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SBA’s New Interim Final Ruling Clarifies Certain PPP Loan Forgiveness Issues

6/24/2020 Articles & Podcasts

The Small Business Administration (SBA) released a new Interim Final Ruling which discusses Paycheck Protection Program Loan (PPP Loan) forgiveness. This new guidance provides some much-needed clarity concerning some issues discussed during our recent PPP Loan Forgiveness Webinar on June 22nd. To listen to the webinar recording and download the slide deck, click here.

Here are five notable changes from this new guidance that borrowers need to be aware of:

  1. The salary/wage limitation for employees is $15,385 for an 8-week Covered Period and $46,155 for a 24-week Covered Period in total across all businesses.
  2. The salary/wage limitation for owner-employees and self-employed individuals is $20,833 for a 24-week Covered Period in total across all businesses.
  3. The salary/wage limitations (in total across all businesses) apply regardless of entity type; however, there are differences in the calculation used to arrive at the salary/wage amount:
    1. C-Corporation owner-employees are capped by the lesser of (1) 2.5 months of their 2019 cash compensation or (2) $20,833; plus retirement and health contributions made by the employer on their behalf capped at 2019 levels (i.e. 2.5/12 of the 2019 levels).
    2. S-Corporation owner-employees are capped by the lesser of (1) 2.5 months of their 2019 cash compensation or (2) $20,833; plus retirement contributions made by the employer on their behalf capped at 2019 levels (i.e. 2.5/12 of the 2019 levels).  Health insurance is excluded as a separate addback because it is already included within cash compensation.
    3. Partners are capped by the lesser of (1) 2.5 months of their 2019 net earnings from self-employment (reduced by Section 179 expense deductions, unreimbursed partnership expenses, and depletion from oil and gas properties) multiplied by 0.9235 or (2) $20,833.
    4. Schedule C or F filers are capped by the lesser of (1) 2.5 months of their 2019 net profit or (2) $20,833
  4. The Flexibility Act established two new exemptions based on employee availability and business activity:
    1. If the business is unable to rehire individuals who were employees of the business as of February 15, 2020 and/or are unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020.  The borrower is required to inform the applicable unemployment insurance office of any employee’s rejected rehire offer within 30 days of the employee’s rejection of the offer.
    2. If the business is unable to return to the same level of business activity as such business was operating at before February 15, 2020 due to compliance with requirement established or guidance issued by the Secretary of HHS, the Director of CDC or OSHA regarding maintenance of standards of sanitation, social distancing, and any other restrictions on worker or customer safety requirements related to COVID-19 or is the result of state and local government shutdown orders (that are based in part on guidance from the three federal agencies). 
  5. The Loan Forgiveness Application can be submitted at any time during the 24-week Covered Period. FTE dilution will not be taken into account if the FTE’s are restored on or before the date of submitting a completed forgiveness application. Salary/wage dilution must be taken into account and extrapolated for the entire Covered Period.

DGC has a proven process that utilizes our sophisticated model and incorporates our data analytics experience and accounting expertise to maximize PPP Loan forgiveness. If you have questions, please contact a member of your DGC client service team or George Shaw, CPA at 781-937-5125 / gshaw@dgccpa.com or Kimberley Train, CPA, ABV at 781-937-5112 / ktrain@dgccpa.com.

You can also visit DGC's coronavirus web page at dgccpa.com/coronavirus which is frequently updated with new resources to help you deal with the financial impact of the coronavirus on you and your business.

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Articles & Podcasts
    Coronavirus, COVID-19, PPP Loan Forgiveness, PPP Loans, SBA

About the Author

George D. Shaw, CPA
George Shaw, CPA Partner, Transaction Advisory Services
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Kimberley A. Train, CPA, ABV
Kimberley Train, CPA, ABV Partner
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About the Author

George D. Shaw, CPA
George Shaw, CPA Partner, Transaction Advisory Services
More Articles by George
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Kimberley A. Train, CPA, ABV
Kimberley Train, CPA, ABV Partner
More Articles by Kimberley
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Webinar Slides & Recording: PPP Loan Forgiveness Update – Critical Changes for Borrowers 6/22/2020
New PPP Loan Forgiveness Guidance Announced by the SBA & ‘EZ Forgiveness Application’ 6/17/2020
PPP Loan Forgiveness Bill Passed by the Senate – DGC’s Webinar Will Review Highlights 6/4/2020
SBA PPP Loan Forgiveness Guidance – A Closer Look 5/21/2020
PPP Loan Forgiveness Application Now Available 5/18/2020
SBA Releases Good-Faith Certification Guidelines for PPP Loans 5/13/2020
New PPP Loan Forgiveness Guidance FAQs Include Details About Rehiring Employees 5/4/2020
Four Steps to Maximize Your CARES Act PPP Loan Forgiveness 4/21/2020
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