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Paycheck Protection Loan Forgiveness FAQ

By StreetShares as of March 5, 2021
 

1. Are Payroll Protection Program (PPP) loans eligible for loan forgiveness?

What does loan forgiveness mean?

2. Are PPP loans forgiven automatically or do I need to apply for forgiveness?

3. How do I determine which expenses are eligible for loan forgiveness?

4. When does the covered period begin?

5. What steps could I take now to improve my chances of loan forgiveness?

6. If my business spent PPP loan proceeds on eligible expenses other than payroll, how does that impact the loan forgiveness amount?

7. If my business reduced its full-time equivalent (FTE) employees, how does that impact the loan forgiveness amount?

8. If my business reduced employee compensation, how does that impact the loan forgiveness amount?

9. How can my business be exempted from reducing the loan forgiveness amount?

10. How does my Economic Injury Disaster Loan (EIDL) loan factor into loan forgiveness?

11. How do I determine how much of the loan will be forgiven?

12. What is considered payroll costs for the purpose of PPP loan forgiveness?

13. When can I seek loan forgiveness?

14. How do I seek loan forgiveness?

15. What documentation will I need to provide in the application for loan forgiveness?

16. I have part-time employees. How do I calculate the number of full-time equivalents?

17. Are there caps on the amount of loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation?
18. What is the SBA Form 3508EZ? Am I eligible to apply using for EZ?
19. What is SBA Form 3508S? Am I eligible to apply using the S form?
20. What is considered cash compensation and non-cash compensation for the forgiveness application? How are they calculated?
21. What utilities are eligible for forgiveness?
22. What is the 3508D and am I required to submit it?
     

    1. Are Payroll Protection Program (PPP) loans eligible for loan forgiveness?  What does loan forgiveness mean?

Yes, up to 100% of the loan amount may be forgiven.  Any portion of the loan that is forgiven does not need to be repaid to the lender.  Essentially, the forgiven portion of the loan converts into a grant.  See FAQ number 3 for loan forgiveness requirements.


     2. Are PPP loans forgiven automatically or do I need to apply for forgiveness?

Loans are not forgiven automatically.  When seeking forgiveness for a PPP loan, a business will need to apply for forgiveness with the lender servicing the loan.  Borrowers seeking forgiveness will be required to maintain or provide documentation of how PPP funds were spent, the number of employees, and other information.  See FAQ number 16 below for more details.

 

     3. How do I determine which expenses are eligible for loan forgiveness?

While up to 100% of the loan is eligible for forgiveness, requirements must be met for the funds to qualify for forgiveness.  First, only loan proceeds that are used for an eligible purpose under the program may be forgiven.  Eligible purposes include payroll and non payroll costs such as payments of interest on mortgage obligations, rent, and  utilities in place before February 15, 2020. Other non payroll costs include covered operations expenditures, covered property damages costs, covered supplier costs and covered worker protection expenditures incurred in the covered period. Second, these expenses are only eligible if they were paid or incurred in the covered period.

 

Third, the forgiveness amount will be reduced for the following reasons: the percentage of loan proceeds spent on payroll is less than 60%, the employee count has decreased, or employees had their compensation reduced by more than 25%.  See FAQ numbers 6, 7, and 8 below for exceptions and further details.

 

    4. The amount of forgiveness of a PPP loan depends on the borrower’s payroll and other eligible costs over a covered period; when does that covered period begin?

The covered period begins on the date the lender makes the first disbursement of the PPP loan to the borrower and ending on a date selected by the borrower that occurs during the period 

(i) beginning on the date that is 8 weeks after the date of disbursement, and

(ii) ending on the date that is 24 weeks after the date of disbursement.

 

    5. What steps could I take now to improve my chances of loan forgiveness?

  1. Spend at least 60% of your PPP loan proceeds on payroll costs. See FAQ numbers 6 and 13 for more information. 
  2. Keep records and documents of all PPP loan proceeds spent. See FAQ number 16 for more information. 
  3. Rehire terminated employees. See FAQ numbers 7 and 9 for more information. 
  4. If you reduced any employee’s pay more than 25%, increase that employee’s pay so that the overall reduction is less than 25%. See FAQ numbers 8 and 9 for more information.

