SBA Releases New PPP Guidance, Frequently Asked Questions on Loan Forgiveness

On August 4th, further guidance was released regarding the forgiveness of Paycheck Protection Program (PPP) loans. The U.S. Small Business Administration (SBA), in consultation with Treasury, released guidance in a new, 10-page FAQs document, that is divided into four sections addressing different aspects of the process and calculations PPP borrowers should use to determine how much of their loan is forgivable. 

Our team has organized the latest guidance and FAQs we believe are most relevant for PPP borrowers, below: 

Source: SBA | Frequently Asked Questions (FAQs) on PPP Loan Forgiveness | August 4, 2020. 

Payroll costs include all forms of cash compensation paid to employees, including tips, commissions, bonuses, and hazard pay. Note that forgivable cash compensation per employee is limited to $100,000 on an annualized basis.

Yes, eligible business mortgage interest costs, eligible business rent or lease costs, and eligible business utility costs incurred prior to the Covered Period and paid during the Covered Period are eligible for loan forgiveness.

Yes. If a lease that existed prior to February 15, 2020 expires on or after February 15, 2020 and is renewed, the lease payments made pursuant to the renewed lease during the Covered Period are eligible for loan forgiveness. Similarly, if a mortgage loan on real or personal property that existed prior to February 15, 2020 is refinanced on or after February 15, 2020, the interest payments on the refinanced mortgage loan during the Covered Period are eligible for loan forgiveness.

Example: A borrower entered into a five-year lease for its retail space in March 2015. The lease was renewed in March 2020. For purposes of determining forgiveness of the borrower’s PPP loan, the March 2020 renewed lease is deemed to be an extension of the original lease, which was in force before February 15, 2020. As a result, the lease payments made under the renewed lease during the Covered Period are eligible for loan forgiveness.

A service for the distribution of transportation refers to transportation utility fees assessed by state and local governments. Payment of these fees by the borrower is eligible for loan forgiveness.

For more information on transportation utility fees, see here.
 

For purposes of calculating reductions in the loan forgiveness amount, the borrower should only take into account decreases in salaries or wages.

So if there is a reduction in bonus pay, that would not go into the 25% reduction calculation – only the base salary or wage.

Need a second set of eyes?

Our CPAs can help you navigate complex PPP loan forgiveness rules including calculation and documentation requirements.

PPP Advisory Services Leader

Mike J. Mondelli,

Tax Manager

With more than a decade of federal tax experience, Mike provides advice on federal tax matters. He routinely advises on IRS practice and procedure including examination, appeals, collection, penalty abatement, audit reconsideration, research, captive insurance disclosures, Private Letter Rulings, and other federal tax issues.

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