SBA Releases Updated PPP Loan Forgiveness Application and Interim Final Rules– June 18, 2020 by Adam Hill

The SBA has released an updated forgiveness application form for the Paycheck Protection Program (PPP) — form 3508 and instructions. They also introduced a streamlined version of the forgiveness application — form 3508EZ and instructions. The updates include the changes passed two weeks ago under the Paycheck Protection Program Flexibility Act of 2020.

The updates incorporate the following changes:

  1. Implemented a 24-week covered period; or, upon election the borrower may keep the eight-week covered period for loans issued prior to June 5.
  2. Added the 24-week alternative covered period, which gives flexibility of when the borrower starts the period based on when the borrower’s bi-weekly (or less frequently) payroll actually gets paid.
  3. Changed the 75% that was required to be used for payroll costs to 60%, allowing 40% to be used on non-payroll qualifying expenses, up from 25% originally. The instructions along with an interim final rule issued earlier this week clarify that the 60% requirement for payroll is required for full forgiveness, but having payroll under 60% will allow for partial forgiveness.
  4. Added a representation and certification to be signed by the borrower that states if the borrower has checked the box for FTE Reduction Safe Harbor 1 on PPP Schedule A, the borrower was unable to operate between February 15, 2020, and the end of 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, or the Occupational Safety and Health Administration. Requirements are those related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19. This language was also added to PPP Schedule A as an FTE reduction safe harbor. 
  5. Clarified if the borrower elects to use the eight-week period and is self-employed or an owner-employee, the cap will be the $15,385 or 8/52nds times 2019 income or compensation. However, if the borrower uses the 24-week period, the forgiveness request cannot exceed the lesser of 2.5/12 times 2019 compensation, or $20,833. This was also included in an interim final rule released this week. If the borrower is a self-employed person reporting taxable income on Schedule C with no employees, use of the 24-week covered period would appear to be the preferable option.
  6. The forms still have the expiration date of the October 31, 2020. This should have been changed to the earlier of October 31, 2021, or 10 months after the end of the covered period. The latest a covered period could end is December 31, 2020. We expect this to be fixed along with a few other typos in the coming weeks.
  7. SBA Form 3508EZ can be used by the borrower if one of the following applies:
    • 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 Borrower Application Form (SBA Form 2483);
    • The borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period or the alternative payroll covered period compared to the period between January 1, 2020, and March 31, 2020, AND the borrower 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. For purposes of this statement, “employees” means only those employees that did not receive compensation in excess of $100,000 during 2019. Reductions that arose from an inability to rehire individuals who were employees on February 15, 2020, are not considered if the borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also, reductions in an employee’s hours that the borrower offered to restore and the employee refused would not be considered; or
    • The borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period or the alternative payroll covered period compared to the period between January 1, 2020, and March 31, 2020 (same definition of employees as above), AND the borrower 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, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.

There is still over $129 billion dollars available under the PPP program. Small businesses that have not applied for a loan should consider whether or not an application would make sense at this time. The loan application deadline is June 30, 2020.

Contact Adam Hill at ahill@cohencpa.com or Dave Sobochan at dsobochan@cohencpa.com to discuss this topic further.


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Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.