    6. If my business spent PPP loan proceeds on eligible expenses other than payroll, how does that impact the loan forgiveness amount?

No more than 40% of the loan forgiveness amount can be for eligible expenses other than payroll (i.e. mortgage interest, rent, and/or utilities). The SBA and Treasury Department have indicated that 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.

    7. If my business reduced the number of its full-time equivalent (FTE) employees how does that impact the loan forgiveness amount?

In general, a reduction in FTE employees during the covered period reduces the loan forgiveness amount by the same percentage as the percentage reduction in FTE employees. For both First Draw PPP Loans and Second Draw PPP Loans, the borrower must first select a reference period:

 (i) February 15, 2019 through June 30, 2019; 

(ii) January 1, 2020 through February 29, 2020; or 

(iii) in the case of a seasonal employer either of the two preceding methods or a consecutive 12-week period between February 15, 2019 and February 15, 2020.

 

If the average number of FTE employees during the covered period is less than during the reference period, the total eligible expenses available for forgiveness is reduced proportionally by the percentage reduction in FTE employees. For example, if a borrower had 10.0 FTE employees during the reference period and this declined to 8.0 FTE employees during the covered period, the percentage of FTE employees declined by 20 percent and thus only 80 percent of otherwise eligible expenses are available for forgiveness

 

See FAQ 9 for exemptions to the rule on reduction.

    8. If my business reduced employee compensation how does that impact the loan forgiveness amount? 

If the business reduced the salary or hourly wage for any eligible employee by more than 25% during the covered period following PPP loan disbursement, then that reduction will also reduce the amount of loan forgiveness. Specifically, for each new employee in 2020 and 2021, as well as each existing employee who was not paid more than the annualized equivalent of $100,000 in any pay period in 2019, the borrower must reduce the total forgiveness amount by the total dollar amount of the salary or wage reductions that are in excess of 25 percent of base salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period (“the prior quarter’).

 

For example, if a borrower who has elected to use an eight-week covered period  reduced a full-time employee’s weekly salary from $1,000 per week during the prior quarter to $700 per week during the covered period and the employee continued to work on a full-time basis during the covered period, with an FTE of 1.0, the first $250 (25 percent of $1,000) is exempted from the loan forgiveness reduction. The borrower seeking forgiveness would deduct $400 as the salary/hourly wage reduction for that employee (the extra $50 weekly reduction multiplied by eight weeks). 

 

To ensure that borrowers are not doubly penalized, the salary/wage reduction applies only to the portion of the decline in employee salary and wages that is not attributable to an FTE reduction. 

 

See FAQ number 4 for details on the covered period and FAQ number 9 below for further details on reversing a reduction in employee compensation.

 

      9. If my business reduced employee compensation how does that impact the loan forgiveness amount?

If the business reduced the salary or hourly wage for any eligible employee by more than 25% during the covered period following PPP loan disbursement, then that reduction will also reduce the amount of loan forgiveness. Specifically, for each new employee in 2020 and 2021, as well as each existing employee who was not paid more than the annualized equivalent of $100,000 in any pay period in 2019, the borrower must reduce the total forgiveness amount by the total dollar amount of the salary or wage reductions that are in excess of 25 percent of base salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period (“the prior quarter’).

 

For example, if a borrower who has elected to use an eight-week covered period  reduced a full-time employee’s weekly salary from $1,000 per week during the prior quarter to $700 per week during the covered period and the employee continued to work on a full-time basis during the covered period, with an FTE of 1.0, the first $250 (25 percent of $1,000) is exempted from the loan forgiveness reduction. The borrower seeking forgiveness would deduct $400 as the salary/hourly wage reduction for that employee (the extra $50 weekly reduction multiplied by eight weeks). 

