As promised in my most recent PPP blog post, there’s tons of good news on the PPP front. This past Friday, June 26th, I led a webinar for clients and colleagues to summarize the newest guidance, give tips on next steps, and walk through the newly-updated AICPA forgiveness spreadsheet.
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So much has happened since my last PPP posts, just a week-and-a-half ago, I hardly know where to begin.
Let’s start with the good news: all of it is good news!
As you may recall, Congress passed the June 5th PPP Flexibility Act, and SBA & Treasury came out with new guidance on June 11th, which I covered extensively. They followed up by reducing the non-financial felony threshold a couple days later. Then the new forgiveness application and EZ-version (thank goodness) were released shortly afterward, on June 17th. However, I held off publishing blog posts or holding webinars on the new applications, since they were released without guidance — and like many of us, waited for the answers to our many outstanding questions.
Well, in the past week that guidance continued to trickle in, culminating in some key answers from the June 22nd Interim Final Rule (IFR) that — believe it or not, after almost three months — actually leave us with most of our concerns answered, and a clear path forward for most small business borrowers.
<This is the part where your blog writer takes her hard-earned glass of wine and raises it in a gesture of cheers.>
The confidence in the piecemeal guidance released since June 5th was evident this morning, when the AICPA decided to re-release their most excellent PPP Forgiveness Calculator Spreadsheet. Mind you, it’s in draft form, and I did find a couple mistakes when I took it on a test-run tonight — but they are quick to incorporate correction requests, and more importantly, this indicates to me that the folks there feel that we’ve gotten most of what we can expect to get from SBA/Treasury on the topic, and we can get back to work on forecasting. (Oh yeah — and tax preparation, as my clients and staff are reminding me.)
Another small win is that the SBA finally agreed to release names of recipients of PPP loans larger than $150,000. SBA loan recipients have always been a matter of public record, so I admit that I was confused by the political angle on this — but in the end, I think the compromise struck is one that will allow single-owner and other closely-held small companies the privacy they need for payroll purposes, while balancing the demands of the public to know where their taxpayer dollars are going. Reportedly, this will account for nearly 75% of the loan dollars approved.
So — what’s new?
These game-changers: – Non-owner employee compensation can be forgiven based on their full 24-weeks of pay — up to a $46,154 (24/52 x $100,000) cap — if the 24-week period is elected; – Owner compensation limits increase to 2.5 months of 2019 income capped at $100k (20.833%) if the 24-week period is elected (compared to 15.385% of 2019 if the 8-week period is used); – Borrowers may submit application early — as soon as requirements are met (including FTE calculations, meaning that even if a borrower does not meet either of the FTE Safe Harbors, they can determine the period for which FTEs must be maintained, between 8 and 24 weeks); – FTE Safe Harbor #1 (business activity limited by government mandate) will apply to the vast majority of borrowers, and frees them from performing the hellish FTE calculations; – FTE Safe Harbor #2 (the original Safe Harbor) allows choice of December 31st or the date of forgiveness application.
What does this mean?
First-off: any business owner(s) with no employees should elect the 24-week forgiveness period. Instead of the 8/52-week limit x 2019 compensation available for those who stick with the original 8-week period, those who elect the 24-week period will have 2.5 months x 2019 compensation forgiven instead. That’s an increase from 15.384% to 20.833%. And since most of these small business owners received their loan based on 2.5 times their 2019 monthly average, this will clearly earn them full forgiveness. (Furthermore, it eliminates the challenging situation whereby the loan amount was determined in months and the compensation limit was determined in weeks, putting most Schedule C and partnership filers in a position where full forgiveness was impossible.)
Secondly: once you have spent the money consistent with the rules, go ahead and submit your forgiveness application early, regardless of whether you have employees or not. You can elect the 24-week period, allowing for more generous caps, but then end the period early. There are many advantages to this approach: – having a shorter period over which to meet the FTE test, or an earlier date to qualify for the FTE Safe Harbor #2 (the original FTE safe harbor) – getting the loan off the Balance Sheet and freeing up any leverage you might need to be able to borrow from other lenders – avoiding the possibility of straddling a tax year with potentially non-deductible expenses to address – peace of mind
What don’t we know yet?
One unanswered question is whether or not the owner-compensation limitation applies to spouses or other relatives. So far there are no attribution rules, so presumably they fall under the (more generous) calculations for regular (non-owner) employees (assuming the wages are legitimate compensation for services rendered to the company).
