PPP ALERT: REVISIONS TO THE PAYCHECK PROTECTION PROGRAM LOAN FORGIVENESS APPLICATION

On June 16, 2020 the SBA released a revised PPP loan forgiveness application, a new EZ PPP loan forgiveness application, and revisions to the third and sixth interim final rules in response to the passage of the PPP Flexibility Act signed into law on June 5, 2020.  These recent changes are likely to impact your company’s approach to loan forgiveness and are important changes to the program.  We will continue to keep you updated on the changes to this program as they occur and will continue our webinar series on such changes.  In summary we provide the following outline of changes for your consideration:

 1. New EZ PPP application for those who meet any one of the following criteria:

a. Borrower is self-employed, independent contractor, or sole proprietor that had no employees at the time of the PPP loan application

b. Borrower did not reduce annual wages or salaries of any employee by more than 25% during the covered period or alternative payroll covered period as compared to Q1 2020 AND the borrower did not reduce the number of employees and the average paid hours of employees between 1/1/20 and the end of the covered period (ignoring reductions from the inability to rehire individuals and reductions in hours offered to be restored and refused)

c. Borrower did not reduce annual wages or salaries of any employee by more than 25% during the covered period or alternative payroll covered period as compared to Q1 2020 AND the borrower was unable to operate during the Covered period at the same level of business activity as before 2/15/20 due to compliance with requirements established or guidance issued between 3/1/20 and 12/31/20 by the Secretary of HHS, Director of the CDC, or OSHA, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirements related to COVID-19.

2. Revisions to PPP Loan Forgiveness Application

a. Addition of  a second safe harbor on the reduction of forgiveness related to the reduction of FTEs if the borrower was unable to operate during the Covered period at the same level of business activity as before 2/15/20 due to compliance with requirements established or guidance issued between 3/1/20 and 12/31/20 by the Secretary of HHS, Director of the CDC, or OSHA, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirements related to COVID-19.

b. Includes the model to walk through the calculation of forgiveness inclusive of the newly revised 60% payroll cost requirement.

c. Limits owner employee, self-employed, or general partner compensation to $20,833 or 2.5 months of the owner’s 2019 compensation if electing the 24 week covered period or $15,385 for those electing the 8 week period.

3. Revisions to the third and sixth Interim Final Rule:

a. Clarifies that the amount of loan forgiveness can be up to the full principal amount of the loan plus accrued interest and caps the payroll costs during the covered period to $46,154 per employee (24 week covered period) or $15,385 per employee (8 week covered period) plus covered benefits for employees (but not owners)

b. Changes and clarifies the maximum amount of forgiveness for Schedule C or Schedule F employers by calculating owner compensation replacement limited to 2.5/12 of 2019 net profit up to $20,833 (24 week covered period) or limited to 8/52 of 2019 net profit up to $15,385 (8 week covered period)

While these changes impact your business, there are still additional items that we are awaiting clarification on and will continue to keep you informed.  As always, please contact your Citrin Cooperman professional with any questions.