CLA Livestream Series: PPP Forgiveness - Part One

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  • 5/19/2020
  • Virtual

Our CLA professionals will be providing updates regarding the Paycheck Protection Program (PPP) forgiveness loan.

Speakers:

In case you missed it:

 

Questions and Answers:

Is there any hope for diesel and gas being allowed as a utility?

They did not define transportation in the guidance.

If I pay a bonus as a severance to someone I will be letting go due to the lack of work, can I count the severance as payroll for PPP forgiveness?

Yes.

We are an ESOP and have bank debt for that. Is that interest forgivable, as it's not mortgage interest?

It appears it has to be a mortgage related to business debt on real and personal property.

I'm wondering if we can't go back to the well after the first round for more help!

As of right now, certain partnerships and seasonal employers can re-size the loan the IFR issued on May 13.

Are we penalized if we reduce hourly paid employees hours worked, but leave per hour wage the same?

There are specific rules now for FTE calculations - you divide hourly folks by 40 hours to get equivalents or you can count part time people as 0.5.  There are also separate tests related to wage reductions for hourly employees.  We recommend understanding the impact of both.

Does rent for trailer spots count as rent?

Rent and lease payments seem to qualify if the lease was in place before February 15.

New rules say alternate 8 week payroll period only for employers paying bi-weekly or more often. What about semi-monthly?

There are allowances for payroll that is incurred during the 8 weeks but paid in the subsequent pay period – no need for a “special” payroll per se.

Our office has been rented from an LLC my family owns for the past 7 years and we do not have a written lease. How would we document a verbal lease, historical payments, etc. for forgiveness?

That may be harder to document - you may need to talk to an attorney about documentation of the agreement existing prior to February 15.

Which cover period do you use if you have multiple payrolls such as monthly or biweekly?

There are allowances for payroll that is incurred during the 8 weeks but paid in the subsequent pay period – no need for a “special” payroll per se.

What if it was an existing lease that expired 2/29/20 and an extension was signed to extend AFTER 2/15/20?

We believe this would qualify if the terms were not substantially modified. There are still some holes - electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.

Do workers’ comp premiums paid to an insurance company count as payroll costs?

The guidance does not currently allow for those payments.

Has anyone seen a definition of transportation utilities...business vehicle fuel costs?

That was not addressed in the guidance.

Is a PTO buyout, with a bonus, allowable?

Bonuses and PTO appear to be allowed so long as they are under the annualized $100K limit per employee.

Are the payroll costs calculated on cash or accrual basis based on the language "Paid AND incurred" on the app?

The new guidance provides rules such that if it is incurred during the eight weeks and paid in the pay period immediately following the 8 week period, the expense is allowable.

If our full-time employees work 37.5 hours a week, would we just count them as 1 FTE?

The FTE count is 40 per week or you can do appears based on 40 hours with a simplified method for those that work 40/week counting as 1, and those that work less than that as 0.5.

How do you determine incurred 401(k) employer contributions for a pay period that began before disbursement date?

It has to be incurred inside of the 56 day window.

PPP proceeds received 5/15. Is it correct that June and July rent qualify for forgiveness?

Yes, you will get two months of rent.

We applied and received loans under two companies, and combined the loans are over $2M. Do we complete one forgiveness application or two?

You complete the application for each loan.

Have you seen any additional guidance on Schedule C operations?

Nothing yet on schedule C.

Can we use funds to pay FICA tax?

The employee portion of FICA - not employer portion.

Do HSA contributions paid during this 8-wk time period count as 'health insurance' costs towards the forgiveness app?

HSA payments do not count for forgiveness.

We laid off an employee that was part time and worked on the weekend for a commission. We let one of our full time employees take that commission work. Will this still be a reduction on our FTE?

It likely will count in the FTE calculation.

Does the company cell phone plan and conference call plan count towards utilities for forgiveness?

The application says telephone...it was a little vague.

If the EE's paid over $100K based on actual YTD earnings at the time of the loan or is it based on contracted pay rate to exceed $100K as projected?

Earnings have to be incurred during the period. The limit is based on $15,834 during the period.

What if you pay twice a month the Alternative Payroll covered period doesn't seem to apply -so do you need to do a special payroll for the days incurred but not paid before the 8 week period ends?

