U.S. House of Representatives Passes the PPP Extension and The Paycheck Protection Small Business Forgiveness Act is Introduced

On Wednesday, July 1, 2020, the U.S. House of Representatives passed a bill to extend the Paycheck Protection Program (PPP) application period by five additional weeks until August 8, 2020.  The U.S. Senate passed the bill by unanimous consent on Tuesday, June 30, 2020, less than four hours before the PPP application window was scheduled to close with more than $130 billion in unspent loan money. It is expected that President Donald Trump will sign the bill into law this week. Members of the House and the Senate are expected to adjourn for the Fourth of July holiday and are scheduled to return in two weeks.

On Tuesday, June 30, 2020, the U.S. Small Business Administration (SBA), which oversees the program with the Treasury Department, had approved nearly 4.9 million loans for a total of more than $520 billion. At midnight on June 30, 2020, the SBA stopped accepting loan applications. The unexpected extension is intended to provide small businesses additional time to apply for the approximately $129 billion in PPP funding remaining.

In addition to the five-week extension for the PPP application period, U.S. Senators Kevin Cramer (R-ND), Bob Menendez (D-NJ), Thom Tillis (R-NC) and Kyrsten Sinema (D-AZ), members of the Senate Banking Committee, introduced the Paycheck Protection Small Business Forgiveness Act to streamline forgiveness of PPP loans for small businesses. This bipartisan legislation includes forgiveness for PPP loans of $150,000 or less if the borrower submits a simple, one-page attestation form to the lender. It also ensures the lender will be held harmless from any enforcement action if the borrower’s attestation contained falsehoods.

Approximately 85% of PPP loans would be eligible for this simplified loan forgiveness process. The approximately 3.7 million PPP loans of $150,000 or less account for 85% of all PPP approved loans, but only 26% of the PPP funds delivered. The cost of applying for forgiveness for a PPP loan of this size is $2,000 for the small business and $500 for the lender. The bipartisan legislation introduced could save small businesses $7.4 billion and banks nearly $2 billion.

As background, in early April, Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The PPP was launched to aid the U.S. economy and assist small businesses facing economic hardships created by the COVID-19 pandemic. The program provides forgivable loans of up to $10 million per borrower that small businesses and other qualifying entities can use to cover payroll and other select costs, including mortgage interest, rent, and utilities.

PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.

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.

The U.S. Senate Approved a Vote to Extend the Paycheck Protection Program Application Period

On Tuesday, June 30, 2020, the U.S. Senate approved a vote to extend the Paycheck Protection Program (PPP) application period by five additional weeks until August 8, 2020.  The vote was passed by unanimous consent less than four hours before the PPP application window was scheduled to close with more than $130 billion in unspent loan money.

The legislation will require President Donald Trump’s signature for the program to continue. It now heads to the House of Representatives, which had finished voting before the bill was approved by the Senate.  Members of both chambers are expected to adjourn by the end of the week for the Fourth of July holiday and are scheduled to return in two weeks. The House would have to pass the measure and President Trump would have to sign it before the extension would take effect.

As of 5:00 p.m. ET on Tuesday, June 30, 2020, the U.S. Small Business Administration (SBA), which oversees the program with the Treasury Department, had approved nearly 4.9 million loans for a total of more than $520 billion. At midnight on Tuesday, June 30, 2020, the SBA stopped accepting loan applications. The unexpected extension is intended to provide small businesses additional time to apply for the approximately $129 billion in PPP funding remaining.

In early April, Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The PPP was launched to aid the U.S. economy and assist small businesses facing economic hardships created by the COVID-19 pandemic. The program provides forgivable loans of up to $10 million per borrower that small businesses and other qualifying entities can use to cover payroll and other select costs, including mortgage interest, rent, and utilities.

PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.

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.

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.

The Small Business Administration and the Treasury Department Announce Streamlined Paycheck Protection Program Loan Forgiveness Applications

On Wednesday, June 17, 2020, the Small Business Administration (SBA) and the Treasury Department unveiled a streamlined loan forgiveness application for the Paycheck Protection Program (PPP). The new five-page “borrower-friendly” application, which can be found here, provides more flexibility to small businesses to receive forgiveness on their SBA-backed loans. The original eleven-page application was released in mid-May.

The SBA and the Treasury also released a three-page EZ Version, which applies to borrowers who are self-employed or have no employees; did not reduce the salaries or wages of their employees more than 25 percent and did not reduce the number of hours of their employees; or experienced reductions in business activity as a result of the coronavirus pandemic and did not reduce the salaries or wages of their employees by more than 25 percent.

