CLA LivestreamSeries: PPP Update: Unpacking the Latest Guidance

Event Detail
  • June 18, 2020
  • 2 – 2:30 p.m. CT
  • Location
  • Virtual
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We will be discussing the latest PPP guidance released June 16th and it's implications for your business.


In case you missed it:


Questions and Answers:

Is there any clarification on limiting forgiveness to a proportionate share of 2019 net profit?

Treasury just released an additional IFR and two new loan forgiveness applications. The guidance on self-employed, general partners, and owner-employees of S Corporations did get clarified. If you use eight-week covered period owners are limited to 8/52nds of 2019 earnings (Schedule C for self-employed, W-2 for owner-employee for S Corp, K-1 for general partner) subject to $100,000 annualized proportionate limit (i.e., $15,385).

If you use 24-week period owners are limited to 2.5 months of 2019 earnings, subject to $100,000 annualized proportionate limit of $20,833.

Health care costs for owners (any type) are not eligible for forgiveness.

Retirement plan contributions for self-employed and general partners are not eligible for forgiveness.

For owner-employees of an S Corp they are eligible for 8/52nds of 2019 contribution if they use eight-week covered period or 2.5 months of 2019 contribution if they use 24-week covered period.

Please check-out our new article on the other changes:   

For the PPP, if we have two loans for two different Employer Identification Numbers, do we have to pick the same period for both or can we pick eight weeks for one company and 24 weeks for the other company?

Each forgiveness application is separate, so I see no reason why you couldn’t use covered periods of different lengths.

I am reviewing the forgiveness application, and want to make sure I am interpreting it correctly. Line #10 on the application is payroll cost 75% requirement – or line #1 payroll costs @ 0.75. Line #11 - the Forgiveness Amount is the smallest of lines #8, #9 and #10. With our company the lowest of these three lines will be 75% of payroll. So, what will be eligible for forgiveness is only 75% of our payroll and 0% for non-payroll costs?

Line #10 calculation is payroll costs divided by 60% (used to be 75%). So, for instance, if you had $100,000 of payroll costs, you would be eligible for $166,667 of total forgiveness. This gives you up to 40% of the forgiveness amount for non-payroll costs. Hope this helps clarify.

Let’s say I received my PPP loan in mid-April and was just approved for the EIDL loan this past week. Apart from not spending the funds on the same expenses, what actions need to be taken to remain in compliance for both programs?

The major piece is not using them for the same expenses.  PPP forgiveness will also be impacted by the EIDL grant amount you received.

Can you use more than 75% of funds for payroll?


Big banks are calling for blanket forgiveness of PPP loans under $150k - any thoughts on whether this will go anywhere?

Uncertain, but definitely hearing this as part of the conversations that are occurring.  More to come on this.

I know that employees who quit or are fired for cause are not supposed to count against us for an FTE reduction. Are they supposed to be excluded from the FTE's included on Schedule A of the forgiveness application, which is the portion used to calculate the FTE reduction quotient; or are they supposed to be deducted from the FTE reduction safe harbor section in the event that we do have a reduction? Or, could they be deducted from both sections if need be?

Also, what is the date range for termination that would allow these employees to be excluded? Does it just apply to employees who leave during the PPP covered period, or would it be employees who have left during one of the other numerous periods that we have to track?

You still keep them in your numerator so you don’t lose out.  Employees who leave during the covered period.

When do you expect the SBA to provide guidance to the banks concerning the documentation and information that needs to be provided in order to attain loan forgiveness?

We expect it soon, stay tuned!

If we have an employee who chose to go part-time but their per hour wage did not change, would we qualify for the EZ form?

We believe so. The EZ criteria is that you did not reduce your employees’ hours or did not reduce their salaries by more than 25%.

I easily spend the loan on payroll in a two-month semi-monthly payroll system but not quite in the eight-week period. Do I have to wait for 24 weeks to apply for forgiveness, or can I use the two months and go ahead and apply and get the loan out of the way?

As we interpret it, if you can’t get the amount in the eight weeks you would have to wait.

What is the new direction on how much can be forgiven for S Corp owners on the payroll?

Payroll amounts are as follows: 8 weeks: $15,384 and 24 weeks: $46,154

I am curious if there is any guidance as to whether trash expense can be included in utilities?

We believe the ‘utility’ definition does include trash, but please also confirm with your lender when you submit your application for forgiveness.

I have already maxed out my forgiveness eligibility in the first eight weeks. I have also completed my Form 3508EZ. When can I request forgiveness and to whom will I send the form?

You send the form over to your lender as soon as they will accept it.

I understand that the non-payroll can now extend to 40% of the loan as eligible expenses, but is the payroll portion still capped at 75%?

