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[1/n] THREAD: @USTreasury & @SBAgov issued PPP guidance (new interim final rule).
Focus is self-empl / sole prop / IC / gig wrkr applicants & lenders. Also a couple unrelated new items.
Full doc (direct link to 19-pg PDF): http://bit.ly/34DtaMn
Summary follows:
Focus is self-empl / sole prop / IC / gig wrkr applicants & lenders. Also a couple unrelated new items.
Full doc (direct link to 19-pg PDF): http://bit.ly/34DtaMn
Summary follows:
[2/n] 1.a. Self-empl = elig for PPP loan if:
(i) u were in operation on 2/15/2020
(ii) you are individ w/self-empl income (e.g. indep contractor or sole proprietor)
(iii) principal residence in USA
(iv) u filed or will file 2019 form 1040 Sched c
(continues...)
(i) u were in operation on 2/15/2020
(ii) you are individ w/self-empl income (e.g. indep contractor or sole proprietor)
(iii) principal residence in USA
(iv) u filed or will file 2019 form 1040 Sched c
(continues...)
[3/n] If you are a partner in a partnership, you may not submit separate PPP loan app for yourself as self-employed.
Self-empl income of general active partners can be reported as payroll costs (up to $100k/yr) on PPP loan app by partnership.
(more on partnerships...)
Self-empl income of general active partners can be reported as payroll costs (up to $100k/yr) on PPP loan app by partnership.
(more on partnerships...)
[4/n] Partnerships (incl LLC filing taxes as ptrship) = limited to 1 PPP loan for aggregate of ptrship & individ ptrs.
SBA decided allowing ptrs to apply as self-empl individs wld create unnecessary confusion regarding applicants, partner/LLC income, use of loan proceeds etc.
SBA decided allowing ptrs to apply as self-empl individs wld create unnecessary confusion regarding applicants, partner/LLC income, use of loan proceeds etc.
[5/n] Rent, utilities, mortgage interest, & other debt service usually incurred at ptrship level, not ptr level, so most natural to provide PPP loan to ptrship not ptrs.
(continued...)
(continued...)
[6/n] BE AWARE: participation in PPP may affect eligibility for state-administered unempl compe or unempl assistance progs, as well as other CARES benefits e.g. employee retention credits (ERCs).
[7/n] SBA will issue additional guidance (sigh) for self-empl individuals who:
(i) were not in operation in 2019 but were in operation on 2/15/2020; and
(ii) will file a 2020 form 1040 Schedule C.
(i) were not in operation in 2019 but were in operation on 2/15/2020; and
(ii) will file a 2020 form 1040 Schedule C.
[8/n] How to calc max loan amt?
If u have no employees, use following steps:
1. Find 2019 Sched C line 31 net profit amt. (If not yet filed, fill out & compute this value). If amt >$100k, set at $100k. If amt <=$0, u r not eligible for PPP.
(continues...)
If u have no employees, use following steps:
1. Find 2019 Sched C line 31 net profit amt. (If not yet filed, fill out & compute this value). If amt >$100k, set at $100k. If amt <=$0, u r not eligible for PPP.
(continues...)
[9/n] [Calculating max loan amt w/no empls]
2. Calculate average monthly net profit amt (divide amt from Step 1 by 12)
3. Multiply avg monthly net profit amt from #2 by 2.5X.
(continues...)
2. Calculate average monthly net profit amt (divide amt from Step 1 by 12)
3. Multiply avg monthly net profit amt from #2 by 2.5X.
(continues...)
[10/n] [Calculating max loan amt w/no empls]
4. Add outstanding amt of any EIDL made betw 1/31/20-4/3/20 that you seek to refinance, MINUS the amt of any advance received under EIDL (b/c does not need to be repaid)
[End of calculation of max loan amt w/no empls]
4. Add outstanding amt of any EIDL made betw 1/31/20-4/3/20 that you seek to refinance, MINUS the amt of any advance received under EIDL (b/c does not need to be repaid)
[End of calculation of max loan amt w/no empls]
[11/n] What loan documentation is required?
1. 2019 Form 1040 Sched C (if not filed; submit one filled out)
-and-
2. To establish u r self-empl, submit 2019 form 1099-MISC, invoice, bank statement, or book of record.
-and-
(continues...)
