Barry Sunshine, Senior Tax Partner,
PPP Updates & more on forgiveness:
The SBA and Treasury Department have released that they will make public all the businesses names that received PPP money in excess of $150,000. The Treasury Department and SBA believes that releasing the names of businesses to the public will add transparency to the program. While I agree with their thinking, I know that a few businesses that really didn’t want this information released to the public and if they knew that their names where going to be released, then they might not have applied for PPP money.
The latest PPP loan forgiveness application addresses these unanswered questions, including:
- Covered Period: All PPP loan borrowers will now have a 24-week Covered Period, unless borrowers of loans originated prior to June 5, 2020 elect to use the 8-week Covered Period as originally designed. The application instructs the borrower to state their covered period on the application, either the 8- or 24-week period. These new instructions do not suggest that there is an additional form required for the 8-week election.
- Maximum Cash Compensation Per Employee: PPP loan borrowers can obtain forgiveness for cash compensation in the maximum amount of $46,154 per employee, calculated as $100,000 as prorated over the 24-week Covered Period, or $15,385 over the 8-week Covered Period.
- Owner Compensation: Prior to this latest guidance, owner compensation was limited to eight weeks’ worth (8/52) of 2019 net profit up to $15,385. PPP loan borrowers using the 24-week Covered Period can now include 2.5 months’ worth (2.5/12) of 2019 net profit up to $20,833. We know that sole proprietors, general partners and LLC members are considered owners but we don’t know if you are an employee-shareholder of a S or C corporation whether will you be subject to the owner compensation limitation.
- Borrower Has No Employees: The borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the PPP loan application form.
- No Salary or Hourly Wages Reductions or FTE Reductions: The borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or compared to the period between January 1, 2020 and March 31, 2020, AND did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period.
- No Salary or Hourly Wages Reductions or Unable to Maintain Level of Business Activities: The borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or compared to the period between January 1, 2020 and March 31, 2020, AND was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, the Occupational Safety and Health Administration, or standards of sanitation, social distancing, and any other work or customer safety requirement related to COVID-19.
Unfortunately, there are still many unanswered questions as well as traps for the unwary.
If you have any questions, then please give me a call.
Barry Sunshine | Senior Tax Partner
485 Madison Avenue | New York | NY 10022
100 Quentin Roosevelt Blvd | Garden City | NY 11530
Direct: 516 393 5602 / 516.542.6300