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1/ THREAD: SUMMARY OF #PPP INTERIM FINAL RULE ON LOAN FORGIVENESS
Per usual practice, SBA & Treasury tonight issued additional IFR guidance on PPP loan forgiveness.
Direct link to IFR [26-page PDF]: https://bit.ly/36pzfgr
Here is my summary of the IFR...
Per usual practice, SBA & Treasury tonight issued additional IFR guidance on PPP loan forgiveness.
Direct link to IFR [26-page PDF]: https://bit.ly/36pzfgr
Here is my summary of the IFR...
2/ [MY ABBREVIATIONS]
IFR = Interim Final Rule
FAQ = Frequently Asked Questions
B = Borrower
LF = Loan Forgiveness
App = Application
CP = Covered Period [e.g. 8 wks after PPP $ disbursement]
Empl = employee
Emplyr = employer
(continued...)
IFR = Interim Final Rule
FAQ = Frequently Asked Questions
B = Borrower
LF = Loan Forgiveness
App = Application
CP = Covered Period [e.g. 8 wks after PPP $ disbursement]
Empl = employee
Emplyr = employer
(continued...)
3/ [ABBREVIATIONS continued]
FTE = full-time equivalent (empl)
SE = self-employed
IC = independent contractor
PC = payroll costs
NPC = nonpayroll costs
FTE = full-time equivalent (empl)
SE = self-employed
IC = independent contractor
PC = payroll costs
NPC = nonpayroll costs
4/[OUTLINE]
The 26-page IFR is divided into the following sections:
* PREAMBLE
1. GENERAL
2. LOAN FORGIVENESS PROCESS
3. PAYROLL COSTS ELIG FOR LOAN FORGIVENESS
4. NONPAYROLL COSTS ELIG FOR LOAN FORGIVENESS
5. REDUCTIONS TO LOAN FORGIVENESS AMT
6. DOC REQUIREMENTS
7. ADD'L INFO
The 26-page IFR is divided into the following sections:
* PREAMBLE
1. GENERAL
2. LOAN FORGIVENESS PROCESS
3. PAYROLL COSTS ELIG FOR LOAN FORGIVENESS
4. NONPAYROLL COSTS ELIG FOR LOAN FORGIVENESS
5. REDUCTIONS TO LOAN FORGIVENESS AMT
6. DOC REQUIREMENTS
7. ADD'L INFO
5/ [PREAMBLE]
SBA also issued prior IFR on 4/2 covering (in part) loan forgiveness [LF]. SBA also issued prior FAQs re: LF on 4/8 & 4/26.
This new IFR supplements prior SBA IFRs on 4/3, 4/14, 4/24, 4/28, 4/30, 5/5, 5/8, 5/13, 5/14, 5/18, & 5/20 as well as Treasury IFR on 4/27.
SBA also issued prior IFR on 4/2 covering (in part) loan forgiveness [LF]. SBA also issued prior FAQs re: LF on 4/8 & 4/26.
This new IFR supplements prior SBA IFRs on 4/3, 4/14, 4/24, 4/28, 4/30, 5/5, 5/8, 5/13, 5/14, 5/18, & 5/20 as well as Treasury IFR on 4/27.
6/ [PREAMBLE cont]
This new IFR relies on rulemaking authority of SBA alone, except for where it relies on Treasury authority (either w/SBA or alone) on 4 items:
(continued...)
This new IFR relies on rulemaking authority of SBA alone, except for where it relies on Treasury authority (either w/SBA or alone) on 4 items:
(continued...)
7/ [PREAMBLE cont]
1. De minimis exemption w.r.t. rehire offers;
2. Add'l ref period for seasonal emplyrs;
3. De minimis exemption from FTE reduc penalty when empl is, e.g., fired for cause
4. De minimis exemption from FTE reduc penalty when B eliminates reduc by June 30
1. De minimis exemption w.r.t. rehire offers;
2. Add'l ref period for seasonal emplyrs;
3. De minimis exemption from FTE reduc penalty when empl is, e.g., fired for cause
4. De minimis exemption from FTE reduc penalty when B eliminates reduc by June 30
8/ 1. GENERAL
CARES 1106(b) provides that PPP B's = eligible for LF in amt equal to sum of costs incurred AND payments made during CP for:
CARES 1106(b) provides that PPP B's = eligible for LF in amt equal to sum of costs incurred AND payments made during CP for:
9/
1. PC
2. Biz mortgate int pmts on obligs incurred b4 Feb 15
3. Biz rent obligs under lease in force b4 Feb 15
4. Biz util pmts for distrib of:
* Electricity
* Gas
* Water
* Transport
* Telephone
* Internet access
...for which service began b4 Feb 15.
1. PC
2. Biz mortgate int pmts on obligs incurred b4 Feb 15
3. Biz rent obligs under lease in force b4 Feb 15
4. Biz util pmts for distrib of:
* Electricity
* Gas
* Water
* Transport
* Telephone
* Internet access
...for which service began b4 Feb 15.
10/ Nonpayroll costs ["NPC"] refer to #2, 3 & 4 in prior tweet. Per prior IFR (85 FR 20811), eligible NPC costs cannot exceed 25% of LF amount.
11/ Payroll costs ["PC"] =comp to empls (w/ principal residence in USA) in form of:
* Salary/wages/commissions or similar;
* Cash tips or equiv (based on emplyr records of past tips or, in absence of records, a reasonable/good-faith emplyr estimate of such tips)
(continued...)
* Salary/wages/commissions or similar;
* Cash tips or equiv (based on emplyr records of past tips or, in absence of records, a reasonable/good-faith emplyr estimate of such tips)
(continued...)
12/ [Eligible PC cont...]
* Pmt for leave (vacay, parental, fam, med, sick)
* Allowance for separation/dismissal
* Pmt of benefits (HC/ins prems & retirement)
* Pmt of state/local tax on empl comp
* [For IC/sole props] wages, commissions, income or net earn from SE or similar
* Pmt for leave (vacay, parental, fam, med, sick)
* Allowance for separation/dismissal
* Pmt of benefits (HC/ins prems & retirement)
* Pmt of state/local tax on empl comp
* [For IC/sole props] wages, commissions, income or net earn from SE or similar
13/ [Eligible PC cont...]
