FAQs: Understanding the New Paycheck Protection Program

[UPDATED 5/26/2020]

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law on Friday, March 27, 2020. In addition to expanded unemployment benefits and tax changes, the CARES Act includes the Paycheck Protection Program (PPP), a significant opportunity for small businesses, nonprofit organizations and sole proprietors that have been negatively impacted by the coronavirus pandemic. Below is a summary of the PPP in the form of frequently asked questions, many of which were asked during WBL’s recent PPP webinars. Red text indicates new or updated answers.

(NOTE: the following information is based on a careful review of sources we believe to be accurate. The CARES Act is new, and some details and rules are still being developed. We will continue to monitor and pass along updated guidance as it becomes available. If you have any questions about the CARES Act or the PPP, please get in touch with your WBL contact.)


PPP Overview

What is the Paycheck Protection Program (PPP)?

The PPP is a program of government guaranteed loans and grants to provide short term liquidity to businesses so they can retain employees. The loans will not require personal guaranties or collateral and businesses may be eligible to have all or a portion of the loan forgiven. The underwriting requirements are very limited. The PPP is an enhancement of the Small Business Administration’s (SBA) existing small business loans through private lenders. The enhancements include additional benefits for small businesses and nonprofits and are fully guaranteed by the U.S. Government. The PPP is designed specifically to provide eligible small businesses immediate relief if they believe that current economic uncertaintyof the COVID-19 pandemic makes such a loan for their business necessary to support their ongoing operations, and are willing to certify to the lender to that affect.

What loans are covered by the program?

The PPP covers certain SBA guaranteed loans (COVID-19 Loans) made to eligible recipients/borrowers between February 15, 2020 and June 30, 2020.

What are loan terms?

The loan maturity date is two years from the date of origination. Principal and interest payments are  deferred six months and interest accrues during the deferral period. Interest is 1% per annum. The portion of the loan that is not forgiven will be due over the 18 months following the deferral period in equal payments of principal and interest.

Who is eligible to apply for COVID-19 Loans?

  • In general, small businesses, 501(c)(3) nonprofit organizations, tax-exempt veterans organizations and tribal business concerns with 500 employees or fewer, based on the average number of employees during the last 12 months (or possibly at the time of the loan application). Full-time and part-time workers are considered employees, but not contractors, whose principal place of residence is the U.S.  Additionally, some businesses with more than 500 employees could qualify if they meet the SBA small business standards which are based on their industry SAIC code. (See SBA guidance on small business size standards).
  • Certain hospitality businesses (e.g. restaurants, hotels) with more than 500 employees, but not more than 500 employees per physical location, as long as these businesses have a NAICS sector 72 code (accommodation/lodging and food services).
  • Individuals with self-employment income who file a Form 1040 Schedule C. However, partners/members in partnerships/LLCs may not submit a separate PPP loan application but should be included in a PPP loan application submitted on behalf of the partnership/LLC with self-employment income reported as a payroll cost up to the $100,000 annual compensation limit. If income for partners/members was NOT included as payroll costs in the loan request, you can apply to the bank for an increase in the loan based on the corrected payroll cost information. Click on the following link to review the SBA’s Interim Final Rule on Additional Eligibility Criteria. Note: Based on the most recent guidance, the maximum salary eligible for forgiveness for the eight-week covered people is $15,385 ($100,000 / 52 X 8).
  • A business that meets the SBA “alternative size standard” as of 3/27/20 — tangible net worth of < $15 million and average net income after taxes for two fiscal years before application for the PPP Loan was <$5 million.
  • There is no requirement to demonstrate an inability to obtain credit elsewhere but new guidance indicates that you must consider other sources of liquidity.


Is company revenue used to determine eligibility?

It is our understanding that company revenue is NOT relevant to eligibility under the program unless you are eligible based on the SBA size standards and, for your industry, the size standard is based on revenues vs. number of employees. However, as noted below, a company with substantial market value and access to capital markets will be able to make the required certification as to the necessity for the loan in good faith.

When does the eight-week covered period of the PPP Loan begin?

The SBA issued guidance indicating the eight-week “covered period” begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval. On 5/15/2020, the SBA released its PPP Loan Forgiveness Application which provides a new “alternative covered period” option for payroll costs only. The alternative covered period for payroll costs begins on the first regular payday after the disbursement of a PPP loan and continues for eight weeks (56 days). 