What happens if the FTEs cannot be maintained due to a limitation on business activity that was not caused by government agency mandate? I am thinking of some professional services, for example, dog-walking, where technically the company was allowed to continue activities at full capacity, but the drop-off in business was precipitous. In this case the FTE rule will not be met, nor Safe Harbor #1 (government mandate). They could aim for the December 31 Safe Harbor #2 (the original safe harbor test), but that would be a gamble, and would presumably delay forgiveness by many months. This is not a large group of borrowers, but the consequences faced by them are certainly inequitable.
Are retirement contributions on behalf of owners allowable? Capped? The guidance makes it clear that these costs are not allowable for Schedule C filers or partners, as any funds earmarked for retirement are already counted in net income before being contributed. For owner-employees, there’s language in the EZ application — but not the main application — that makes it sound like retirement contributions are only allowed to the extent they are included in income, and are capped at 2.5 months x the 2019 amount. Why the discrepancy is unknown. This article discusses that topic in more detail.
There was concern about the announcement that S-Corp owners were suddenly not able to include health insurance in the payroll total — but it turns out that’s because by law those costs are already considered part of the Box 1 W-2 wages. It just means you can’t double-count them. (Schedule C filers and partners were already disallowed health insurance costs for forgiveness, as similarly, they are paid out of net income, which has already been counted for forgiveness purposes.) This article discusses that topic in more detail.
And for a step-by-step explanation of how to calculate forgiveness, I’ll also point you to the AICPA (no, I do not receive any remuneration from them — I’m just impressed by their resources). This step-by-step guide is quite helpful, and also points you to their greatest contribution to the PPP forgiveness thus far — the AICPA PPP Forgiveness Calculator Spreadsheet. Don’t fill out your forgiveness application or plan accordingly without it!
If you haven’t applied yet, please do. There are only a few days left in which to do so, and $130 Billion still available. The SBA has recently relaunched its Lender Match site, which connects small businesses with SBA-approved PPP lenders to get their loans approved before the June 30th deadline. I’ve had excellent luck with Cross River Bank, which has provided approximately 70% of my clients’ PPP loans, either directly or through various FinTech companies — and there was a great article in the New York Times about them recently. (Nope, those links aren’t monetized and I receive nothing from them. Just hoping to help out some small businesses.)
After a few more webinars on the topic — see the most recent one here — I plan to take a break from PPP planning for a short while and focus on tax preparation. I can’t begin to express my relief that we finally have a comprehensive PPP rule book that takes the real world into account.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
IRS Officials at Thursday’s NYU Tax Controversy Forum, presented by CPA Academy.
As the IRS begins slowly opening its offices in various states over the next four weeks, a panel of IRS officials discussed the recent changes and next steps at Thursday’s NYU Tax Controversy Forum, presented via CPA Academy.
I had been frustrated recently by a pretty big “fail” on the part of the IRS, where suddenly all of their notices — the letters that were not sent out during the period when employees were offsite — were mailed to taxpayers months late, causing a great deal of confusion and anxiety. As it turns out, for as many changes as the IRS was able to make to allow employees to process work offsite, one thing the IRS was not able to pivot effectively was anything that involves paper.
Sunita Lough, Deputy Commissioner for Services & Enforcement at the IRS, explained, “we’ve had 136 million returns filed and we’ve processed 134 million, but there are a number of paper returns that are in the mail that need to be opened and processed. We estimate that we receive 1 million new pieces of mail each week. Think about all of the weeks that we were closed. Our mailrooms are opening 5 million per week. We’re working really hard to open them. We currently have about 11 million pieces of mail that are unopened, but we are continuing to make progress.”
Accounting Today reported that among the areas where improvements were made, the IRS was able to offer some more flexibility for communicating with taxpayers and tax professionals by enabling secure email to be sent. “We created a way for people who are in compliance contact with us or have applications pending like the exempt organizations to be able to communicate with us through email, which is something we have never done,” said Lough.
They also reported that Eric Hylton, Commissioner of the IRS’s Small Business/Self-Employed Division, said he has seen more collaboration than he’s ever seen before in his 30 years at the IRS. “We’ve been extremely busy,” he said. “A lot of long conversations, late-night conversations….”
