The U.S. Treasury Department and Small Business Administration (SBA) released two Interim Final Rules regarding the Paycheck Protection Progam (PPP). One rule assists borrowers in the preparation and submission of the PPP loan forgiveness application as well as provide guidance regarding the SBA’s process for reviewing PPP loan applications and loan forgiveness applications.

The “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) authorizes the SBA to make loans to qualified businesses under certain circumstances. The provision established the Paycheck Protection Program (PPP). The program provides up to eight weeks of cash-flow assistance through 100% federally guaranteed loans to eligible recipients to maintain payroll during the COVID-19 public health emergency and to cover certain other expenses. If the recipient maintains their full-time staffing and wage levels, up to 100% of the loan is forgivable by the SBA if the loan proceeds are used to cover the first eight weeks of payroll, rent, mortgage interest, or utilities following loan origination. No more than 25% of the forgiven amount may be for non-payroll costs. If full-time staffing is decreased or wages are reduced by more than 25%, the level of forgiveness is reduced.

The first Interim Final Rule regarding loan forgiveness covers the loan forgiveness process, payroll costs eligible for forgiveness, non-payroll costs eligible for forgiveness, reductions to forgiveness amount, and documentation requirements.

• Loan forgiveness process. Borrowers must submit the Loan Forgiveness Application (SBA Form 3508 or equivalent) to the lender. In 60 days, the lender will determine whether the borrower’s loan may be forgiven and requests payment from the SBA. No later than 90 days, the SBA will review the loan and remit the appropriate forgiveness amount to the lender including any interest accrued. If the SBA determines the borrower is not eligible for a PPP loan, the loan will not be forgiven. If forgiveness is reduced or denied, the remaining balance of the loan must be repaid by the borrower on or before the two-year maturity of the loan.

• Payroll costs eligible for forgiveness. Payroll costs paid or incurred during the eight consecutive weeks of the covered period (56 days) are eligible for forgiveness. The period may begin on the date of the loan disbursement or the first day of the first payroll cycle of the covered period (“alternative payroll covered period”). Because the eight-week period may not align with the borrower’s payroll cycle, borrowers with a bi-weekly pay frequency (or more frequent) may use the alternative payroll covered period. The rules clarify that if a borrower uses PPP loans to pay furloughed employees salary, wages or commissions, these will be considered payroll costs. Additionally, hazard pay or bonuses may be included in the calculation of payroll costs if the employee’s total compensation does not exceed $100,000 on an annualized basis.

• Non-payroll costs eligible for forgiveness. Non-payroll costs are eligible for loan forgiveness when: (1) incurred during the covered period and paid on or before the next regular billing date (even if the billing date is outside the covered period) and/or (2) paid during the covered period. However, advance payments of interest on mortgage obligations are not eligible for loan forgiveness.

• Reductions in forgiveness. Reductions in full-time equivalent employees or salary and/or wages during the covered period may result in a reduction in the forgiveness amount. Exemptions include restoring staff and/or salary and wage levels by June 30, 2020 or when an employer offers to rehire an employee or restore hours but the employee refuses the offer. The borrower should maintain documents of the offer and rejection and is required to inform the state unemployment agency of the work refusal within 30 days of the employee’s rejection. Borrowers will not be doubly penalized and the salary/wage reduction applies only to the portion of the decline in employee salary and wages that is not attributable to the FTE reduction. Any employee fired for cause, voluntarily resigns, or voluntarily requests a schedule reduction will not be counted towards the reduction.

• Full-time equivalent employee. The SBA and Treasury Department have clarified that a full-time equivalent employee (FTE) is an employee who works 40 hours or more. The rules note that the CARES Act did not define FTE and it has been decided rather than use the 30-hour standard for FTE as defined under the Affordable Care Act (ACA), the SBA and Secretary has chosen to use the 40-hour standard.

Documentation requirements. The rules note that the Loan Forgiveness Application details the list of documents required with the application as well as documentation that must be maintained. The second Interim Final Rule regarding borrower and lender responsibilities explains that the SBA will review individual PPP loans, what representations and statements the SBA will review and when an SBA loan review will occur. The rules also clarify that if the SBA determines a borrower is ineligible for a PPP loan, the loan will not be forgiven. The SBA may seek repayment of the outstanding PPP loan or pursue other remedies. Finally, the rules provide the loan forgiveness process for lenders.

JT Goldstein continuously finds new ways to assist our business community during the COVID-19 pandemic. We listed some requirements required for loan forgiveness of  The Paycheck Protection Program “PPP”, which are shown below. Please feel free to contact us for additional information on the PPP requirements. We are here to help you move forward!

PPP restricts your use of loan proceeds to the categories of expenses described below. The amount of forgiveness depends on the expenses you pay during the eight-week period after you receive your loan proceeds. Up to 100% of your PPP loan amount may be forgiven.

Permitted Expenses & Eligible for Loan Forgiveness

• Payroll costs (as defined in the Interim Final Rule) – At least 75% of loan proceeds must be used for payroll costs over the life of the PPP loan. Non-payroll costs may not exceed 25% of the forgiveness request.
• Interest on mortgage obligations (no payment or prepayment of principal) – for mortgages entered into before February 15, 2020
• Lease payments (rent) – for leases entered into before February 15, 2020
• Utility payments – for service agreements entered into before February 15, 2020
• Payments of interest on debt obligations incurred before February 15, 2020 – Not eligible for loan forgiveness

Based on current guidance, we expect that most PPP loan recipients will apply for forgiveness with sometime after the eight-week period following the disbursement of their PPP loan. You will likely be required to submit the following documentation to apply for loan forgiveness, pending more specific detail from additional SBA guidance:

• Documentation similar to what was provided to obtain the loan that supports your use of PPP loan proceeds during the eight-week period after you receive your loan proceeds.