For more detail on eligible payroll costs [PC], see references:
* 15 U.S.C. 636(a)(36)(A)(viii)
* 85 FR 20811
* 85 FR 20813
For more detail on eligible payroll costs [PC], see references:
* 15 U.S.C. 636(a)(36)(A)(viii)
* 85 FR 20811
* 85 FR 20813
14/ 2. LOAN FORGIVENESS [LF] PROCESS
B must complete & submit LF App (SBA Form 3508 or lender equivalent) to PPP lender (or lender now servicing loan).
B must complete & submit LF App (SBA Form 3508 or lender equivalent) to PPP lender (or lender now servicing loan).
15/
"As a general matter," lender will review LF App & make decision re: loan forgiveness. Lender has 60 days from receipt of completed LF App to issue decision to SBA.
"As a general matter," lender will review LF App & make decision re: loan forgiveness. Lender has 60 days from receipt of completed LF App to issue decision to SBA.
16/
If lender determines that B is entitled to LF of some/all amt applied for, lender must request pmt from SBA *at same time* it issues decision to SBA.
If lender determines that B is entitled to LF of some/all amt applied for, lender must request pmt from SBA *at same time* it issues decision to SBA.
17/
Within 90 days after lender issues decision to SBA, SBA will remit (subject to any additional SBA review of PPP loan or LF application) to lender the appropriate forgiveness $ amt, plus interest accrued thru date of pmt.
Within 90 days after lender issues decision to SBA, SBA will remit (subject to any additional SBA review of PPP loan or LF application) to lender the appropriate forgiveness $ amt, plus interest accrued thru date of pmt.
18/
If applicable, SBA will deduct Economic Injury Disaster Loan [EIDL] Advance amount from forgiveness amount remitted to lender, as required by CARES 1110(e)(6).
If applicable, SBA will deduct Economic Injury Disaster Loan [EIDL] Advance amount from forgiveness amount remitted to lender, as required by CARES 1110(e)(6).
19/
PPP loan will NOT be elig for forgiveness if SBA determines that B was ineligible for PPP loan based on:
* CARES Act;
* SBA rules/guidance "available at the time of B's loan app," or
* Terms of B's PPP loan app (e.g., b/c B lacked adequate basis for required certifications)
PPP loan will NOT be elig for forgiveness if SBA determines that B was ineligible for PPP loan based on:
* CARES Act;
* SBA rules/guidance "available at the time of B's loan app," or
* Terms of B's PPP loan app (e.g., b/c B lacked adequate basis for required certifications)
20/
The PPP lender (or lender servicing the loan) is responsible for notifying B of forgiveness amount/decision.
If only a portion of loan is forgiven, or if LF is denied, remaining balance of loan must be repaid by B on/before 2-year maturity.
The PPP lender (or lender servicing the loan) is responsible for notifying B of forgiveness amount/decision.
If only a portion of loan is forgiven, or if LF is denied, remaining balance of loan must be repaid by B on/before 2-year maturity.
21/
If amt remitted by SBA to lender exceeds remaining principal balance of PPP loan (e.g., b/c B already made scheduled pmts on PPP loan after initial deferment period), lender must remit excess amt (incl. accrued interest) to B.
If amt remitted by SBA to lender exceeds remaining principal balance of PPP loan (e.g., b/c B already made scheduled pmts on PPP loan after initial deferment period), lender must remit excess amt (incl. accrued interest) to B.
22/
The process described above applies only to LF apps NOT reviewed by SBA *prior to* lender's decision on forgiveness.
Separate IFR to come, "SBA Loan Review Procedures & Related B and Lender Responsibilities," will describe procedures for reviewing PPP loan apps & LF apps.
The process described above applies only to LF apps NOT reviewed by SBA *prior to* lender's decision on forgiveness.
Separate IFR to come, "SBA Loan Review Procedures & Related B and Lender Responsibilities," will describe procedures for reviewing PPP loan apps & LF apps.
23/ 3. PAYROLL COSTS [PC] ELIGIBLE FOR LOAN FORGIVENESS [LF]
This section has 3 Q&As:
a. When must PC be incurred/paid to be elig for LF?
b. Are PC to furloughed empls; bonuses; or hazard pay during CP elig for LF?
c. Are there caps on LF for owner-empls and SE's own PC?
This section has 3 Q&As:
a. When must PC be incurred/paid to be elig for LF?
b. Are PC to furloughed empls; bonuses; or hazard pay during CP elig for LF?
c. Are there caps on LF for owner-empls and SE's own PC?
24/ 3.a. When must PC be incurred/paid to be elig for LF?
In general, PC paid/incurred during 8 consec wk (56 day) CP or APCP [see below] are elig for LF.
In general, PC paid/incurred during 8 consec wk (56 day) CP or APCP [see below] are elig for LF.
25/ 3.a. cont.
B may seek LF for PC for 8 wks beginning on either:
i. Date of disbursemt of PPP $ from lender (i.e. start of covered period), ["CP']
or
ii. 1st day of 1st payroll cycle in CP (the "alternative payroll covered period") ["APCP']
B may seek LF for PC for 8 wks beginning on either:
i. Date of disbursemt of PPP $ from lender (i.e. start of covered period), ["CP']
or
ii. 1st day of 1st payroll cycle in CP (the "alternative payroll covered period") ["APCP']
26/
PC = considered paid on day that paychecks are distributed or B originates ACH transaction.
PC incurred during B's last pay period of CP/APCP = elig for LF if paid on/before next payroll date; otherwise, PC must be paid during CP/APCP to be elig for LF.
PC = considered paid on day that paychecks are distributed or B originates ACH transaction.
PC incurred during B's last pay period of CP/APCP = elig for LF if paid on/before next payroll date; otherwise, PC must be paid during CP/APCP to be elig for LF.
27/
PC = generally incurred on day that empl pay is earned (i.e. on day that empl worked).
For empls who are not performing work, but still on B's payroll, PC are incurred based on schedule established by B (typically, each day that empl *would have* performed work).
