Helpful Video on Paycheck Protection Program Forgiveness Application

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We’ve been getting a lot of questions about the Paycheck Protection Program (PPP) and how our clients can maximize the amount that is forgiven. While this is a bit of a moving target, our friends at Geffen Mesher have put together a helpful video on working through the Small Business Association’s (SBA) PPP Forgiveness Application that we wanted to commend to your attention. View the video here.

Valerie Sasaki specializes in jurisdictional tax consulting, working closely with Fortune 50 companies involved in audits before the Oregon or Washington Departments of Revenue. She also works with business owners on tax, business, and estate planning issues in Oregon or Southwest Washington.

Senate Approves Additional Funds for Paycheck Protection Program

On Tuesday, April 21, 2020, the U.S. Senate passed H.R. 266, the “Paycheck Protection Program and Health Care Enhancement Act” by voice vote. The bill appropriates an additional $310 billion for the Paycheck Protection Program (PPP), which exhausted its initial $349 billion in funding within two weeks of Congress’ passage of the CARES Act. The bill also provided $60 billion for community banks and smaller lenders, $75 billion for hospitals, $25 billion for testing, and $60 billion for emergency disaster loans and grants.

The U.S. House of Representatives is expected to take up the bill on Thursday morning, April 23, 2020, as House lawmakers are expected to return to Washington for a recorded vote on that date. The President is expected to sign the bill shortly thereafter, thereby releasing the funds for additional lending to small businesses across the country.

The Paycheck Protection Program provides loans to small businesses under 500 employees. The loan obligation is eligible for complete forgiveness if loan proceeds are spent to support payroll costs, rent, and other qualified expenses. The amount of loan forgiveness is also not included in the taxable income of the borrower.

If a business has applied for the loan and did not receive funding due to the exhaustion of the program, they should contact their lender immediately to confirm their loan application is still active and any other pertinent details to get their Paycheck Protection Loan back on track.

Michael D. Walker is a business, tax and estate planning attorney who has worked with individuals and small to medium-sized businesses for nearly 30 years. A careful listener, Michael skillfully guides his clients to meet the wide variety of legal challenges they face in our current complex world.

Treasury Department Releases Additional Guidance on Paycheck Protection Program

On April 8, 2020, the U. S. Treasury Department updated its “Frequently Asked Questions (FAQs)” guidance on the Paycheck Protection Program (PPP) that is being administered by the Small Business Administration (SBA). While this document was previously issued by the Treasury Department, it has been updated to address some of the questions that borrowers and lenders have raised as lenders have been inundated with applications for the forgivable loans under the PPP. Congress is currently considering allocating another $200 to $250 billion to the PPP.

Here of some of the highlights under the FAQs:

  • Computing the $100,000 Cap. For purposes of computing a borrower’s “payroll costs” (which is then multiplied by 2.5 to determine a borrower’s loan amount up to $10 million), the $100,000 cap on an individual’s compensation is limited to “cash compensation,” and does not include employer contributions to defined-benefit or defined-contribution retirement plans (e.g. employer 401(k) contributions), group health care coverage including insurance premiums, and state and local taxes assessed on employee compensation.
  • Vacation, Family Leave, Etc. PPP loans cover payroll costs, including costs for employee vacation, parental, family, medical, and sick leave. However, this does not include qualified sick and family leave wages for which a credit is allowed under the recently passed Families First Coronavirus Response Act.
  • Time frame of Payroll Costs Calculation. In calculating “payroll costs” for purposes of determining a borrower’s loan amount, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019.
  • Independent Contractors. Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor are excluded from the “payroll costs” calculation. However, independent contractors and sole proprietors are themselves eligible to apply for their own PPP loans.
  • Use Gross Wages for Calculation. “Payroll costs” are based upon an employee’s gross compensation (i.e. not after-tax withholdings). However, the employer-side federal payroll taxes imposed on employee’s compensation is excluded from the payroll costs calculation.
  • Spending the PPP Money. For purposes of computing the loan amount that is eligible to be forgiven under PPP, the borrower must spend the loan proceeds within eight weeks beginning on the date “the lender makes the first disbursement of the PPP loan to the borrower.” The SBA has previously indicated that, for purposes of the loan forgiveness requirement, no more that 25{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} of the loan proceeds can be used for non-payroll costs permitted under PPP (i.e. rent, interest on mortgage obligations and utility payments).

The FAQs still do not address whether the income allocation to partners in a business taxed as a partnership are included in the payroll costs calculations. Our experience is that lenders have varying interpretations of this issue. Hopefully, more guidance with continue to be provided by the SBA and Treasury Department on this and other issues that have arisen under the PPP.

Michael D. Walker is a business, tax and estate planning attorney who has worked with individuals and small to medium-sized businesses for nearly 30 years. A careful listener, Michael skillfully guides his clients to meet the wide variety of legal challenges they face in our current complex world.

U.S. Treasury Releases Paycheck Protection Program Loan Application, Additional Information

On March 31, 2020, the U.S. Treasury Department released the initial loan application for borrowers under the “Paycheck Protection Program,” a Small Business Administration (SBA) forgivable loan program that is part of the CARES Act passed by Congress last week.  In addition, the Treasury Department provided borrowers with an “Information Sheet” for borrowers under the program.

Here are some notable highlights from these releases:

  • On the loan application, the borrower and each 20{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} or greater owner of the borrower must make certain certifications, including that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations” of the borrower, and the loan will be used “to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.”
  • With respect to the future applications to potentially forgive the loan, the application states that “[d]ue to likely high subscription, it is anticipated that not more than twenty-five percent (25{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6}) of the forgiven amount may be for non-payroll costs.”
  • The Information Sheet states that borrowers can begin applying for the Paycheck Protection Loans on April 3, 2020 and includes a link to help borrowers locate a local SBA lender.

A link to the loan application can be found HERE.

A link to the Information Sheet can be found HERE.

Michael D. Walker is a business, tax and estate planning attorney who has worked with individuals and small to medium-sized businesses for nearly 30 years. A careful listener, Michael skillfully guides his clients to meet the wide variety of legal challenges they face in our current complex world.