The U.S. SBA (Small Business Administration) posted new interim final rules (IFR), effective without advance notice, to conform to the Paycheck Protection Program Flexibility Act signed by President Trump on June 5, 2020. The IFR provides:
• “Covered period” may be extended from 2/15/2020 until 12/31/2020.
• PPP maturity of two years for PPP loans made before 6/5/2020 unless the borrower and lender mutually agree to extend the maturity of such loans to 5 years; PPP’s maturity of 5 years for PPP loans made on or after 6/5/2020.
• PPP loan proceeds that must be used for payroll costs reduced from 75% to 60%.
 Loan forgiveness is extended by the “covered period”—24 weeks; however, a borrower that received their PPP loan before 6/5/2020 may elect to use the original 8-week covered period.
• Loan forgiveness can be up to the full principal amount of the loan plus accrued interest. The actual amount of loan forgiveness depends, in part, on the total amount spent during the 24-week period beginning on the date the PPP loan is disbursed:

- Payroll costs including salary, wages, and tips, up to $100,000 of annualized pay per employee (for 24 weeks, a maximum of $46,154; for 8 weeks, a maximum of $15,385 per individual) as well as covered benefits for employees (not owners), including health care expenses, retirement contributions, and any applicable state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums);
- Owner compensation replacement formula, calculated on 2019 net profit with forgiveness limits;
- Interest payments for mortgage obligations on real or personal property incurred before 2/15/2020, to the extent deductible on Form 1040 Schedule C (business mortgage payments); 
- Rent payments on lease agreements in force prior to 2/15/2020 to the extent deductible on Form 1040 Schedule C; and,
- Utility payments under service agreements dated before 2/15/2020 to the extent deductible on Form 1040 Schedule C. 

 Two new Loan Forgiveness Application Forms with instructions have also been issued on today’s date.

  • 3508 EZ Form (HERE) and Instructions (HERE)
  • The Covered Period is either:  1.  The 24-week (168-day) period beginning on the PPP Loan Disbursement Date, or 2.  If the borrower received the PPP loan before 6/5/2020, the borrower may elect to use an 8-week (56-day) Covered Period. 
  • A borrower may elect to use the Alternative Payroll Covered Period for a borrower with a biweekly, or more frequent, payroll schedule, that begins on the first day of their first pay period following their PPP Loan Disbursement Date.

1. Using the PPP 35080 EZ Application Form requires borrower certification that the borrower did not reduce salaries or hourly wages by more than 25% for any employee during the Covered Period or Alternative Payroll Covered Period compared to the period between 1/1/2020 and 3/31/2020. For purposes of the certification, an “employee” includes only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000.

2. In addition, the borrower must also certify ONE of the following two items:

A. The borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period (other than any reductions that arose from an inability to rehire individuals who were employees on 2/15/2020, if the borrower was unable to hire similarly qualified employees for unfilled positions on or before 12/31/2020, and reductions in an employee’s hours that a borrower offered to restore were refused).
B. The borrower was not able to operate between 2/15/2020 and the end of the Covered Period at the same level of business activity as before 2/15/2020 due to compliance with requirements established or guidance issued between 3/1/2020 and 12/31/2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or OSHA, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.

If the above certification requirements applicable to the 3508 EZ cannot be met, use:

  • Loan Forgiveness Application Revised 6/16/2020 (HERE) and Instructions (HERE)
  • Covered Period and Alternative Covered Period (see above under 3508 EZ).

Please consult with your CPA and lender for guidance.