- the 24-week (168-day) period that begins on the first day of your first pay period following their PPP Loan Disbursement Date
- the eight-week (56-day) period) that begins on the first day of your first pay period following their PPP Loan Disbursement Date.
For loans funded on June 5, 2020 or later:
You may elect to calculate eligible payroll costs using the 24-week (168-day) period that begins on the first day of your first pay period following their PPP Loan Disbursement Date.
For example, if you are using a 24-week Alternative Payroll Covered Period and received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, October 10.
If you elect to use any Alternative Payroll Covered Period, you must:
- Apply the Alternative Payroll Covered Period wherever there is a reference in this application to “the Covered Period or the Alternative Payroll Covered Period.”
However, you must apply the Covered Period -- not the Alternative Payroll Covered Period -- wherever there is a reference in this application to “the Covered Period” only. The Alternative Payroll Covered Period cannot extend beyond December 31, 2020.
It begins on the date loan funds were deposited into your account -- look for the ACH credit for SMALL BUSINESS N/A CREDIT PPD in your transaction history. If using the Alternative Payroll Covered Period, it starts the first day of your first pay period following your loan disbursement date.
Under current SBA guidance:
- You must use at least 60% of funds for eligible payroll costs to qualify for full Loan Forgiveness, down from 75%
- You can use up to 40% of funds for eligible non-payroll costs, up from 25%
You need to use the funds within the Covered Period or Alternative Covered Period.
Yes, for the portion that meets all the SBA rules and if the SBA approves your request for Forgiveness.
Based on the latest SBA announcements, you may be eligible for partial Forgiveness. However, since you can only request Forgiveness once, it would be beneficial to use all of your funds before requesting Forgiveness.
Payroll costs consist of compensation to your employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation.
You are generally eligible for payroll costs paid and payroll costs incurred during the Covered Period or Alternative Payroll Covered Period. Payroll costs are considered:
- Paid on the day that paychecks are distributed or you originate an ACH credit transaction or
- Incurred on the day that your employees’ pay is earned
Yes, your eligibility shouldn’t be affected by this. See FAQ 10 for the acceptable documents.
- The total annual amount of cash compensation eligible for Forgiveness may not exceed $100,000 per employee. So if you’re using the 8-week Covered Period, you can receive Forgiveness for no more than $15,385 per employee. If you’re using the 24-week Covered Period, you can receive Forgiveness for no more than $46,154 per employee.
- For an owner-employee, self-employed individual, or general partner using the 8-week Covered Period, eligible compensation is capped at $15,385 per individual or the 8-week equivalent of their applicable compensation in 2019, whichever is lower. If using the 24-week Covered Period, eligible compensation is capped at $20,833 per individual or the 2.5-month equivalent of their applicable compensation in 2019, whichever is lower.
Owner compensation limits are the same for Forms 3508S, 3508EZ and the full 3508.
According to the SBA’s Instructions for PPP Schedule A, the following payroll costs are eligible for Forgiveness if incurred during the Covered or Alternative Payroll Covered Periods:
- Employer contributions for employee health insurance, including employer contributions to a self-insured, employer-sponsored group health plans
- Employer contributions to employee retirement plans, including pension plans
- Employer state and local taxes assessed on employee compensation (e.g., state unemployment insurance tax)
The following are not eligible for Forgiveness:
- Employee contributions -- either pre-tax or after-tax -- to health insurance and/or retirement plans
- Employer contributions made on behalf of a self-employed individual, general partners, or owner-employees of an S-corporation, because such payments are already included in their compensation
- Any taxes withheld from employee earnings
The SBA states the below categories are eligible if service began before February 15, 2020:
- phone
- internet
- gas
- water
- electricity
- transportation
Please visit SBA.gov or Treasury.gov for any updates.However, mortgage interest payments do qualify as a non-payroll cost.
No. However, mortgage interest payments do qualify as a non-payroll cost.
Yes – if the borrow does not own the property, they need to submit a rent or lease agreement
Yes, so long as at least 60% of the funds requested for Forgiveness are used for eligible payroll costs and no more than up to 40% of funds requested for Forgiveness are used for eligible non-payroll costs.
- 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 current lease agreement 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.
If the documents you submit to support your Forgiveness request include your DBA or Tradename, you must submit additional documents to show the connection between that name and the legal name of your business.
Yes, you must upload them with your supporting documents.
You should submit all documents showing you’ve met FTE, payroll and/or non-payroll guidelines for the full amount and time period for which you’re requesting Forgiveness. This means you may need to submit documents for multiple reporting periods. For example:
If the payroll period extends beyond the dates covered by Form 941s you’ve already filed, include on your payroll document the tax liability you will report for that period. If the last payroll for your Covered Period ended October 15, and your 941 covered through September 30, you would submit the 941 through September 30 as well as the tax liability you will report for October 1 through October 15.
What to Prepare
No. You must request Forgiveness through the Chase online portal.
Yes. There is no prepayment penalty.
The new relief legislation – passed in December -- may reduce your Paycheck Protection Program (PPP) loan balance by the amount of your Economic Injury Disaster Loan (EIDL) Advance.
We are waiting on details from the Small Business Administration (SBA) that we’ll share with you in the coming weeks.
You should continue to make scheduled payments on your PPP loan.
