Paycheck Protection Program

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The Paycheck Protection Program (PPP) is a $669-billion business loan program established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help certain businesses, self-employed workers, sole proprietors, certain nonprofit organizations, and tribal businesses continue paying their workers.

The Paycheck Protection Program allows entities to apply for low-interest private loans to pay for their payroll and certain other costs. The amount of a PPP loan is approximately equal to 2.5 times the applicant's average monthly payroll costs. The loan proceeds may be used to cover payroll costs, rent, interest, and utilities. The loan may be partially or fully forgiven if the business keeps its employee counts and employee wages stable. The program is implemented by the U.S. Small Business Administration.

Purpose[edit]

The purpose of the Paycheck Protection Program and loan forgiveness is to provide economic relief to small businesses and certain other entities that have been adversely impacted by the COVID-19 pandemic.[1][2]

Provisions[edit]

Eligibility[edit]

In order to be eligible for the Paycheck Protection Program, an applicant must be a small business, sole proprietor, independent contractor, self-employed person, 501(c)(3) nonprofit organization,[a][b][5] 501(c)(19) veterans organization,[6][7] or a tribal business.[c][9][10]

Applicants who operate as a sole proprietorship, an independent contractor, or an eligible self-employed individual must have been in operation on February 15, 2020. Other types of applicants must have been in operation on February 15, 2020,[d] and must have either had paid employees or paid independent contractors.[9]

The applicant and its affiliates[e][f][g] must also:[10]

The applicant must be located in the United States or its possessions. The applicant's primary operations must be located in the United States or its possessions or, alternatively, the applicant's business must make a significant contribution to the economy of the United States.[27]

An applicant is ineligible for a PPP loan if:

An applicant is not required to demonstrate that it cannot find credit elsewhere, but it is required to certify, in good faith, that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant".[2][9]

Each business may receive only one PPP loan.[p][9]

Loan amount[edit]

The amount of the PPP loan is based on the applicant's payroll costs.[9]

Payroll costs include salaries, wages, commissions, cash tips, paid leave,[q] severance pay, clergy parsonage and housing allowance[18], and other compensation paid to employees. These costs are limited to $100,000 annualized per employee. Payroll costs also include group health benefits and insurance and retirement benefits. Payroll costs include taxes withheld from employees' wages and all state and local taxes assessed on compensation, but payroll costs do not include the employer's portion of social security tax, the employer's portion of Medicare tax, and federal unemployment tax.[9][10] In the case of a sole proprietor, independent contractor, or self-employed person, payroll costs include net profits from self-employment, based on the 2019 Form 1040 Schedule C line 31, and limited to $100,000 annualized.[35][36]

Payroll costs do not include payments to workers whose primary residence is outside the United States.[j][r][10] Payroll costs also do not include payments to non-employees of the applicant.[9]

In order to calculate the amount of the PPP loan, the applicant calculates its payroll costs between January 1, 2019, and December 31, 2019.[s] Average monthly payroll costs are calculated by dividing this amount by 12.[9]

The PPP loan amount is equal to 2.5 times the average monthly payroll costs. For applicants with an Economic Injury Disaster Loan (EIDL) made between January 31, 2020, and April 3, 2020, the PPP loan amount could be increased by the outstanding amount of the EIDL, less any advance received under an EIDL COVID-19.[9]

A PPP loan may not exceed $10 million.[p][9] However, some companies applied for multiple loans, thereby receiving more than this in total. On April 24, NBC reported that at least eight companies had done this, and half of them had received more than $20 million in total.[39]

Application process[edit]

An applicant applies for a PPP loan directly with an eligible private lender, such as a federally insured bank, a federally insured credit union[40], Farm Credit System institution, or a Small Business Administration-approved lender.[9][41]

The Small Business Administration has a standard application form, although private lenders were allowed to use their own paper forms or electronic forms if they were substantially similar to the standard form. An applicant has to attach documentation to support the amount of the loan applied for, such as payroll reports, payroll tax filings, Form 1099-MISC, or a sole proprietor's income and expenses. If these records were unavailable, a lender could accept bank records if they sufficiently demonstrate the qualifying amount.[9]

Applicants must make certain assertions, including that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant".[2] While a lender does not need to require a business to demonstrate the basis its certification, the Small Business Administration may do so. The Small Business Administration does not believe that a publicly traded business with substantial market value and access to capital markets could make that certification in good faith.[42][43] An applicant that, together with its affiliates, receives PPP loans totaling $2 million or more should retain documentation of what basis it made this certification.[44]

