IFR 14 – On May 22nd, the SBA issued its 14th “final” ruling with respect to the PPP. We have written extensively about it in this article. Much of this ruling seems to support assertions made on the application itself which recently was released. The application came out before this ruling, and an application is certainly not “law”, thus this IFR was needed to cement the SBAs views on a variety of issues.
We highly recommend you read the entire article as many topics were covered, but here are some notable highlights:
- For the purpose of forgiveness, owners of Partnerships and Schedule C’s are capped at their 2019 earnings. That could be problematic for companies that had down years in 2019.
- As we know, borrowers do not have to count (as a reduction of FTEs) employees who were offered employment during the covered period and refused to come back to work, however this IFR indicates that the borrower will need to inform the applicable state unemployment insurance office of the rejected offer of reemployment within 30 days of the rejection.
- As we expected, employee hazard pay and bonuses are eligible for loan forgiveness because they are a similar form of compensation. Notably, the IFR offers no other limitations on the payment of bonuses, so the bonus payment may be able to exceed 8 weeks’ worth of the annual bonus amounts and still be eligible for forgiveness (up to the $15,385 limit).
Reminder Section: (what should I be doing):
- Call your payroll company about claiming the payroll tax deferrals and employee retention credits that were made available in the CARES Act.
- Talk to your payroll company about the Sick Pay Bill (passed prior to the CARE Bill).
- Consider speaking with your bank to discuss changes to terms of existing debt facilities. The banking system remains strong.
- If you have already applied for the PPP, start forecasting how you intend to spend the funds and how to qualify for the highest amount of forgiveness possible.