“Yes, we were hit with the crisis, but we also thought about what is the opportunity that we can take advantage of. I think we did yeoman’s work as it relates to getting our nonportable workforce into a telework environment. With SB/SE, we increased our numbers by 40 percent, which was outstanding. We had a lot of different efforts and a lot of different managers doing outstanding work to try to assist employees to get telework ready. Ultimately, that’s going to be a paradigm shift for us as we move forward.”
He believes telework will offer more flexibility with new seasonal hires, as well as office space. “There are certain pockets around the country where we could actually have more employees if we have the space, so it gives us an opportunity to look at this environment and turn this crisis into an opportunity,” said Hylton.
Doug O’Donnell, Commissioner of the Large Business & International Division, is seeing more collaboration across divisions. He also highlighed the new secure email system. “This really improved our ability to work in a telework environment. In addition to being able to send and receive documents, we also had an improved capability to accept signed documents,” he said. “We greatly improved our ability to operate in that environment and are actually progressing on work from our homes, which was a significant change from where we’ve been operating previously.”
Tammy Riperda, Commissioner of the IRS’s Tax Exempt and Government Entities Division, said that some of the managers in the her division would retrieve applications for tax-exempt status that arrived in the mail and deliver them curbside to the determination specialists who were driving up in their cars. The employees could then take the applications home and work through them in a telework environment. “Kudos to those managers and the ingenuity that they had and the ambition that they had to keep things going,” said Riperda.
But she acknowledged there is still a delay with paper-filed information returns, such as the Form 990 series. “We’re still trying to proceed with the processing of those as best we can,” said Ripperda. “But even those, as well as the processing of the applications, we’re unable to get them uploaded to TEOS, the Tax-Exempt Organization Search tool on IRS.gov, because of some back-end processing requirements for those uploads.
“But really it can almost be seen as fortunate timing that we stopped accepting paper applications for 501(c)3s on April 30 of this year.” Lough pointed out that the Form 1023 application for tax-exempt status was mandated to be electronically filed after that date.
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Due to office closures, the IRS wasn’t able to mail out letters to taxpayers. The overdue notices are being delivered to taxpayers now — and confusing us all to no end. The IRS says the due dates printed on the notices have been extended.
I received a few panicked texts and chats from clients and colleagues this week, as a result of the receipt of IRS letters with dates such as April 6th and May 4th (mind you, today’s June 16th — making these letters 1.5-2.5 months late).
As it turns out, the IRS wasn’t able to mail out the pre-printed letters to taxpayers due to office closures during the ongoing COVID-19 pandemic. Apparently, given the amount of time it would take to reprogram IRS systems and generate newly-updated notices, “some of the notices that taxpayers will receive show due dates that have already passed.” They claim that each notice will come with an insert confirming that the due dates printed on the notices have been extended.
However, this was not the experience we had — in the first case I encountered, no insert was received, and not only had the due date passed… but the letter-date itself was more than two months’ passed; and in the intervening months, a refund check had arrived, with no explanation. The amount they were claiming was due in the most recent back-dated letter had a) since been paid, then b) found erroneous and then c) refunded. Imagine my client’s confusion.
Normally I’m a huge fan of the IRS — inasmuch as I recognize how overworked and underfunded they are. But there’s no way to view this other than a major clusterfest.
And my clients and colleagues aren’t the only ones freaking out. Basically what happened was that since the IRS was shut down for a while due to the COVID-19 pandemic, letters weren’t going out — so when they reopened, ALL these late letters went out. This was apparently the week for it — loads of people are getting letters all-of-a-sudden, with no reference to any activity since then. Furthermore, a lot of people are getting “late payment” letters for various taxes that were due 4/15, because they didn’t change their system internally to reflect the new due date of 7/15. According to Accounting Today, the IRS said Monday that these notices will be delivered to taxpayers in the next few weeks, so expect a lot of scared, confused taxpayers.
Solutions? Well, if this is due to personal income taxes, you can go to the IRS website and check to see if you have a current balance due; but to my knowledge they do not have a similar system for payroll taxes, unfortunately. In this case you could try to call the IRS, but they’re still not entirely ramped up yet, so the hold time could be interminable. In case you want to give it a try (especially if you’re concerned about penalties or interest), then the number for business services is 800-829-4933.
