Congress Passes PPP Extension
The U.S. House of Representatives unanimously passed a five-week extension of the Paycheck Protection Program (“PPP”) on Wednesday, July 1. The House action follows the Senate’s approval of a five-week extension on Tuesday night. The bill will now be sent to President Trump who is expected to sign it into law.
The application period for the PPP loan program was set to expire on June 30, 2020. The bill extends the application period until August 8, 2020. The extension provides more time for small businesses to apply for the remaining $129 billion of authorized PPP funding.
PPP Loan Forgiveness Updates
In the past couple of weeks, the Treasury Department and SBA have issued new Interim Final Rules and FAQs intended to reflect changes made to the PPP by the Paycheck Protection Program Flexibility Act of 2020 that was passed into law in early June (See “ Whitley Penn Tax Alert: Congress Passes Favorable PPP Loan Legislation ” dated June 4, 2020).
Some of the key provisions contained in the new guidance include:
- Allowing a borrower to apply for loan forgiveness before the end of the “covered period” during which it must spend its PPP loan funds in order to qualify for forgiveness. The early loan forgiveness application can be submitted if the borrower has spent all the PPP loan proceeds before the end of its applicable covered period. Special rules regarding salary and wage restoration requirements will apply to borrowers filing an early application.
- Clarification that employer health insurance contributions for S Corporation owners are not includible in payroll costs. However, retirement contributions for these individuals are includible.
- The steps to calculate the forgivable amount of compensation of owner-employees and self-employed individuals is provided for both the 8 and 24-week covered periods.
- Clarification that it is the responsibility of the borrower to provide an accurate calculation of the loan forgiveness amount. Lenders are expected to perform a good-faith review of the forgiveness calculation, but are not required to independently verify a borrower’s information if the borrower submits the required documentation supporting its forgiveness application.
Whitley Penn is continually monitoring the tax and economic developments related to the coronavirus pandemic and will send out additional alerts in the future. For previous tax alerts regarding the CARES Act and SBA loan programs, please see the Whitley Penn COVID-19 resource page.