1. 2019 Form 1040 Sched C (if not filed; submit one filled out)
-and-
2. To establish u r self-empl, submit 2019 form 1099-MISC, invoice, bank statement, or book of record.
-and-
(continues...)
[12/n] [req'd loan documentation]
3. To establish you were in operation on/around 2/15/2020, submit a 2020 invoice, bank statement, or book of record.
3. To establish you were in operation on/around 2/15/2020, submit a 2020 invoice, bank statement, or book of record.
[13/n] Req'd calc of max loan amt for self-empl individs *with* empls:
Calc 2019 payroll by adding:
1. 2019 form 1040 Sched C line 31 net profit amt (if not filed, fill out & compute value). If net profit amt >$100k, set at $100k. If <= $0, set at $0.
(cont...)
Calc 2019 payroll by adding:
1. 2019 form 1040 Sched C line 31 net profit amt (if not filed, fill out & compute value). If net profit amt >$100k, set at $100k. If <= $0, set at $0.
(cont...)
[14/n] [Calc of max loan for SE w/empls]
Add to prev:
b. 2019 gross wages/tips paid to empls w/princ residence in USA, computed using 2019 IRS form 941 (line 5c-col 1) from each qtr, PLUS any pre-tax health ins contribs/other fringe benefits excl from taxable medicare wages/tips
Add to prev:
b. 2019 gross wages/tips paid to empls w/princ residence in USA, computed using 2019 IRS form 941 (line 5c-col 1) from each qtr, PLUS any pre-tax health ins contribs/other fringe benefits excl from taxable medicare wages/tips
[15/n] [Calc max loan, SE w/empls]
b. (continued) Subtract any amts paid to any individ empl >$100k/yr and any amts paid to any empl w/princ residence outside USAS
(continued...)
b. (continued) Subtract any amts paid to any individ empl >$100k/yr and any amts paid to any empl w/princ residence outside USAS
(continued...)
[16/n] [Calc max loan, SE w/empls]
c. Add for 2019:
* emplyr health ins contribs (health ins component of Sched C line 14)
* retirement contribs (Sched C line 19), and
* state/local taxes assessed on empl comp (from state qtrlyl wage reporting forms under SUTA laws)
c. Add for 2019:
* emplyr health ins contribs (health ins component of Sched C line 14)
* retirement contribs (Sched C line 19), and
* state/local taxes assessed on empl comp (from state qtrlyl wage reporting forms under SUTA laws)
[17/n] [Calc max loan, SE w/empls]
2. Calc avg monthly amt for 2019 (divide total from 1.a, b, c by 12)
3. Mult avg monthly amt in #2 by 2.5X
(continues...)
2. Calc avg monthly amt for 2019 (divide total from 1.a, b, c by 12)
3. Mult avg monthly amt in #2 by 2.5X
(continues...)
[18/n] [Calc max loan, SE w/empls]
4. Add outstanding amt of any EIDL made betw 1/31/20-4/3/20 that you seek to finance, MINUS amt of any advance on EIDL (b/c does not need to be repaid)
4. Add outstanding amt of any EIDL made betw 1/31/20-4/3/20 that you seek to finance, MINUS amt of any advance on EIDL (b/c does not need to be repaid)
[19/n] Req'd Documentation for Self-Empl w/Empls
* 2019 Sched C
* 2019 Each qtr:
-941 forms (or other/equiv payrl process records w/similar info)
- state qtrly wage unempl ins tax report forms or equiv payrl process records
* Evidence of 2019 retirement & health ins contribs
* 2019 Sched C
* 2019 Each qtr:
-941 forms (or other/equiv payrl process records w/similar info)
- state qtrly wage unempl ins tax report forms or equiv payrl process records
* Evidence of 2019 retirement & health ins contribs
[20/n] [Req'd docs for SE w/empls]
* To establish in operation on 2/15/2020, must supply payroll statement or similar doc from pay period covering 2/15/20.
* To establish in operation on 2/15/2020, must supply payroll statement or similar doc from pay period covering 2/15/20.
[21/n] How can self-empl individs use PPP loan proceeds?