This is, by the way, CRAY-CRAY. I’m 48 years old and have never seen anything like this.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
As a reminder — EIDL is considered a “working capital” loan, which means it’s meant to be used to make payments that would have been required to sustain operations if the disaster hadn’t occurred in the first place. The only items that EIDL can’t be used on are a) expansion costs (which includes new assets only if they are part of the expansion; therefore regular replacement or investment in equipment for increased efficiency is allowable), b) consolidating long-term debt (so regular LOC and debt service payments are fine, but not anything that essentially refinances existing long-term debt), and c) shareholder payroll or distributions that are not in the usual course of business (in other words, you can’t use the EIDL to essentially give yourself a bonus).
From their press release today, June 15: “The SBA is strongly committed to working around the clock, providing dedicated emergency assistance to the small businesses and non-profits that are facing economic disruption due to the COVID-19 impact. With the reopening of the EIDL assistance and EIDL Advance application portal to all new applicants, additional small businesses and non-profits will be able to receive these long-term, low interest loans and emergency grants – reducing the economic impacts for their businesses, employees and communities they support,” said SBA Administrator Jovita Carranza.
EIDL assistance can be used to cover payroll and inventory, pay debt or fund other expenses. Additionally, the EIDL Advance will provide up to $10,000 ($1,000 per employee) of emergency economic relief to businesses that are currently experiencing temporary difficulties, and these emergency grants do not have to be repaid.
The SBA is offering low interest federal disaster loans for working capital to small businesses and non-profit organizations that are suffering substantial economic injury as a result of COVID-19 in all U.S. states, Washington D.C., and territories.
These loans may be used to pay debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact, and that are not already covered by a Paycheck Protection Program loan. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
To keep payments affordable for small businesses, SBA offers loans with long repayment terms, up to a maximum of 30 years. Plus, the first payment is deferred for one year.
In addition, small businesses and non-profits may request, as part of their loan application, an EIDL Advance of up to $10,000. The EIDL Advance is designed to provide emergency economic relief to businesses that are currently experiencing a temporary loss of revenue. This advance will not have to be repaid, and small businesses may receive an advance even if they are not approved for a loan.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
The eligibility threshold for those with felony criminal histories has been changed. The look-back period has been reduced from 5 years to 1 year to determine eligibility for applicants, or owners of applicants, who, for non-financial felonies, have (1) been convicted, (2) pleaded guilty, (3) pleaded nolo contendere, or (4) been placed on any form of parole or probation (including probation before judgment).
The period remains 5 years for felonies involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance. The application also eliminates pre-trial diversion status as a criterion affecting eligibility.
SBA issued revised PPP application forms to conform to these changes. The guidance and revised application forms are available on SBA’s and Treasury’s websites. SBA will issue additional guidance regarding loan forgiveness and a revised forgiveness application to implement the PPPFA in the near future.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Late night on June 10th, the SBA and Treasury released the 17th interim final rule to reflect changes made by the Paycheck Protection Program Flexibility Act. SBA also published updated application forms to use for loans made on or after June 5, 2020.
The new IFR is mostly a restating and clarification of what we already knew from the statute, its accompanying statement, and the recent Treasury statement.
We are still waiting for guidance for most of our questions, which is especially frustrating given that many PPP loan borrowers have reached or are nearing the end of the original eight-week covered period. As has been a consistent theme, the SBA and the Treasury have promised additional regulations and guidance soon. The concern over the constantly-changing, difficult-to-understand rules — which have been impossible to plan around thus far — has caused a big slow-down in applications. As of now, PPP loans must be approved by June 30th (not applied-for, but approved-by).
(For those who haven’t yet applied: these days I’m finding Funding Circle to have the quickest turnaround and easiest application process for new borrowers. No, I do not receive any benefits from them.)
The biggest problem with the PPP is that you will likely need an accountant (or you could possibly get away with an advanced degree in mathematics) to figure out how to calculate the forgivable portion of the loan — which is hard enough on its own, but even harder when trying to plan, as the rules keep changing. The government did not — in any of the three Acts that involve these loans — realize the administrative burden these rules place on business owners… especially at a time when they’re trying to figure out how to survive the coronavirus shutdown and cautious reopening of our economy.
That said, it may no longer be “free” money, but in most cases, it is definitely still worth it. I’ve been attending the weekly AICPA Town Hall meetings and reporting on them to my clients and colleagues, and making some of those recordings available for the public, in hopes that it will help guide you (or your clients) to making better decisions about how to use the funds.
