Source: Enhancement Act (passed by Senate 4/21 and House 4/23)

This Act added $310 billion to the PPP loan program. It also attempted to answer some open questions from the quickly thrown-together CARES Act. (Many questions remain).

Significant is the answer on federal employer payroll taxes: These are not allowed to be considered in the PPP loan applied for. By example, if the employee gross payroll was $4,000 per month, the loan maximum would be $4,000 * 2.5 months = $10,000 without regard to the federal employer tax on that amount.

Can the employer consider these taxes when applying for debt forgiveness: No answer yet, however it is unlikely that it would be allowed. (Under IRC Section 265, deductions are not allowed for expenses relating to tax-exempt income (such as the amount of the PPP loan forgiven)).

Source: Journal of Accountancy, April 14, 2020: New SBA interim final rule issued April 13, 2020.

Sole proprietors: Will have to provide Form 1040, Schedule C from 2019. Net income (subject to self-employment tax) up to $100,000 will be considered.

Partners in a partnership / members of an LLC: Cannot apply separately from the partnership or LLC. Self employment income of partners/members pay be reported as a payroll cost up to $100,000.

As of last Monday, $242 billion of the total $350 billion had been funded to 1 million small businesses… so the funding window is closing.

From Forbes article 13 April 2020

The SBA is concerned that many banks are not taking new customers at this time and therefore not offering PPP loans. Forbes listed in the article several avenues to use.

For traditional banking: American First CU (based on Utah). Website is amerfirst.org. You can become a new customer and apply for the PPP loan online.

Non traditional banking: Both PayPal and Square are accepting PPP applications.

Business clients are starting to have their PPP loans funded.

It’s VERY IMPORTANT when you open your loan that you find out from the bank WHEN , HOW and WHAT the bank wants to see to consider loan forgiveness.

1. How is the documentation to be submitted?
2. Exactly what do they want you to submit?
3. When can you start submitting?

Note that many editorial writers feel that payroll costs must represent 75% (or more) of the use of the loan funds for… with the other 25% used for approved items such as business rent and utilities. AGAIN, CHECK WITH YOUR BANK!

If not forgiven, this is a loan subject to the terms in the loan application that you signed.

As of 4/3/20, Bank of America is the only large bank set up to accept applications. They took in 60,000 applications on 4/3 requesting $6 billion. They will only accept applications from customers who had a business account with them on or before 2/15/20. (According to Yahoo News).

Wells Fargo’s web site has a PPP section but they are not accepting applications yet. The two other large banks, JP Morgan Chase and Citibank should follow soon.

Ref: Borrowers Guide released by SBA April 1, 2020

Highlights:

1. Application opening 4/3/20 for most businesses. 4/10/20 for self-employed.
2. Where: Any SBA approved lending institutions (most banks).
3. How long will application stay open: Until June 30, 2020 BUT when funding runs out, the program will be over. The SBA suggests filing as soon as possible.
4. What amount will be forgiven: SBA says that non-payroll costs cannot exceed 25% of the loan in order to be forgiven.
5. What is payroll costs: salaries and wages PLUS employee benefits such as vacation pay, sick leave, state and local taxes on compensation.
6. What is “payroll” for self employed: The items in number 5, above, plus net earnings from self-employment capped at $100,000.
7. What is the interest rate on the loan: .50% fixed. Payments are deferred for six months.
8. To request forgiveness: Submit a request to the lender servicing the loan. You will be required to submit documents on how the funds were used including payroll forms.
9. Re-hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between 2/15/20 and 4/26/20.