PC = generally incurred on day that empl pay is earned (i.e. on day that empl worked).
For empls who are not performing work, but still on B's payroll, PC are incurred based on schedule established by B (typically, each day that empl *would have* performed work).
28/
SBA & Treasury recognize that 8-wk CP will not always align with B's payroll cycle.
For administrative convenience of B, a B w/bi-weekly (or more freq) payroll cycle may elect to use APCP that begins on 1st day of 1st payroll cycle in CP & continues for the following 8 wks.
SBA & Treasury recognize that 8-wk CP will not always align with B's payroll cycle.
For administrative convenience of B, a B w/bi-weekly (or more freq) payroll cycle may elect to use APCP that begins on 1st day of 1st payroll cycle in CP & continues for the following 8 wks.
29/
If PC = incurred during 8-wk APCP, but paid after end of such APCP, such PC will be elig for LF if paid no later than 1st regular payroll date thereafter.
If PC = incurred during 8-wk APCP, but paid after end of such APCP, such PC will be elig for LF if paid no later than 1st regular payroll date thereafter.
30/
SBA & Treasury determined that this alternative computational method for PC is justified by consideration of administrative feasibility for B's, as it will reduce burdens on B's & their payroll agents while achieving purposes of CARES, incl. sec 1102.
SBA & Treasury determined that this alternative computational method for PC is justified by consideration of administrative feasibility for B's, as it will reduce burdens on B's & their payroll agents while achieving purposes of CARES, incl. sec 1102.
31/
Because this alternative computational method= limited to bi-weekly or more frequent payroll cycles, this method will yield a calc that SBA does not expect to materially differ from actual CP, while avoiding unnecessary administrative burdens & enhancing auditability.
Because this alternative computational method= limited to bi-weekly or more frequent payroll cycles, this method will yield a calc that SBA does not expect to materially differ from actual CP, while avoiding unnecessary administrative burdens & enhancing auditability.
32/ EXAMPLE OF APCP
B has bi-weekly payroll schedule (ev other wk). B's 8-wk CP begins on June 1 / ends on July 26. The 1st day of B's 1st payroll cycle that starts in this CP is June 7.
B may elect APCP that starts June 7 and ends 55 days later (for total 56 days) on Aug 1.
B has bi-weekly payroll schedule (ev other wk). B's 8-wk CP begins on June 1 / ends on July 26. The 1st day of B's 1st payroll cycle that starts in this CP is June 7.
B may elect APCP that starts June 7 and ends 55 days later (for total 56 days) on Aug 1.
33/ APCP EXAMPLE cont...
PC *paid* during this APCP = elig for LF.
Also, PC *incurred* during this APCP = elig for LF, as long as paid on/before the 1st regular payroll date occurring after Aug 1.
PC both paid & incurred during CP/APCP may only be counted once.
PC *paid* during this APCP = elig for LF.
Also, PC *incurred* during this APCP = elig for LF, as long as paid on/before the 1st regular payroll date occurring after Aug 1.
PC both paid & incurred during CP/APCP may only be counted once.
34/ 3.b. Are salary/wages/commissions paid to furloughed empls; bonuses; or hazard pay during CP elig for LF?
Answer: YES.
CARES defines PC broadly to incl comp in form of salary, wages, commissions or similar.
(continued...)
Answer: YES.
CARES defines PC broadly to incl comp in form of salary, wages, commissions or similar.
(continued...)
35/ 3.b. continued
If B pays furloughed empls sal/wages/commissions during CP, those pmts = elig for LF as long as do not exceed annual salary of $100k prorated for CP.
(continued...)
If B pays furloughed empls sal/wages/commissions during CP, those pmts = elig for LF as long as do not exceed annual salary of $100k prorated for CP.
(continued...)
36/ 3.b. cont...
SBA has determined this is consistent with CARES text & advances its purposes by enabling B's to continue paying empls *even if* empls are not able to perform day-to-day duties, whether due to lack of economic demand or public health considerations.
(cont...)
SBA has determined this is consistent with CARES text & advances its purposes by enabling B's to continue paying empls *even if* empls are not able to perform day-to-day duties, whether due to lack of economic demand or public health considerations.
(cont...)
37/ 3.b. cont...
This intent= reflected thruout CARES, incl 1106(d)(4), which provides that add'l wages to tipped emplsd= elig for LF.
SBA & Treasury also determine that if empl total comp <$100k annualized, empl's hazard pay+bonuses= elig for LF (b/c "similar" to sal/wages).
This intent= reflected thruout CARES, incl 1106(d)(4), which provides that add'l wages to tipped emplsd= elig for LF.
SBA & Treasury also determine that if empl total comp <$100k annualized, empl's hazard pay+bonuses= elig for LF (b/c "similar" to sal/wages).
38/ 3.c. Are there caps on amt of LF avail for owner-empls & SE individs' own PC?
Answer: YES.
Amt of LF for O-E's & SE's PC can't exceed lesser of:
* 8/52 of 2019 comp (i.e. ~15.38% of 2019 comp),
or
* $15,385 per individ in total across all biz.
Ref: 85 FR 21747, 21750.
Answer: YES.
Amt of LF for O-E's & SE's PC can't exceed lesser of:
* 8/52 of 2019 comp (i.e. ~15.38% of 2019 comp),
or
* $15,385 per individ in total across all biz.
Ref: 85 FR 21747, 21750.
39/ 3.c. cont...
In particular, O-E's = capped by 2019 empl cash comp & emplyr retirement + health care contribs made on their behalf.
In particular, O-E's = capped by 2019 empl cash comp & emplyr retirement + health care contribs made on their behalf.
40/ 3.c. cont...
Schedule C filers are capped by amt of owner comp replacement, calcualted based on 2019 net profit.
Ref: See 85 CFR 21747, 21749 (April 20, 2020).
Schedule C filers are capped by amt of owner comp replacement, calcualted based on 2019 net profit.
Ref: See 85 CFR 21747, 21749 (April 20, 2020).
41/ 3.c. cont...
