On June 16, 2020, the U.S. Small Business Administration (SBA) released the updated Paycheck Protection Program (PPP) Loan Forgiveness Application (see link below) which supersedes the application previously released on May 15, 2020. The new application incorporates changes to the PPP per the Paycheck Protection Program Flexibility Act (H. R. 7010), which was signed into law on June 5, 2020. The latest PPP loan forgiveness application, in conjunction with the June 17, 2020 release of the Revisions to the Third and Sixth Interim Final Rules, addresses some of the previously unanswered questions, including:

1. 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.
2. 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.
3. 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.

The SBA also released the PPP Loan Forgiveness Application Form 3508EZ (Form EZ) on June 16, 2020. The Form EZ is a simplified version of the loan forgiveness application and is applicable to PPP loan borrowers who are willing to certify they have met one of the following conditions:

1. 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.
2. 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.
3. 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.

Further guidance and instructions are anticipated, especially as they relate to the PPP Loan Forgiveness Application. The HT2 COVID-19 Task Force is hard at work deciphering new regulations as they are published! Stay tuned for updates and contact us for assistance with your loan forgiveness application.