Applying for a PPP loan is free to the applicant.[41] An applicant was not charged any application fees by either the private lender or the federal government. The Small Business Administration compensates lenders for processing PPP loans.[9] Certified Public Accountants and accounting firms are not allowed to charge businesses to prepare their applications for PPP loans; instead, the lender is permitted to, and may, compensate them directly.[45] Nevertheless, an accounting firm is allowed to charge a business for providing advice on deciding which loan program and tax relief program would be best for their business.[45]

Some lenders only accept PPP applications from businesses that already have a depository account at the lender.[46][47]

Loan applications are only accepted, and loans may only be made, through June 30, 2020.[48]

Making a false statement to obtain a PPP loan is a crime subject to possible imprisonment, fines, or both.[49][50][51][52]

Applications for PPP loans are accepted, approved, and disbursed in the order of first-come first-served, until the entire amount appropriated by Congress is depleted.[48][53] The first appropriation of $349 billion was depleted on April 16, 2020, and the Small Business Administration stopped accepting new applications from lenders as of that date.[54] A bill to add $320 billion of funding was passed by the Senate and the House of Representatives on April 21 and April 23, respectively, and signed into law by President Trump on April 24, and the Small Business Administration began accepting new applications from lenders on April 27.[55]

The Equal Credit Opportunity Act requires lenders to notify an applicant of a decision on the PPP loan application within 30 days[t] of the date the lender receives either a loan number or a response about the availability of funds from the Small Business Administration.[58][57]

If a PPP loan application is incomplete, the Equal Credit Opportunity Act requires the lender to notify the applicant of the issue, and the lender must provide the applicant a period of time to make the application complete. A lender is allowed to deny an incomplete application only if the applicant does not make the application complete by the end of the time period provided by the lender. A lender is not allowed to deny a PPP loan application solely because the lender has not yet received a response from the Small Business Administration.[58][57]

If a lender denies a PPP loan application, the Equal Credit Opportunity Act requires the lender to provide an adverse action notice to the applicant with specific reasons for the denial, even if the application is denied before sending the application to the Small Business Administration.[58][57]

Loan terms[edit]

Loan payments are not required to be made for six months. The loan has a maturity of two years. Each PPP loan has an interest rate of 1 percent.[59]

Each PPP loan is guaranteed by the U.S. Small Business Administration.[41] An applicant need not provide any collateral or personal guarantees in order to apply or be approved for a PPP loan.[41] A PPP loan is a non-recourse loan, unless the loan proceeds are used for unallowable purposes.

Allowable use of loan proceeds[edit]

Payroll costs, including health insurance benefits and retirement benefits, are allowable, although the portion used for compensation was limited to $100,000 annualized per worker.[10][60] Emergency Paid Sick Leave and Emergency Family Medical Leave must be excluded from payroll costs.[19] In the case of a sole proprietor, independent contractor, or self-employed person, payroll costs include owner-compensation replacement, up to 15.38% of their net self-employment profit in 2019, up to a maximum of $15,385.[35] A sole proprietor, independent contractor, and self-employed person may use the loan proceeds to pay for health insurance benefits for any employees but not for the owner.[35]

Up to 25 percent of the loan may be used for non-payroll costs.[10] Allowable non-payroll costs include business payments of mortgage interest,[u] other interest,[v] rent,[w] and utilities, such as electricity, gas, water, telephone, and internet.[x][10] For purposes of the 25-percent limit, the amount of any refinanced Economic Injury Disaster Loan does not count as a non-payroll cost.[35]

In the case of a sole proprietor, independent contractor, or self-employed person, loan proceeds cannot be used to pay for mortgage interest, rent, or utility payments for their home, vehicle, or shed, even if they operate the business out of these places.[35]

PPP loan proceeds cannot be used to compensate outside independent contractors that provide services to the business, nor to compensate employees whose primary residence is not in the United States.[60][11]

If the applicant operates internationally, the PPP loan proceeds must only be used for the benefit of its operations in the United States and its possessions.[27]

Concerns have been raised over unclear SBA guidance regarding the repayment process.[61]

Loan forgiveness[edit]