General partners are capped by amt of 2019 net earnings from SE (reduced by claimed sec 179 expense deduction, unreimbursed partnership expenses, & depletion from oil&gas properties) multipled by 0.9235.
General partners are capped by amt of 2019 net earnings from SE (reduced by claimed sec 179 expense deduction, unreimbursed partnership expenses, & depletion from oil&gas properties) multipled by 0.9235.
42/ 3.c. cont...
NOTE: NO ADDITIONAL FORGIVENESS is provided for retirement or health insurance contributions for SE individs, incl. Sched C filers & general partners, as such expenses are paid out of their net SE income.
NOTE: NO ADDITIONAL FORGIVENESS is provided for retirement or health insurance contributions for SE individs, incl. Sched C filers & general partners, as such expenses are paid out of their net SE income.
43/ 4. NONPAYROLL COSTS [NPC] ELIGIBLE FOR LOAN FORGIVENESS [LF]
This section has 2 Q&A's:
a. When must NPC be incurred/paid to be elig for LF?
b. Are advance pmts of int on mortgage obligs elig for LF?
This section has 2 Q&A's:
a. When must NPC be incurred/paid to be elig for LF?
b. Are advance pmts of int on mortgage obligs elig for LF?
44/ 4.a. When must NPC be incurred/paid to be elig for LF?
Answer: NPC is elig for LF if:
i. Paid during CP
or
ii. Incurred during CP and paid on/before next regular billing date (even if billing date is after CP).
Answer: NPC is elig for LF if:
i. Paid during CP
or
ii. Incurred during CP and paid on/before next regular billing date (even if billing date is after CP).
45/ 4.a. EXAMPLE NPC PMT TIMING
B's CP begins on June 1 / ends July 26. B pays May & Jun electricity bill during CP *and* pays July electricity bill on Aug 10, which is next regular billing date.
(continued...)
B's CP begins on June 1 / ends July 26. B pays May & Jun electricity bill during CP *and* pays July electricity bill on Aug 10, which is next regular billing date.
(continued...)
46/ 4.a. EXAMPLE continued
B may seek LF for May & June bills, b/c paid during CP.
B may also seek LF for *the portion* of July bill thru July 26 (end of CP), b/c it was incurred during CP and paid on next regular billing date.
B may seek LF for May & June bills, b/c paid during CP.
B may also seek LF for *the portion* of July bill thru July 26 (end of CP), b/c it was incurred during CP and paid on next regular billing date.
47/ 4.a. cont...
SBA/Treasury determined this= appropriate B flexibility while consistent w/CARES 1106(b). SBA believes this= also supported by considerations of administrative convenience for B's. SBA notes that cap of 25% LF from NPC will avoid excessive inclusion of NPC.
SBA/Treasury determined this= appropriate B flexibility while consistent w/CARES 1106(b). SBA believes this= also supported by considerations of administrative convenience for B's. SBA notes that cap of 25% LF from NPC will avoid excessive inclusion of NPC.
48/ 4.b. Are advance pmts of int on mortgage obligs elig for LF?
Ans: NO.
Advance pmts of int on covered mortgage oblig= NOT elig for LF, b/c CARES LF provisions specifically exclude mortgage "prepayments".
Principal on mortgage is NOT elig for LF under any circumstances.
Ans: NO.
Advance pmts of int on covered mortgage oblig= NOT elig for LF, b/c CARES LF provisions specifically exclude mortgage "prepayments".
Principal on mortgage is NOT elig for LF under any circumstances.
49/ 5. REDUCTIONS TO LF AMOUNT
This sec has many sub-Q&A's:
a. Is LF reduced if B laid-off or reduced # hrs of empl, then offered to rehire same empl for same salary & # hrs, or restore reduc in # hrs, but empl declined offer?
b. How does reduct in # FTES affect LF?
(cont)
This sec has many sub-Q&A's:
a. Is LF reduced if B laid-off or reduced # hrs of empl, then offered to rehire same empl for same salary & # hrs, or restore reduc in # hrs, but empl declined offer?
b. How does reduct in # FTES affect LF?
(cont)
50/ 5. REDUCTIONS TO LF AMT cont...
c. What does FTE mean?
d. How shld B calc # FTEs?
e. How does B's reduc in sal/wages affect LF?
f. How should B's account for LF reductns based on reduc in # empls (Sec 1106(d)(2)) relative to reduc in sal/wages (Sec 1106(d)(e))?
(cont...)
c. What does FTE mean?
d. How shld B calc # FTEs?
e. How does B's reduc in sal/wages affect LF?
f. How should B's account for LF reductns based on reduc in # empls (Sec 1106(d)(2)) relative to reduc in sal/wages (Sec 1106(d)(e))?
(cont...)
51/ 5. REDUCTIONS TO LF AMT cont...
g. If B restores redctns made to empl sal/wages or # FTE empls by June 30, can B avoid reduction in LF amt?
h. Will B's LF amt be reduced if empl is fired for cause, voluntarily resigns, or vountarily requests a schedule reduction?
g. If B restores redctns made to empl sal/wages or # FTE empls by June 30, can B avoid reduction in LF amt?
h. Will B's LF amt be reduced if empl is fired for cause, voluntarily resigns, or vountarily requests a schedule reduction?
52/ 5. REDUCTIONS TO LF AMT cont...
PREAMBLE before Q&A's:
CARES 1106 requires certain reductions in B's LF amt based on reductions in FTEs or sal/wages during CP - subject to important exemption for B's who rehire empls & restore sal/wage levels by June 30 (w/limitations).
PREAMBLE before Q&A's:
CARES 1106 requires certain reductions in B's LF amt based on reductions in FTEs or sal/wages during CP - subject to important exemption for B's who rehire empls & restore sal/wage levels by June 30 (w/limitations).
53/ 5. REDUCTIONS TO LF AMT - PREAMBLE cont...
In addition, SBA/Treasury are adpoting a regulatory exemption to the reduction rules for B's who have *offered* to rehire empls or restore empl hrs, *even if* the empls have not accepted.
See instructns to LF app + below guidance.