 

To ensure that borrowers are not doubly penalized, the salary/wage reduction applies only to the portion of the decline in employee salary and wages that is not attributable to an FTE reduction. 

 

See FAQ number 4 for details on the covered period and FAQ number 9 below for further details on reversing a reduction in employee compensation.

    10. How does my Economic Injury Disaster Loan (EIDL) loan factor into loan forgiveness?

The EIDL Advance Amount received by the borrower will not reduce the amount of forgiveness to which the borrower is entitled and will not be deducted from the forgiveness payment amount that SBA remits to the lender.

 

    11. How do I determine how much of the loan will be forgiven?

Calculating the loan forgiveness amount can be complicated and requires consideration of factors.  To make it easier we have prepared a Cash Compensation Worksheet and Instructions, which can be used to calculate cash compensation, FTE reductions, exceptions, and safe harbors, and salary/hourly wage reductions and safe harbors.  These FAQs also provide details on calculation of loan forgiveness amounts.

 

    12. What is considered payroll costs for the purpose of PPP loan forgiveness?

The definition of “payroll costs” for the Paycheck Protection Program includes the following:

 

  • Salary, wage, commission, or similar compensation
  • Payment of cash tip or equivalent
  • Hazard pay and cash bonuses
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment required for the provisions of group health care benefits, including insurance premiums
  • Payment of any retirement benefit
  • Payment of State or local tax assessed on the compensation of employees
  • The sum of payments of any compensation to a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period

Payroll costs, however, do not include the following expenses:

  • The compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period
  • Taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period
  • Any compensation of an employee whose principal place of residence is outside of the United States
  • Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–127)
  • Qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act (Public Law 116–127)

Payroll costs may be counted even if the payments were to furloughed employees.

See FAQ number 20 for questions regarding the two types of payroll costs on the forgiveness application (cash compensation and non-cash compensation) and how to calculate these costs for forgiveness purposes.

  13. When can I seek loan forgiveness?

A borrower may submit a loan forgiveness application any time on or before the maturity date of the loan if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness.  A borrower should wait until the end of its covered period (a date elected by the borrower that is between 8 to 24 weeks after the PPP loan disbursement date) before applying for forgiveness. 

A  borrower applying for forgiveness of a Second Draw PPP Loan that is more than $150,000 must submit the loan forgiveness application for its First Draw PPP Loan before or simultaneously with the loan forgiveness application for its Second Draw PPP Loan.

While the borrower has until the maturity date of the loan to apply for forgiveness, if the borrower does not apply for forgiveness within 10 months from the last day of the maximum covered period of 24 weeks (or if SBA determines that the borrower is not eligible for forgiveness) then the borrower must begin paying principal and interest on the PPP loan.

    14. How do I seek loan forgiveness?

When a business is ready to seek loan forgiveness, an authorized representative of the business should contact their loan servicer (likely the lender that originated the loan) to begin the loan forgiveness application process.

To receive loan forgiveness, a borrower must complete and submit the Loan Forgiveness Application (SBA Form 3508, 3508EZ, 3508S or lender equivalent) to its lender (or the lender servicing its loan). 

If your lender is using Atlas powered by StreetShares Platform, the loan forgiveness Application may be submitted via an online forgiveness application hub. The authorized representative of the borrower should receive an email from your lender soon inviting you to login to the application hub.

    15. What documentation will I need to provide in the application for loan forgiveness?

Depending on the type of loan forgiveness application you complete, there are three broad categories of documentation that must be provided with your loan forgiveness application: payroll expenses, your full-time equivalent (FTE) employee count, and non-payroll eligible expenses. There are also several documents that need to be maintained in addition to those that must be provided with the application.  The documents that need to be provided or maintained are listed as follows in the loan forgiveness applications particularly SBA Form 3508 or 3508EZ (the following are not required to be submitted with SBA Form 3508S but are required to be maintained):  

 

  1. Payroll Expenses during the Covered Period 

You must submit the following documents showing your use of PPP funds for payroll expenses during the Covered Period:

  • Bank statements or third-party service provider reports documenting compensation paid to employees
  • Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941)
  • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state 
  • Payment receipts, canceled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans
  • Additional Requirement for Certain EZ Form Users:  the average number of full-time equivalent employees on payroll employed by the borrower on January 1, 2020 and at the end of the Covered Period. 

