The Small Business Administration (SBA) and Treasury Department have issued a new interim final rule, as well as a revised Paycheck Protection Program (PPP) loan forgiveness application and instructions, and an “EZ” loan forgiveness application (details on that below). The new guidance documents and standard loan forgiveness application predominantly contain clerical updates to reflect the new 24-week loan forgiveness covered period. But there are some important clarifications of open issues that have drawn the attention of many.

Latest Highlights of PPP Loan Forgiveness New Interim Final Rule

• Borrowers utilizing a 24-week loan forgiveness covered period likewise may, for payroll purposes, use the Alternative Payroll Covered Period (APCP), which is the 24-week period beginning on the first day of the first pay period after the loan disbursement date. The APCP may not extend past December 31, 2020. 
• For borrowers who utilize the 24-week loan forgiveness covered period/APCP:
  • Employees earning an annual salary in excess of $100,000 annually will be capped, for loan forgiveness purposes, at $46,154 (24/52 of $100,000).
  • Self-employed individuals, general partners, and “owner-employees” will be capped at $20,833 (which is the 2.5 month equivalent of $100,000 annually) or the 2.5-equivalent of their 2019 annual compensation, whichever is lower.
• The term “owner-employee” remains undefined, but the forgiveness application instructions clarify that health insurance contributions made on behalf of self-employed individuals, general partners, and “owner-employees of an S-corporation” are not eligible for forgiveness.
  • Although not specifically stated, this suggests that health insurance contributions made on behalf of shareholder employees of a C-corporation are eligible for forgiveness.
• Loan forgiveness is not available for retirement contributions made on behalf of self-employed individuals or general partners. The guidance notably does not reference “owner-employees” in this discussion, suggesting that retirement contributions made on behalf of owner-employees of an S-corporation, as well as shareholder employees of a C-corporation, are eligible for loan forgiveness. 

EZ Loan Forgiveness Application

And as noted above, borrowers now have the availability of an EZ application, which is available to borrowers that:

• Are self-employed and have no employees; or
• Did not reduce the salaries or wages of any employee by more than 25% during the loan forgiveness covered period/APCP, and did not reduce the number of employees or the average paid hours of employees between January 1, 2020, and the end of the loan forgiveness covered period; or
• Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of their employees by more than 25%.

The news release announcing the EZ application explains that it “requires fewer calculations and less documentation for eligible borrowers.” This should allow many borrowers to breathe a sigh of relief, although it does not eliminate the obligation to keep and provide underlying documents and data supporting appropriate expenditures. Click to view the EZ application instructions.