In addition, SBA/Treasury are adpoting a regulatory exemption to the reduction rules for B's who have *offered* to rehire empls or restore empl hrs, *even if* the empls have not accepted.
See instructns to LF app + below guidance.
54/ 5.a. Will B's LF amt be reduced if B laid-off or reduced # hrs of an empl, then offered to rehire same empl for same sal & same # hrs, or restore the empl's reduction in # hrs, but the empl declined the offer?
Answer: NO.
(continued...)
Answer: NO.
(continued...)
55/ 5.a. cont...
Empls whom B offered to rehire are generally exempt from CARES LF reduction calculation. This exemption= also available if B previously reduced # hrs of an empl + offered to restore the empl's # hrs at same sal/wages.
(continued...)
Empls whom B offered to rehire are generally exempt from CARES LF reduction calculation. This exemption= also available if B previously reduced # hrs of an empl + offered to restore the empl's # hrs at same sal/wages.
(continued...)
56/ 5.a. cont...
Specifically, in calculating LF amt, a B may EXCLUDE any reduction in FTE headcount attributable to an individual empl if:
i. B made good faith, written offer to rehire such empl (or, if applicable, restore # reduced hrs of such empl) during CP/APCP;
and...
Specifically, in calculating LF amt, a B may EXCLUDE any reduction in FTE headcount attributable to an individual empl if:
i. B made good faith, written offer to rehire such empl (or, if applicable, restore # reduced hrs of such empl) during CP/APCP;
and...
57/
ii. Offer was for same sal/wages + same # hrs as earned by such empl in last pay period prior to the separation or reduction in # hrs;
and
iii. Offer was rejected by such empl;
and...
ii. Offer was for same sal/wages + same # hrs as earned by such empl in last pay period prior to the separation or reduction in # hrs;
and
iii. Offer was rejected by such empl;
and...
iv. B maintained records documenting offer + rejection;
and
v. B informed applicable state unempl ins office of empl's rejected offer of reemployment w/in 30 days of empl's rejection*.
--
* SBA website will provide more info to B on how to report rejected rehire offers.
and
v. B informed applicable state unempl ins office of empl's rejected offer of reemployment w/in 30 days of empl's rejection*.
--
* SBA website will provide more info to B on how to report rejected rehire offers.
59/ SBA & Treas determined that this exemption = appropriate exercise of their joint rulemaking authority to grant de minimis exemptions under CARES 1106(d)(6).
60/ 1106(d)(6) is sole joint rulemaking authority exercised in this IFR; all other proisions of this IFR = exercise of SBA authority except as expressly noted otherwise.
61/ CARES 1106(d)(2) reduces PPP LF amt if B reduces FTE during CP as compared to base period selected by B.
CARES 1106(d)(5) waives this reduction in LF amt if B eliminates (by June 30) the reduction in FTE occuring during the ref period of 2/15/20-4/26/20.
CARES 1106(d)(5) waives this reduction in LF amt if B eliminates (by June 30) the reduction in FTE occuring during the ref period of 2/15/20-4/26/20.
62/ SBA & Treasury believe that this add'l exemption = consistent w/CARES purpose, and provides B w/appropriate flexibility in current economic climate.
Have determined this exemption = de minimis for 2 reasons:
(continued...)
Have determined this exemption = de minimis for 2 reasons:
(continued...)
63/ 2 reasons exemption is de minimis:
1. Reasonable to expect most laid-off empls will accept rehire offers in light of current labor mkt conditions.
and...
1. Reasonable to expect most laid-off empls will accept rehire offers in light of current labor mkt conditions.
and...
64/
2. To extent the exemption allows emplyrs to cure FTE reductns attributable to terminations occurring prior to Feb 15, reasonable to anticipate those reductions = relatively small portion of aggregate empls, given historically strong labor mkt conditions prior to COVID-19.
2. To extent the exemption allows emplyrs to cure FTE reductns attributable to terminations occurring prior to Feb 15, reasonable to anticipate those reductions = relatively small portion of aggregate empls, given historically strong labor mkt conditions prior to COVID-19.
65/ 5.b. What effect does reduction of B's # FTEs have on LF amount?
Answer: In general, reduction in # FTEs during CP/APCP reduces LF amt by same % as the % reduction in # FTE empls.
(continued...)
Answer: In general, reduction in # FTEs during CP/APCP reduces LF amt by same % as the % reduction in # FTE empls.
(continued...)
66/ 5.b. cont.
B must first select ref period:
(i) 2/15/2019 - 6/30/2019;
(ii) 1/1/2020 - 2/29/2020;
or
(iii) for seasonal emplyrs, either (i), (ii), or a consecutive 12-wk period between 5/1/2019 - 9/15/2019.
B must first select ref period:
(i) 2/15/2019 - 6/30/2019;
(ii) 1/1/2020 - 2/29/2020;
or
(iii) for seasonal emplyrs, either (i), (ii), or a consecutive 12-wk period between 5/1/2019 - 9/15/2019.
67/ 5.b. cont.
Note: Permitting seasonal emplyrs to use any consec 12-wk period betw 5/1/19-9/15/19 = exercise of SBA rulemaking authority under CARES 1109. Consistent w/ IFR on seasonaly emplyrs issued by Treasury. Ref: 85 FR 23917 (April 30, 2020).
Note: Permitting seasonal emplyrs to use any consec 12-wk period betw 5/1/19-9/15/19 = exercise of SBA rulemaking authority under CARES 1109. Consistent w/ IFR on seasonaly emplyrs issued by Treasury. Ref: 85 FR 23917 (April 30, 2020).
68/ 5.b. cont.
If avg # FTE empls during CP/APCP = less than the ref period chosen by B, then total LF eligible expenses = reduced proportionately by % reduction in FTE empls.
If avg # FTE empls during CP/APCP = less than the ref period chosen by B, then total LF eligible expenses = reduced proportionately by % reduction in FTE empls.
69/ 5.b. cont. - EXAMPLE
EXAMPLE: If B had 10.0 FTE empls during ref period, then declined to 8.0 FTE empls during CP, the % of FTE empls declined by 20%.
Thus, only 80% of otherwise elig expenses = available for LF.
