On June 16, the Small Business Administration, with support from the Treasury Department, issued a revised application for the Paycheck Protection Program (PPP) Loan Forgiveness program. You can download the form from the Small Business Administration website (SBA.gov). The new application reflects revisions to the loan forgiveness program issued on June 5.
In part, the SBA revised the program to resolve questions concerning the Treasury Department’s definition of a full-time employee. The Department clarified that when a business hires back its former employees, their calculations are based on a 40-hour workweek. This can prove helpful for employers whose full-time employees worked less than 40 hours. For example, if your full-timers only worked a 30-hour week, you would just require rehiring 75% of your employees to meet eligibility for loan forgiveness.
PPP loan forgiveness is more complex than an Economic Injury Disaster Loan (EIDL). With an EIDL, the only portion forgiven is the loan advance (up to $10,000), which is automatically forgiven so long as it was not used for business expansion, refinancing of debt, or replacing lost sales. Employers, however, must repay the remainder.
The government grants PPP loans with the requirement that employers must return the unused portion. Furthermore, you can only apply for forgiveness after you have spent the money. To receive forgiveness, you must present sincere in-writing offers to rehire your employees with written proof of any turn-downs, provide evidence that suitable replacements could not be found, and present attestations that you could not rehire employees due to COVID-19 stipulations. In addition, you have 24 weeks to spend your loan after receiving your initial portion, and payroll disbursements must account for at least 60 percent of the forgiven amount.
Forgiven portions of PPP loans are exempt from taxation as a discharged debt, and you can delay paying payroll taxes.
We have carefully reviewed the details of the loan forgiveness program. Should you have questions, we welcome you to contact us.
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