No cap on the payroll piece. You cannot reduce wages by more than 75% and must use a minimum of 60% towards payroll.

Does the extension of the time frame for the PPP also extend the forgiveness period and funds qualified for forgiveness?

Yes, but keep in mind your loan amount doesn’t change, so you can only be forgiven up to your loan amount.

Now that the time frame has been extended, if we keep X number of employees employed, will the money we use from the PPP funds to pay those employees for the additional 16 weeks qualify for forgiveness?

Yes, the extended period is 24 weeks.

How is SBA defining 100% forgiveness? 

Is it the full principal amount funded? You would not owe any money back to the bank. You received $100k and then would not have to repay any amount.

If Congress does not act to make the PPP expenses deductible, and forgiveness occurs in the following year, would the related expenses be deductible in the current year?

Correct, the expenses are deductible until the amounts are forgiven.

Would a discretionary profit-sharing contribution to employees’ 401(k)’s be a forgivable expense?

Yes, it would be.

We have biweekly and monthly payrolls. I assume we can we use the Alternative Payroll Covered Period for the biweekly, but I have not seen any guidance for monthly payroll.

You are correct for the biweekly piece. No guidance on the monthly piece yet.

Can I include the owner’s health insurance for a C Corp?

For C Corp, yes.

Is Workman’s Compensation Insurance an allowable payroll cost for the PPP loan?

Workman’s compensation is not a forgivable expense.

Has SBA paid out any fees to the banks yet for the PPP loans? We are being told that there is an issue with SBA and Colson working together, which is why we haven’t seen any fees.

I’m aware that banks started receiving those fee payments last week.  Based on what I understand, it’s wise to reconcile your calculation of expected fees to their payment as some banks reported they’ve received 90% of what they expected.

Would it be advantageous to only use actual payroll costs, if possible, when requesting forgiveness to simplify the process?  In other words, no health insurance, 401(k) contributions, etc.

Assuming you meet the FTE and other requirements.

Sure, if you are at 100% forgiveness that would simplify it, just not recommending leaving money on the table.

Does the 60% rule apply to commissions or salary only?

Bill all wages. The CARES Act defines the term payroll costs broadly to include compensation in the form of salary, wages, commissions, or similar compensation.

If you outsource a company to do your payroll, are the fees for their services considered payroll costs that can be included in the forgiveness calculations?

Unfortunately, no.

Has related party rent been addressed?

No guidance yet has excluded related party rents.

Can the alternative payroll covered period be used with the new 24-week option?

Yes, it can.

How do we ‘elect’ the 8 or 24 weeks, and when does this have to be made?  Before the eight weeks are done or some other time frame?

On the forgiveness application you select the option.

Does the $100K maximum inclusive of health care, SUTA, and 401(k) employer matching funds or does the maximum only apply to gross wages?

Wages, benefits (health and retirement) are on top of that cap.

I was wondering if you think there will be a deadline to elect the eight-week period when applying for forgiveness. In other words, are borrowers allowed to elect the eight-week period for forgiveness at any time?

If your eight weeks are up, then submit. No deadline.

If the borrower uses the 24-week covered period and the timing is close to the end of the year, what will the tax consequences be if the SBA does not forgive the loan prior to year-end 2020?

Status quo. Expenses are deductible until forgiven.

On the Forgiveness form – line 6 is the total of all payroll costs.  Can this line be greater than the PPP loan amount?


Does the new safe harbor for FTE Safe Harbor 1 have to be met for the entire covered period?  What if we shut down for only a portion of the covered period due to COVID related concerns?

It would, yes.

Can employees out on FMLA during the covered period be included in FTE count?

They would count.

If you are a sole practitioner, how are the amounts for payroll determined / reported, consistent with the new loan forgiveness application?  It states that you can use the EZ form, but if you are not “paying” yourself payroll, how do you document this?

Here is a detailed link:

Can you please explain the definition of “owner-employee” in an S Corp? i.e. does a 1% shareholder of an S Corporation qualify as an owner-employee?

For an S Corp if you receive a K-1 from the S Corp then you are an owner employee, there is no threshold for amount of ownership.

I just want to confirm that we cannot include health insurance premiums or 401(k) contributions for S Corp owners paid as employees.

Health no. Retirement yes. see link below for a detailed explanation.

If employee layoffs and/or terminations are made AFTER our eight-week period has passed, will this have any impact on the amount of loan forgiveness?  In other words, are we safe to do layoffs/terminations after our eight-week period without it affecting our loan forgiveness?

Post your period as long as it ends after June 30 you should be fine.

Can you use the EZ form if you have an LLC and you are the only employee?

