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Treasury Releases Application for PPP Loan Forgiveness

05.18.2020

The Small Business Administration (SBA) has released the highly-anticipated Paycheck Protection Program Loan Forgiveness Application (Form 3508).

The document includes the following:

  • PPP Loan Forgiveness Calculation Form (plus Instructions)
  • PPP Schedule A (plus Instructions)
  • PPP Schedule A Worksheet (plus Instructions)
  • Documents that Each Borrower Must Submit with PPP Loan Forgiveness Application
  • PPP Borrower Demographic Information Form (Optional)

The application and instructions include guidance on several provisions, including defining full-time employees. The definition of full-time employees is those that work at least 40 hours or a combination of employees that work 40 hours. The calculation of FTE has been simplified to include 40-hour employees as one and those working less than 40 hours as a half employee.

Below are additional highlights from the new release. The full instructions and form can be found here.

Documentation Requirements. The guidance lists documentation requirements to be submitted with the forgiveness application. It also includes a list of documents that need to be retained for six years.

Forgiveness Period Cut-Off. The instructions allow the use of an eight-week covered period from loan funding or an alternative period beginning on the first day of the first payroll period and ending 56 days later. It also allows for the last pay period to continue to be eligible if paid on or before the next payroll date, eliminating the need for a special payroll. The cut-off procedures have been simplified for occupancy costs and interest, allowing for costs to be either paid or incurred so long as they are paid with the next billing cycle.

75/25 Split. The 75 percent requirement on expending loan proceeds toward payroll costs now includes a “Modified Total.” The amount is the payroll costs plus non-payroll costs reduced for reductions in salary and wage and then multiplied by FTE reduction percentage.

$100k Compensation Limit. The annualized limit applies to cash compensation only and is applied to the whole eight week period such that an employee’s wages up to $15,385 will be eligible for forgiveness.

Raises During Covered Period. The guidance prohibits increases in compensation for owner-employees, self-employed individuals, and general partners during the covered forgiveness period. These classes of employees will be limited to the $15,385 maximum, as well as their 2019 compensation.

FTE Safe Harbor. The guidance creates a safe harbor for employees who are terminated, voluntarily resign, or voluntarily reduced their hours by request. The “written offer” guidance from the FAQ still applies to any worker who refused to return to work.

June 30 Restoration Date. The instructions confirm that the restoration of payroll and headcount by June 30 will be a safe-harbor for forgiveness reduction.

We will be issuing additional information in the near term to help borrowers understand the application and process to complete. We will also be hosting a webinar to walk through the form.

Team

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