The principal of a PPP loan will be either partially or fully forgiven under certain circumstances.[62][53]{{refn "PPP forgiveness Rules Clarified As First Recipients Face Payments' Exhaustion". Yahoo Finance. May 26, 2020. Retrieved May 26, 2020. }} Forgiveness is based on what the loan proceeds were spent on, to what extent the employer maintained or rehired its employees, and to what extent it maintained the wages of its employees.[62][63]

  1. Take the business' average number of full-time equivalent (FTE) employees per month during the eight weeks after the loan proceeds were disbursed,[y][z] and divide it by the average number of FTEs per month between February 15, 2019, and June 30, 2019.[aa]
  2. Multiply the above by the total amount paid for payroll costs,[ab] mortgage interest,[ac] rent,[ad] and utilities during the eight weeks after the loan proceeds were disbursed.[ae][af][ag]
  3. If, during the eight weeks of the loan, the business reduced any employee's wages by more than 25% when compared to the previous calendar quarter, reduce the above amount by the amount of the reduction in wages.[ah][66][67]

For those business owners who received funds in the first round of loans, eligibility for forgiveness began on May 27, 2020, eight weeks after the distribution.[68]

The loan forgiveness amount is not reduced if the business made a good-faith, written offer to rehire an employee during the eight-week period and the employee declined the offer. The loan forgiveness amount is also not reduced for any employee who was fired for cause, voluntarily resigned, or voluntarily requested and received a reduction in work hours.[ai][64][4]

One FTE is equal one worker who worked at least 40 hours per week. FTE for someone who worked fewer than 40 hours per week is equal to the number of hours worked per week divided by 40. Alternatively, the business may choose to consider each and every worker who worked fewer than 40 hours per week to each be 0.5 FTE.[65][64]

In the case of a sole proprietor, independent contractor, or self-employed person, owner-compensation replacement is also eligible for forgiveness, up to the lesser of 15.38% of net self-employment income in 2019 or $15,385 and certain other limits.{{refn | Each owner-employee and each self-employed individual is limited to a maximum amount of compensation for purposes of the PPP loan. The maximum is either 8/52 of 2019 compensation or $15,385 per individual, whichever is smaller. The maximum of each owner-employee has a further limitation equal to the amount of the owner-employee's 2019 employee cash compensation, employer retirement contributions, and health care contributions. A worker who files a Schedule C with their Form 1040 are limited to the amount of the worker's owner compensation requirement, which is calculated based on 2019 net profit. General partners of a business are generally limited by the amount of their 2019 net earnings from self-employment.[65] For Forgiveness would also include the amount incurred and spent on business mortgage interest, business rent, and business utilities during the first eight weeks after receiving the PPP loan.[69][35]

Loan forgiveness is reduced if less than 75% of the PPP loan proceeds are used for payroll costs.[70]

The amount of loan forgiveness cannot exceed the amount of the PPP loan. The amount of loan proceeds used for unallowable purposes is ineligible for forgiveness. Knowingly using loan proceeds for unallowable purposes is fraud.[9][65]

The business' application for loan forgiveness and documentation are given to the lender. At that point, the lender has 60 days to send a decision and a request for payment to the Small Business Administration. When the lender does so, the Small Business Administration has 90 days to remit the appropriate forgiveness amount to the lender, including accrued interest on that amount, subject to Small Business Administration's review of the loan or the loan application.[65][71] The business must then paid any remaining principal and accrued interest to the lender by the end of the two-year maturity of the PPP loan.[72] If the Small Business Administration determines that a business was ineligible for a PPP loan, the Small Business Administration may have recourse against individual shareholders, members, or partners of the business for non-payment of the PPP loan, and the lender will be required to repay the processing fee it had received from the Small Business Administration. A business will be able to seek reconsideration and appeal of the Small Business Administration's decisions.[65]

Each business must keep documentation related to the PPP loan for a minimum of six years after the date its PPP loan is forgiven or the date the PPP loan is paid in full, whichever is later. The business must send the documentation to the Small Business Administration and its inspector general upon request. the Small Business Administration and its inspector general may review any PPP loan.[65]

Ordinarily, loan forgiveness is considered taxable income, but forgiveness of a PPP loan is not considered taxable income.[73][74] A business may not take a tax-deduction for business expenses that resulted in loan forgiveness.[75]

Interaction with tax credits, tax deductions, and tax deferrals[edit]

