General

  • There are two periods to consider for the application, the Covered Period and the Alternative Payroll Covered Period.
    • The Covered Period is the eight-week (56-day) period that your Paycheck Protection Program covers. The first day of the covered period is the day you received the funds from your loan. For example, if you received for loan proceeds on Monday, April 20, the first day of your Covered Period would be Monday, April 20 and the last day of the Covered Period would be Sunday, June 14.
    • The Alternative Payroll Covered Period was established for administrative convenience. For borrowers with a payroll schedule of biweekly, you can elect to calculate eligible payroll costs using the eight-week period that begins on the first day of their first pay period following their PPP Loan Disbursement Date. For example, if the borrower receives its PPP loan proceeds on Monday, April 20 and the first day of its first pay period following the loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is Sunday, April 26 and the last day of the period is Saturday, June 20.

Payroll Related Costs

  • Eligible payroll costs for forgiveness include payroll costs paid and incurred during the eight-week period.
  • Payroll costs are considered paid on the day that paychecks are distributed or the ACH credit transaction is initiated.
  • Costs are considered incurred on the day that the employee’s pay is earned.
  • Payroll costs that are incurred but not paid during the borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, all payroll costs must be paid during the applicable period.
  • Eligible payroll costs forgiveness includes:
    • The sum of gross salary, gross wages, gross tips, gross commissions, paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act), and allowances for dismissal or separation paid or incurred during the Covered Period or the Alternative Payroll Covered Period. Individual employees cannot exceed $15,385 for the eight-week period ($100,000 annualized).
    • The amounts paid for employer contributions for employee health insurance, including employer contributions to a self-insured, employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees.
    • Amount paid by the borrower for employer contributions to employee retirement plans, excluding any pre-tax or after-tax contribution by employees.
    • Amount paid by the borrower for employer state and local taxes assess on employee compensation. For example, state unemployment insurance tax would count but taxes withheld for employees do not count.
  • FTE Calculation
    • When calculating the Full-Time Equivalents, you will want to take the average number of hours paid per week and divide it by 40. The FTE is based on a 40-hour workweek.
  • FTE Reduction Exemptions
    • Reductions to FTES for the following reasons will not reduce the borrower’s loan forgiveness:
      • Any positions for which the borrower made in good-faith, written offer to rehire an employee during the Covered Period or the Alternative Payroll Covered Period which was rejected by the employee.
      • Any employee who during the Covered Period or Alternative Payroll Covered Period were fired for cause, voluntarily resigned, or voluntarily requested and received a reduction of their hours.
  • FTE Reduction Safe Harbor
    • The borrower is exempt from the reduction in loan forgiveness based on FTE employees if they meet two conditions:
      • (1) the borrower reduced its FTE employee levels in the period beginning February 15, 2020 and ending April 26, 2020 and
      • (2) the borrower then restored its FTE employee levels by not later than June 30, 2020 to its FTE employee levels in the borrower’s pay period that included February 15, 2020.

Nonpayroll Related Costs

  • Costs that are eligible for forgiveness include:
    • Covered mortgage obligations (business mortgage interest payments): payments of interest (not including any prepayments or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020.
    • Covered rent obligations (business rent or lease payments): business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020.
    • Covered utility payments (business utility payments): business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which services began before February 15, 2020.
  • Eligible nonpayroll related costs cannot exceed 25% of loan forgiveness.
  • Documentation to verify obligations were in place prior to February 15, 2020 will be required to be submitted.

Documentation

  • Payroll documentation:
    • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
    • Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period and the Alternative Payroll Covered Period:
      • Payroll tax filings reported, or that will be reported to the IRS (typically, Form 941) and
      • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
    • Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount.
    • FTE – at the election of the borrower documentation showing,
      • The average number of FTE employees on payroll per month employed by the borrower between February 15, 2019 and June 30, 2019.
      • The average number of FTE employees on payroll per month employed by the borrower between January 1, 2020 and February 29, 2020.
      • In the case of a seasonal employer, the average number of FTE employees on payroll per month employed by the borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve-week period between May 1, 2019 and September 15, 2019.
  • Nonpayroll documentation:
      • Business mortgage interest payments: copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
      • Business rent or lease payments: copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
      • Business utility payments; Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments. Documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period.

Documents Each Borrower Must Maintain But Not Required to Submit

  • PPP Schedule A Worksheet or its equivalent and the following:
    • Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 1, including the “Salary/Hourly Wage Reduction” calculation, if necessary.
    • Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 2; specifically, that each listed employee received during any single pay period in 2019 compensation at an annualized rate of more than $100,000.
    • Documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations, and written requests by any employee for reductions in work schedule.
    • Documentation supporting the PPP Schedule A Worksheet “FTE Reduction Safe Harbor.”
  • 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 the necessity of the loan request and 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 you have any questions, please reach out to your personal Sciarabba Walker contact or email us at info@swcllp.com.