LLC meaning you are a schedule C, yes.

Has there been any guidance as to what can be included as healthcare expenses under the PPP loan?  We are self-insured and are wondering if we should be using our average healthcare accrual rate or actual claims/admin fees.

No specific guidance, however, we believe average is a good start.  For the application, the strict interpretation would be the incurred claims/expenses during the 8 or 24 weeks.

I have payroll biweekly for regular payroll, while bonuses and commissions are paid monthly.  I understand I can elect the “alternate period” for my biweekly payroll.  For the monthly bonuses/commissions – do I just prorate that amount for the 8- or 24-week period – or use the “alternate period” that corresponds with my biweekly payroll and prorate it or handle it differently?

No clear guidance here yet, but we believe either is appropriate.

Is the requirement of restoration of salaries to pre-COVID-19 levels (no greater 25% reduction) – be for the entire covered period? Whether for the entire 8 weeks or 24 weeks?

Yes, we agree with your interpretation.

It was mentioned that you take your payments less employee contributions. Do payments mean stop loss premiums, broker costs, and claims?

Costs would be a tough one, but claims for sure.

Regarding transportation, if you have a vehicle lease prior to the loan, are those costs forgiven/allowable as non-payroll expenses?

If the lease is in place prior to the loan, those expenses should qualify for forgiveness.

Is there any information on reporting the tax credits claimed through reducing payroll taxes paid on the Q2 941? I don't see any changes yet on the 941 form.

There is a draft of the new 941 that’s available on the IRS website, and along with the proposed instructions indicates that there will be a line for this to reduce your deposits.  In the meantime, you have two options – the first is to reduce those deposits or second, you may pay in full and request a refund of the credit amount on Form 7200.

What you missed:

Jen Rohen: Hello CLA family, friends, colleagues, and community partners. Welcome back to our livestream. We sincerely hope that you are continuing to stay safe and healthy at this time. On June 16 and 17, SBA released new loan forgiveness applications and a new interim final rule (IFR).

Today, we have Jack Rybicki and Rick Krueger to help understand key takeaways from these new documents. In addition, we have Brendan Kurvers, from our Manufacturing and Distribution team, to walk us through a specific example as it relates to food and beverage and how your consumer experience will be impacted as a result of Paycheck Protection Program (PPP) changes. Welcome, guys!

Rick, I’d like to start with you talking about the new Form EZ. What are the criteria that an organization needs to meet in order to utilize this form?

Rick Krueger: Thanks, Jen. You need to meet one of three criteria in order to complete Form EZ.

  1. Self-employed individuals, independent contractors, or sole proprietors that had no employees at the time of application and did not include any employee salaries in the average monthly payroll of the borrower application form.

  2. Borrowers who did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period (or alternative payroll covered period) compared to Q1 2020 AND did not reduce the number of employees or average paid hours of employees between January 1, 2020 and the end of the covered period. Note that for this certification, borrowers should ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020, if the borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also, borrowers should ignore reductions in an employee’s hours that the borrower offered to restore and the employee refused.

  3. Borrowers who did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period (or alternative payroll covered period) compared to Q1 2020 AND the Borrower was unable to operate during 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 of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.

Rohen: Jack, why might this not be as “EZ” as it seems?

Jack Rybicki: Note that while the EZ form is significantly shorter, the documentation instructions still require the borrower to submit information to support each assertion made. So unfortunately, this doesn’t necessarily decrease the effort required by a borrower to comply with the requirements.

For borrowers with employees, this would include payroll records that separately list each employee and show the amounts paid to each employee during the period between January 1, 2020 and March 31, 2020, and the amounts paid to each employee during the Covered Period or Alternative Payroll Covered Period. It would also include payroll records that separately list each employee and show the amounts paid to each employee between January 1, 2020 and the end of the Covered Period.

Additionally, borrowers may need to include information regarding any employee job offers and refusals, refusals to accept restoration of reductions in hours, firings for cause, voluntary resignations, written requests by any employee for reductions in work schedule, and any inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.

If applicable, borrowers may also need to include documentation supporting the certification that it was 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 of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19. This documentation must include copies of the applicable requirements for each borrower location and relevant borrower financial records.

Rohen: Thanks, Jack. Rick, another really important thing that happened with the application and the new IFR is that we have some clarity on limits for both the 8- and 24-week covered periods. Can we please talk about that for a little while?

Krueger: Sure, Jen. Borrowers had many questions about how limits in effect for the eight-week covered period would apply to the 24-week covered period. The new applications and IFR include that detail and answered some outstanding questions we had for both periods (e.g. health insurance for owner-employees of an S-corporation).