 

  1. Full-time Equivalent (FTE) Employee Count before COVID-19 

(Not Required for EZ Form users) 

 

You must submit the following documents showing your FTE employee count prior to the COVID-19 crisis. You may elect to provide documentation for one of the following periods: 

 

(i) the average number of FTE employees on payroll per week employed by the Borrower between February 15, 2019 and June 30, 2019; 

(ii) the average number of FTE employees on payroll per week employed by the Borrower between January 1, 2020 and February 29, 2020; or 

(iii) in the case of a seasonal employer, either of the above periods or any consecutive 12-week period between February 15, 2019 and February 15, 2020

 

The documents to be submitted may include: 

  • Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) 
  • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state. non-payroll eligible expenses. 
  1. Non-Payroll Eligible Expenses 

 

You must submit the following documents verifying the existence of debt/services prior to February 15, 2020 and showing your use of PPP funds for eligible payments during the Covered Period (8 to 24 weeks after disbursement at the borrower’s election):

  • Business mortgage interest payments: Copy of lender amortization schedule and receipts or canceled checks verifying payments; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and payments. 
  • Business rent or lease payments: Copy of current lease agreement and receipts or canceled checks verifying payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period period verifying payments.
  • Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, canceled checks, or account statements verifying those payments.
  • Covered operations expenditures: Copy of invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments. 
  • Covered property damage costs: Copy of invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments, and documentation that the costs were related to property damage and vandalism or looting due to public disturbances that occurred during 2020 and such costs were not covered by insurance or other compensation. 
  • Covered supplier costs: Copy of contracts, orders, or purchase orders in effect at any time before the Covered Period (except for perishable goods), copy of invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments. 
  • Covered worker protection expenditures: Copy of invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments, and documentation that the expenditures were used by the Borrower to comply with applicable COVID-19 guidance during the Covered Period. 

 

Documents to Be Maintained but Not Submitted with Application 

There are also documents that do not need to be provided with the forgiveness application but must be maintained for six years and provided to the SBA or your lender upon request. The following documents must be maintained depending on whether you complete the full forgiveness application, the EZ Form forgiveness application, or the simple (“S”) forgiveness application. 

 

Full Forgiveness Application (SBA Form 3508) 

  • PPP Schedule A Worksheet or its equivalent and the following: 
  1. Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 1, including the “Salary/Hourly Wage Reduction” calculation, if necessary. 
  2. Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 2; specifically, that each listed employee received during any single pay period in 2019 compensation at an annualized rate of more than $100,000. 

 

  • Documentation regarding any employee job offers and refusals, refusals to accept restoration of reductions in hours, firings for cause, voluntary resignations, written requests by any employee for reductions in work schedule, and any inability to hire similarly qualified employees for unfilled positions on or before (i) December 31, 2020 for a PPP loan made before December 27, 2020 or (ii) the last day of the Covered Period for a PPP loan made after December 27, 2020.

 

  • Documentation supporting the certification, if applicable, that 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 (or, for a PPP loan made after December 27, 2020, requirements established or guidance issued between March 1, 2020 and the last day of the Covered Period) 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. This documentation must include copies of the applicable requirements for each borrower location and relevant borrower financial records.

 

  • Documentation supporting the PPP Schedule A Worksheet “FTE Reduction Safe Harbor 2.”

 

  • All records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower’s certifications as to the necessity of the loan request and its eligibility for a PPP loan (including the Borrower’s gross receipt reduction certification for a Second Draw PPP Loan, if applicable), documentation necessary to support the Borrower’s loan forgiveness application, and documentation demonstrating the Borrower’s material compliance with PPP requirements. 

