The Small Business Association (SBA) recently released its forgiveness application and instructions at this site: Loan Forgiveness Application and Instructions for Borrowers.
The application allows the borrower to use two alternative “covered periods” - (i) the 56-day period that begins on the day of the PPP Loan Disbursement Date, or (ii) the 56-day “Alternative Payroll Covered Period” that begins on the first day of the first pay period following the PPP Loan Disbursement Date. Alternative (ii) is designed to provide administrative convenience to employers with a bi-weekly or more frequent payroll.
Employers are generally eligible for forgiveness for payroll costs paid or incurred during the 56-day covered period. Payroll costs are considered paid on the date that paychecks are distributed or the employer initiates an ACH payment transaction. Payroll costs are incurred on the day the employee’s pay is earned. Payroll costs incurred but not paid during the covered period are eligible for forgiveness if paid on or before the next regular payroll date. Salaries may not exceed $100,000 on an annual basis per employee and pro-rated for the covered period.
Forgiveness eligibility will also be based on the employer’s employee “full time equivalency” by comparing the number of full time equivalent employees during the covered period and one of the following reference periods chosen by the employer: (a) the period of February 15, 2019 to June 30, 2019; (b) the period of January 1, 2020 to February 29, 2020; or (c) for seasonal employers, either of the first two periods or a consecutive 12-week period between May 1, 2019 and September 15, 2019. If the comparison shows a lower head count “now” versus “then,” the amount of forgiveness will be reduced. Additional reductions in the forgiveness amount will occur if the salaries or hourly pay rates of certain employees was reduced by more than 25% in the first quarter of 2020.
The instructions also list the documentation that is required to be submitted with the application as well as documentation the employer is required to maintain but not submit for both “payroll costs” and “non-payroll costs.”
The instructions and requirements for forgiveness are rather complex and detailed. As always, its is recommended that employers seek qualified professional assistance if there are any questions regarding the information and documentation that must be submitted.