On Tuesday of this week the SBA released an FAQ specifically devoted to PPP loan forgiveness. The 23 questions are divided into four sections on loan forgiveness including:
· General
· Payroll costs
· Nonpayroll costs
· Forgiveness reductions
Below are highlights from each section.
About FAL
General loan forgiveness:
This section clarifies that sole proprietors, independent contractors and self-employed individuals, with no employees, should use the 3508EZ PPP loan forgiveness application. It also exempts borrowers who submit timely loan forgiveness applications from making payments on their loan until they receive a decision on their application.
Loan forgiveness payroll costs:
The FAQs in this section provides the definition for an owner-employee as someone who is both an owner and an employee of a C corporation. Also addressed are partial pay periods, group health care benefits, and payroll that was incurred or paid outside of the eight-week or 24-week covered periods. Lastly, this section covers how to determine eligible owner compensation for the following entities and provides examples:
· C Corps
· S Corps
· Self-employed schedule C (or schedule F)
· General partners
· LLC owners
It further clarifies that owner compensation is capped at $20,833 for the 24-week covered period ($15,385 for the eight-week covered period) across all entities in which the person holds ownership. If the owner’s total compensation across businesses that receive a PPP loan exceeds the cap, the owner can choose how to allocate the capped amount across different businesses.
Loan forgiveness nonpayroll costs:
This section deals with nonpayroll expenses that were incurred or paid outside the eight-week or 24-week covered periods and states that the Alternative Payroll Covered Period does NOT apply to nonpayroll costs. Also clarified in this section is that state and local government assessed transportation and utility fees are eligible for loan forgiveness.
Loan forgiveness reductions:
The FAQs in this section explain how to calculate loan forgiveness and account for reductions in employee salary or hourly wage. Three examples of the salary/hourly wage reduction are provided.
These FAQ’s offer much needed clarity to borrowers but there are still questions related to loan forgiveness. We expect that this will be a living document which we will track and notify our clients and colleagues of updates and additional guidance as it becomes available.
We recommend reading the FAQs in their entirety. You can access them here: