On April 6, 2020, the U.S. Department of Treasury, in conjunction with the Small Business Administration (SBA), published guidance for the Paycheck Protection Program (PPP) as Frequently Asked Questions (FAQ) – a copy of which can be found here. The FAQ provides guidance to borrowers and lenders as to the SBA’s interpretation of the CARES Act and the PPP Interim Final Rule published on April 2, 2020.
Should you have any questions on the highlights outlined below or other information in the FAQ, our attorneys are ready to answer any questions you may have at CV19team@tarterkrinsy.com.
Highlights of the FAQ:
- The exclusion of an employee’s annual compensation in excess of $100,000 applies only to cash compensation and not to non-cash benefits, such as health or retirement benefits, or state and local taxes assessed on compensation.
- An eligible borrower’s payments to an independent contractor or sole proprietor are excluded from the eligible borrower’s payroll costs – NOTE: an independent contractor or sole proprietor will itself be eligible for a PPP loan if it otherwise satisfies the applicable requirements.
- Borrowers have the choice of calculating payroll costs using the 2019 calendar year OR the previous 12 months.
- For determining a borrower’s number of employees, a borrower has the choice of using the average number of employees for the same time period as used for calculating payroll costs OR the average number of employees per pay period for the 12 months prior to the date of the loan application.
- If a minority shareholder in a business irrevocably waives or relinquishes any existing rights specified in the applicable SBA regulations, the minority shareholder would no longer be an affiliate of the business (assuming no other relationship that triggers the affiliation rules).
- Borrowers who use a professional employment organization (PEO) or third-party payroll providers are eligible to apply for a PPP loan and the borrower’s employees are not considered employees of the PEO or payroll provider.
- Borrowers who have already submitted PPP loan applications based on the PPP Interim Final Rule published on April 2, 2020, do NOT need to amend or refile their applications – NOTE: borrowers who have already submitted PPP loan applications are permitted to revise their applications based on clarifications in the FAQ.
The FAQ notes that the Federal Government will not challenge lender PPP actions that conform to the FAQ, and to the Interim Final Rule and any subsequent rulemaking in effect at the time.