The government continues to release additional regulations about the Paycheck Protection Program, including how to apply for forgiveness, and what expenses qualify for forgiveness.  In the most recent revisions to the regulation, we received answers to two of the questions we are asked most frequently:

1.  When can I submit my PPP forgiveness application?   A borrower may submit a loan forgiveness application any time on or before the maturity date of the loan so long as the borrower has used all of the loan proceeds for which it is requesting forgiveness.  The borrower can even submit the application before the end of the covered period.  However, if the borrower applies before the end of the covered period and has reduced any employee’s wages or salary in excess of twenty-five percent, the borrower must account for the excess salary reduction for the full covered period.  But just because you can apply any time before the maturity date of the loan, that doesn’t mean you should wait that long.  If you don’t apply for loan forgiveness within ten months after the last day of the covered period, OR if the SBA determines the loan is not eligible for forgiveness, even in part, the loan is no longer deferred.  Principal and interest payments then become due.

2. I am an owner-employee of my business.  Are there special rules for the treatment of my compensation?    Yes.  Your compensation is affected by both the length of your covered period and the type of business you own. 

• 8-week covered period.  If you elect to use an 8-week covered period, the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at the lesser of 8 weeks’ worth of 2019 compensation or $15,385 per individual in total across all businesses. 
• 24-week covered period.  The amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at the lesser of 2.5 months’ worth of 2019 compensation or $20,833 per individual across all businesses. 
• C-Corporation owner-employees. The forgiveness of these payroll expenses is capped by the amount of their 2019 employee cash compensation and employer retirement and health insurance contributions made on their behalf. 
• S-Corporation owner-employees.  The forgiveness of this compensation is capped by the amount of their 2019 employee cash compensation and employer retirement contributions made on their behalf.  Employer health insurance contributions made on their behalf cannot be separately added as these are included in employee cash compensation. 
• Schedule C or F filers and General Partners cannot include retirement and health insurance contributions in addition to their owner compensation amount based on 2019 net profit. General Partners should also pay close attention to the formula in the regulations for their owner compensation that reduces the 2019 net earnings from self-employment for certain deductions and expenses.

Many of you who received loan proceeds at the outset of the Paycheck Protection Program have used all your funds and are ready to apply for forgiveness.  We have thoroughly reviewed the revisions to the regulations and forgiveness application and are ready to answer any questions that arise as you prepare the packet.