EXAMPLE: If B had 10.0 FTE empls during ref period, then declined to 8.0 FTE empls during CP, the % of FTE empls declined by 20%.
Thus, only 80% of otherwise elig expenses = available for LF.
70/ 5.b. cont.
This formula implements CARES 1106(d)(2), which expressly requires that LF amt be reduced by amt resulting from
mulitplying:
(the LF amt B would otherwise receive)
by
(the quotient of
((avg FTE empls in ref period)
divided by
(avg FTE empls in CP)).
This formula implements CARES 1106(d)(2), which expressly requires that LF amt be reduced by amt resulting from
mulitplying:
(the LF amt B would otherwise receive)
by
(the quotient of
((avg FTE empls in ref period)
divided by
(avg FTE empls in CP)).
71/ 5.c. What does "full-time equivalent employee" mean?
Answer: Full-time equivalent (FTE) empl means an empl who works >= 40hrs, on avg, each week.
The hrs of empls who work <40 hrs are calculated as proportions of a single FTE empl and aggregated, as explained below in 5.d.
Answer: Full-time equivalent (FTE) empl means an empl who works >= 40hrs, on avg, each week.
The hrs of empls who work <40 hrs are calculated as proportions of a single FTE empl and aggregated, as explained below in 5.d.
72/ 5.c. cont...
Note: CARES does not define "full-time equiv employee."
SBA & Treasury detrmined FTE = best understood to mean 40+ hrs / wk.
SBA considered using a 30 hr/wk standard, but determined 40+ hrs /wk better reflects what is full-time employmt for majority US empls.
Note: CARES does not define "full-time equiv employee."
SBA & Treasury detrmined FTE = best understood to mean 40+ hrs / wk.
SBA considered using a 30 hr/wk standard, but determined 40+ hrs /wk better reflects what is full-time employmt for majority US empls.
73/ 5.d. How should B calculate # FTE empls?
B must document avg # FTE empls during CP/APCP *and* their selected reference period.
For this calc, divide avg # hrs paid for each empl per wk by 40, capping at 1.0.
E.g., empl paid 48 hrs/wk during CP = FTE of 1.0.
B must document avg # FTE empls during CP/APCP *and* their selected reference period.
For this calc, divide avg # hrs paid for each empl per wk by 40, capping at 1.0.
E.g., empl paid 48 hrs/wk during CP = FTE of 1.0.
74/ 5.d. cont.
For empls paid for <40 hrs/wk, B may choose 1 of 2 calcs:
1. Calc avg # hrs a PT empl was paid per wk during CP. E.g., if paid for avg 30 hrs/wk during CP, empl = FTE of 0.75.
If empl paid for avg 10 hrs/wk during CP, empl = FTE of 0.25.
OR...
For empls paid for <40 hrs/wk, B may choose 1 of 2 calcs:
1. Calc avg # hrs a PT empl was paid per wk during CP. E.g., if paid for avg 30 hrs/wk during CP, empl = FTE of 0.75.
If empl paid for avg 10 hrs/wk during CP, empl = FTE of 0.25.
OR...
75/ 5.d. cont.
OR...
2. For administrative convenience, B may elect to use FTE of 0.5 for each PT employee.
SBA recognizes not all empyrs record hrs worked, & decided to afford such B's flexibility in calculating FT equivalency of PT employees.
cont...
OR...
2. For administrative convenience, B may elect to use FTE of 0.5 for each PT employee.
SBA recognizes not all empyrs record hrs worked, & decided to afford such B's flexibility in calculating FT equivalency of PT employees.
cont...
76/ 5.d. cont.
B may select ONLY 1 of these 2 methods, & must apply that method consistently to ALL PT empls for CP/APCP and selected ref period.
cont...
B may select ONLY 1 of these 2 methods, & must apply that method consistently to ALL PT empls for CP/APCP and selected ref period.
cont...
77/ 5.d. cont.
In either case, B shall provide aggregate total # FTE empls for both selected ref period and CP/APCP.
B then divides avg # FTE empls during CP/APCP by avg # FTE empls during selected ref period, resulting in the "reduction quotient."
In either case, B shall provide aggregate total # FTE empls for both selected ref period and CP/APCP.
B then divides avg # FTE empls during CP/APCP by avg # FTE empls during selected ref period, resulting in the "reduction quotient."
78/ 5.d. cont.
SBA & Treas determined that b/c CARES does not define FTE empl, this approach= reasonable & approp exercise of SBA rulemaking authority. Balances need for reasonable measurement of # FTEs w/need to limit B compliance burden & ensure administrative feasibility.
SBA & Treas determined that b/c CARES does not define FTE empl, this approach= reasonable & approp exercise of SBA rulemaking authority. Balances need for reasonable measurement of # FTEs w/need to limit B compliance burden & ensure administrative feasibility.
79/ 5.e. What effect does B's reduction in empl salary/wages have on LF amt?
Ans: Under CARES 1106(d)(3), reduction in empl sal/wages of >25% = generally result in reduction in LF amt - unless exception applies.
(continued...)
Ans: Under CARES 1106(d)(3), reduction in empl sal/wages of >25% = generally result in reduction in LF amt - unless exception applies.
(continued...)
80/ 5.e. cont.
Specifically, for ea new empl in 2020 + ea existing empl who was not paid >$100K annualized in any 2019 pay period, B must reduce total LF amt by total $ amt of sal/wage reductions that are in excess of 25% of base sal/wages betw 1/1/20-3/31/20 (the ref period).
Specifically, for ea new empl in 2020 + ea existing empl who was not paid >$100K annualized in any 2019 pay period, B must reduce total LF amt by total $ amt of sal/wage reductions that are in excess of 25% of base sal/wages betw 1/1/20-3/31/20 (the ref period).
81/ 5.e. cont.
The above is subject to exceptions for B's who restore reduced sal/wages (see 5.g. below).
This reduction calculation is performed on a per-employee basis, NOT in the aggregate.
The above is subject to exceptions for B's who restore reduced sal/wages (see 5.g. below).
This reduction calculation is performed on a per-employee basis, NOT in the aggregate.
