This past Friday night, May 22nd, the Small Business Administration issued an interim final rule covering the forgiveness process associated with a Paycheck Protection Program, or PPP, loan. A link to the rule is available on our COVID resource page.
The highly anticipated formal guidance supplements the application form that was issued a week earlier. The guidance is repetitive in many respects to the information contained in the loan forgiveness application.
However, the twenty-six-page document does address new items including:
- Clarifying the “Paid” and “Incurred” Rules: The application form presented the possibility that borrowers could include costs that were incurred over a period of more than eight weeks. The Interim Final Rule confirms borrowers can include costs that were incurred over a period of more than eight weeks.
- Clarifying Owner-Employee Payroll Costs: Unlike self-employed individuals, owner-employees can include retirement plan expenses and health plan expenses in their payroll costs. However, the total included payroll costs are limited to 8/52 of the lesser of the 2019 amounts or $100,000.
- Additional requirement for FTE reduction exception: The application outlined an exception for an FTE reduction If a borrower made a “good-faith, written offer to rehire an employee” and that offer was rejected. The borrower now has 30 days to inform the state unemployment insurance office of the employee’s rejection of the offer.
- Loan Forgiveness Process: The rule outlines the process for how the SBA will review loans that were forgiven by the lender prior to the SBA completing its review. The SBA must make its decision on forgiveness within 90 days after the lender has issued its decision to the SBA.
The SBA also issued a 19-page rule that provides more detail on the loan review procedures and borrower/lender responsibilities. The link for the rule is available on our COVID resource page.
Please reach out to your Henry & Horne professional for further insight on how these aspects of the application process for PPP loan forgiveness affect your business’ situation.
Phillip R. McCollum Jr., CPA