3508 EZ Forgiveness Application 

  • Documentation supporting the certification that annual salaries or hourly wages were not reduced by more than 25 percent during the Covered Period relative to the most recent full quarter before the Covered Period. This documentation must include payroll records that separately list each employee and show the amounts paid to each employee during the most recent full quarter before the Covered Period, and the amounts paid to each employee during the Covered Period

 

  • Documentation regarding any employee job offers and refusals, refusals to accept restoration of reductions in hours, firings for cause, voluntary resignations, written requests by any employee for reductions in work schedule, and any inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020 (or, for a PPP loan made after December 27, 2020, the last day of the Covered Period). 

 

  • Documentation supporting the certification, if applicable, that 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, other than any reductions that arose from an inability to rehire individuals who were employees on February 15, 2020, if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020 (or, for a PPP loan made after December 27, 2020, the last day of the Covered Period). This documentation must include payroll records that separately list each employee and show the amounts paid to each employee between January 1, 2020 and the end of the Covered Period. 

 

  • Documentation supporting the certification, if applicable, that 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 (or, for a PPP loan made after December 27, 2020, requirements established or guidance issued between March 1, 2020 the last day of the Covered Period) 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. This documentation must include copies of the applicable requirements for each borrower location and relevant borrower financial records.

 

  • All records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower’s certifications as to the necessity of the loan request and its eligibility for a PPP loan (including the Borrower’s gross receipt reduction certification for a Second Draw PPP Loan, if applicable), documentation necessary to support the Borrower’s loan forgiveness application, and documentation demonstrating the Borrower’s material compliance with PPP requirements. 

3508S Forgiveness Application

  • All payroll and non payroll documentation listed above and all records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower’s certifications as to its eligibility for a PPP loan (including the Borrower’s gross receipt reduction certification for a Second Draw PPP Loan, if applicable), documentation necessary to support the Borrower’s loan forgiveness application, and documentation demonstrating the Borrower’s material compliance with PPP requirements

    16. I have part-time employees.  How do I calculate the number of full-time equivalents?

For each employee, enter the average number of hours paid per week, divide by 40, and round the total to the nearest tenth. 

A borrower may elect a simplified method: assign a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours.

This calculation will be used to determine whether the borrower’s loan forgiveness amount must be reduced due to reductions in full-time equivalent employees.

    17. Are there caps on the amount of loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation?

Yes, the amount of loan forgiveness requested for each  individual’s payroll compensation is capped. There are different caps for employees and owner-employees (including self-employed individuals). 

Non-Owner Employees 

For employees who are not owners, each employee’s payroll compensation eligible for forgiveness is capped at the employee’s annualized pay (up to $100,000) as prorated for the covered period (for 24 weeks, a maximum of $46,154 per individual, or for eight weeks, a maximum of $15,385 per individual), as well as covered benefits for employees (but not owners), including health care expenses, retirement contributions, and state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums). 

Owner-Employees/ Self-Employed 

The payroll compensation for owner-employees and self-employed individuals is capped at the lower of:  $20,833 (the 2.5-month equivalent of $100,000 per year) for each individual or 2.5 months’ worth (2.5/12) of an owner-employee or self-employed individual’s 2019 or 2020 compensation. The individual’s total compensation may not exceed $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred. 

For example, for borrowers that are using an eight-week covered period, the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at eight weeks’ worth (8/52) of 2019 or 2020 compensation (i.e., approximately 15.38 percent of 2019 or 2020 compensation) or $15,385 per individual, whichever is less, in total across all businesses.  

Owner- employees are capped by the prorated amount of their 2019 or 2020 employee cash compensation and employer retirement and health care contributions made on their behalf.

No additional forgiveness is provided for retirement or health insurance contributions for self-employed individuals, including Schedule C or F filers and general partners, as such expenses are paid out of their net self-employment income.

