ATLAS Update: PPP Update – New Interim Final Regulation
As you are well aware, we have been monitoring the Small Business Administration (SBA) for updates concerning the Payroll Protection Program (PPP). Although Congress has not yet acted, yesterday the SBA announced, through its regulatory authority, a new Interim Final Regulation (IFR) making a de minimus exception from the FTE employee reduction for PPP loans less than $50,000 and a de minimus exception for employee salary and wage reduction for PPP loans of less than $50,000, effective immediately. This provision means that if your business has been so adversely impacted that you have not been able to bring your workforce back to the pre-pandemic levels, you will experience no reduction in forgiveness, so long as the borrower otherwise qualifies for the 3508S.
Further, the SBA has published the alternative Loan Forgiveness Application, Form 3508S, for use by the PPP borrowers with PPP loans of less than $50,000 – with the notable exception that if the PPP loan was made to an affiliate organization when the affiliates together received loans totaling $2,000,000 or greater. The Form 3508S is two-pages long, and requests that borrowers certify that:
- The dollar amount for which the forgiveness is requested does not exceed the principal amount of the loan, and:
- Was paid to cover costs that are eligible for forgiveness;
- Includes payroll costs equal to at least 60% of the forgiveness amount;
- If a 24-week Covered Period applies, that the forgiveness does not exceed 2.5 months’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $20,833 per individual; and
- If the borrower elects the eight-week Covered Period, does not exceed 8 weeks’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $15,385 per individual.
- The instructions to the Form 3508S also state:
Documents that Each Borrower Must Maintain but is Not Required to Submit
All records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower’s certifications as to its eligibility for a PPP loan, documentation necessary to support the Borrower’s loan forgiveness application, and documentation demonstrating the Borrower’s material compliance with PPP requirements. The Borrower must retain all such documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.
If all of the borrowed funds have been used 100% for payroll costs within the given perimeters, we recommend that the clients request forgiveness as soon as the lender makes the application available, using the payroll reports provided by ATLAS or another payroll provider for the indicated eight- or twenty-four-week covered period.
Unfortunately, for those who borrowed $50,000 or more, please stay tuned. While this action by the SBA shows some regulatory capability, the Congress and Administration will have to legislate any additional modifications to the forgiveness program.
We expect that lenders of the PPP loans will have the Form 3808S posted to the borrowers for these smaller loans in short order. Of course, if you need any further guidance with this new development, please contact us at your earliest convenience.
Our ATLAS team will continue to monitor the situation and advise as soon as we have more clarity. We know this has been an exhausting and overwhelming year. We are here to help provide you assistance to see your way forward.