New PPP Loan Forgiveness Guidelines
This week the SBA released a revised PPP loan forgiveness application and instructions. I n addition, SBA also published a new EZ version of the forgiveness application Form 3508EZ that applies to borrowers that:

  • Are self-employed and have no employees, OR

  • Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number of hours of their employees; 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 SBA also clarified certain changes effected by the PPP Flexibility Act of 2020, signed into law by the President on June 5, 2020.

Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period.

New Limitation on Owner Compensation Replacement and Non-owner Employee Compensation Limit during 24-week Period:

  • For owner-employees, self-employed individuals and general partners, the cap is 2.5 months of 2019 compensation, with a maximum of $20,833 (2.5 ÷ 12 × $100,000). Note: The application appears to include corporation owner-employees in this cap.

  • The amount for all other employees is increased to $46,154 (24 ÷ 52 × $100,000) plus covered benefits such as health care, retirement contributions, and state payroll taxes.

The new application instructions also clarify that:

  • Eligible payroll costs do not include any employer health insurance contributions made on behalf of self-employed individuals, general partners, or S corporation owner-employees;

  • Employer retirement contributions made on behalf of a self-employed individual or general partner are also excluded from payroll costs; and

  • Employer retirement contributions on behalf of owner-employees are capped at 2.5 months' worth of the 2019 contribution amount. This limit is included on the EZ application but is not included on the full forgiveness application or in the updated interim final rule, but it is possible it will be added in the future.


As always, we will keep you informed on all the important updates to the PPP as the SBA and Treasury continue to release new rules and guidance. Please don't hesitate to contact one of us or reach out to our COVID-19 team at should you have any questions. Take care and stay safe.

This newsletter is based on interpretation of the CARES Act and guidance released through June 17, 2020. There are areas of the Act where additional clarification from the Treasury and SBA is needed. Your judgement and interpretations of the Act may be necessary. This alert is provided for information purposes only and does not constitute accounting and tax advice. Please contact your MGGGY LLP accountant for additional assistance.

CC mgggy newsletter release 2020-18
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