If a business has not been able to open yet, does the eight-week window move?

The eight-week covered period begins when the loan funds are received or on the first payday following disbursement of the PPP loan funds. There is no provision for moving it at this time, but it is being discussed.

Are holding companies, parent entities, PE or VC owned firms eligible?

The affiliation rules were released on April 3, 2020 and are posted here. Borrowers must apply the SBA Interim Final Rule on Affiliation. We do not see any exception for private equity or other companies owned by investors. The loan application requires a business to add a supplemental schedule disclosing number of employees for all related entities. The only exception may be for foreign-owned companies and international employees. Only U.S. resident employees would be counted toward the 500-employee count. A foreign owned company may not need to count their non-U.S. employees, which might allow them to qualify. However, recent guidance indicates all foreign affiliates should be included. This is unclear and we are awaiting further guidance.

Is there a limit to the amount of time a business will have access to the loan funds?

Funds must be drawn down within 10 days of SBA approval. You have eight weeks (56 days) to use the funds to qualify for forgiveness. New guidance states that payroll and costs incurred during the eight week period can be paid after the conclusion of the eight-week period. There is possibility this time-frame may be extended based on political considerations, but any extension will require congressional action. 

Will business owners have to personally guaranty the loan or provide collateral to secure the loan?

No. The COVID-19 Loans are non-recourse. No personal guaranty by business owners or principals is expected, and SBA will not require collateral as security for the loan.

Who are the lenders?

Both existing SBA certified lenders and new lenders meeting SBA’s lender qualifications may loan under the program. We expect almost all lenders to be able to make COVID-19 Loans. Front-end paperwork and underwriting requirements will be limited. To further simplify the application process, we recommend businesses contact their current banker/lenders first, as they are already familiar with your business. The SBA and lenders began accepting applications on Friday, 4/3/20 using the existing SBA organization. Note that many banks are restricting loans to existing customers, specifically focusing on customers of a certain size, and, in some cases, credit customers.

Can any FDIC lender be used for PPP loans?

The SBA will be allowing all banks and other lenders to participate in the program. However, banks and other lenders that are not currently SBA-approved lenders will need to apply to become SBA lenders to participate. In any case, we understand that the turnaround time will be quick.


New Guidance for Businesses with Adequate Resources

Must borrowers prove they have been negatively impacted by current economic conditions?

A borrower must attest that the current economic uncertainty has led to their need to borrow money for operations. There are no requirements that the business must close or prove the loss of customers or revenue.

All applicants must make a good faith certification as follows, keeping in mind that this is a representation to the federal government and could be subject to consequences if you intentionally misrepresented your situation:

  • That the current uncertain economic conditions makes the loan needed to support the ongoing operations
  • The funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments
  • The applicant does not have an application pending for a similar loan (e.g., an Economic Injury Disaster Loan) for the same purpose
  • The applicant has not received amounts under a similar loan for the same purpose during the period beginning on February 15, 2020 and ending on December 31, 2020


Are businesses with other adequate resources to support their ongoing operations eligible for a PPP loan?

PPP loans are intended to provide relief to small businesses that might not have access to capital markets. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere, borrowers still should carefully review the required certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.

Unfortunately, the SBA’s initial PPP guidance did not clearly define the nature or extent of the required impact to operations or the “current economic uncertainty” that would make the loan request “necessary to support ongoing operations.” On April 23, 2020, the agency issued new guidance clarifying that companies that are able to support their operations during the pandemic could risk consequences should they certify otherwise.

Lenders may rely on a borrower’s certification regarding the necessity of the loan request. You should consider the above guidance in applying for a loan and in your decision to keep the loan funds. If you conclude that you meet the guidance to qualify for a loan, we advise you to create contemporaneous documentation that supports your position. All PPP loans in amounts over $2 million, and other PPP loans as deemed necessary, will be subject to review by the SBA for compliance with program requirements before they can be forgiven. The SBA will select loans to review and may request additional documentation.

If my company receives a PPP loan, will that information be shared with the public?

Loan recipients are unlikely to remain anonymous as borrowers can be made public under the Freedom of Information Act. The SBA has indicated that they do not intend to disclose the borrowers but they may be required to do so. 

What can my company do if it applied for and received a PPP loan before the new SBA guidance made it clear that companies with access to liquidity were not intended loan recipients?