The PPP was included as part of the CARES Act, the $2.2 trillion program that included economic impact payments to individuals and aid to businesses in response to the novel coronavirus pandemic. The program was initially launched on April 3 with $349 billion in funding to help small businesses remain open and retain employees. The loans would be forgiven if businesses retained their employees for up to eight weeks. Many small businesses had problems accessing or applying for the loans and the funds were quickly depleted. The program resumed on April 27 and Congress provided another $320 billion; however, the rules, eligibility, and forgiveness criteria have constantly changed. The program does not run out until June 30 and as of Tuesday, more than 4.6 million loans worth close to $513 billion had been distributed through the program. Congress allocated about $610 billion to the PPP, leaving approximately $120 billion to $130 billion in the fund.

Earlier this month, Congress provided more flexibility by passing the PPP Forgiveness Act to encourage more businesses to sign-up and to alleviate concerns regarding the loan forgiveness.  This was helpful to businesses such restaurants and the hospitality industry.  It extends the covered period from eight to 24 weeks, amends the requirement that no more than 25 percent of the loan forgiveness amount be attributed to non-payroll costs, and allows up to 60 percent to be used for non-payroll costs. The bill also included several other changes, including extending the deferral of payments of loan principal, interest and fees, from the current six months, until the date when the SBA pays the forgiveness amount to the lender. The new loan forgiveness application from the SBA reflects these changes.

The EZ application requires fewer calculations and less documentation for eligible borrowers. Details about the applicability of the various provisions are available in the instructions accompanying the new EZ application form. Both applications give borrowers the option of using the original eight-week covered period, if their loan was made before June 5, 2020, or the extended 24-week covered period under the new law. According to the SBA and the Treasury, the changes will result in a more efficient process and ease the process for businesses to realize full forgiveness of their PPP loan.

Please view the following applications for more information:

The EZ Forgiveness Application

The Full Forgiveness Application

The SBA’s new Interim Final Rule revises the previous Third and Sixth Interim Final Rules, published on April 14, 2020, and April 28, 2020, respectively. It specifically addresses the amount of employee compensation that may be forgiven under the extended 24-week covered period. While forgivable employee compensation was previously capped at $15,385 per individual, based on the annual covered salary cap of $100,000 and an 8-week covered period, the cap under the new 24-week covered period is $46,154 per individual employee. The annual covered salary cap remains at $100,000 per employee. However, owner compensation is specifically excluded from the $46,154 cap, although the forgivable figure does rise from the previous $15,385 cap under an 8-week covered period to $20,833 (a multiplier of 2.5 months is used for 24-week covered periods).

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.

Senate Passes the Paycheck Protection Flexibility Act to Provide Direct Relief to Small Businesses, Proceeds to President Trump to Sign into Law

On the evening of Wednesday, June 3, 2020, the U.S. Senate unanimously approved legislation to fix the Paycheck Protection Program (PPP) by providing direct relief to small businesses affected by the coronavirus pandemic. Senate Majority Leader Mitch McConnell, R-Ky., requested a unanimous consent vote and the vote was nearly unanimous at 417-1.

The bill, which was passed by the House of Representatives on May 28, 2020, now proceeds to President Trump to sign into law. The legislation:

  • gives small businesses more time to use Paycheck Protection Program loans, increasing the deadline from eight weeks to 24 weeks.
  • amends the 75/25 rule for how much businesses must spend on payroll versus non-payroll costs to get full forgiveness of the loan to 60/40. This gives businesses more flexibility to use the loans to pay for expenses other than payrolls.
  • moves the deadline to rehire workers from June 30 to December 31.
  • extends the two-year term for the loans to five years, among other provisions.

Under the PPP program, loans for restaurants, hotels, and other small businesses would convert into federal grants if recipients adhere to conditions, including spending the loan amount within the required time.  The previous eight-week requirement to use the funds to carry out the terms of the loans had been very restrictive to caterers, museums, gyms, and other small businesses.

Many businesses reported an inability to rehire employees because they are making more on unemployment than they made working. The bill extends the deadline to rehire employees to align with the expiration of enhanced Unemployment Insurance. This was created through the CARES Act, and in some cases is higher than the median wage in 44 states.

Negotiations to expand the PPP’s flexibility have been in process for weeks since the Senate’s Memorial Day recess without being able to pass its own version of the House legislation.

Tarlow is here to help!

Our Partners and staff members are closely monitoring tax-related legislation and regulations and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.