Here are my notes from the above zoom session, in case it’s easier to read than to listen/watch, or in case you’d like to follow along.
I have taken three webinars on the new PPP forgiveness rules in the past week — and gotten three different interpretations, and a lot of misinformation. So please keep in mind that I am only AN expert, not THE expert.
AICPA Town Hall 6/11 – WHAT WE KNOW
Treasury statement came out 6/8 and more guidance released 6/10.
60% cliff fixed!
Extension to 24 weeks is automatic; can elect 8-wk period on forgiveness application.
The Interim Final Rule released today does not address FTEs. As-written, we’ll have to keep FTEs up for 24 weeks. Alternatives: expansion of FTE reduction exemptions AND/OR Safe Harbor of 12/31/20.
May not use the old application… wait for new one.
Simplified application expected for those with no employees — at the very least, AICPA will release simplified spreadsheet.
You do not have to wait until the end of the 24 weeks to apply for forgiveness if you meet the requirements.
If you use the 8-week period, the new 60% rule applies – you do not still need to meet the 75% rule.
They are trying to get every loan forgiven as much as possible – guidance will be lenient; more relief may come.
Treasury referred to ACIPA forgiveness spreadsheet as the gold standard (yay!)
You can reapply for PPP if you returned the money or didn’t get full funding.
RECOMMENDATION — OPT IN TO PAYROLL TAX DEFERRALS!
June 10: Sec. Carranza indicated new EIDL applications will be accepted starting next week!
WHAT WE DON’T KNOW
1) Owner compensation limits – extended to 24/52 of 2019… or remain at 8/52? Waiting for guidance.
2) Will the FTE reduction rule remain in place as-is? It was hard enough for clients to keep average FTE at 100% of their comparison period for 8 weeks, but 24 weeks will render this new “flexibility” useless. Currently, for clients in this situation who cannot use expansion of FTE reduction exemptions or Safe Harbor of 12/31/20, we are encouraging sticking with original 8-week covered period. (Compass Tax agrees this is the largest remaining concern.)
3) FTE reduction flexibility — the examples I’m seeing are when companies don’t have the same level of activity due to agency standards. But what if you’re “allowed” to open at 100% capacity, but you just don’t have enough business anymore? Currently “too bad” as-written… will this change with SBA interpretation?
4) FTEs – the 1.0 vs 0.5 shortcut calculation… do we still have to calculate this on a weekly basis? I have two colleagues who say you can just count any PT staff who worked at any point during the forgiveness period as 0.5, and similarly for FT, but none of the FTE calculators or case-studies I’ve seen have used this approach. This would make passing the FTE test SO MUCH EASIER.
5) Our clients who (for various reasons) did not apply for PPP beforehand, we had them take the ERTC instead. So now that the forgiveness rules have changed, they want to apply for PPP; but they are disqualified because you can’t do both. Best solutions here? Backing out the credits before filing the 941? Amending the 941? AICPA response: “If they receive the ERC, they are ineligible for PPP per the CARES act.”
6) EIDL advance grant — subtract from PPP forgiveness or not? Some folks are saying you have to deduct EIDL advance grant from PPP forgiveness — some say you only do this if you spent it on same costs as PPP. It looks like on the PPP application you have to deduct it… BUT it says “if applicable”. Since the CARES Act is clear about the fact that it does NOT have to be deducted if taken after April 6 and not used for the same costs, many are saying the “if applicable” means only if pre-April 6th or if used on the same costs as PPP. It sounds like you’re saying that’s not your interpretation, even though it’s in the CARES Act? AICPA had previously said on their FAQ that we’re waiting for SBA guidance on this. Now they’re saying it has to be subtracted. “If an advance is received, it will reduce PPP forgiveness. If they are used for different purposes, a borrower is able to take loans from both programs but it does not impact the reduction of the advance from the PPP forgiveness.”
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They summarized the main points of the Act and clarified a few things that were previously unclear to folks who didn’t read it in full and who missed the accompanying Congressional Statement of Intent. Luckily if you are a regular reader of this blog, you got the news correct first-time around.
