On Wednesday, June 17, 2020, The U.S. Small Business Administration (SBA) released a revised loan forgiveness application for the Paycheck Protection Program (PPP) as well as unveiled a new EZ application for forgiveness of PPP loans. The applications reflect changes to the PPP made by the Paycheck Protection Flexibility Act of 2020, which became law on June 5. The SBA also issued a new interim final rule providing guidance on how to calculate employee and owner compensation for loan forgiveness in the new 24-week covered period created by the Paycheck Protection Flexibility Act. Below is a summary of the recent changes.
New Interim Final Rule
The SBA issued rules for determining payroll costs and owner compensation in calculating PPP loan forgiveness under the new 24-week covered period.
The Paycheck Protection Flexibility Act tripled the duration during which PPP recipients could spend the funds and still qualify for loan forgiveness. The interim final rule adjusts and adds to previous guidance for calculating loan forgiveness under the original eight-week covered period.
The PPP allows loan forgiveness for payroll costs — including salary, wages, and tips — for up to $100,000 annualized per employee, or $15,385 per individual over the eight-week period. The new interim final rule establishes the 24-week maximum for full loan forgiveness at $46,154 per individual.
Owner Compensation Replacement Calculations
While the employee compensation limit for the 24-week period is three times the eight-week limit, the interim final rule does not do the same with the owner compensation replacement for businesses that file Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming, tax returns. For those businesses, forgiveness for the owner compensation replacement is calculated for the eight-week period as 8 ÷ 52 × 2019 net profit, up to a maximum of $15,385. For the 24-week period, the forgiveness calculation is limited to 2.5 months’ worth (2.5 ÷ 12) of 2019 net profit, up to $20,833.
The interim final rule also modifies earlier guidance to account for changes included in the Payroll Protection Flexibility Act.
The PPP Loan Forgiveness Application
Notable changes to the application and instructions.
The EZ PPP Loan Application
The EZ PPP Loan Forgiveness Application requires fewer calculations and less documentation than the full application. The EZ application can be used by borrowers that:
If you have any questions, please contact us at (973) 298-8500.More Resources