The U.S. Department of Treasury released more information on the Paycheck Protection Program (PPP) on the evening of April 2, 2020. These updated guidelines are titled “Interim Final Rule” and include an updated application.
Applications through participating lenders for the SBA’s PPP, as part of the recently approved CARES Act, are to open today, Friday, April 3, 2020. A summary of the significant items that are either new or changed from prior reporting include:
- This rule is being issued to allow for immediate implementation of the program and is effective immediately.
- The rule states that the SBA will allow lenders to rely on certifications of the borrower in order to determine the eligibility of the borrower and to rely on specified documents provided by the borrower to determine the loan amount.
- 1099-MISCs are still left out of the loan calculation. Individuals being paid through 1099-MISCs are allowed to apply for themselves as Self-Employed Individuals presumably still starting 4/10/20.
- Payroll was clarified to be the average 2019 calendar year wages. Seasonal and new businesses still have optional time periods to use and are described in the application.
- The rule specifically states that you can obtain the PPP Loan AND the EIDL.
- If your EIDL was not used for payroll costs, it does not affect your PPP Loan eligibility. If any part of your EIDL was used for payroll costs, the PPP Loan must be used to refinance your EIDL.
- If the PPP funds are used for unauthorized purposes, the SBA will direct the business to repay those amounts.
- If the PPP funds are KNOWINGLY used for unauthorized purposes, the business and its owners could be subject to additional liability such as charges for fraud.
- The interest rate on the loan is now 1%, and increase from the original .5%.
- The question of whether only the loan or both the loan and the accrued interest are eligible to be fully forgiven was answered – BOTH are eligible to be fully forgiven
- The PPP Loan is “first come, first served.”
- They did state that the loans will only be paid until the funds run out.
- You can only apply for 1 loan, so all borrowers “should apply for the maximum amount.”
- E-Signature on applications is allowed.
- The SBA will issue guidance on the loan forgiveness later.
- Borrowers will have to prove that they had payroll on or around February 15, 2020.
The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses. Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.
DMJPS will continue to provide analysis and assistance as we review these announcements as proactively as we can. Our complete written summary of the CARES Act is available here. The Paycheck Protection Program Borrower Application Form can be found here.
Jeff Marko, CPA
Jeff is a Senior Tax Manager in DMJPS’ Durham, North Carolina office with experience in large multi-state C-Corporations, closely held S-Corporations and Partnerships, Sole Proprietorships, and high net-worth individuals. In addition, Jeff provides a variety of services including international and domestic tax consulting and compliance, business entity structure and planning, individual income tax planning, ASC 740 tax provision services, FIN 48 documentation and analysis, state tax nexus studies, and IRS correspondence.
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