The rush to apply for the PPP loans seems justifiable, given the limited amount of funding available, the sudden economic decline brought on by the pandemic and the ambiguity of the available guidance. However, businesses that have received PPP loans and are later found to have not qualified under the eligibility rules could be required to repay their loans. We recommend that businesses carefully consider whether their circumstances fall within the spirit and intent of the PPP. It is critical for recipients of PPP funding to maintain complete and accurate documentation to support their eligibility for such funding, the specific use of these funds, and their qualifications for forgiveness under the terms of the program. The thoroughness and accuracy of this documentation will greatly minimize the potential that you will have to repay the loan and not be qualified for forgiveness. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving SBA notification, SBA will not pursue administrative enforcement or referrals to other agencies. 

How will the SBA review borrowers’ required good-faith certification regarding the necessity of their loan request?

The SBA, in consultation with the Department of the Treasury, has issued guidance that any borrower and its affiliates that received a PPP Loan for less than $2 million will be deemed to have made the required certification because borrowers with loans below this threshold are generally less likely to have access to adequate sources of liquidity than borrowers that obtained larger loans.

If I repaid my PPP loan by the safe harbor (May 18th) deadline, am I still eligible for the employee retention credit?

Yes. If you repaid your loan by May 18, 2020 you will be treated as though you never received a PPP Loan.


PPP Loan Amounts and Permitted Uses

What amount can be borrowed under the program?

Applicants can request loans up to $10 million, based on a formula that analyzes the average monthly payroll of the applicant during the 2019 calendar year or the 12 months prior to the application. For seasonal businesses, borrowers may use average monthly payroll for the period between 2/15/19, or 3/1/19, and 6/30/19. An applicant that was not in business from 2/15/19 to 6/30/19 may use the average monthly payroll costs for the period 1/1/20 through 2/29/20. The average monthly payroll cost is multiplied by 2.5 to determine the loan amount. In addition, applicants can roll into the loan the refinancing of an Economic Injury Disaster Loan (EIDL) obtained after January 31, 2020.

Example: AnyCo, Inc., an eligible borrower, had average monthly payroll costs of $200,000 during the past 12 months. AnyCo Inc. would be eligible for a loan under this program of up to $500,000 ($200,000 X 2.5). In other words, you are requesting a loan to cover 2.5 months of payroll (including benefits).

For partnerships and LLCs, the loan amount calculation method depends on if the partnership/LLC has employees. 

Self-employed with no employees:

Net profit from Schedule C, line 31*  / 12 = average monthly net profit 

(Average monthly net profit X 2.5) + any outstanding amount of an EIDL from between 1/31/20 and 4/3/20 to be refinanced**  = PPP loan amount

Self-employed with employees:

[Net profit from Schedule C, line 31* + (2019 gross wages and tips paid to U.S. resident employees – payments to employees over $100,000) + 2019 non-owner employer health insurance, retirement contributions, state and local payroll taxes)] / 12 = average monthly amount

(Average monthly amount X 2.5) + any outstanding amount of an EIDL from between 1/31/20 and 4/3/20 to be refinanced**  = PPP loan amount

*If more than $100,000, use $100,000; if zero or less, you are ineligible for a PPP loan. Note that Benefits and Plan contributions are not added in for a self-employed person since the net profit from Schedule C is prior to deducting those expenses.

**Less any advance under EIDL COVID-19 which does not have to be repaid.

What are the permitted uses/authorized purposes of the COVID-19 Loan proceeds?

The amount borrowed may be used for:

  • Payroll costs
  • Mortgage interest (but not prepayments or the payment of principal)
  • Utilities
  • Rent
  • Interest on other debt incurred by the borrower before 2/15/20


What are payroll costs?

Payroll costs INCLUDE:

Salary, wages, commission or similar compensation including self-employment income paid to partners/members 

Vacation, parental, family, medical, or sick leave

Group health care benefits, including insurance premiums

Retirement benefits

State or local taxes on compensation to employees


Payroll costs EXCLUDE:

Compensation for employees and self-employment income to partners/members that is in excess of an annual salary of $100,000. This only applies to cash compensation (including commissions and bonuses) and not to non-cash benefits including employer contributions to benefit plans, group health costs including insurance premiums and state and local taxes assessed on compensation. Based on the most recent guidance, the maximum salary eligible for forgiveness for the eight-week covered people is $15,385 ($100,000 / 52 X 8).