82/ 5.e. EXAMPLE
EXAMPLE: B reduced a FT empl's weekly sal from $1k/wk during ref period to $700/wk during CP.
Empl continued to work FT during CP (FTE = 1.0).
(continued...)
EXAMPLE: B reduced a FT empl's weekly sal from $1k/wk during ref period to $700/wk during CP.
Empl continued to work FT during CP (FTE = 1.0).
(continued...)
83/ 5.e. Example cont...
In this case, the first $250 reduction (25% of $1K) = exempted from LF reduction.
B would thus list $400 as sal/hrly wage reduction for this empl (the "extra" $50 weekly reduction, multipled by the 8 wks of CP/APCP).
In this case, the first $250 reduction (25% of $1K) = exempted from LF reduction.
B would thus list $400 as sal/hrly wage reduction for this empl (the "extra" $50 weekly reduction, multipled by the 8 wks of CP/APCP).
84/
CARES 1106(d)(3): "amt of LF shall be reduc by amt of reduc in total sal/wages of any empl (who did not receive, during any pay period in 2019, sal/wages at ann rate >$100k) dur CP >25% of total sal/wages of empl during most recent Q in which empl was employed before CP".
CARES 1106(d)(3): "amt of LF shall be reduc by amt of reduc in total sal/wages of any empl (who did not receive, during any pay period in 2019, sal/wages at ann rate >$100k) dur CP >25% of total sal/wages of empl during most recent Q in which empl was employed before CP".
85/ 5.f. How should B seeking LF account for reduction based on reduction in # empls (CARES 1106(d)(2)) relative to reduction relating to sal/wages (CARES 1106(d)(3))?
86/ 5.f. ANSWER:
To ensure B's are not doubly penalized, the sal/wage reduction applies only to the portion of the decline in empl salary/wages that is NOT attributable to FTE reduction.
(continued...)
To ensure B's are not doubly penalized, the sal/wage reduction applies only to the portion of the decline in empl salary/wages that is NOT attributable to FTE reduction.
(continued...)
87/ 5.f. cont.
CARES does not address intersection betw FTE empl reduction (1106(d)(2)) and sal/wage reduction (1106(d)(3)).
CARES does not address intersection betw FTE empl reduction (1106(d)(2)) and sal/wage reduction (1106(d)(3)).
88/ 5.f. cont.
To help ensure uniformity across all B's in applying FTE reduction & sal/wage reduction provisions, sal/wage reduction applies only to portion of decline in empl sal/wages that is NOT attributable to FTE reduction. This helps ensure B's are not doubly penalized.
To help ensure uniformity across all B's in applying FTE reduction & sal/wage reduction provisions, sal/wage reduction applies only to portion of decline in empl sal/wages that is NOT attributable to FTE reduction. This helps ensure B's are not doubly penalized.
89. 5.f. EXAMPLE
Example: An hourly wage empl had been working 40 hrs/wk during B's selected ref period (FTE = 1.0)
and
B reduced the empl's # hrs to 20 hrs/wk during CP (FTE = 0.5).
No change in empl's hourly wage during CP.
(continued...)
Example: An hourly wage empl had been working 40 hrs/wk during B's selected ref period (FTE = 1.0)
and
B reduced the empl's # hrs to 20 hrs/wk during CP (FTE = 0.5).
No change in empl's hourly wage during CP.
(continued...)
90. 5.f. Example cont...
Because the empl's hourly wage did not change, the reduction in empl's wages is entirely attributable to the FTE empl reduction. B is not required to calculate salary/wage reduction for that empl.
Because the empl's hourly wage did not change, the reduction in empl's wages is entirely attributable to the FTE empl reduction. B is not required to calculate salary/wage reduction for that empl.
91. 5.f. cont.
SBA considered applying sal/wage reduction provision in addition to FTE reduction in similar situations to the example above, b/c CARES 1106(d)(3) refers [only] to reductions in "total salary or wages" >25%.
(continued...)
SBA considered applying sal/wage reduction provision in addition to FTE reduction in similar situations to the example above, b/c CARES 1106(d)(3) refers [only] to reductions in "total salary or wages" >25%.
(continued...)
92/ 5.f. cont.
HOWEVER, SBA determined, based on structure of CARES 1106(d)(2) + 1106(d)(3), Congress intended to distinguish betw FTE reduction vs. reduction in hourly sal/wages.
This interpretation harmonizes the 2 LF reduction provisions in logical manner consistent w/CARES.
HOWEVER, SBA determined, based on structure of CARES 1106(d)(2) + 1106(d)(3), Congress intended to distinguish betw FTE reduction vs. reduction in hourly sal/wages.
This interpretation harmonizes the 2 LF reduction provisions in logical manner consistent w/CARES.
93/ 5.g. If B restores reductions made to empl sal/wages OR # FTE empls by June 30, can B avoid reduction in LF amt?
Answer: YES.
(continued...)
Answer: YES.
(continued...)
94/ 5.g. cont.
CARES 1106(d)(5) provides that if empl sal/wages were reduced betw 2/15/20-4/26/20 (the safe harbor period), but B eliminates those reductions by June 30 or earlier, B is exempt from LF reduction otherwise req'd due to reduction in # FTE empls.
CARES 1106(d)(5) provides that if empl sal/wages were reduced betw 2/15/20-4/26/20 (the safe harbor period), but B eliminates those reductions by June 30 or earlier, B is exempt from LF reduction otherwise req'd due to reduction in # FTE empls.
94a/ TYPO at end of prior tweet. Instead of "due to reduction in # FTE empls", the last sentence should end with "due to reductions in salaries & wages under CARES 1106(d)(3)."
Sorry about that!
Sorry about that!
95/ 5.g. cont.
Similarly, if by June 30 or earlier, B eliminates any reductions in # FTE empls that occurred during the safe harbor period 2/15/20-4/26/20, B is exempt from any LF reduction that would otherwise be required due to reduction in # FTE empls.
Similarly, if by June 30 or earlier, B eliminates any reductions in # FTE empls that occurred during the safe harbor period 2/15/20-4/26/20, B is exempt from any LF reduction that would otherwise be required due to reduction in # FTE empls.
