[1/n] BREAKING: @USTreasury & @SBAgov just issued additional guidance in the form of an "FAQ" document.

In this thread I will quickly summarize what it says as I read through it.

The 6 page document is linked in Sen. Rubio& #39;s tweet below, if you want to read it yourself. https://twitter.com/marcorubio/status/1247351995092140033">https://twitter.com/marcorubi...
[2/n] FAQ document will updated regularly in the future.

Borrowers & lenders may rely on this doc as SBA& #39;s interp of CARES Act + PPP Interim Final Rule. US Govt will not challenge lender PPP actions that conform to this doc, to PPP IFR, and any future rules.
[3/n] Q1: PPP IFR 3.b.iii says lenders "must confirm $ amt of avg mo payroll costs for preceding cal yr by reviewing doc submitted with borrower& #39;s app." Does that require lender to replicate each borrower& #39;s calculations?
[4/n] A1: No. Accurate calc = borrower responsblty & must attest. Lenders shld perform good faith review, in reasonable time, of brwr& #39;s calcs & docs. Level of diligence shld be informed by quality of borrower& #39;s docs. E.g., minimal review of known 3rd-party payroll report=ok.
[5/n] Q2: Are small biz cncrns (as def by Small Business Act, section 3, 15 U.S.C. 632) req to have <500 empl to be eligible borrower?
[6/n] A2: No. Small biz concerns = elig even if >500 empl, if satisfy existing def in sec 3 of Small Biz Act 15 U.S.C. 632.

Biz can qualify if meets SBA empl-based or rev-based size std for its primary industry. See http://www.sba.gov/size ">https://www.sba.gov/size"... for details.

(A2 continues...)
[7/n] A2 continued:

Biz also PPP elig as small biz cncrn if met 2 tests in SBA "alt size" std as of 3/27/2020:
1. Max tang net worth <= $15M; and
2. Avg net inc after fed inc tax (excl carry over losses) is <=$5M for two prior full yrs before applic date.

(A2 continues...)
[8/n] A2 continued:

If biz qual as small biz cncrn, it may truthfully attest to eligibility for PPP loans, unless otherwise ineligble.
[9/n] Q3: Does biz have to qual as small biz cncrn (per above, sec 3 of Small Biz Act 15 U.S.C. 632) in order to participate in PPP?
[10/n] A3: No.

In addn small biz cncrns, a biz is elig for PPP if:
* has <500 empl whose principal residence is in USA,
OR
* if biz meets SBA empl-size stds for industry in which it operates (if applicable).

(A3 continues...)
[11/n] (A3 continued)

PPP loans also avail for:
* tax-exempt 501(c)3 non-profits
* tax-exempt veterans orgs per sec 501(c)(19)
* tribal biz concerns per sec 31(b)(2)(C) of Small Biz Act

Above must have <500 empl w/USA res OR meet SBA empl-based size stds for their industry
[12/n] Q4: Are lenders req& #39;d to make independent determination regarding applicability of affiliation rules under 13 C.F.R. 121.301(f) to borrowers?
[13/n] A4: No. It is borrower& #39;s responsibility to determine which entities (if any) are its affiliates, and to determine empl headcount of borrower + its affiliates.

Lenders are permitted to rely on borrower& #39;s certifications.
[14/n] Q5: Are borrowers required to apply SBA affiliation rules under 13 C.F.R. 121.301(f)?
[15/n] A5: YES - AFFILIATION RULES STILL APPLY. [My emphasis added to highlight this].

Borrowers must apply affil rules set forth in SBA IFR on Affiliation. Borrower must certify that it is elig for PPP. That certification means that...

[A5 continued]
[16/n][A5 cont]

Borrower must certify, after applying affiliation, is:

1. Small biz cncrn per sec 3 of 15 U.S.C. 632, OR

2. Meets SBA empl-based or rev-based size std, OR

3. Meets 2 tests in SBA alt size std

Existing affil exclusions apply to PPP, incl. 13 CFR 121.103(b)(2)
[17/n] Q6: Affiliation rule based on ownership (13 CFR 121.301(f)(1)) says minority shrhldr = control the biz if has right to prevent quorum or otherwise block action by BoD or shrhldrs. If minority shrhldr irrevocably gives up such rights, is it still an affiliate?
[18/n] A6: ***NO.**** [emphasis added by me]

If minority shrhldr irrevocably waives/relinquishes any existing rights specificed in 13 CFR 121.301(f)(1), it will no longer be an affiliate (assuming no other relationship that triggers the affiliation rules).
[19/n] Q7: CARES Act excludes from payroll costs any empl comp / annual salary > $100k. Does that exclusion apply to all empl benefits of monetary value?
[20/n] A7: No. Exclusion of annual comp > $100k applies only to cash comp, NOT to non-cash benefits, including:
* emplyr contributions to def-bnft or def-contrib retirement plan;
* pmt for empl group health care coverage, incl ins prems;
* pmt of state/local tax on emlp comp.
[21/n] Q8: Do PPP loans cover paid sick leave?
[22/n] A8: Yes. PPP loans cover payroll costs, incl costs for empl vacation, parental, medical & sick leave.

HOWEVER [emphasis mine],

CARES Act excludes qual sick & family lv wages for which tax credit is allowed under FFCRA.
[23/n] Q9: My SMB = seasonal; activity increases April-June. Considering activity from that period = more accurate for my biz. However, my SMB was not fully ramped up on Feb 15, 2020. Is my SMB eligible for PPP?
[24/n] A9: In evaluating borrower eligibility, a lender may consider whether a seasonal borrower was in operation on Feb 15, 2020 *or* for an 8-week period between Feb 15, 2019 and June 30, 2019.
[25/n] Q10: What if otherwise elig borrower contracts with a third-party payer, e.g. payroll provider or professional employee organization (PEO) to process payroll & report payroll taxes?
[26/n] A10: SBA recognizes that elig borrowrs that use PEOs or similar payroll providers are req& #39;d under some state reg laws to report wage & other data on the EIN of the PEO or payroll provider.