Compensation to a non-resident.

Sick leave or qualified family leave under the recently enacted FFCRA.

Employer’s share of payroll tax.

Note: The most recent guidance published on 4/6/20 clarified there is no need to back out payroll taxes withheld in computing the eligible payroll for the loan amount or the amount of the loan forgiveness.

How are annual salary, benefits, etc. calculated? Does “salary” include bonuses, commissions, insurance, or other benefits?

It is our assessment, based on careful review of all guidance issued to date, that “compensation” includes salaries, bonuses, hazard pay, commissions, and all cash compensation that is included in an employee’s W-2 or treated as self-employment income by a partner/member. If commission draws are treated as compensation vs. a receivable, they would also be included. Workers’ compensation insurance is not included since it is not a benefit cost. For S corps, only the amount treated as compensation can be included. If your business is self-insured, we believe you would consider total costs paid on the self-insurance program to determine your total benefit costs.

Can severance pay and bonuses be included with covered (forgivable) compensation?

Yes, severance pay, hazard pay and bonuses are considered part of employee compensation and also should be included in the cash compensation cap.

Will the PPP cover overhead costs if there isn’t a typical lease arrangement?

The guidance says funds can be used to pay “rent” and any leases entered into before 2/15/2020 can be included, as well as utilities and certain interest payments. We have no other information at this time. 


About the Compensation Cap

Is it true that employees with salaries >$100,000 would not be included in the calculation for the loan forgiveness amount?

Per the SBA’s 4/6/20 FAQ document, the $100,000 cap applies to cash compensation, not to non-cash benefits such as employer contributions to defined benefit plans, group healthcare coverage premiums, state and local tax payments on employee compensation. Based on the most recent guidance, the maximum salary eligible for forgiveness for the eight-week covered people is $15,385 ($100,000 / 52 X 8).

If an employee was earning more than $100,000 per year before the covered period, can you reduce their pay to the cap ($15,385) during the covered period and use forgivable PPP Loan funds for their compensation, or are employees earning more than $100,000 excluded from payroll calculations?

Yes, you can pay any employee up to $15,385 during the covered period, regardless of their pre-PPP Loan compensation, subject to the limitation discussed below.

Can you pay all your employees $15,385 for the eight-week period even if their average earnings is less?

Yes. However, there is an exception for employee/owners and partner/members subject to self-employment income. The most recent guidance issued in connection with the forgiveness application requires that compensation eligible for forgiveness to employee/owners and partner/members cannot exceed the annualized amount paid in 2019. The amount that can be included in the forgiveness calculation is limited to 8/52 of 2019 compensation. Therefore, the compensation rate of owners cannot be increased above the prior year level as a way to increase the amount eligible for forgiveness. 

Since the compensation limit is $100K, do payroll taxes and other benefits that are incurred by the amount of pay have to be prorated downward accordingly?

You can use $15,385 as payroll during the eight-week period. The other benefits don’t have to be prorated down. Payroll taxes are ignored, other than state and local payroll taxes paid by the company.

What if your work force comprised of salespeople under commission arrangement and with the shelter in place mandates they cannot travel, and sales of the company are impacted? Can we use the funds to true-up what their commission would have been?

Yes, you can.


For Self-employed Individuals, Partners, Owners and Others

How will the PPP calculate “payroll” for contractors, partners, owners or those who aren’t paid wages, per se?

The new guidance indicates that compensation is based on amounts paid or incurred, so amounts not paid during the eight-week period can be included if they are paid on or before the next regular payroll date. The guidance issued on April 2, 2020 clarified that contractors should NOT be included. If an owner is paid compensation as a W-2 employee, the owner would be included in the employee count and payroll costs, subject to the cap and the 2019 compensation limits discussed above. The SBA’s Interim Final Rule on Additional Eligibility Criteria clarified that payments to partners/members should be included in the payroll compensation utilized to apply for a PPP loan on behalf of the partnership/LLC. A PPP loan obtained without including the partner/member income on the application can be increased if the partner/member compensation is reported as self-employment income. It is fairly clear that S corp. distributions do not qualify as payroll costs. 

Are there special considerations for temporary agencies or companies that use temp workers for seasonal work?