1. Owner comp replacement, based on 2019 net profit per above
2. Empl payroll costs (as def in 1st PPP interim final rule) for empl w/princ res in USA (if have empls)
(continued)
1. Owner comp replacement, based on 2019 net profit per above
2. Empl payroll costs (as def in 1st PPP interim final rule) for empl w/princ res in USA (if have empls)
(continued)
[22/n] [Allowable SE use of PPP $]
3. Business mortgage int pmts on real/pers property (no prepaymts or principal pmts)
e.g.:
-Int on mortgage for warehouse where store equip
-Int on auto loan for vehicle used for biz
(continued...)
3. Business mortgage int pmts on real/pers property (no prepaymts or principal pmts)
e.g.:
-Int on mortgage for warehouse where store equip
-Int on auto loan for vehicle used for biz
(continued...)
[23/n] [Allowable SE use of PPP $]
4. Business rent pmts
e.g.:
-warehouse where store biz equip
-vehicle used to perform biz
(continued...)
4. Business rent pmts
e.g.:
-warehouse where store biz equip
-vehicle used to perform biz
(continued...)
[24/n] [Allowable SE use of PPP $]
5. Business utility pmts
e.g.:
-cost of electricity in warehouse
- cost of gas used for driving biz vehicle
(continued...)
5. Business utility pmts
e.g.:
-cost of electricity in warehouse
- cost of gas used for driving biz vehicle
(continued...)
[25/n] [Allowable SE use of PPP $]
During 8 wks post 1st disbursmt PPP loan $, to use PPP $ on above, must have claimed (or be entitled to claim) deduction on 2019 Sched C.
e.g. If did not claim/not entitled to claim util on 2019 Sched C, can't use PPP $ for util during 8 wks.
During 8 wks post 1st disbursmt PPP loan $, to use PPP $ on above, must have claimed (or be entitled to claim) deduction on 2019 Sched C.
e.g. If did not claim/not entitled to claim util on 2019 Sched C, can't use PPP $ for util during 8 wks.
[26/n] [Allowable SE use of PPP $]
OK to use PPP $ on interest pmts on any debt obligations incurred before 2/15/2020 (but such amts are not eligible for PPP loan forgiveness).
OK to use PPP $ on interest pmts on any debt obligations incurred before 2/15/2020 (but such amts are not eligible for PPP loan forgiveness).
[27/n] Refinancing EIDL into PPP
If received EIDL betw 1/31/20-4/3/20, ok to also apply for PPP.
If EIDL was not used for payroll costs, does not affect eligibility for PPP.
If EIDL *was* used for payroll costs, must use PPP loan to refinance EIDL loan.
(continued...)
If received EIDL betw 1/31/20-4/3/20, ok to also apply for PPP.
If EIDL was not used for payroll costs, does not affect eligibility for PPP.
If EIDL *was* used for payroll costs, must use PPP loan to refinance EIDL loan.
(continued...)
[28/n] [Refinancing EIDL into PPP]
If received any advance on EIDL up to $10k, then receive PPP loan, $ amt of EIDL advance will be deducted from amt eligible for forgiveness on PPP loan.
If received any advance on EIDL up to $10k, then receive PPP loan, $ amt of EIDL advance will be deducted from amt eligible for forgiveness on PPP loan.
[29/n] Note on limit on use of PPP proceeds by SE
Reason for limiting SE use of PPP $ to allowable uses for which borrower made expenditures in 2019 =
need to be consistent w/req'd borrower cert that PPP loan is "necessary to support ONGOING operations"
[emphasis mine]
Reason for limiting SE use of PPP $ to allowable uses for which borrower made expenditures in 2019 =
need to be consistent w/req'd borrower cert that PPP loan is "necessary to support ONGOING operations"
[emphasis mine]
[30/n] Other Restrictions on Use of PPP $
>= 75% of PPP $ must be used for payroll costs.
For purposes of calc % of proceeds used for payroll (but not for calc forgiveness), amt of any refi'd EIDL will be incl.
See 1st PPP IFR for rationale on 75% floor.
>= 75% of PPP $ must be used for payroll costs.
For purposes of calc % of proceeds used for payroll (but not for calc forgiveness), amt of any refi'd EIDL will be incl.
See 1st PPP IFR for rationale on 75% floor.
[31/n] Eligible Forgivness Amounts
Amt of loan forgiveness = up to full principal PLUS ACCRUED INTEREST.