If a business receives loan forgiveness on a PPP loan, other tax-related provisions of the CARES Act are either not available or limited.[76][77]

The Employee Retention Tax Credit allows a tax credit equal to half of qualified wages, up to $10,000 per employee, if the business' operations are ordered to partially or fully suspend due to the COVID-19 pandemic or if the business suffered at least a 50-percent decline in revenue due to the COVID-19 pandemic.[45] A business that receives a PPP loan cannot also receive the Employee Retention Tax Credit.[19][78]

Under the payroll tax deferral, the payment of the employer portion of social security tax incurred between March 27, 2020, and December 31, 2020, may be delayed. Half may be paid by December 31, 2021, and the remaining half must be paid by December 31, 2022. For self-employed individuals, the delay applies to approximately 40 percent of their self-employment tax.[79][80] A business that receives a PPP loan may only defer tax that was incurred prior to the date the lender informs the business that it has received forgiveness of any portion of a PPP loan.[19] Any taxes incurred on or after that date must be paid as usual.[19]

Employee compensation, employee benefits, business rent, business mortgage interest, and business utilities are typically tax-deductible as business expenses.[81][82] If a business receives PPP loan forgiveness, no tax deduction is allowed if payment of the expense resulted in the loan forgiveness.[83][84][85][86]

History[edit]

Legislative history[edit]

The Paycheck Protection Program was enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). All of the Paycheck Protection Program's original $349 billion was allocated between April 3 and April 16, 2020. The Small Business Administration stopped accepting new PPP applications on April 16, 2020.[54][87] $342.3 billion was for PPP loans, and $6.7 billion was for lender reimbursements for processing loan applications that were approved.[aj][87] Between April 3 and April 16, 2020, there were 1.7 million loans made, and 4,975 lenders approved loans. The average loan amount was $206,000. Of all loans, 74 percent were for $150,000 or less.[87] Businesses in the construction industry received 13.12 percent of the total of loan amounts, the largest percentage of any classification. The next four highest classifications were professional, scientific, and technical services with 12.65 percent; manufacturing with 11.96 percent; health care and social assistance with 11.65 percent; and accommodation and food services with 8.91 percent.[87]

On April 21 and 23, respectively, the Senate and House passed the Paycheck Protection Program and Health Care Enhancement Act to add $320 billion of funding to the PPP.[89][90] President Trump signed the bill into law on April 24, 2020, which allowed the Small Business Administration to accept applications again on April 27.[55][91]

Proposed amendments[edit]

Reps. Dean Phillips (DMN) and Chip Roy (RTX) introduced the Paycheck Protection Flexibility Act of 2020. The bill would allow PPP loan forgiveness for allowable expenses incurred after eight weeks. It would remove the requirement to use no more than 25% of the loan for non-payroll costs. The bill would allow the term of the loan to be longer than two years. It would extend the rehiring deadline past June 30. The bill would allow businesses to defer payroll taxes incurred after receiving PPP loan forgiveness.[92]

Rep. Pramila Jayapal (DWA) proposed the Paycheck Guarantee Act. Rather than having businesses take a private loan that may be forgiven after the fact under certain circumstances, the Treasury Department would reimburse businesses for employee salaries and benefits for three months or until consumer demand increases.[93]

Rep. Nita Lowey (DNY) introduced the Heroes Act, which would extend the period that PPP loans can be made from June 30 to December 31, 2020.[94] It would expand loan forgiveness from eight weeks of eligible costs to the 24 weeks or December 31, 2020, whichever is earlier.[94] The bill would include eligible interest costs in the debt forgiveness calculation. It would lift the requirement that at least 75% of the loan forgiveness amount must be for payroll costs.[95] Employers would be allowed to use PPP loan proceeds for personal protective equipment and other safety items for its employees, and those costs would be part of loan forgiveness.[94][96] Each local television, radio, and newspaper company would be eligible to apply separately, rather than together as an affiliated group, if they are otherwise eligible.[97] It would expand eligibility from 501(c)(3) and 501(c)(19) nonprofit organizations to all nonprofit organizations that are tax-exempt under Section 501(c), although certain politically active 501(c)(4) organizations would be ineligible and compensation of registered lobbyist employees would not be allowable payroll costs.[98] PPP loans would have a minimum term of five years, rather than two years, allowing businesses additional time to repay the loan. It would make a business ineligible for a PPP loan if an owners has been convicted of a felony of financial fraud or deception within the previous five years. The bill was passed by the House of Representatives in a vote of 208–199.[99]

