New Paycheck Protection Program Loan Forgiveness Forms Available

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The U.S. Small Business Administration (SBA) and U.S. Treasury Department issued new forms and guidelines to help clear up confusion about the Paycheck Protection Program (PPP), which was created to help small businesses keep workers on their payrolls during the coronavirus crisis.

The PPP initially had stringent requirements for employers that wanted to apply for loan forgiveness. On June 5, however, President Donald Trump signed into law the Paycheck Protection Program Flexibility Act (PPPFA), which gives employers more leeway. For instance, instead of eight weeks, borrowers will now have 24 weeks from the disbursement of their loan to use the PPP funds, or until Dec. 31 when the program is now set to end. Borrowers that received loans before June 5 can still opt to use funds in the original eight-week period.

On June 17, the SBA and the Treasury Department issued a revised, "borrower-friendly" loan forgiveness application, as well as a simplified form for borrowers that meet one of the following criteria:

  • They are self-employed and have no employees.
  • They didn't reduce employee wages by more than 25 percent and didn't reduce employee headcount or hours.
  • They experienced reductions in business activity as a result of health directives related to COVID-19 and didn't reduce employee wages by more than 25 percent.

We've rounded up the latest news on this topic from SHRM Online and other trusted outlets.

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Coronavirus and COVID-19

Options

The new forms were updated to reflect congressional changes to the loan program under the PPPFA, including the new 24-week coverage period. Both applications give employers the option of using funds in the original eight-week period, if their loan was made before June 5, or the extended 24-week period. 

(Bloomberg Tax)

Guidance

The SBA also released guidance on PPP loan forgiveness and on how the administration intends to merge the original PPP rules with the PPPFA amendments into one package. The SBA said it expects to release additional guidance on loan forgiveness soon.

(Forbes)

The PPPFA Amendments

The PPPFA gave borrowers more flexibility regarding the amount of loan money that must be used for payroll purposes. Employers now have to spend 60 percent—rather than the previous 75 percent—of PPP funds on payroll costs. Payroll costs include:

  • Salary, wages, commissions and tips—up to $100,000 annualized for each employee.
  • Employee benefits, including paid leave, severance pay, insurance premiums and retirement benefit.
  • State and local taxes assessed on pay.

Payroll costs for sole proprietors and independent contractors include wages, commissions, income or net earnings from self-employment (up to $100,000 annualized). The additional 40 percent can be spent on mortgage interest, rent, utilities and other costs. Additionally, employers now have until Dec. 31, rather than June 30, to rehire certain laid-off workers if they are seeking loan forgiveness. Exceptions to the rehire rule may apply based on employee availability.

(SHRM Online)

Check for Updates to FAQs

The SBA and Treasury Department have been periodically updating their answers to frequently asked questions, so employers should check regularly for new insight on nuanced issues. For instance, do businesses owned by large companies that have the means to support ongoing operations qualify for a PPP loan? The guidance says that "all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere … borrowers still must certify in good faith that their PPP loan request is necessary." 

(U.S. Treasury Department)

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