Let’s Talk….FORGIVENESS!… PPP Updated Loan

Forgiveness & ApplicationAs of 6/26/2020

Jonathan Gallagher, CEOCraig Coleman, President

Shelley Addy, CHROPhil Gilreath, VP of Operations

Justina Davis, Project Manager, HR Elite

Agenda• PPP Flexibility Act Overview

• Review of PPP Flexibility Act changes

• New Loan Forgiveness Applications

• Form 3508 vs Form 3508EZ

• Documentation Requirements

• FAQ’s

• Open Q&A

Disclaimer

We are providing this information based on our “interpretations” of the CARES Act and PPP Flexibility Act. Some information is still awaiting clarification from the SBA and the Treasury Dept. Always consult your attorney, CPA and lending institution first.

PPP Flexibility ActOverview

On June 5th the President signed the PPP Flexibility Act of 2020 that changed key provisions of the PPP, to include;• PPP Loan Maturity• Deferrals of PPP Loan Payments• Loan Forgiveness and use of PPP funds

What it is: Amendments designed to increase the flexibility for companies utilizing the PPP• Extended timelines• Increased opportunities for forgiveness• Less restrictive use of funds

What it is not• An increase to your original PPP loan amount to cover the extended covered period

PPP Flexibility ActReview of ChangesLoan Maturity• Five years for loans made on or after June 5th (prior loans can be extended upon borrower/lender

agreement)

Deferral Period• 10-months from end of Covered Period to submit forgiveness application • Borrowers begin payment of principal and interest if application is not submitted by the last day of the

deferral period

Loan Covered Period• Begins the date funds were disbursed and ends on the earlier of;

• 24 weeks from loan origination• 31 Dec 2020

• Alternative Covered Period for bi-weekly & more frequent pay frequency still applies• Borrowers who received loans prior to June 5th may still elect the original 8-week Covered Period

PPP Flexibility ActReview of ChangesUse of Funds

• 60% minimum for payroll costs / 40% maximum for non-payroll expenses

• Forgiveness still dependent upon;• FTE levels – Covered Period compared to chosen look back period• Individual salary/hourly wage reduction >25%

• Max salary/wages per individual • $15,385 (8-week Covered Period) / $46,154 (24-week Covered Period)

PPP Flexibility Act

Forgivable Owner BenefitsBusiness Retirement Medical

S-Corp

C-Corp

Schedule C or F

General Partners

Review of ChangesUse of Funds

• Owner’s Compensation• 8-week Covered Period: The lesser of eight weeks’ worth of 2019 comp, or $15,385• 24-week Covered Period: The lesser of 2.5 months’ worth of 2019 comp, or $20,833• Employer contributions to owner benefits

PPP Flexibility ActReview of ChangesFTE Reduction Exceptions

• Can document –• Inability to re-hire former employees; and• Inability to hire similarly qualified employees

• Current employee rejected offer to restore hours

• Any employees who during the Covered Period;• Terminated for cause• Voluntarily resigned• Voluntarily requested and received a reduction of hours

NOTE: Borrowers are required to inform the applicable state unemployment insurance office of any employee’s rejected rehire offer within 30 days of the rejection.

PPP Flexibility ActReview of ChangesSafe Harbor: Exempts certain borrowers from loan forgiveness reduction based on reduction in FTE employee levels:

• Safe Harbor 1: Reduction in Business• The borrower can document it was unable to operate between Feb 15th and the end of the Covered

Period at the same level of business activity as before Feb 15th due to compliance with COVID-19 health and safety regulations.

• Safe Harbor 2: Restored FTE Levels• FTE levels reduced between Feb 15th and Apr 26th, AND;

• The borrower restored its FTE employee levels to that of the pay period that included Feb 15th by the earlier of; the submission of the loan forgiveness application, or Dec 31st, 2020.

PPP Flexibility ActLoan Forgiveness Applications The SBA has released two loan forgiveness applications – Forms 3508 and 3508EZ

Form 3508EZSimplified to streamline forgiveness process• No reduction calculations• Reduced documentation requirements

Form 3508Standard forgiveness application• Requires reduction calculations, and/or • Use of safe harbors

PPP Flexibility ActDocumentation Requirements

Form 3508• PPP Loan Forgiveness Calculation Form

• PPP Schedule A

• Payroll Documents:• Cash comp to employees (PR register/ bank statements)• Tax Forms

• Quarterly Filings• UI tax filings

• Employer contribution account statements

• FTE – Evidence for avg FTE for selected look back and Covered Period

• Non-payroll • Verifying obligation/service existence prior to Feb 15th

• Payments from Covered Period

Form 3508EZ• PPP Loan Forgiveness Calculation FormEZ

• Payroll Documents:• Cash comp to employees (PR register/ bank statements)• Tax Forms

• Quarterly Filings• UI tax filings

• Employer contribution account statements

• Non-payroll • Verifying obligation/service existence prior to Feb 15th

• Payments from Covered Period

PPP Flexibility ActLoan Forgiveness Applications Criteria to use Form 3508EZ:

• Borrowers must meet one of three criteria;

1. Are self-employed, indep. contractor, or sole proprietor with no employees, OR;

2. a) Did not reduce wages of any employee by more than 25% during the Covered Period, AND;

b) Did not reduce the number of FTE employees between Jan 1st and the end of Covered Period, OR;

3. a) Did not reduce wages of any employee by more than 25% during the Covered Period, AND;

b) Was unable to operate at pre-COVID level of business

FORM 3508EZ

FORM 3508EZ

FORM 3508

FORM 3508

PPP Flexibility ActDelay of Payment of Employer Payroll Taxes

• Then: Those participating in the PPP previously only able to defer payment of employer payroll taxes until final decision of borrower’s loan forgiveness

• Now: No longer restricted and may defer payment of these taxes until Dec 31st, 2020• 50% of deferred taxes must be paid by Dec 31st, 2021• Final 50% of deferred taxes must be paid by Dec 31st, 2022

Commonly asked questionsCan a company use the loan for a period between the eight- and 24-week Covered Periods?

How does the 24-week Covered Period impact the previous individual salary cap of $15,385 ($100k annualized)?

The legislation use the terminology “incurred or paid” for payroll and non-payroll expenses. Does this mean I can include a payroll that was paid during the Covered Period, but the pay period occurred before my loan date?

Do I need to run a payroll on the final day of my Covered Period to maximize the use of my loan?

How does my EIDL Loan impact my PPP Loan?

Click HERE to view the PPP Flexibility Act.Click HERE to view the list of Interim Final Rules.

Questions?

Thank you!

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