New Interim Final Rules issued May 22, 2020
On Friday evening, just before the holiday weekend, the SBA and the Treasury Department released two additional IFR (Interim Final Rules) regarding PPP Loan Forgiveness. We learned the government has little regard for weekends, as this is the second consecutive week they released guidance on a Friday night. Here is what else we learned:
1. The IFR can be interpreted to say that payroll costs can be paid OR incurred in order to be eligible for forgiveness. This interpretation would allow you to get more than 56 days of costs forgiven. One reason not to choose Alternative Covered Period might be if there is benefit gained by a payroll cycle being paid after funding but before first day of next payroll cycle. On our webinar, we indicated that we are not confident that this will be the final interpretation. The workbook is designed to account for 56 days which is our interpretation and is conservative. We would need to revise the workbook if it becomes clear that more than 56 days of payroll costs can be forgiven.
2. Eligible payroll costs can include bonuses and hazard pay. There had been some uncertainty over this.
3. Owner payroll costs – limit is across all businesses (No reference to affiliation rules) There is a reference to 2019 retirement and health care. It appears they are saying that these are forgivable BUT are part of the 100k limit for owners. It also appears they are saying that SUTA for owners are not eligible. This would require a clarification to what was said on the webinar. Still no clarity regarding definition of owner.
4. Non-Payroll Costs – again appears to allow either paid OR incurred – seems you can get more than 2 months. Additionally, opens the door to prepay some expenses, except mortgage interest, and include that in the forgiveness calcs. Still 25%, so may limit the usefulness of this strategy. On our webinar, we indicated we did not expect this interpretation. The workbook can likely handle this pretty easily with just a change to the instructions for how to complete the Forgivable Costs tab
5. In order to use the FTE exception for good faith offer of employment being declined – the salary or wages and # of hours should be based on the last pay period prior to separation or reduction. Also – is a new provision that was not discussed on the webinar, employer will need to pro-actively inform state unemployment department. The process to do so is to be determined.
6. Definition of FTE – 40 hours is 40 hours. Does not appear to be an exception for companies with normal work schedules less than 40. From a practical matter, we could still probably say that salaried employees are paid for 40 hours even if only required to work less. The less than 40 would apply to the hourly employees. Also, as long as they use the same base for the comparison period, probably won’t matter – it is still just a fraction. Also – remember the simplified 0.5 method is optional. In the normal method, you take the decimal to one place and round. So 36 hours is .9 and 38 hours or more is 1.0
7. Re-Hire Provisions – Uses the language “by June 30, 2020 or earlier” for the restoration of salary and wages and the language “not later than June 30” for the FTE restoration. Does that mean actual amount on June 30 itself is not relevant?
Stay tuned for more information this coming week.