PPP Update – New Loan Forgiveness Applications Now Available

New and updated loan forgiveness applications and instructions are now available for borrowers under the Paycheck Protection Program (PPP) created by the Coronavirus Aid, Relief and Economic Security Act (the CARES Act). The applications and accompanying instructions implement the changes to the PPP contained in the Paycheck Protection Program Flexibility Act of 2020 (PPPFA) and, for some borrowers, simplify the forgiveness application process. In addition, these recent publications seek to clarify some continuing questions borrowers have regarding caps on individual compensation during the covered period.

The highlights include:

• A new EZ loan forgiveness application Form 3508EZ is available to borrowers who meet certain criteria (such as self-employed individuals, independent contractors or sole proprietors who had no employees at the time of their loan application and did not include any employee salaries in their calculation of payroll costs in their application, or generally speaking, borrowers that would not have a reduction in forgiveness because they did not experience reductions in employees or salaries). The instructions clearly describe which borrowers are eligible to use the 3508EZ and the forgiveness application contains a certification that borrowers must complete to confirm their eligibility to use the 3508EZ. The instructions for the 3508EZ application are also now available.

• The new loan forgiveness application for borrowers who don’t qualify to use the 3508EZ is now available along with the updated instructions.

• For borrowers using a 24-week Covered Period, the amounts paid to owners (owner-employees, a self-employed individual, or general partners) is capped at $20,833 (the 2.5-month equivalent of $100,000 per year) for each individual or the 2.5-month equivalent of their applicable compensation in 2019, whichever is lower.

• For borrowers using an 8-week Covered Period, the amounts paid to owners (owner-employees, a self-employed individual, or general partners) is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower.

• For each individual employee (other than as set forth above), the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the Covered Period. For an 8-week Covered Period, that total is $15,385. For a 24-week Covered Period, that total is now $46,154.
• Employer health insurance contributions made on behalf of a self-employed individual, general partners, or owner-employees of an S-corporation are included in compensation and, thus, subject to the caps referenced above.
• Employer retirement contributions made on behalf of a self-employed individual or general partner (but presumably NOT owner-employees of an S-corporation), are included in their compensation and, thus, subject to the caps referenced above.

• The required allocation of costs between payroll and non-payroll costs to maximize forgiveness has been changed to 60/40 and Borrowers can still obtain partial forgiveness if the ratio is not met.

Our attorneys are familiar with the PPP and PPPFA and can help you navigate through the loan forgiveness application process. Please contact us at 215-887-0200.