(And yes, I am annoyed by old-white-cis-male attorneys telling me that the points I pulled directly from the AICPA Town Hall and their summary were “matters of my opinion”. Anyone who knows me knows I do not take being condescended to well — especially not by lawyers, and especially not by white male lawyers. But I digress.)
But they also made a very important additional point: they eliminated the 60% “cliff” Rubio was worried about, and stated unequivocally, “If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.”
They also noted that they “will promptly issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing these legislative amendments to the PPP”.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I’ve been doing regular 40-minute free zoom sessions for my clients and colleagues for a few months now, mostly centering on questions concerning PPP & EIDL applications and forgiveness.
Today we did one on the recent big changes to the PPP forgiveness program, and many have asked me for the recording, so I decided to make it public — to assist them and others out there in getting the facts (well, at least the ones we know so far).
The AICPA has come out with the best summary I’ve seen so far, which is what I chose to use in the zoom session as a reference — so if you don’t have 40 minutes handy, take a quick look at it instead (or in addition):
And of course, the inimitable Tony Nitty has gotten to the core of the issue by pointing out all the stuff we don’t know yet. His excellent analysis can be found at Forbes, as always.
More to come — hopefully soon, as I have many clients whose initial forgiveness period is about to come to a close, and we can only remain in a holding pattern for so long.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Honestly, I’m shocked. (And a little worried — but mostly pleased and shocked.)
When the House passed their extremely generous Paycheck Protection Program reform bill last week (which I affectionately termed “Relief for the Relief Program”), the Senate made it clear there was no way it would clear their chambers: “Multiple members are opposed for different reasons,” GOP Sen. John Thune of South Dakota told CNN on Tuesday, as he suggested that fast-tracking the legislation this week didn’t look likely. Every single pundit, journalist, and even my colleagues at the AICPA said there was no way such a windfall would make it past the Senate. Surprise!
Tonight it passed with an overwhelming majority, and it — mostly — will likely make forgiveness so much easier for small businesses (and the big ones who managed to get the funding despite everything, but that’s old news). We now await its signing between golf outings.
It will allow borrowers to extend the forgiveness period from eight to 24 weeks (or December 31st, whichever is shorter).
It will lower — to 60% from 75% — the minimum portion of the PPP loan that must be spent on payroll. As before, the rest must be spent on rent, utilities and other business-related expenses.
It will expand the exceptions for employers who are not able to re-hire staff due to COVID-19, and extend the safe harbor rehire date to December 31st.
It will extend the repayment period start-date for the non-forgiven portion from six months (the prior rule), to the date when SBA has processed the forgiveness application from the lender — or if the borrower doesn’t apply for forgiveness, then ten months after the last day of the covered period. This also means that you have ten months after the forgiveness period in which to apply for forgiveness.
It will extend from two to five years the time new PPP loans must be paid back (with an option for as much as ten) if the amount provided doesn’t convert into a grant. (So far this is only for PPP loans that haven’t been awarded yet, not retroactive to existing loans; but borrowers may work with lenders to amend terms if needed.)
Mostly, this is just amazing. My clients are struggling to jump through all the hoops to spend this money according to the unbelievably complex rules — ones that don’t seem to have much connection to the reality we’re facing right now, especially in the hospitality industry.
So why am I concerned? Because yesterday Marco Rubio said this: “People need to know that the way the Treasury has told us they are going to interpret that bill — if you don’t spend 60% of your money on payroll, if you only spend 59.9%, you will get zero forgiveness.”
MarketWatch reported: “There’s some issues with it that are going to cause people problems, and I just want everybody to know that ahead of time,” Florida’s senior senator also said. “I think still we’re better off passing it than not passing it.”
So of course I am concerned that it sounds like the phase-out of forgiveness that we previously had in the rules is going away. Rubio pointed out that, “procedurally, the problem is if we change the House bill, we’ve got to send it back then,” which is clearly not an option, as this is already “too little, too late”. As it is, I have clients who will not get to use this new relief, as their forgiveness periods end in a few days and they spent all the money based on the old rules — paying staff to do nothing, at a business that is still closed by law.
But for those who can benefit from it, I am thrilled. Now we await signing, and then an inevitably much longer wait for Treasury to issue necessary guidance to answer the many questions this creates.
Please note that several large companies and chains have returned their multi-million-dollar PPP loans, so there is now more than $130 billion available — for eligible nonprofits, companies, and gig workers. So please apply now if you haven’t already!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