For the PPP, “employees” refers to individuals employed by and receiving a W-2 from the entity, so temporary employees hired through a contract with a temporary agency would not count toward a business’s employee count or payroll costs. However, if the company is using a professional employer organization (PEO) or similar arrangement, the employees paid by the PEO would count as employees and their payroll costs would be included in the company’s payroll costs. There are special rules for determining the payroll costs and the comparative period to use when you have seasonal employees. Also, since the average number of employees is used to calculate the number of employees for the purpose of the PPP COVID-19 Loan, the impact seasonal or temporary employees may have on your employee totals would be reduced through the averaging process.

Can salary paid to owners of a company be forgivable? For example, in a partnership where there are two partners who work the business, take weekly distributions and receive K-1s, how do you compute the loan forgiveness amount? Can you include their health insurance and SEP IRA contributions as well?

Assuming the distributions are treated as self-employment income distributed from an LLC or Partnership, the distributions and the related benefits would be treated similar to salary, subject to the base cap and the cap based on 2019 income. This is not the case for S corps.

Can a business owner pay for home office utilities with PPP Loan funds and have those costs forgiven?

Yes, if the owner typically deducts home-office utilities on their income tax returns, these can be paid for with forgivable PPP Loan funds.

For self-employed people, the loan amount was $20,832 based on $8333 per month salary x 2.5. but if my allowable salary is $15,385, that is 73.9% of the loan, so I can’t meet the 75% rule. I can’t use the loan for other purposes since I don’t pay for health insurance. Any ideas on how to handle?

Health insurance does not qualify for forgiveness for a self-employed person since the replacement income calculation is not net of such. The SBA realizes that self-employed people will probably not get full forgiveness, but they specifically state in their guidance that such is in accordance with the bill and acceptable.


What Are Forgivable Uses of PPP Loan Funds?

Can any portion of the COVID-19 Loan be forgiven in the form of a government grant?

Yes. All or a portion of the principal amount of a COVID-19 Loan is forgiven based on the amounts incurred and paid by the borrower during an 8-week covered period (beginning on the date of disbursement of the COVID-19 Loan) using a formula that includes:

  • Payroll costs (as defined in the loan application)
  • The following non-payroll costs which may not exceed 25% of the forgiven amount:
    • Payment of interest on covered mortgage obligations on real or personal property incurred before February 15, 2020
    • Payment of rent obligations covered under a leasing agreement in force before February 15, 2020
    • Any covered utility payment (electricity, gas, water, transportation, telephone or internet) for which the service was begun before February 15, 2020

Example: AnyCo Inc. borrows $500,000 under the loan program. Its covered period begins on April 15, 2020, and during the 8-week covered period it incurs and pays qualifying expenses as follows:

Payroll costs:                  $400,000
Utility expenses:             $20,000
Rent expenses:               $25,000
Total:                             $445,000

 AnyCo Inc. is entitled to have $445,000 of the principal amount of the COVID-19 Loan forgiven.


Are there additional limitations on loan forgiveness?

Yes. The amount of loan forgiveness can be reduced if an employer:

  • Reduces the number of full-time equivalent (FTE) employees during the covered period more than it would during a comparable period in other years.
  • Reduces compensation by 25% or more to employees who earn less than $100,000 per year. This is based on a per employee basis, not the aggregate payroll.

However, salary or FTE reductions will not limit loan forgiveness if salaries and/or FTE employees are reinstated by June 30, 2020. If you have already terminated employees, you can hire them back (or others) and get credit for them. If a borrower makes a good-faith offer to rehire an employee during the covered period and the employee rejects the offer, the borrower’s loan forgiveness will not be reduced. Employees that are fired for cause, voluntarily resign, or voluntarily ask for and receive reduced hours during the covered or alternative covered period will not reduce a borrower’s forgiveness. 

How do you compute full time equivalent (FTE) employees before the loan and after the eight-week period? What dates are used after the eight-week period? An average, at the beginning, at the end or on June 30th? Are part-time employees included in the FTE calculation?

The SBA released guidance on 5/15/2020 that FTEs should be calculated based on a 40-hour work week. The SBA provided several optional time frames for determining the average FTE that you will use to compare your FTE rate during the covered period. We recommend you use a loan calculation tool, such as the one we have on our website, to compare the options and select the one that works best for your company. Part-time and full-time employees must be included when calculating your FTE headcount.

What do we do if a laid-off worker doesn’t want to return? What if layoffs were planned before the COVID-19 outbreak? How long does a company need to retain a re-hired employee?

