By Brian Deutsch
The U.S. Small Business Administration released guidance answering 23 frequently asked questions regarding the forgiveness of Paycheck Protection Program loans. Following are highlights from the guidance provided:
- Eligible costs incurred before the Covered Period but paid during the Covered Period are eligible for loan forgiveness. Further, eligible costs incurred during the Covered Period but paid after the Covered Period could also be eligible for forgiveness if they are paid on or before the entity’s next regular payroll or billing date.
- The employer portion of group healthcare benefits and employer contributions for retirement benefits paid or incurred during the Covered Period or “Alternative Payroll Covered Period” are eligible for forgiveness. Forgiveness will not be granted for amounts accelerated from periods outside the Covered Period or Alternative Payroll Covered Period.
- Owner compensation is capped at $15,385 per owner for the 8-week period or $20,833 per owner for the 24-week period. The limitation applies across all businesses in which the owner has an ownership stake.
- Health insurance contributions for S Corporation owners with at least a 2 percent stake in the business are not eligible for forgiveness, nor are the contributions for family members. Instead, these amounts are considered part of the owners’ cash compensation.
- If an eligible organization has a rent or interest payment for a mortgage loan that existed prior to February 15, 2020 but is renewed or refinanced after that date, the lease payments under the renewed lease or interest payments on the refinanced mortgage are eligible for forgiveness.
- Transportation, which is included as a utility eligible for forgiveness, is defined as ‘transportation utility fees assessed by state or local governments.”
- When considering the full-time equivalent (FTE) employee reduction related to forgiveness, borrowers may exclude reductions that occur due to, “(1) an inability to rehire individuals who were employees of the borrower on February 15, 2020 and (2) an inability to hire similarly qualified individuals for unfilled positions on or before December 31, 2020.” Within 30 days of the employee’s rejection of the offer to rehire, borrowers must inform the applicable state unemployment insurance office. In addition, borrowers must maintain documentation, which could include a written offer to rehire the individual, a written record of the employee’s rejection of that offer, and a written record of efforts to hire a similarly qualified individual.
- Seasonal employers should use the same 12-week period they used for calculating the maximum loan for the reference period for calculating any loan forgiveness reduction.
- When calculating the forgiveness reduction related to salary/hourly wages, borrowers should only consider decreases in salaries or wages (not all forms of compensation).