Business Loan Program Temporary Changes: The SBA and Treasury Provide New Guidance on Interim Final Rules to Clarify the Loan Forgiveness Application Timeline and Owner Compensation

On Monday, June 22, 2020, the U.S. Small Business Administration (SBA) and the Department of Treasury released new guidance about the Paycheck Protection Program (PPP), Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures Interim Final Rule.

This new guidance outlines two significant changes affecting PPP loan borrowers:

  • Application Timeline: When can a borrower apply for loan forgiveness? 

A borrower can apply for loan forgiveness at any time on or before the loan maturity date.  If; however, the borrower applies for forgiveness before the end of the covered period, and if any employee’s salaries or wages have been reduced by more than 25 percent, the borrower must account for the excess salary reduction for the full eight-week or 24-week covered period.

  • Owner Compensation: What are the expanded limitations on owner compensation? 

The release of Revisions to the Third and Sixth Interim Final Rules on June 17, 2020, increased the maximum compensation for all employees and owners. The new interim rules added that the employer portion of retirement plan funding for owner-employees of S-Corporations and C-Corporations is now capped at 2.5 months’ worth of the 2019 contribution amount. In addition, healthcare costs paid on behalf of owner-employees of S-Corporations are not eligible for forgiveness.

Additional minor revisions to existing guidance are also included in the new regulations. These updates address the extension of the covered period derived from the June 5, 2020 enactment of the Paycheck Protection Program Flexibility Act (H. R. 7010).

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.