Owner-employees with less than a 5 percent ownership stake in a C- or S-corporation are not subject to these caps on owner-employees.

Schedule C and F Filers 

Schedule C or F filers are capped by the prorated amount of their owner compensation replacement (calculated based on 2019 or 2020 net profit) or proprietor expenses (calculated based on 2019 or 2020 gross income).  

 

General Partners 

General partners are capped by the prorated amount of their 2019 or 2020 net earnings from self-employment (reduced by claimed section 179 expense deduction, unreimbursed partnership expenses, and depletion from oil and gas properties) multiplied by 0.9235.

18. What is SBA Form 3508EZ? Am I eligible to apply using the EZ form?

 Borrowers can use the EZ form if they meet the following criteria:

  • PPP Loan is more than $150,000; and
  • Did not reduce the wages of their employees by more than 25%, and did not reduce the number or hours of their employees; or
  • Experienced reductions in business activity as a result of federal health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

 

19. What is SBA Form 3508S? Am I eligible to apply using the S form?

Borrowers can use the new S form if their PPP loan amount is $150,000 or less. 

Borrowers that received a PPP loan of more than $50,000 (and borrowers with a PPP loan of less than $50,000 that together with their affiliates received PPP loans totaling $2 million or more) must adjust their “Requested Loan Forgiveness Amount” due to statutory requirements concerning reductions in either full-time equivalent (FTE) employees or employee salary and wages. See FAQ numbers 7, 8, and 9. 

All borrowers completing the new S form must also adjust their “Requested Loan Forgiveness Amount”  if less than 60% of the PPP loan was used on payroll costs or if the PPP loan amount was used to pay owners or employees in excess of the caps. See FAQ numbers 6 and 17. 

When submitting this S form, borrowers are not required to submit calculations or documentation unless the forgiveness application is for a Second Draw loan that did not provide documentation of the 25% revenue reduction requirement on the PPP loan application. However, borrowers are still required to maintain records of their calculations and documentation. See FAQ number 15.


20. What is considered cash compensation and non-cash compensation for the forgiveness application? How are they calculated?

The forgiveness application separates payroll costs into two parts: (1) cash compensation; and (2) non-cash compensation. 

Cash compensation is defined as gross salary, gross wages, gross tips, gross commissions, paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act), and allowances for dismissal or separation paid or incurred during the covered period.  

Non-cash compensation includes employer contributions for employee health insurance and employee retirement plans and employer payments for state and local taxes assessed on employee compensation. 

Payroll costs are calculated on a gross basis without regard to (i.e., not including subtractions or additions based on) federal taxes imposed or withheld, such as the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and income taxes required to be withheld from employees. As a result, payroll costs are not reduced by taxes imposed on an employee and required to be withheld by the employer, but payroll costs do not include the employer’s share of payroll tax. For example, an employee who earned $4,000 per month in gross wages, from which $500 in federal taxes was withheld, would count as $4,000 in payroll costs. The employee would receive $3,500, and $500 would be paid to the federal government. However, the employer-side federal payroll taxes imposed on the $4,000 in wages are excluded from payroll costs under the statute.

 

21. What utilities are eligible for forgiveness?

For PPP forgiveness purposes, a covered utility payment includes payment for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.

 

22. What is the 3508D and am I required to submit it?

The 3508D is a supplemental form required to be submitted by borrowers if any of the following persons directly or indirectly hold a controlling interest in the borrower: President of the United States, Vice President of the United States, the head of an Executive department, or a Member of Congress, or the spouse of any of the preceding.

 

 

 

 

These FAQs have been prepared for general information purposes only and are not intended to be relied upon as legal, accounting, tax or other professional advice. Information contained in the FAQs is based upon PPP details that are frequently evolving and subject to change. For the most up-to-date guidance, please consult the U.S. Small Business Administration (SBA) (www.sba.gov), Department of the Treasury (www.treasury.gov) and/or your own legal and tax advisors prior to taking any action. Please refer to your advisors for specific advice.