weeks. However, there have been, and will continue to be, changes to the forgiveness of PPP loan calculations, and other PPP related rules. Below are a few of the major changes, and more changes will be forthcoming as the government attempts to interpret the rules of the PPP loans.

As of today, there are still PPP funds remaining, so if you qualify for the PPP loan, we advise you to apply.

This newsletter builds on the many prior updates that we have been sending on the small business and individual stimulus that has become available during this COVID-19 crisis. This is another update. If you missed the prior information, you are able to review it at:

https://unbehagenadvisors.com/covid-19/

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PAYCHECK PROTECTION PROGRAM (PPP) – TRACKING AND MAINTAINING RECORDS:

Many small business owners, including independent contractors, have secured funding through the SBA’s Paycheck Protection Program (PPP). While each scenario, lender, and small business may be different, below are some highlights of the program and suggestions on record keeping which may assist you in qualifying for PPP loan forgiveness.

Tracking the use of the proceeds is critical. Taxpayers should identify and track the usage of PPP loan funds during the eight-week loan forgiveness period. This is important, as only certain types of expenses qualify for forgiveness. Also, the IRS has issued guidance which indicates that expenses paid with the PPP

loan funds will be non-deductible, so tracking will also assist in preparing next year’s tax return. However, it looks like the US Treasury is considering reversing this, but that has not yet been clarified as of today.

Maintaining supporting documentation is also important, as it’ll serve as proof to the bank on how PPP loan funds were used. Although the PPP funds are primarily, and foremost, a loan which you may be required to repay, borrowers can qualify to have some of the loans forgiven, if the proceeds are used to pay

certain eligible expenses. These include payroll, mortgage obligations, rent/lease payments and utilities. The amount of loan forgiveness may be reduced if the funds are used for non-qualified expenses. In addition, the total amount forgiven may also be reduced if employee head count decreases or if salaries are cut.

Special rules apply to sole proprietors who don’t have employees.

We’re here to assist you in navigating these thresholds if you are a current or new client of ours!

Ultimately, it will be up to your banker to decide the forgiveness of the PPP loan based on the information that you provide and how you fill out the forgiveness application. We hope you find this helpful and we encourage you to contact us to tailor this to your specific business.

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PPP LOAN FORGIVENESS ESTIMATORS:

In the meantime, you can use one of the many loan forgiveness calculators online, and a useful one (that is updated often) is from one of our payroll affiliates. It is available by clicking here:

PPP Loan Forgiveness Estimator

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LET US KNOW: If your PPP loan has funded or you have received the EIDL and are engaged with us for accounting and advisory services, please forward the agreement to us if you haven’t already, so that we may assist you to maximize your forgiveness amount. Send this information to Mary at Unbehagen Advisors.
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JUST IN! – SBA PPP LOAN FORGIVENESS APPLICATION RELEASED:

The SBA has issued guidance on their forgiveness application that banks are going to use. THIS IS NOT FINAL! There will likely be further changes to it in the coming weeks as politicians and the SBA and US Treasury continue to hash-out their concerns. This NEW SBA PPP loan forgiveness application was released late last week, and we encourage you to read it for the most recent guidance in the link below:

SBA PPP Loan Forgiveness Application and Instructions

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PPP LOANS – OVER AND UNDER $2 MILLION – CLARIFICATION ABOUT YOUR PPP LOAN APPLICATION THAT YOUR BUSINESS REQUIRED THE PPP FUNDS IN GOOD FAITH – SAFE HARBOR RULE

PPP LOANS UNDER $2 MILLION: Recently, the SBA published Frequently Asked Question (“FAQ”) 46, which provides some answers for PPP borrowers who are concerned about the good faith certification. In effect, the SBA has created a new safe harbor rule for borrowers with smaller loans to satisfy the requirement that they make the good faith certification that their PPP loan was necessary to support their ongoing operations: “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” This means that a borrower with a PPP loan that, when combined with PPP loans received by the borrower’s affiliates, totals less than $2 million does not need to return the loan by May 18 in order to satisfy the safe harbor rule. Rather, the SBA will deem that the certification concerning the necessity of the PPP loan was made in good faith due to the amount of the PPP loan. The SBA is effectively saying, “if the aggregate amount of your and your affiliates’ PPP loans was less than $2 million, then you must have needed it.”

PPP LOANS OVER $2 MILLION: FAQ 46 goes on to say that “borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.”  The SBA reminded borrowers that, as previously announced, they intend to review all PPP loans in excess of $2 million and other PPP loans as appropriate. FAQ 46 states that, during the review, if the SBA determines that the borrower lacked an adequate basis for making the certification in good faith, then the SBA will seek repayment of the outstanding PPP loan balance and the borrower will not be eligible for PPP loan forgiveness. However, if the borrower repays the loan after the SBA’s review and determination, FAQ 46 indicates that the SBA will not pursue administrative enforcement or referrals to other agencies.

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PPP LOANS – FORGIVENESS – PAYROLL THAT CAN BE PAID TO A BUSINESS OWNER IS NOW LIMITED:

On the new application instructions (see link above for for the full application) the SBA now states the following AND asks you to initial each statement – see especially the last point highlighted in red about business owners payroll for the eight week forgiveness of PPP loan period.

The dollar amount for which forgiveness is requested:

• Was used to pay costs that are eligible for forgiveness (payroll costs to retain employees; business mortgage interest payments; business rent or lease payments; or business utility payments);
• Includes all applicable reductions due to decreases in the number of full-time equivalent employees and salary/hourly wage reductions;
• Does not include nonpayroll costs in excess of 25% of the amount requested; and
• Does not exceed eight weeks’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $15,385 per individual.

AT THIS TIME WE DO NOT KNOW IF THIS IS GOING TO CHANGE, BUT IT IS THE CURRENT INFORMATION THAT THE SBA HAS AVAILABLE AS OF TODAY.