[emphasis mine; this is change from prev guidance]
(continued...)
Amt of loan forgiveness = up to full principal PLUS ACCRUED INTEREST.
[emphasis mine; this is change from prev guidance]
(continued...)
[32/n] Actual Amount of Loan Forgiveness
Actual amt of loan forgiveness will depend (in part) on amt spent during 8 wks post-1st-disbursement on the following:
(list follows...)
Actual amt of loan forgiveness will depend (in part) on amt spent during 8 wks post-1st-disbursement on the following:
(list follows...)
[33/n] Loan Forgivnss Amt
i. Payroll costs, incl:
* salary, wages, & tips, up to $100k ann/empl (i.e. for 8 wks, up to $15,385 per empl) PLUS
* covered benefits for empls (but NOT owners) incl health care, retirement, & state/local taxes on empl payroll paid by emplyr
(cont...)
i. Payroll costs, incl:
* salary, wages, & tips, up to $100k ann/empl (i.e. for 8 wks, up to $15,385 per empl) PLUS
* covered benefits for empls (but NOT owners) incl health care, retirement, & state/local taxes on empl payroll paid by emplyr
(cont...)
[34/n] [Loan Forgivnss Amt]
ii. Owner comp replacmt, calc based on 2019 net profit amt per above;
w/forgiveness limited to 8 wks (8/52) of 2019 net profit, but excl qual sick/family leave equiv amts for which FFCRA credit is claimed
(cont...)
ii. Owner comp replacmt, calc based on 2019 net profit amt per above;
w/forgiveness limited to 8 wks (8/52) of 2019 net profit, but excl qual sick/family leave equiv amts for which FFCRA credit is claimed
(cont...)
[35/n] [Loan Forgivnss Amt]
iii. Interest pmts on mortgage obligations on real/prs property incurred before 2/15/20, to extent deductible on Sched C (i.e. business mortgage pmts)
(cont...)
iii. Interest pmts on mortgage obligations on real/prs property incurred before 2/15/20, to extent deductible on Sched C (i.e. business mortgage pmts)
(cont...)
[36/n] [Loan Forgivnss Amt]
iv. Rent pmts on lease agrmts in force before 2/15/2020, to extent deductible on Sched C (i.e. business rent payments)
(cont...)
iv. Rent pmts on lease agrmts in force before 2/15/2020, to extent deductible on Sched C (i.e. business rent payments)
(cont...)
[37/n] [Loan Forgivnss Amt]
v. Utility pmts under service agrmts dated before 2/15/2020 to extent deductible on Sched C (i.e. business utility pmts)
(cont...)
v. Utility pmts under service agrmts dated before 2/15/2020 to extent deductible on Sched C (i.e. business utility pmts)
(cont...)
[38/n] Note on forgiveness limits for SE:
Purpose of limiting forgiveness of SE owner comp replacmt to 8 wks (8/52) of 2019 net profit= CARES focus on paying workers + prevent unintended windfalls.
[Long, poorly written section on this; pls read doc directly if interested]
Purpose of limiting forgiveness of SE owner comp replacmt to 8 wks (8/52) of 2019 net profit= CARES focus on paying workers + prevent unintended windfalls.
[Long, poorly written section on this; pls read doc directly if interested]
[39/n] Req'd docs for SE PPP loan forgiveness
* Borrower certification req'd by CARES Sec 1106(e)(3)
* If have empls, form 941(s) & state qtrly wage unempl ins tax report forms or equiv payroll process records that best correspond to 8 wk period post-1st-disbursement
(cont...)
* Borrower certification req'd by CARES Sec 1106(e)(3)
* If have empls, form 941(s) & state qtrly wage unempl ins tax report forms or equiv payroll process records that best correspond to 8 wk period post-1st-disbursement
(cont...)
[40/n] Req'd SE PPP loan forgvnss docs
* If used PPP $ on following during 8 wks post-1st-disbursmt, submit evidence of:
- Biz rent
- Biz mortgate int pmts on real/prs property
- Biz utility pmts
* 2019 Sched C (for amt of allowable net profit allocated to owner during 8 wks)
* If used PPP $ on following during 8 wks post-1st-disbursmt, submit evidence of:
- Biz rent
- Biz mortgate int pmts on real/prs property
- Biz utility pmts
* 2019 Sched C (for amt of allowable net profit allocated to owner during 8 wks)
[41/n] Clarification re: Eligible Businesses
Are elig biz owned by directors/shrhldrs of PPP lenders permitted to apply for PPP thru lender with which they are associated?
