PPP Forgiveness Guidance Issued as Congress Mulls Changes

A couple new interim final rules were issued late Friday giving additional details on forgiveness. The rules didn’t make needed changes to either the eight-week period during which PPP funds must be spent to qualify for forgiveness or the rule requiring PPP borrowers to spend at least 75% of the funds on payroll costs to qualify for full loan forgiveness.  

Here is what you need to know about the new interim final rules:

  • Confirms that both payroll costs paid & payroll costs incurred will be eligible for forgiveness
  • Confirms that owner-employee compensation will be limited to 8/52 of 2019 compensation
  • Confirms that Retirement or Health Insurance for sole proprietors or partners are not eligible – determining that the amount would already be included in profit or eligible earnings.
  • States that any employee that rejects a qualified offer needs to be reported to Unemployment within 30 days of rejection.

The eight-week period and 75% payroll rules are the focus of separate bills being considered in Congress this week. With most businesses well into their eight-week reporting period, hopefully it is not too late.

The House is expected to vote this week on standalone legislation that would extend the loan forgiveness period to as long as 24 weeks and also eliminate the rule requiring PPP borrowers to spend at least 75% of the funds on payroll costs to qualify for full loan forgiveness. This bill would also change the loan term from 2 years to 5 years and provide an exception to the FTE reduction if you have trouble replacing a position.

The Senate could vote as early as this week on a bill that would double the loan forgiveness period to 16 weeks. This bill would also eliminate the 75% rule. There is a high expectation that one of these bills will be passed and signed by the President later this week or early next week.

Critics of the eight-week loan forgiveness period argue that it isn’t flexible enough for businesses that have dealt, and in many cases continue to deal, with state and locally mandated stay-at-home orders that have kept many types of businesses closed or operating at significantly reduced capacity. Critics of the 75% rule argue that it does not do enough to accommodate businesses whose employees haven’t been able to work because of government-imposed business closures.

As always – We are here to help you successfully navigate through the loan forgiveness application process.  

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