[A10 continues]
[27/n] [A10 continued]

Payroll docs provided by PEO/payroll provider that indicates amt of wages & payroll taxes reported to IRS for the borrower& #39;s empls will be acceptable for PPP.

[Provides fine print guidance on which specific forms to use, etc]

[A10 continued]
[28/n] [A10 continued]

In addition, employees of the eligible borrower will not be considered employees of that eligible borrower& #39;s PEO/payroll provider.
[29/n] Q11: May lenders accept sigs from a single individual who is authorized to sign on behalf of borrower?
[30/n] A11: Yes.

HOWEVER, only auth rep of biz applicant may sign on behalf of biz. A sig as "Authorized Rep"= rep to lender + US govt that signer is authorized to certify, incl w/respect to applicant PLUS each owner of >=20% equity. Lenders may rely on/accept on that basis.
[31/n] Q12: I need PPP loan to support my SMB ops in light of current econ uncertainty. However, I pleaded guilty to felony a very long time ago. Am I still elig for PPP?
[32/n] A12: Yes.

Biz only inelig if owner of >= 20% equity is:
1. *presently* incarcerated, on probation, on parole; subject to indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction,

OR

[A12 continues]
[33/n] [A12 continued]

OR

2. Within last 5 yrs, for any felony, has been convicted; pleaded guilty; pleaded nolo contendere; been placed on pretrial diversion; or been placed on any form of parole or probation (incl probation before judgement).
[34/n] Q13: Can lenders use own online portals & elec forms to collect same info & certs as in SBA Borrower App form?
[35/n] A13: Yes. Lenders can use own online systems + form they establish that asks for same info (using same language) as SBA Borrower App. Lenders still req& #39;d to send data to SBA using SBA& #39;s interface.
[36/n] Q14: What time period should borrowers use to determine their # of employees and payroll costs to calculate max loan amounts?
[37/n] A14:

Borrowers can calc payroll using data from:
1. Previous 12 months, OR
2. Calendar year 2019.

IF borrower was not in biz 2/15/19-6/30/19, can use avg mo payroll 1/1/20-2/29/20.

Seasonal biz may use avg mo payroll 2/15/19-6/30/19 OR 3/1/19-6/30/19.

[A14 continues]
[38/n] [A14 continued]

Can use avg # empl over same periods above for empl-based size stds,

OR

Can use avg # of empl per pay period in 12 completed cal months prior to date of loan app

OR

If not operational for >=12 mos, use avg # of empl for ech pay period in operation.
[39/n] Q15: Should pmts to independent contractors or sole proprietors be incl in calcs of elig borrower& #39;s payroll costs?
[40/n] A15: No.

Any amt paid to IC or sole prop should be *excluded* from payroll costs.

However, such IC/sole props will be eligible themselves to apply for PPP loan, if they satisfy other requirements.
[41/n] Q16: How to account for federal taxes when determining payroll costs for purpose of max loan amt, allowable uses of PPP loan $, and amt of eligible loan forgiveness?
[42/n] A16:

Payroll costs = calc on gross basis without regard to (i.e. not incl subtractions/additions based on) fed taxes imposed or withheld,

e.g. empl & emplyr share of FICA & inc taxes withheld from empls.

[A16 continues]
[43/n] [A16 continued]

Result = payroll costs are not reduced by taxes imposed on empl & req& #39;d to be withheld by emplyr,

BUT

Payroll costs do NOT include employer& #39;s share of payroll tax.

[A16 continues]
[44/n] [A16 continued]

Example:
Empl earned $4k/mo gross. $500 fed tax withheld. Payroll costs for PPP= still $4k. Empl receives $3.5k; $500 paid to fed govt. However, add& #39;l employer-side fed payroll taxes imposed on the $4k wages are excluded from payroll costs for PPP.
[45/n] Q17: I already filed a PPP loan application based on the version of PPP IFR published April 2, 2020. Do I need to take any action based on this updated guidance in these FAQ& #39;s?
[46/n] A17: No. Borrowers & lenders may rely on laws/rules/guidance available at time of application.

However, if desire, borrowers who previously submitted PPP loan apps that have not yet been processed may revise their applications based on these FAQ& #39;s.
[47/n] Q18: Are PPP loans for existing customers considered new accounts for lender& #39;s FinCEN Rule CDD purposes? Are lenders req& #39;d to collect, certify, or verify beneficial ownership info in accordance with rules for existing customers?
[48/n] A18: If PPP loan is being made to existing customer and necessary information was previously verified, lender does NOT need to re-verify the information.

[A18 continues]
[49/n] [A18 continued]

Further, if FDIC banks/fed ins credit unions elig to do PPP have NOT yet collected beneficial ownership info on exist cust, they do NOT need to now collect & verify for exist cust applying for new PPP loans, unless for lender& #39;s own risk-based compliance.
[50/50] This concludes summary of @SBAGov & @USTreasury FAQ guidance released April 6, 2020.

You can access full document at (link to PDF file):
https://bit.ly/2JMSDJw 

Please">https://bit.ly/2JMSDJw&q... consult legal counsel & financial/tax advisor(s) before proceeding to apply for PPP loans.

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