  • $100,000 cash compensation limits updated for 24-week covered period
    • Employees are capped at $15,385 for 8 weeks or $46,154 for 24 weeks
    • Owner compensation is capped at $15,385 for eight weeks or the lower of $20,833 or 2.5-month equivalent of their applicable compensation in 2019 for the 24-week period.
  • Employee benefits for employees who are not owners include
    • Employer contributions for employee health insurance, including employer contributions to a self-insured, and employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees.
    • Employer contributions to employee retirement plans, excluding any pre-tax or after-tax contributions by employees.
    • Employer, state, and local taxes paid by the borrower and assessed on employee compensation (e.g., state unemployment insurance tax), excluding any taxes withheld from employee earnings.
  • Employee benefits for owners include further restrictions
    • Borrowers must exclude employer health insurance contributions made on behalf of a self-employed individual, general partners, and owner-employees of an S-corporation. The SBA has stated these are excluded because such payments are already included in their compensation.
    • Borrowers must exclude employer retirement contributions made on behalf of a self-employed individual or general partners. The SBA has stated these are excluded because such payments are already included in their compensation.
    • Employer retirement contributions on behalf of owner-employees are capped at 2.5 months’ worth of the 2019 contribution amount

Rohen: Thanks, Rick. We do have one more key change that I’d like to have us talk through. Jack, can you please talk us through the application of the new December 31 safe harbor date?

Rybicki: Absolutely. Safe harbors for both salary/hourly wage reduction and FTE reductions include a new option:

  • The CARES Act originally provided a safe harbor date of June 30.
  • In the original loan forgiveness application, borrowers assessed that as of June 30.
  • We knew that the PPP Flexibility Act updated the safe harbor date from June 30 to December 31. However, we were unsure if SBA would apply that change the same way as it did with the CARES Act.
  • In the new application, the safe harbor is assessed as of the earlier of December 31 and the date the application is submitted.CLA Principal, WOTC Practice Leader

This should be beneficial for many borrowers because it provides them additional flexibility depending on the timing of their application.

Rohen: We would now like to welcome Brendan Kurvers, to the show to provide us a brief teaser on what you all can expect on next week’s livestream. Brendan comes to us from Minneapolis, Minnesota where he leads the Manufacturing and Distribution team. He serves a variety of manufacturing and distribution companies but has a deep passion and concentration of clients that are food and beverage manufacturers and distributors. Brendan, can you give the viewers a snap shot of what to expect on Tuesday’s livestream?

Brendan Kurvers: Good afternoon Jen, and thanks for the warm introduction. As Jen mentioned, my specialty focus area is around food and beverage manufacturing and distribution. With all these recent changes to the PPP and the overall market landscape we have been working up and down the food and beverage supply chain ranging from agribusiness, food/beverage production and distribution, and ultimately retailers – such as restaurants and grocery stores – to help our clients navigate these uncertain times.

On Tuesday, we will have Eric Beenken from our agribusiness team to enlighten us on what to expect from the livestock and meat production markets. I will also be joining the livestream to discuss how the middle of supply chain is handling the new normal, and ultimately we will conclude with discussing what you as a consumer can expect when you go to the grocery store to pick up your food for your July 4th festivities. We would welcome any major questions you may have prior to the show and we will plan to build them into the agenda.

To leave you with something to chew on over the weekend, here are some stats that the CLA Grocery and Restaurant teams have put together:

Grocery Stats:

  • In April, the price of groceries rose 2.6%, according to the Bureau of Labor Statistics, resulting in the biggest one-month increase in grocery prices since 1974.
  • Even more alarming is the increase in egg prices, which shot up 16.1% on average.
  • In some areas of the country, the increases were larger. For example, the price of ground beef in the Dallas-Fort Worth area increased by 14.5%, the price of chicken breast in Los Angeles skyrocketed by more than 26%, and the price of orange juice is up 14.6%, according to Nielsen data exclusively obtained by NBC News.

Restaurant Stats:

  • After a near total shutdown of restaurants to slow the spread of COVID in late March and early April, nearly every state is open or partially open for business, as of today
  • However, according to restaurant business, May 2020 sales were $25B short of 2019. However, this was an improvement from April 2020, where sales were $30B short of 2019
  • Overall, the impacts you will see during your July 4th weekend could vary and you could see significant prices changes at restaurants that only may be a mere mile away from one anotherIn April, the price of groceries rose 2.6%, according to the Bureau of Labor Statistics, resulting in the biggest one-month increase in grocery prices since 1974.

Rohen: Unfortunately, that’s all we have time for today. Thank you to our guests today, to you for your questions, and to our moderators for all the support, great information, and answers.

For more information:
Heather Kloster
Marketing Project Management Senior

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