Yes, you can request Forgiveness and two major factors set by the SBA will be 1) changes of compensation during your Covered Period and 2) Average FTE during your Covered Period divided by Average FTE during your chosen reference period.
If you have a PPP loan of $50,000 or less, you may be eligible to use Form 3508S. This allows you to make fewer calculations and be exempt from reductions in loan Forgiveness amounts based on reductions in Full-time Equivalent (FTE) employees or salary or hourly wages. However, if you and your affiliates have PPP loans totaling $2 million or more, you can’t use the new form. We will let you know when we are ready to begin accepting requests with Form 3508S, likely early in the new year. In the meantime, please refer to the SBA’s new Form 3508S on SBA.gov.
Loan Forgiveness and Your Employees
Documents may include 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. Documents submitted may cover periods longer than the specific time period.
The selected time period must be the same time period selected for purposes of completing PPP Schedule A, line 11.
- The average number of FTE employees on payroll per week you employed between February 15, 2019 and June 30, 2019;
- The average number of FTE employees on payroll per week you employed between January 1, 2020 and February 29, 2020; or
- In the case of a seasonal employer, the average number of FTE employees on payroll per week you employed between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive 12-week period between May 1, 2019 and September 15, 2019.
If you are using either the full Form 3508 or 3508EZ, your loan Forgiveness amount may be reduced if your average weekly FTE employees during the Covered Period or Alternative Payroll Covered Period was less than during your chosen reference period and doesn’t meet Full-time Equivalency (FTE) Reduction Safe Harbor rules.
If you are using Form 3508S, you are exempt from any reductions in your loan Forgiveness amount based on reductions in full-time equivalent (FTE) employees or in salaries or wages.
- If you are using either the full Form 3508 or 3058EZ, the FTE Reduction Exceptions may apply to you if: Any positions for which you made a good-faith, written offer to rehire an individual who was an employee on February 15, 2020 and you were unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020;
- Any positions for which you made a good-faith, written offer to restore any reduction in hours, at the same salary or wages, during the Covered Period or the Alternative Covered Period and the employee rejected the offer, and
- Any employees who during the Covered Period or the Alternative Payroll Covered Period
- Were fired for cause
- Voluntarily resigned,
- Voluntarily requested and received a reduction of their hours. In all of these cases, include these FTEs on this line only if the position was not filled by a new employee.
If you are using Form 3508S, you are exempt from any reductions in your loan Forgiveness amount based on reductions in full-time equivalent (FTE) employees or in salaries or wages.
If using the full Form 3508 or 3508EZ, the rules may apply if you meet either Safe Harbor 1 or 2:
FTE Reduction Safe Harbor 1: In good faith, you are able to document that you were unable to operate between February 15, 2020, and the end of the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020, 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 the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
FTE Reduction Safe Harbor 2:
- You reduced your FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; AND
- You then restored your FTE employee levels by not later than December 31, 2020 to your FTE employee levels in the pay period that included February 15, 2020.
If you added to your FTE employment levels and maintained similar salary and wage levels, it should not affect your ability to request Forgiveness.
Loan Forgiveness and Change of Ownership
It depends on whether your transaction or series of transactions will constitute a “change of ownership.” A “change of ownership” will be considered to have occurred if (1) at least 20 percent of the common stock or other ownership interest of a PPP borrower (including a publicly traded entity) is sold or otherwise transferred, whether in one or more transactions (in aggregate since the date of loan origination), including to an affiliate or an existing owner of the entity, (2) a PPP borrower sells or otherwise transfers at least 50 percent of its assets (measured by fair market value), whether in one or more transactions, or (3) a PPP borrower is merged with or into another entity.
No “change of ownership” = No approval required. If your transaction or series of transactions will not result in a “change of ownership” as described above, then neither Chase nor SBA approval is required.
A “change of ownership” = Approval required. If your transaction or series of transactions will result in a “change of ownership” as described above, Chase or SBA approval is required as follows:
- If the change in ownership is comprised of the sale or other transfer of 20-50% of the common stock or other ownership interest of the PPP borrower (and the PPP borrower will not be merged with or into another entity), then Chase approval is required (but establishment of a funded escrow and prior submission of Forgiveness application will not typically be required).
- If the change in ownership is comprised of (a) the sale or other transfer of more than 50% of the common stock or `other ownership of the PPP borrower, (b) the sale of 50% or more of the PPP borrower’s assets (measured by fair market value), or (c) the merger of the PPP borrower with or into another entity, then either Chase or SBA approval is required.
- Chase Approval: As a condition to obtaining Chase approval (in accordance with SBA requirements) you will be required to, among other things, (i) establish and fund an escrow account at Chase in an amount equal to the outstanding loan balance (including interest) and (ii) immediately apply for Forgiveness.
- SBA Approval: In lieu of obtaining Chase approval, you may request approval from the SBA. The SBA may take up to 60 days to review such request and the request could be denied. The approval request must include a reason why the PPP borrower cannot repay the loan or establish a funded escrow account (as described above) prior to the change of ownership. SBA may impose additional requirements.
- You can avoid the need for Chase or SBA approval altogether if the PPP borrower is able reduce their loan balance to $0 (by obtaining Forgiveness and/or repaying their loan) prior to the change of ownership.
No, you may be required to take additional steps such as establishing an escrow account.