96/ 5.g. cont.
This provision implements CARES 1106(d)(5); gives B oppty to cure reductions in # FTEs, sal/wage reducs > 25%, or both, by using applicable methodology in 1106(d)(5), which provides that reduction in # FTEs or sal/wages must be elim "not later than June 30, 2020."
This provision implements CARES 1106(d)(5); gives B oppty to cure reductions in # FTEs, sal/wage reducs > 25%, or both, by using applicable methodology in 1106(d)(5), which provides that reduction in # FTEs or sal/wages must be elim "not later than June 30, 2020."
97/ 5.g. cont.
NOTE: The previous provision (implementing CARES 1106(d)(5) ability to cure reductions in # FTEs or sal/wages by June 30) ...
...does NOT change or affect the requirement that at least 75% of the LF amount must be attributable to payroll costs.
NOTE: The previous provision (implementing CARES 1106(d)(5) ability to cure reductions in # FTEs or sal/wages by June 30) ...
...does NOT change or affect the requirement that at least 75% of the LF amount must be attributable to payroll costs.
98/ 5.h. Will B's LF amt be reduced if empl is fired for cause, voluntarily resigns, or voluntarily requests a schedule reduction?
Answer: NO.
(continued...)
Answer: NO.
(continued...)
99/ 5.h.
When empl= fired for cause, voluntarily resigns, or voluntarily requests reduced sched during CP/APCP (a "FTE reduction event"), B may [still] count such empl at same FTE level as b4 FTE reduction event when calculating CARES 1106(d)(2) FTE empl reduction penalty.
When empl= fired for cause, voluntarily resigns, or voluntarily requests reduced sched during CP/APCP (a "FTE reduction event"), B may [still] count such empl at same FTE level as b4 FTE reduction event when calculating CARES 1106(d)(2) FTE empl reduction penalty.
100/ 5.h. cont.
SBA & Treasury have decided to exempt such employees from the calculation of the FTE reduction penalty.
CARES 1106 is silent re: how to account for empls who are fired for cause, voluntarily resign, or voluntarily request reduced sched.
(continued...)
SBA & Treasury have decided to exempt such employees from the calculation of the FTE reduction penalty.
CARES 1106 is silent re: how to account for empls who are fired for cause, voluntarily resign, or voluntarily request reduced sched.
(continued...)
101/ 5.h. cont.
SBA/Treasury determined that such exemption is de minimis, b/c limited # of B's will face an FTE reduction event during CP or APCP. B's should not be penalized for changes in # FTEs that result from empl actions & requests.
(continued...)
SBA/Treasury determined that such exemption is de minimis, b/c limited # of B's will face an FTE reduction event during CP or APCP. B's should not be penalized for changes in # FTEs that result from empl actions & requests.
(continued...)
102/ 5.h. cont.
B's that avail themselves of this de minimis exemption shall maintain records demonstrating that each such empl was fired for cause, voluntarily resigned, or voluntarily requested reduction in sched. B shall provide such documentation upon request.
B's that avail themselves of this de minimis exemption shall maintain records demonstrating that each such empl was fired for cause, voluntarily resigned, or voluntarily requested reduction in sched. B shall provide such documentation upon request.
103/ 6. DOCUMENTATION REQUIREMENTS.
Q. What must B's submit for LF app?
Answer: See LF application form for:
* docs B must submit w/ LF App (SBA form 3508 or lender equivalent)
* docs B must maintain & make avail upon request
* docs B may voluntarily submit with LF app
Q. What must B's submit for LF app?
Answer: See LF application form for:
* docs B must submit w/ LF App (SBA form 3508 or lender equivalent)
* docs B must maintain & make avail upon request
* docs B may voluntarily submit with LF app
104/ 6. cont.
CARES 1106(e) requires Bs to submit LF app to lenders, including certain documentation.
1106(f) provides that B shall not recieve LF without submitting the required docs.
CARES 1106(e) requires Bs to submit LF app to lenders, including certain documentation.
1106(f) provides that B shall not recieve LF without submitting the required docs.
105/ 6. cont.
SBA/Treas determined that, for admin convenience of B's & lenders, requiring B's to:
* submit certain docs
* maintain certain docs
* choose whether to submit add'l docs
...will reduce reporting burdens on B's & reduce recordkeeping burdens on lenders.
SBA/Treas determined that, for admin convenience of B's & lenders, requiring B's to:
* submit certain docs
* maintain certain docs
* choose whether to submit add'l docs
...will reduce reporting burdens on B's & reduce recordkeeping burdens on lenders.
106/ 7. ADDITIONAL INFORMATION
SBA may provide further guidance, if needed, thru SBA notices that will be posted on website at http://www.sba.gov .
SBA may provide further guidance, if needed, thru SBA notices that will be posted on website at http://www.sba.gov .
107/ 7. cont.
Questions on PPP may be directed to Lender Relations Specialist in local SBA Field Office, which can be found at http://www.sba.gov/tools/local-assistance/districtoffices .
Questions on PPP may be directed to Lender Relations Specialist in local SBA Field Office, which can be found at http://www.sba.gov/tools/local-assistance/districtoffices .
108/
The guidance in the IFR summarized above is supplmenetal to SBA's release earlier in the week of the PPP Loan Forgiveness Application + instructions, which are summarized in the thread linked below. https://twitter.com/trevorloy/status/1261501605951594496?s=20
The guidance in the IFR summarized above is supplmenetal to SBA's release earlier in the week of the PPP Loan Forgiveness Application + instructions, which are summarized in the thread linked below. https://twitter.com/trevorloy/status/1261501605951594496?s=20
109/109. CONCLUSION
This ends my summary of the SBA IFR on PPP Loan Forgiveness issued the evening of May 22, 2020.
I may add additional tweets to the thread for any needed corrections, clarifications or follow-up information.
[END OF THREAD]
This ends my summary of the SBA IFR on PPP Loan Forgiveness issued the evening of May 22, 2020.
I may add additional tweets to the thread for any needed corrections, clarifications or follow-up information.
[END OF THREAD]