You do not need to hire back the same employees who were laid off. The rule is based on number of full-time equivalent employees (FTEs) not on specific individuals in specific roles. If you have laid off employees due to COVID-19 issues, you can rehire an equivalent number of FTEs by June 30 and not be subject to a reduction in loan forgiveness. Borrowers’ loan forgiveness amount will not be reduced if the borrower made a good faith, written offer of rehire a laid-off or furloughed employee, and the employee’s rejection of that offer is documented by the borrower. An employer is required to inform the applicable state unemployment insurance office of the employee’s rejection of its offer for reemployment within 30 days of rejection of the offer AND to include these employees in the FTE calculation. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation. 

Can you use PPP loan funds to pay new hires?


If you layoff someone and then decide to hire another person to take the role, can that amount be included in the total amount considered for forgiveness?


If during the time covered by the PPP loan an employee voluntarily resigns, will this affect the FTE calculation?

No. Under the most recently issued guidance, an employee who voluntary resigns, voluntary requests a reduced schedule, or is terminated for cause can be counted as a FTE at the same level as previously indicated. The borrower must retain records that document that the employee fits these exceptions.

What happens if a worker is only contracted to work a portion of the eight-week covered period (i.e. schools which end in May or June)? Is there any guidance on whether or not to include them in this calculation?

The guidance in connection with the loan forgiveness calculation addresses this situation in the calculation.

Is the amount of forgiveness included in taxable income to borrowers?

No. However, the IRS issued Notice 2020-32 on April 30th indicating that expenses paid with PPP funds which are forgiven under the program are not deductible. Arguably this is a backdoor way of taxing the amount of forgiveness. Click here for more information. There is a bill proposed in the Senate to reverse the impact of this IRS Notice.

Does the interest on the loan qualify for forgiveness?

The interest on a PPP loan does not qualify for forgiveness since the maximum forgiveness is limited to the “principal” of the loan. However, the supplemental guidance related to the forgiveness application states that the SBA will pay the interest to the bank on the forgiven portion of the loan.

For PPP loan forgiveness, do payroll costs have to be incurred or paid?

The CARES Act and PPP Loan guidance appeared to include the confusing instruction that payroll and non-payroll costs must be incurred AND paid during the covered period to be considered eligible for forgiveness. The SBA’s PPP Loan Forgiveness Application and related guidance clarifies that payroll and non-payroll costs incurred but not paid during the covered or alternative covered period are still eligible for loan forgiveness if they are paid on or before the next regular payroll or billing date. It is not totally clear if it is possible to include more than eight weeks of payroll based on payroll paid and incurred during the period if the alternative covered period is not used. We are hopeful that further guidance will be issued. 

Can PPP loans be used to cover medical, dental, vision or other health insurance premiums paid by the employer during the covered period? What about life insurance, short- or long-term disability insurance premiums or 401(k) management fees?

Health insurance (including dental and vision) are forgivable costs. Life, short- and long-term disability insurance, payroll service costs and 401(k) management fees are not considered forgivable expenses.

Are employer-paid retirement benefits (i.e., 401(k) matching contributions) considered in the forgiveness calculation?

Yes. They are included in payroll costs but not subject to the $15,385 cap.

Will 100% of the 401(k) match be eligible for forgiveness even if it includes a match for employees making more than $100,000?

Yes, we believe so. However, the most recent guidance indicated that no additional forgiveness is provided for retirement or health insurance contributions for general partners/members and self-employed individuals. 

Can PPP Loan funds be used to pay employer’s state income or unemployment taxes?

PPP loan funds can be forgiven if used for paying an employer’s state or local taxes on employee compensation but not for an employer’s state withholding tax.

Are mobile phones or software subscriptions/licenses included as utilities?

Mobile phone costs are considered utilities and therefore forgivable, but software subscriptions or licenses are not.

If payroll is incurred during the eight-week covered period but the actual pay date is a few days after the end of the covered period, can PPP Loan funds be used for that payroll and be forgiven?

Yes. New SBA guidance states that payroll and non-payroll expenses must be incurred during the covered or alternative covered period and can be paid on or before the next payday or billing date, even if this occurs after the end of the covered/alternative covered period. 

If the loan is funded on 5/1, and we have a pay day on the 5th covering 4/16 to 4/30, is this payroll going to be included in the analysis for forgiveness?