Review, oversight, and criticism of recipients[edit]

Acting Pentagon Inspector General Glenn Fine was named the chair of the committee that oversees how the PPP loans were administered as well as the rest of the funding from the CARES Act. On April 7, 2020, four days after PPP loans began to be made, President Donald Trump removed Fine as head of the committee.[100]

Criticism and review of loans made to certain entities[edit]

Between April 3 and April 14, PPP loans included at least 94 loans made to publicly traded companies or their subsidiaries, totaling $365 million.[101] One company, Chembio Diagnostics, was criticized for using an almost $3 million PPP loan to grow the company and increase testing capacity for infections diseases, despite being publicly traded and seeing a large increase in customers wanting COVID-19 testing.[102]

On April 23, the Small Business Administration released guidance stating that it is unlikely that a publicly traded business with substantial market value and access to capital markets would be eligible for a PPP loan. Such a business would not be able to certify in good faith that the PPP loan is necessary to support its ongoing operations because of the current economic uncertainty. While a lender does not need to require a business to demonstrate the basis in its certification, the Small Business Administration may do so.[42][43] The Small Business Administration said it would not pursue action against any such business that applied for a PPP loan prior to April 23 and repays the loan proceeds by May 7, later extended to May 14 and then extended again to May 18.[43][103][44] On April 28, the guidance was extended to businesses owned by private companies with similar situations.[104][105]

Several businesses, including Potbelly, Ruth's Hospitality Group, Shake Shack, Nathan's Famous, and the Los Angeles Lakers, decided to repay the loan proceeds.[106][107][108][109][110] Ashford Inc., whose subsidiaries own 117 hotels, received a total of $58.7 million in PPP loans for itself and its subsidiaries.[111] It originally said it would not return the loan proceeds, but it later decided to do so.[111][112] On May 4, The New York Times reported that publicly traded companies had returned at least $375 million in PPP loans, based on securities filings and public announcements.[113]

On April 28, Treasury Secretary Steven Mnuchin said that the Small Business Administration would do a "full review" of each PPP loan exceeding $2 million.[114] Treasury Secretary Steven Mnuchin warned that businesses would held be "criminally liable" if they receive a loan exceeding $2 million and do not follow the rules.[115]

On May 13, the Small Business Administration said that any business that, together with its affiliates, received a total of less than $2 million of PPP loan proceeds will be assumed to have made the good-faith certification of need in good faith.[44] If the Small Business Administration determines that a business "lacked an adequate basis" for certifying the necessity of the PPP loan, the Small Business Administration will request business repay the outstanding PPP loan balance, and the business will become ineligible for PPP loan forgiveness.[44] If the business subsequently repays the loan, no further enforcement actions will be taken on the matter.[44]

LifeWay Christian Resources surveyed Protestant pastors and found that 40% said their church had applied for government assistance through the CARES Act or through the Small Business Administration, and, of those who applied, 59% said they had been approved.[116] The Diocesan Fiscal Management Conference estimated that 9,000 Catholic parishes had received PPP loans, roughly half of the Catholic parishes in the country. Jon Costas wrote in Christianity Today that churches should consider the "socio-economic and social justice issues" of applying for PPP loans, and whether following the rules for the loan proceeds are consistent with religious texts.[117]

On May 5, the Small Business Administration said that PPP loans received by nonprofit organizations are not considered federal financial assistance and are not subject to audit requirements under Uniform Guidance.[118][119]

Report from Inspector General[edit]

Hannibal Ware, the Inspector General of the Small Business Administration, said that the Small Business Administration had set stricter rules than were stated in the law establishing the program, which is causing an "unintended burden" on businesses.[120]

The Small Business Administration requires 75% of a PPP loan be used for payroll costs, which is a rule not found in the law. The Small Business Administration stated all PPP loans would have a maturity date of two years, while the law allowed for up to ten years. The Small Business Administration has also not complied with all of the requirements stated in the law. The law required the Small Business Administration to issue guidance to lenders about the loan deferment process, but it did not do so. The law required lenders to prioritize businesses in underserved and rural areas, but the Small Business Administration did not issue any such guidance to lenders. The law required the Small Business Administration to register each PPP loan using the Taxpayer Identification Number of each business within 15 days after each loan was made, but it did not do so.[121][122]

