SBA released new Paycheck Protection Program (PPP) guidance on Friday, May 22nd. The new interim final rules build upon the PPP forgiveness application that was released a week earlier.
This summary is in addition to the summary that we prepared when the forgiveness application and instructions were released. We look forward to discussing these with you in more detail and how they apply to your specific situation.
- Bonuses and hazard pay to employees are eligible for loan forgiveness as long as payments do not exceed the pro-rated amount of a $100,000 annual salary.
- Salary, wages and commission payments to furloughed employees are also eligible for forgiveness, subject to the pro-rated $100,000 pay limitation
- Owner employees and self-employed individuals are subject to caps on amount of loan forgiveness available for their compensation and benefits
- Forgiveness amount can be no more than the lesser of 8/52 of 2019 compensation (approximately 15.38% of 2019) or $15,385 in total across all businesses.
- Owner-employees are capped by the amount of their 2019 employee cash compensation and employer retirement and health care contributions made on their behalf.
- Schedule C filers are capped by the amount of their owner compensation replacement, calculated based on 2019 profit.
- General partners are capped by the amount of their 2019 net earnings from self-employment (reduced by section 179, UPE, and depletion from oil and gas properties) multiplied by 0.9235
- No additional forgiveness is provided for retirement or health insurance contributions for self-employed individuals, including Schedule C filers and general partners, as such expenses are paid of their net SE income.
- When calculating any reduction in full time equivalent employees, employers can exclude any employees who decline a good faith offer to return at the same pay and hours as before they were laid off or furloughed. Borrowers need to notify the state unemployment office of an employee’s rejected offer within 30 days of that rejection.
- In order for non-payroll costs to be eligible for forgiveness, they need to be:
- Paid during the covered period; or
- Incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.