Yes, the most recent guidance clarified that payroll paid during the eight-week covered period qualifies for forgiveness even if it was incurred prior to the covered period. Payroll is considered paid on the date an ACH credit transaction is initiated or the paycheck is distributed.

Can you pay the fiscal year 2020 retirement benefit if you usually pay it after the FY ends?

This is still not completely clear in the supplemental guidance. What does appear clear that you can obtain forgiveness for any retirement benefit that has been incurred during the eight-week period if it is paid by the next payroll period. What is unclear is any retirement benefits paid related to the periods prior to the covered period. The forgiveness application includes retirement benefits paid during the covered period. Based on the wording in the application, you may be able to justify paying the 2019 contribution, if not paid yet, but there is more uncertainty on that. We are advising clients that it is better to pay it if you have excess loan capacity, since you definitely will not get forgiveness if you don’t pay it. Possibly 8/52 of the amount may be allowable based on future guidance. Seems like you should be able to get some forgiveness either way, and unless they clearly say you cannot, we recommend you try it.

Can PPP Loan funds be used to pay raises that had been planned but were not paid when salaries were frozen?

Yes. That should be acceptable for forgiveness purposes.

If the expenses covered by PPP are not deductible, will we have to reflect that on the P&L as misc. income?

Show the expenses incurred in the P&L where you would typically record the expenses. Then you will book the debt forgiveness as other income and you can provide your accountant with the detail of the expenses that were reimbursed; they can handle for the tax return and adjust accordingly. We are still hopeful that Congress will overturn the position of the IRS that expenses paid with loan proceeds that are forgiven are nondeductible.

Are payroll processing fees considered forgivable expenses?


Can funds be used to pay a 1099 as long as that person has not received his/her own PPP?


Can we use the entire loan on payroll/salary or is it capped?

At least 75% of the PPP loan must be used on payroll costs. The only cap is the amount of the loan so all the loan proceeds can be used for payroll costs and should be forgivable.

What if during the covered period your payroll actually goes up due to more employees or higher wages. Does the amount forgiven go up as well?

Yes. But only up to the loan amount.

If we are currently deferring the SS payroll tax, when do we have to stop once loan is received or when it is forgiven?

Our understanding is that the employer must catch up the payroll taxes that were deferred when the loan is forgiven, but the guidance is not clear.

If the office is closed due to state mandates, can we pay people to sit at home and not work, AND they draw unemployment insurance (UI) as long as they report the PPP funds to UI?

If an employee is being paid by his/her employer, that employee is not eligible for UI. If employee pay is reduced, then that employee may be eligible for UI.

Can I bring family members on the payroll to make up for the loss of staff?

Yes, if they are working in the business. However, if an owner, the salary will only qualify for forgiveness to the extent of the pro rata period of the 2019 compensation. There is no guidance as to attribution rules for family members of owners.   

Can you pre-pay likely profit-sharing plan contributions that ordinarily would not be made until sometime next year?

We believe so, if the cost has been incurred and you are simply depositing them earlier than normal.

Can PPP funds be used for “hazard” pay? Can the funds be used for back pay for March and April when the business was closed?

They can definitely be used for hazard pay based on the most recent guidance. And it seems like they can be used to catch up pay subject to the cap per person during the eight-week period.

Can PPP Loan funds be used to pay the interest on another non-mortgage loan?

Interest on debt incurred prior to 2/15/20 can be paid for using PPP funds but it is not  eligible for forgiveness unless it is mortgage debt.


International Companies

How will the PPP apply to companies that are partially or wholly owned by foreign interests?

We believe foreign owned companies are eligible for the program (the original loan application indicated they were not, but the updated application doesn’t include that question). See comments above under holding companies addressing affiliated companies being included in the number of employee count.

If the company is a U.S. corporation that is owned by an international group with more than 500 employees worldwide, but only 100 employees are in USA and at least 90%+ are U.S. citizens or residents, are the foreign nationals working outside the U.S. included in the employee count for PPP Loan purposes? If so, do we need to repay back the loan because we should not qualify as an international company?

SBA guidance is to count all U.S.-based employees of a company. Recently issued guidance also refers to counting employees of foreign affiliates. It is not clear at this time if this includes all employees of foreign affiliates or just those based in the U.S.


Managing PPP Loans

Does the SBA require borrowers to open a new account for the PPP Loan funds?