A group of software and information technology companies has sued the Small Business Administration and the Department of the Treasury, alleging that the two agencies had improperly added restrictions to the program that were not present in the original law.[123]

A lobbyist for the Independent Community Bankers of America has said that virtually all business owners have taken such a loan assuming it would be forgiven, but the rules are highly complex and all the rules have not yet been released for loans that have already been made. The American Bankers Association has urged the federal government to release the forgiveness rules urgently.[115]


Notes[edit]

  1. ^ In the case of a church, a temple, a mosque, a synagogue, another house of worship, an integrated auxiliary of churches, or a convention or association of churches that is not required to apply for a determination of its 501(c)(3) status, the organization is eligible as long as it meets the requirements of Section 501(c)(3) and all other PPP requirements.[3]
  2. ^ A hospital that is tax-exempt under Section 115 of the Internal Revenue Code qualify as a nonprofit organization if it maintains written documentation that it has reasonably determined that it is described in section 501(c)(3) of the Internal Revenue Code and is therefore within a category of organization that is exempt from taxation under section 501(a).[4]
  3. ^ An tribal business is a business that is wholly owned by one or more Indian tribal governments or by a corporation that is wholly owned by one or more Indian tribal governments. Being partially owned by one or more Indian tribal governments also qualifies if all other owners of the business are either United States citizens or small businesses.[8]
  4. ^ A seasonal business is eligible to apply for a PPP loan if it was in operation on February 15, 2020, or it was in operation for at least an eight-week period between February 15, 2019, and June 30, 2019.[11]
  5. ^ According to the Small Business Administration, affiliation is generally determined based on ownership, management, interest, and other circumstances.[12] Two entities are affiliates if one entity owns at least 50 percent of the other. Two entities are also affiliates of each other if one controls, or has the power to control, the other. Two entities are also affiliates of each other if another entity controls, or has the power to control, them both. Having the power to control does not necessarily imply that the power is actually exercised. If an external party has at least 50 percent ownership, it has the power to control. The power to control may also exist by way of contractual agreement.[13][14]
  6. ^ A faith-based organization may disregard the number of employees of its affiliates if the connection between the two organizations is based on a religious teaching, religious belief, or is otherwise a part of the exercise of religion. The affiliation rules do apply, however, if the affiliation is solely for non-religious reasons, such as administrative convenience. The application should include a written statement explaining the reason the applicant believes it qualifies for the affiliation exception.[15]
  7. ^ Affiliation rules are waived for businesses in the hotel and food services industries, franchises in the Small Business Administration's Franchise Directory, and businesses that receive financial assistance from small business investment companies licensed by the Small Business Administration.[10][12]
  8. ^ Count all employees regardless of work location, as long as their primary place of residence is in the United States. A business that is in either the accommodation or food services industries and has more than one physical location, however, qualifies if it employs fewer than 500 per location.[11]
  9. ^ Colleges and universities do not need to count student workers if the student works as part of either a Federal Work-Study Program or a substantially similar program of a state or municipality.[16] [17]
  10. ^ a b 26 C.F.R. 1.121-1(b)(2) may be used to determine an employee's primary place of residence.[18]
  11. ^ Number of employees is determined by counting all paid employees, whether employed on a full-time, part-time, or seasonal basis; leased from a temporary employee agency or a professional employer organization. Count all paid employees as whole employees.[20] Volunteers who receive no pay for their services are excluded from the number of employees.
  12. ^ The average number of employees is equal to the average of the number of employees for each payroll between January 1, 2019, and December 31, 2019.[21] If the applicant began its operations after January 1, 2019, it averages the number of employees in each pay period that it operated between January 1, 2019, and December 31, 2019.
  13. ^ Small business revenue standards are not used for qualification of PPP loans.[22]
  14. ^ Tangible net worth equals total assets, less intangible asset, less liabilities.[25]
  15. ^ Such as selling medical marijuana
  16. ^ a b In the case of entities that are exempt from the affiliation rules, each affiliate may apply and receive a separate PPP loan, each of which may be up to $10 million.[34]
