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.

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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.”

The most up-to-date AICPA Summary of the PPP Flexibility Act can be downloaded here.

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