Tarlow Update: The Paycheck Protection Program (PPP) Flexibility Act Passed the House

The Paycheck Protection Program (PPP) Flexibility Act passed the House on Thursday, May 28, 2020. The PPP Flexibility Act extends the time businesses need to spend funds and alters the rule that they must contribute 75% of the funds on payroll for full forgiveness (that level would be reduced to 60%).

The House bill proposes extending the time in which businesses must use the funds from eight weeks to 24 weeks; amending the 75/25 rule for how much businesses must spend on payroll versus non-payroll costs to get full forgiveness of the loan to 60/40. The bill pushes back the deadline to rehire workers from June 30 to December 31; and extends the two-year term for the loans to five years, among other provisions.

The Senate has its own PPP extension bill that would propose increasing that time frame from eight to 16 weeks, extend the deadline to apply for the PPP, and allow businesses to use funds to purchase protective equipment for employees, among several other amendments.

The first recipients of loans that opened up on April 3 are nearing the end of their eight-week period. Many small businesses and lobbyists have argued the time frame and payroll limits have made it challenging for businesses that remain unable to fully open, (especially restaurants, bars, and salons), to use the funds.

The House’s legislation has been widely endorsed by various outside groups, including the U.S. Chamber of Commerce and the National Restaurant Association, among others. 

The House bill now heads to the Senate for a vote. The bill must be signed by the President to become law.

 

Tarlow is here to help!

Our Partners and staff members are closely monitoring tax-related legislation and regulations and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.

SBA and Department of Treasury Release PPP Loan Forgiveness Application

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.

SBA Releases Final Rule on Loan Increases for Partnerships

On Wednesday, May 13, 2020, the Small Business Administration (SBA) released Interim Final Rule 9 (“IFR 9“), which provides important guidance for partnerships on loan increases.

As an update, partnerships that received a Paycheck Protection Program (PPP) loan and only included the partnership’s employees in the loan amount calculation are given the option of submitting a request to the SBA to increase the PPP loan amount to include partner compensation. The request would allow the lender to make an additional disbursement, although the previously issued Interim Final Rule on Disbursements (Interim Final Rule – Disbursements of PPP Proceeds) requires PPP loans to be disbursed in a single disbursement. Although an additional disbursement is allowed, the SBA clearly stated that maximum loan amounts still apply, including $10 million for an individual borrower or $20 million for a corporate group.

As background, on April 14, 2020, the SBA released an interim final rule (“IFR 2”) to provide guidance for individuals with self-employment income. The rule, “Guidance on SBA Loans for Self-Employed,” stated, “if you are a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual. Instead, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.”

On April 28, 2020, the Department of the Treasury posted an interim final rule (“IFR 4”) that provided an alternative criterion for calculating the maximum loan amount for PPP loans issued to seasonal employers.  It was expected that compensation to partners was not to be included in calculating the PPP loan amount.  With concerns of diminishing PPP funds, many partnerships filed their applications quickly, and without including partner compensation in their calculations.  The Interim Final Rule offers further options for ‘partnerships that received a PPP loan that did not include any compensation for its partners’ on their application.

Tarlow is Here to Help!

We are readily available to assist partnerships who applied for a PPP loan and did not include partner compensation as part of the loan amount calculation.

Please contact your Tarlow advisor for assistance and to discuss how to calculate partner income for the loan amount increase, or how to interpret and document spending requirements for PPP forgiveness.

Tarlow Update: SBA Announces Additional Guidance on the Paycheck Protection Program Certification Requirement

We would like to provide an update released today, May 13, 2020, by the Small Business Administration (SBA) regarding how the SBA will review borrowers’ required good-faith certification concerning the necessity of their loan request.

According to the SBA, “When submitting a Paycheck Protection Program (PPP) application, all borrowers must certify in good faith that ‘current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.’ SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”

Borrowers with loans greater than $2 million that do not satisfy this safe harbor may have an adequate basis for making the required good-faith certification, based on their individual circumstances. The SBA previously stated that all PPP loans in excess of $2 million will be subject to review by SBA for compliance with the program requirements as set forth in the PPP Interim Final Rules and in the Borrower Application Form. If, during the course of the SBA’s review, it is determined that a borrower lacked an adequate basis for the required certification regarding the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness.  If, after receiving notification from SBA, the borrower repays the loan, SBA will not pursue administrative enforcement with respect to the certification regarding the necessity of the loan request. In addition, SBA’s determination concerning the certification will not affect SBA’s loan guarantee.

Tarlow is here to help!

Our Partners and staff members are closely monitoring tax-related legislation and regulations and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.