On Friday, May 15, 2020, the Small Business Administration (SBA), together with the Department of the Treasury, released the Paycheck Protection Program (PPP) Loan Forgiveness Application. The application, which was announced via a press release, includes detailed instructions to advise borrowers how to apply for forgiveness of their PPP loans, consistent with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The SBA will also soon issue regulations to further assist borrowers in completing their applications and provide lenders with guidance on their responsibilities.
The application and instructions include several updates related to the tracking and calculation of loan forgiveness. These changes, which reduce the compliance burden and simplify the process for borrowers, include:
- Borrowers are given options on calculating payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles.
- After receiving their PPP loan, borrowers have the flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week covered period.
- To confirm eligibility for loan forgiveness, detailed ‘step-by-step’ instructions guide borrowers on how to perform the calculations required by the CARES Act.
- Borrowers are given clear guidance on the implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30.
- The addition of a new exemption from the loan forgiveness reduction. This applies to borrowers who made ‘good-faith,’ written offers to rehire workers that were declined.
As background, the PPP was created by the CARES Act to provide forgivable loans to eligible small businesses. The goal of the PPP was to keep American workers on the payroll during the coronavirus pandemic. The newly released Loan Forgiveness application and detailed instructions will assist small businesses apply for forgiveness at the conclusion of the eight-week covered period, which begins with the disbursement of their loans.
Tarlow is Here to Help – Please Contact Us with Questions
Tarlow Partners and staff members are closely monitoring tax-related legislation and regulations, and new guidance from the SBA and the Department of Treasury. We will continue to send updates and communications about relevant news and changing guidelines.
We are readily available to assist business owners in submitting Loan Forgiveness applications. If you have any questions about interpreting these new requirements and maximizing PPP loan forgiveness, please contact your Tarlow advisor for assistance.