PPP Forgiveness Summary of HR 7010
As many of you may have heard congress has passed another bill relating to the PPP. This was intended to assist in clarifying many items relating to the forgiveness process. These are outlined below. We expect to see more changes and guidance arise as lenders start the forgiveness process.
Repayment Period of Loans Changed
The SBA originally assigned a 2-year requirement for repayment of the PPP loans for those proceeds that are not forgiven. With this new bill passing this has extended that to five years. Also, the payment of principle and interest will be deferred until the lender receives the forgiveness amount from the SBA. So please work closely with your lender on this.
Extension of Covered Period
The original act required that the costs incurred for forgiveness to take place within 8 weeks. This has now been extended to 24 weeks or December 31, 2020, whichever is sooner. This is a result of many state orders not allowing businesses to operate back at 100% capacity. Please note that the salary limits remain.
If you would still like to keep the 8-week period it is an option. You will just work closely with your lender for the forgiveness process.
What can proceeds be spent on?
Per the original CARES act, there was a cap of 25% for non-payroll related expenses that were specifically listed as part of the PPP. This was raised in the new bill to 40%, but please be careful about the type of expenses allowed and documentation. Also, there are specific rules surrounding those that do not meet these requirements that could result in the proceeds from the PPP not being forgiven.
FTE Count, what about it?
As mentioned in prior posts there is a requirement for businesses to restore their employee FTE count/salary amounts to levels that preceded February 15th. In the original bill, this was to be done no later than June 30th. This has now been extended to December 31, 2020.
There are other options surrounding this requirement relating to businesses that remain partially or fully closed through the end of the year. Please communicate with your accountant and financial team to clarify this requirement.
Can you defer payroll taxes even if you received the PPP?
There was a portion of the CARES act that addressed an incentive allowing employers to defer the employer’s 6.2% share of 2020 Social Security tax until 2021 (50%) and 2022 (50%). For PPP borrowers they can now partake in this deferral until the moment the loan is forgiven.
There are still many unclear questions that remain. This includes treatment for Self-Employed/Schedule C filers, waiting period to apply for forgiveness if the period is expended how does that affect tax deductions, etc. As we discover more information, we will be sharing it with our clients and those that tune into our educational materials.