PPP Forgiveness Simplified for Loans $50,000 or less
The SBA released Form 3508S and Form 3508S Instructions, for borrowers with PPP Loans $50,000 or less, using simplified forgiveness procedures. This simplified process exempts those borrowers from reducing the forgiveness amount due to either a reduction of 1) full-time-equivalent (FTE) employees or 2) employee salaries and wages.
However, current rules regarding PPP Loan forgiveness are still in place, including:
- At least 60% must be spent on eligible payroll costs (payroll and employee benefits) with a $100,000 annual salary cap, pro-rated for the covered period.
- No more than 40% can be spent on nonpayroll costs (mortgage interest, rent, and/or utilities in force before 2/15/2020)
- Owner compensation limits on compensation (including prior year lookback) and employee benefits still apply
- Documentation substantiating forgivable expenses must be submitted with the application
- Economic Injury Disaster Loan (EIDL) grant advance amounts of $1,000 per employee reduce the amount of PPP Loan forgiveness
There is current legislation in both the House and Senate that discuss additional forgiveness rules for PPP Loans $150,000 or less. However, it is unclear when (or if) either of these bills will pass and be signed by the President.
At this time, if your PPP Loan is $50,000 or less, you can apply for forgiveness using the new Form 3508S. However, some lenders may not have started accepting applications, plus the SBA has barely started processing forgiveness applications received.
As a reminder, the forgiveness application is not due until ten months after the end of your covered period. So, you have time to see if any other forgiveness changes will be forthcoming. If you decide to apply for forgiveness now, and changes are made to the process, our understanding is the forgiveness application cannot be pulled back after submission.
On a separate note, we are hoping to receive from Washington DC guidance about the deductibility of expenses paid for with forgiven PPP Loan amounts. At this time, the law states these expenses are not deductible if the loan is forgiven.