If you have applied for a Paycheck Protection Program (“PPP”), the SBA released the application form (SBA Form 3508) and the worksheets you will have to submit to your lender shortly after June 30th to obtain loan forgiveness. You will be required to include in your submission package to the lender, documentation substantiating your expenses (for payroll, utilities, mortgage interest, and rent expense) that you paid in the eight weeks after your loan was disbursed to you by your lender. For example if your loan was disbursed on April 26, the eight week period ends on Saturday, June 20. In that example, you should have documents showing that you paid in cash or by check (including electronic analogs) dated by June 20 the required expenses. You are not allowed to prepay expenses for periods after the eight week period ends.
The PPP statute requires that you spend 75% of the loan amount on payroll and 25% on utilities, mortgage interest and rent expense to claim loan forgiveness. The instructions give explicit guidance on matters not addressed in pervious SBA pronouncements. For example, in calculating payroll costs employers will include: (a) gross amounts paid to employees, (b) employer contributions to retirement and health care plans, and (c) employer’s share of state and local payroll expenses paid for state unemployment taxes and Pittsburgh Payroll Tax. In calculating payroll costs, employers will exclude: (a) federal payroll taxes (wage withholding, FICA, and FUTA); (b) state and local taxes withheld from wages (wage withholding, local earned income taxes, local services taxes); and (c) any pre-tax or after-tax contributions by employees to retirement or health care plans.
Special guidance on loan forgiveness is given to self-employed, owner-employees, and general partners. Weekly payments to those individuals cannot exceed $15,385 (the weekly equivalent of the $100K cap on compensation). That guidance appears to require actual distributions to partners to claim loan forgiveness.
SBA Loan Forgiveness Form
Alert – Possible Changes
Also on May 15, the House passed the HEROES Act (H.R. 8600). That bill would make significant modifications to the PPP Loan forgiveness rules, such as dropping the 75%/25% rule and delaying the final payment period for allowed expenses to December 31, 2020. None of those changes are shown on the SBA form. The Senate is unlikely to take up the House bill until June and is certain to make changes of its own to the SBA PPP loan program. Everyone should assume that the loan forgiveness rules will be in flux for some time.
Our advice is to assume that the SBA loan forgiveness form will not change before the end of June. Before you actually submit the SBA form, please check if the law has changed or if the SBA changed its form and react accordingly.