The Small Business Administration (SBA) has released a revised Paycheck Protection Program (PPP) loan forgiveness application (instructions) and a new EZ PPP loan forgiveness application (instructions) which incorporate the changes from the Paycheck Protection Flexibility Act.
The new EZ PPP loan forgiveness application requires less information and documentation and can be used if any one of the following circumstances apply to the borrower:
- Files a Schedule C and has no employees.
- Did not reduce salaries or wages of any employee by more than 25% during the covered period compared to the period 1/1/2020 and 3/31/2020 (Does not apply to employees making greater than $100,000) AND the borrower did not reduce the number of employees or average paid hours between 1/1/2020 and the end of the covered period (exceptions for the inability to rehire or where employees voluntarily left).
- Did not reduce salaries or wages of any employee by more than 25% during the covered period compared to the period 1/1/20 and 3/31/2020 (Does not apply to employees making greater than $100,000) AND the borrower was unable to operate during the covered period at the same level before 2/15/20 due to compliance with health requirements.
The revised applications also incorporates the following changes created by the Paycheck Protection Flexibility Act:
- Borrowers that received the loan before 6/5/2020 can elect an 8-week or 24-week forgiveness period.
- Eligible payroll costs are capped at $15,385 (if 8-week period used) or $46,154 (if 24-week period used).
- Employee Benefits can include –
- Employer contributions for health insurance. DO NOT include health insurance for self-employed, general partners, or owner-employees of an S Corporation.
- Employer contributions made to employee retirement plans. DO NOT include payments made on behalf of general partners or self-employed individuals.
- Employer state and local taxes paid and assessed on employee compensation.
- Specified limitations for owner compensation –
- Owners (owner-employees, self-employed individual, or general partners) compensation is capped at $20,833 for the 24 week period or the 2.5 month equivalent of 2019 compensation, whichever is lower. If the 8 week period is used, it’s capped at 8/52 of 2019 compensation (up to $15,385).
- FTE reduction safe harbor (applies to borrowers that reduced FTEs and subsequently restored them) can be applied the earlier of December 31, 2020 or the date of the PPP loan forgiveness application.
Stay tuned for updates.
For additional guidance and resources on PPP loans, visit our COVID-19 Hub or contact our COVID-19 Advisory Team at 240.364.2580.