Creating a separate bank account is a best practice that we recommend. Some lenders may require a separate account be established (especially if it is a new relationship) as a condition of the loan so they have an account to fund, but it is not required by the PPP or the SBA.

What happens if some or all of a PPP Loan is NOT forgiven?

Any portion of a PPP loan that is not forgiven is considered a loan at 1% interest and must be repaid in two years from the date of funding, beginning on the seventh month after funding typically in equal payments of principal and interest.  All payments are deferred the first six months.  

If I can’t open my business. would I be better repaying the PPP loan and taking tax credits to use when we can reopen?

Possibly. If you don’t incur any compensation, you won’t be eligible for forgiveness. If not forgiven, the PPP is a low interest (1%), two-year loan.

The PPP Loan application did not ask for FTE. It asked for number of employees. How will the FTE come into play? 

A borrower has to calculate the total number of employees, including part-time employees, when determining their employee headcount for purposes of the loan eligibility threshold. For example, if a borrower has 200 full-time employees and 50 part-time employees each working 10 hours per week, the borrower has a total of 250 employees. For loan forgiveness, FTEs will be used to determine the extent to which the loan forgiveness amount will be reduced in the event of workforce reductions.

If we return 100% of our PPP Loan now, will we have to pay interest?

Yes, we believe so.



Will nonprofit organizations be audited if they receive a PPP loan?

If a nonprofit organization receives a loan over $2 million, we expect that they will be audited just as the for-profits businesses.


The PPP and Other Relief Programs

Will use of a COVID-19 Loan impact the availability of other benefits under the CARES Act?

Yes. For example, if an employer might qualify for employee retention credits under Section 2301 of the CARES Act, the employer will not be eligible for the Section 2301 credit if the employer received a COVID-19 Loan. Similarly, if a taxpayer has any amount of a COVID-19 Loan forgiven under the forgiveness provisions, that taxpayer may not elect to delay payment of payroll taxes under Section 2302 of the CARES Act. Other limitations may also apply.

Are other emergency loans available?

Yes. The SBA still offers its existing Economic Injury Disaster Loans (EIDL) which is available for federal disaster declarations. EIDLs can provide an immediate (within three days) $10,000 advance that does not have to be repaid. Even if the loan is not approved, you can often retain the initial advance. You cannot take a loan under both programs, but you can roll an existing EIDL loan into a COVID-19 Loan. EIDL loans have stricter underwriting (compared to COVID-19 loans) which may cause delays in approval. Borrowers cannot maintain an existing EIDL if the funds are for the same purposes as the PPP.

Is one type of emergency relief for small businesses preferable to another e.g., an EIDL vs a COVID-19 Loan)? If a company pursues multiple sources of emergency relief, what timing considerations should be considered?

A business with an EIDL advance would be eligible to receive a reduced COVID-19 Loan (by the advance loan amount). A business may have both loans outstanding, but not for the same purposes. If a business applies for a COVID-19 Loan for the same purpose as an existing EIDL loan, the outstanding EIDL loan must be rolled into the COVID-19 Loan. In this case, the business would be allowed to exceed the $10,000,000 loan limit on the COVID-19 Loan. Businesses may have outstanding commercial or SBA loans outstanding and still qualify for the program. We are unsure at this time if the EIDL advance is forgivable, but it appears you do not have to repay it if you do not obtain a loan.

Can a business receive a COVID-19 Loan and still participate in other relief elements of the CARES Act?

A business cannot participate in the CARES Act tax deferral program if it receives a COVID-19 Loan. We believe that businesses that have begun participation in the tax deferral program and then receive a COVID-19 Loan would probably stop deferring taxes and pay taxes going forward, but we don’t have specific guidance on such. It appears taxes would need to be caught up to participate in the forgiveness program. Churches, synagogues and other religious organizations are qualified to participate if they meet the other rules regarding number of employees. The recently released affiliation rules indicate that religious organizations do not have to count employees of their affiliates to qualify for the COVID-19 Loan.


How can we keep up with the changing guidance?

Please check WBL’s website frequently for regular updates (wblcpa.com). Subscribe to WBL’s blog to receive an email when new information is posted.

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WBL is here to help. We can help businesses understand their potential loan amount and loan forgiveness under the PPP and assist with sources for these loans. We are also a resource for employers considering if or when to lay off or furlough workers, when to apply for the loans, and when to rehire workers when business circumstances improve. Please email or call your WBL contact to discuss your needs or questions.

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