SBA Releases Simplified PPP Forgiveness Application and Revised Standard Application While Providing Additional Guidance

Last week the SBA issued a Simplified PPP Forgiveness Application, Form 3508 EZ, that streamlines the forgiveness process for certain applicants as well as provided additional guidance.
Who is eligible to use Form 3508EZ?

  • Self Employed Individuals and General Partners that did not include any employees in the Borrower Application Form that was submitted to the SBA.
  • Companies that did not reduce any employee wages who earned $100,000 or less in 2019 by more than 25% during the covered period compared to the period between January 1, 2020 and March 31, 2020  AND Did not reduce the number of employees or average paid hours between January 1, 2020 and March 31, 2020.

For purposes of this exception, you can ignore reductions that arose from\ an inability to rehire individuals who were employees on February 15, 2020, as you were unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. You may also ignore reductions in an employee’s hours who refused to be rehired.

  • Companies that did not reduce any employee wages who earned $100,000 or less in 2019 by more than 25% during the covered period compared to the period between January 1, 2020 and March 31, 2020  AND were unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance requirements issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration related to maintenance of standards of sanitation, social distancing , or any other worker or customer safety requirements related to COVID-19.

In addition to the Simplified Form the SBA also clarified certain other . issues.
Choice of Covered Period

  • Borrowers that received their loans prior to June 5, 2020 will have a choice of electing an 8 week or 24 week period.
  • Borrowers that received their loans on or after June 5, 2020 must use a 24 week period.

Maturity Date of Loan

  • Borrowers that received their loans on or after June 5, 2020 will have a maturity date of 5 years from the date the loan was received.
  • Borrowers that received their loans before June 5, 2020 will have a maturity date of 2 years from the date the loan was received unless mutually agreed to extend the loan by the borrower and lender.

Forgiveness Calculation for Compensation Paid to Individuals In Excess of $100,000

  • Self Employed Individuals or General Partners – The maximum amount of earnings included in the forgiveness calculation is $20,833.
  • W-2 Employees(Including Owners of Businesses)- The maximum amount of earnings included in the forgiveness calculation is $46,154.

Treatment of Employee Benefits for Business Owners as Other Payroll Costs
This point of differentiation has received little commentaryas part of the forgiveness calculation although the treatment between the different types of employee owners is quite significant.

  • Self Employed Individuals or General Partners – These expenses are not considered other payroll costs for the forgiveness calculation.
  • S Corporation Shareholder Employees

Health Insurance
Since self-employed health insurance is included in wages for payroll tax purposes, these expenses are included in the calculation of the $100,000 wage limit($46,154 for PPP forgiveness) and are not considered other payroll costs for purposes of the forgiveness calculation.


Employer Pension Contributions
These expenses are considered other payroll costs for purposes of determining the forgiveness calculation.

  • C Corporation Shareholder Employees – There is no distinction between this type of employee and non-owner employees for purposes of determining the forgiveness calculation as employee benefits and state and local taxes are considered other payroll costs in determining the forgiveness calculation.

Removal of Mandatory Minimum Usage of 60% of PPP Funds to Achieve Forgiveness
Under the prior act, loan forgiveness was based on businesses using 75% of PPP funds received for payroll costs. This has now been lowered to 60% thus allowing businesses with higher permissible non payroll costs the ability to treat these expenses as forgivable expenditures.
In previous guidance, the SBA had stated that in order to achieve any forgiveness the Borrower had to spend a minimum of 60% of the loan proceeds on payroll costs however this requirement was removed.
Disclosure of Names Who Received Loans Who Received in Excess of $150,000


The SBA announced that it will disclose the business names and addresses of borrowers who received in excess of $150,000.
Deductibility of Expenses Paid With PPP Funds That Are Forgiven
Although it has been previously stated that the forgiveness of PPP loans will be nontaxable, the expenditures made with the forgiven funds are still nondeductible.


Many were hoping that Congress would have incorporated a change in the Act to allow these expenditures to be tax-deductible but at this writing, this remains unchanged.


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