  17. ^ Payroll costs exclude Emergency Paid Sick Leave and Emergency Paid Family Leave under the Families First Coronavirus Response Act.
  18. ^ Workers who are U.S. permanent residents count as having their primary residence in the United States. Workers with a non-immigrant status, such as J-1 or H-2A, do not count as having their primary residence in the United States.[37]
  19. ^ An applicant may choose to use its payroll costs for the previous 12 calendar months instead. Businesses not in business on February 15, 2019, may use the period from January 1, 2020, to February 29, 2020. Seasonal businesses may choose to use the period from February 15, 2019, to June 30, 2019; or from March 1, 2019, to June 30, 2019; or from May 1, 2019, to September 15, 2019.[11][38]
  20. ^ The Equal Credit Opportunity Act's 30-day requirement applies only if the applicant is a business with gross revenues of $1 million or less in its preceding fiscal year. Otherwise, the lender must notify the applicant in a reasonable period of time.[56][57]
  21. ^ Mortgage interest payments are allowable if the business mortgage was obligated prior to February 15, 2020. Mortgage principal payments are not allowable.[9]
  22. ^ Interest payments are allowable if the business loan was made prior to February 15, 2020. [9]
  23. ^ Rent payments are allowable if the business lease was obligated prior to February 15, 2020.[9]
  24. ^ Utilities are allowable if service began prior to February 15, 2020.[9]
  25. ^ Any former employee who is rehired by April 27, 2020, counts as being employed the entire eight weeks.
  26. ^ Alternatively, a business that pays biweekly or more frequently may choose to begin the eight-week period on the first day of the first pay period after the day the loan proceeds were disbursed.[64]
  27. ^ Alternatively, the business may choose to divide by the average number of FTEs per month between January 1, 2020, and February 29, 2020. A seasonal business divides by the average number of FTEs per month between February 15, 2019, and on June 30, 2019.
  28. ^ Bonuses, hazard pay, and wages paid to furloughed employees are included in the definition of eligible payroll costs.[65]
  29. ^ Advance payments of mortgage interest are ineligible for loan forgiveness.[65]
  30. ^ Rent includes lease payments for real property (such as office space) and lease payments for personal property (such as equipment).[65]
  31. ^ A business that pays biweekly or more frequently may choose to use an alternative payroll covered period for payroll costs instead. The alternative payroll covered period begins on the first day of the first pay period beginning after the date the loan proceeds were received. The alternative payroll covered period does not apply to non-payroll costs.[65]
  32. ^ Payroll costs are considered to be incurred on the day the employee's pay is earned, which is generally the day the employee worked. If an employee is paid but not performing work, payroll costs are incurred based on the business' schedule, which is generally each day the employee would have ordinarily performed work.[65]
  33. ^ In order for a non-payroll cost to be eligible for loan forgiveness, the non-payroll cost must either be paid during the eight-week covered period or incurred during the eight-week covered period and paid by the next regular billing date, which is allowed to be after the eight-week covered period ends. Any non-payroll costs that are partially incurred during the eight-week covered period may be included in loan forgiveness only for the portion incurred during the eight-week covered period and paid by the next regular billing date.[65]
  34. ^ A business may disregard wage reductions to any employee who received wages exceeding $100,000 annualized during any single pay period in 2019. A business may also disregard wage reductions if it eliminated the wage reduction by June 30, 2020.
  35. ^ In these cases, the business must document these situations in writing and inform the applicable state unemployment insurance office within 30 days of the individual's rejection of the offer of employment, or else the exception does not apply.[65]
  36. ^ Lenders receive payment on approved PPP loans based on the amount of the loan. Payment is 5 percent of loans of up to $350,000; 3 percent of loans of between $350,001 and $1,999,999; and 1% of loans between $2,000,000 and $10,000,000. Payment is disbursed to the bank within five days that the lender disbursed the loan proceeds to the business.[88]

References[edit]

  1. ^ "Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak". The White House. March 13, 2020.
  2. ^ a b c Rothenberg, Pamela V.; Hicks, Jason C.; Few, Stephanie (April 10, 2020). "The Paycheck Protection Program in Action: Questions About Loan Application Risks". National Law Review.
  3. ^ 26 U.S.C. § 501(c)(3)
  4. ^ a b "Paycheck Protection Program Loans: Frequently Asked Questions (FAQs)" (PDF). U.S. Department of Treasury. May 3, 2020.
  5. ^ 26 U.S.C. § 508(c)(1)(A)
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See also[edit]

External links[edit]