Unexpectedly, the SBA and Treasury Department released 10 pages of FAQ’s related to PPP forgiveness. Obviously 10 pages is a lot of information; however most of it was clarifications of what we already knew. Information I think you should know or see again is listed below.
1. Payments on PPP loans are not required until forgiveness amounts are remitted to the lender by the SBA.
2. Any portion of the PPP loan that is not forgiven must be repaid by the borrower. This INCLUDES accrued interest, which began when the loan was disbursed.
3. Amounts incurred prior to the covered period, but paid for during the covered period are eligible for forgiveness.
4. Amounts incurred during the covered period, but paid for subsequent to the covered period are eligible for forgiveness if they were paid on the standard schedule.
5.All cash compensation can be included for forgiveness. This includes tips, commissions, bonuses, and hazard pay.
6. Business owners are capped at either $20,833 (24-week covered period) or $15,385 (8-week covered) period, regardless of how many businesses or PPP loans they have. Business owners can choose how to allocate this cap if they do have more than one PPP loan.
7. Business owners can be eligible for forgiveness related to employer benefit contributions and employer retirement contributions depending on the business type. These employer benefits do not count towards the business owners cash compensation amount noted in bullet 6. Benefit forgiveness is limited to either $20,833 or $15,385.
– C-Corp Owner – Eligible for Employer Benefits and Employer Retirement
– S-Corp Owner – Eligible for Employer Retirement
– Schedule C, Schedule F, and General Partners – Not eligible for either
8. General Partners – Partners are only eligible for forgiveness if the amounts are paid to partners during the Covered Period or Alternative Covered Period
9. Interest is not eligible for forgiveness if it is incurred on unsecured credit obligations
10. Covered Utility Payments – the CARES Act included “transportation” in this section. The FAQ explains this is “A service for the distribution of transportation refers to transportation utility fees assessed by state and local governments”. There is a link in the FAQ to more information on this topic.
Full details can be found here.