Make sure to visit our twitter @JTGoldsteinCPA and our web for the latest updates COVID-19 financial impacts

Here at JT Goldstein, we understand disasters are unpredictable. As a company who cares about everyone’s wellbeing, we believe proper preparation for your business will position the company to withstand and overcome such unexpected events. We have created a Business Emergency Package Checklist to facilitate your preparedness for a potential unexpected event that would disrupt your business.

Click Download to View :

Paycheck Protection Program and Health Care Enhancement Act Signed into Law, April 24, 2020

Purpose – Amendments to the Paycheck Protection Program, economic injury disaster

loans, and emergency grants.

• Amends the Coronavirus Relief and Economic Security (“CARES”) Act ‘s Payroll Protection Program (“PPP”) to increase the $349 billion originally appropriated to $659 billion.
• Amends the CARES Act to increase the Emergency Economic Injury Disaster Loan Grants (EIDL) from $10billion to $20billion
• Small Business Agriculture Enterprises with less than 500 employees engaged in the production of food and fiber, ranching, and raising of livestock, agriculture, and all other farming and agricultural-related industries are eligible for EIDL and Emergency Grants
• Set Aside $30 billion for Insured Depository Institutions, Credit Unions, and Community Financial Institutions
• $75 Billion Public Health and Social Services Emergency Fund established for eligible health care providers (For Profit and Non- Profit) for health care related expenses or lost revenues attributable to coronavirus.
• $25 billion is made available for the prevent, prepare for, test, research, provide equipment for, and respond to coronavirus.
• An additional $2.1 billion is to remain available to the Small Business Administration until September 30, 2021 for salaries and wages to prevent, prepare for, and respond to coronavirus, only as an emergency requirement under the Balanced Budget and Emergency Deficit Control Act of 1985
• An additional $50 billion is to remain available to the Small Business Administration until expended for the Disaster Loans Program Account only as an emergency requirement under the Balanced Budget and Emergency Deficit Control Act of 1985
• An additional $10 billion is to remain available to the Small Business Administration until expended for the Emergency EIDL Grants only as an emergency requirement under the Balanced Budget and Emergency Deficit Control Act of 1985
• Except for the $2.1 billion for salary and wages mentioned above, none of the appropriations (both non-emergency and emergency requirement appropriations) are made available after September 30, 2020 (The current federal government fiscal year end)
• Each amount designated as an emergency requirement shall be available or rescinded or transferred only if the President designates all such amounts and transmits such designations to the Congress

IRS has updated its website detailing what it calls its “mission-critical functions” during the COVID-19 pandemic. The update includes information regarding paper returns and the release of levies due to COVID-19 hardship.

The IRS has updated its mission-critical website to include the following information:

Paper tax returns:

All taxpayers should file electronically through their tax preparer, tax software provider, or IRS Free File if possible. The IRS is not currently able to process individual paper tax returns. If a taxpayer has already filed via paper but the return has not yet been processed, the taxpayer should not file a second tax return or write to the IRS to inquire about the status of the return or economic impact payment. The IRS says paper returns will be processed once processing centers are able to reopen. The IRS adds that, this year, more than 90% of taxpayers have filed electronically.

Levies:

Levies will not be automatically released. IRS will consider taxpayers’ requests to release levies on a case by case basis if the levy is causing an economic hardship. “Economic hardship” means the levy prevents the taxpayer from meeting basic, reasonable living expenses. The IRS may ask for additional financial information to determine if a levy is causing an economic hardship.

If the taxpayer is working with a revenue officer (RO) and wishes to request a release of a levy, the taxpayer should contact the RO. For cases not assigned to a RO, taxpayers who wish to request a levy release should call the number on the notice of levy. If the taxpayer is unable to get through, the taxpayer should fax the request to 855-796-4524. The request should include the taxpayer’s name, address and social security numbers (for both the taxpayer and spouse if they file jointly). In addition, include the name, address and fax number of the taxpayer’s employer or bank where the levy is being processed.
The fax number will only be used to address emergency levy release requests. Due to IRS’s current limited staffing, it will not respond to other issues sent to this fax line.

The IRS says that it is processing all electronically submitted lien certificate applications (certifying that either (1) a lien should be completely released or (2) a portion of the property subject to the lien is to be discharged from the lien, in accordance with Reg §301.6325-1) normally and assigning them within 10 days. To protect the health and safety of IRS employees and taxpayers, the IRS is NOT currently processing lien certificate applications submitted on paper and mailed to the Advisory Consolidated Receipts (ACR) site in Florence, KY. The IRS is working to reopen its offices and to restore mail service and will provide updates as the situation changes.

The IRS requests that taxpayers use the E-Fax line for its ACR site (844-201-8382) for certificates (i.e., requests) related to: selling or transferring property subject to a lien; borrowing or refinancing using property subject to the lien; borrowing to purchase property when taxes are owed; clarifying whom a lien is against or what a lien attaches; and removing the effect of a notice of lien in the public record. The E-Fax line should also be used to requests the IRS’s consent to the non-judicial sale of property.