(answer follows...)
Are elig biz owned by directors/shrhldrs of PPP lenders permitted to apply for PPP thru lender with which they are associated?
(answer follows...)
[42/n]
OK for dir/shrhldr of <30% in lender, as long as same process as other cust. Favoritism in time/priority= prohibited. SBA cautions lenders to comply w/all applicable state/fed laws re: loans to associates, & consult own policies re: lending to assoc individ/entities.
OK for dir/shrhldr of <30% in lender, as long as same process as other cust. Favoritism in time/priority= prohibited. SBA cautions lenders to comply w/all applicable state/fed laws re: loans to associates, & consult own policies re: lending to assoc individ/entities.
[43/n] Rationale for allowing PPP to associates of Lender
Unlike other SBA progs, PPP terms= uniform for all + no credit chk req'd / no std underwriting.
Thus no sig risk bias / below-mkt rates/terms.
SBA recognizes many dirs/shrhldrs of PPP lenders = owners of unrelated biz.
Unlike other SBA progs, PPP terms= uniform for all + no credit chk req'd / no std underwriting.
Thus no sig risk bias / below-mkt rates/terms.
SBA recognizes many dirs/shrhldrs of PPP lenders = owners of unrelated biz.
[44/n] Excl. from foregoing
Exemption does not apply to BoD/shrhldr of lender who= officer/key empl.
Officer/key empl of lender may obtain PPP from diff lender.
"Authorized Lender Official" for ea PPP loan=subj to limits: neither ALO nor spouse/child have fin int in borrower.
Exemption does not apply to BoD/shrhldr of lender who= officer/key empl.
Officer/key empl of lender may obtain PPP from diff lender.
"Authorized Lender Official" for ea PPP loan=subj to limits: neither ALO nor spouse/child have fin int in borrower.
[45/n] PPP eligibility of gaming biz
Biz w/legal gaming revenue= elig for PPP if:
* existing std 13 CFR 120.110(g) is met
OR
* legal gaming rev (net of payouts but not other expenses) satisfies 2 conditions:
(a) <=$1M in 2019, and
(b) <50% of biz total revenue in 2019.
Biz w/legal gaming revenue= elig for PPP if:
* existing std 13 CFR 120.110(g) is met
OR
* legal gaming rev (net of payouts but not other expenses) satisfies 2 conditions:
(a) <=$1M in 2019, and
(b) <50% of biz total revenue in 2019.
[46/n] Requirements for PPP loan pledges
Do requirements for loan pledges under 13 CFR 120.434 apply to PPP loans pledged for borrwing from a Federal Reserve Bank (FRB) or advances by Federal Home Loan Bank (FHLB)?
(answer follows...)
Do requirements for loan pledges under 13 CFR 120.434 apply to PPP loans pledged for borrwing from a Federal Reserve Bank (FRB) or advances by Federal Home Loan Bank (FHLB)?
(answer follows...)
[47/n] Re: loan pledges
Ans: NO.
Pledge of 7(a) loan to FRB / FHLB does not require SBA prior written consent/notice.
Add'l requirements in 120.434 shall also not apply.
e.g. no need for SBA to approve loan docs or require multi-party agreement among SBA, lender & others.
Ans: NO.
Pledge of 7(a) loan to FRB / FHLB does not require SBA prior written consent/notice.
Add'l requirements in 120.434 shall also not apply.
e.g. no need for SBA to approve loan docs or require multi-party agreement among SBA, lender & others.
[48/48] @SBAgov & @USTreasury reserve right to issue add'l updated guid in future.
This completes summary of Interim Final Rule on PPP issued April 14, 2020.
Reminder: full 19-page document can be downloaded here (direct link to PDF): http://bit.ly/34DtaMn
[END OF THREAD]
This completes summary of Interim Final Rule on PPP issued April 14, 2020.
Reminder: full 19-page document can be downloaded here (direct link to PDF): http://bit.ly/34DtaMn
[END OF THREAD]