There are allowances for payroll that is incurred during the 8 weeks but paid in the subsequent pay period – no need for a “special” payroll per se.

Are guaranteed payments forgivable as payroll?

Yes.

When does the 8-week period begin? When the loan was approved, or when our bank account was funded?

The day you get the money.

Are we to only count FTE as employees that work 30 hours each week during the 8 week period, or an average of 30 hours a week for the 8 week period?

Appears based on 40 hours with a simplified method for those that work 40/week counting as 1 and those that work less than that as 0.5.

Part of my lease specifies that I need to pay all expenses in addition to rent and utilities. I'm paying for HOA, taxes, and insurance on the office. Are any of those forgivable?

Utilities under a service agreement qualifies. Therefore, the utilities subject to the lease agreement likely qualify.  The HOA, taxes and insurance likely do not.

Rent or lease payment - Is this included in equipment lease?

Yes.

What about a sole proprietor? Do I simply need to show an invoice paid during the forgiveness period to show the payroll activity?

If you are referring to a Schedule C, then there is no calculation, you just get a percentage of forgiveness.

Can we fund a separate account for future payrolls, and that funding be forgiven?

Likely not - the forgivable amounts would need to be paid directly to the employees.

What about real estate taxes paid directly, not included in rent?

I don't know how they would qualify – that is not a specified expense within the law

What about cell phones and garbage service?

This was not addressed on the application as to whether these are includable in utilities.

What does transportation refer to in the forgiveness language? Service vehicle fuel?

That was not defined in the application instructions – we will need more guidance on this.

Any potential guidance on the potential extension of the PPP 8 week period?

While the HEROES Act hints at this - we don't know if that will become actual legislation. The HEROES Act that was passed through the House will likely go through many iterations before becoming an actual bill.  It was largely political posturing.

How does the forgiveness affect a sole proprietorship?

It is a fixed formula and you get a fixed percentage forgiven.

Where can we find a copy of the loan certification document?

https://凯发k8官方旗舰店home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf

Are Staffing Companies allowed forgiveness for supplying temporary personnel to clients?

Those are likely included in the FTE count for the company paying for them.

We are a non-profit and own a college that is a separate legal entity with its own EIN. They secured a PPP loan. We later got one too. Is their loan aggregated with ours in terms of the $2M limit?

It would be a control/affiliation assessment.

Has there been any guidance on 凯发k8官方旗舰店home-based business. I use 14% of my 凯发k8官方旗舰店home for business purposes. Am I able to use 14% of my mortgage interest, utilities, etc. for forgiveness?

Nothing on this for Self-employed people is defined at this point beyond the payroll portion of the loan forgiveness.

I thought we could use the interest for bond payments?

The instructions appear to say that mortgage and loan interest need to be related to business debts on real or personal property.

We are a 凯发k8官方旗舰店home Health Non-profit. Can we offer hazard pay and have that fall under the PPP for the amount to be forgiven?

That sounds like a great idea, keep in mind the limit of $15,384 per person.

Do twice monthly payrolls qualify for the Alternative Payroll Covered Period or just biweekly and more frequent?

We believe so, the alternative selection just adjusts your starting point.

Since most, if not all employee med/dental policies are on a monthly basis, I assume 2 months payments would be eligible.

We believe that to be correct.

I have a single-member S-corp where I pay myself a $35K salary. I run payroll once per quarter. My loan amount is $7,500. Will there be an issue with forgiveness if I do one payroll run for $7.5K?

I would pay yourself the amount earned during the period, and talk to your accountant or attorney if you believe otherwise.

How is an “owner-employee” defined?

Think of an owner who owns equity (stock/units) and also receives "wages” (i.e. W-2/guaranteed payment).

Is the loan forgiveness application available? If so, where can we obtain it?

Yes, check the treasury website or the CLA page for a link.

MY PPP ends 6/10 can I count the entire cost of my 6/15 payroll against the PPP?

There are allowances for payroll that is incurred during the 8 weeks but paid in the subsequent pay period – no need for a “special” payroll per se.  There would be some proration to consider here.

Do costs to have a payroll processor qualify?

No.

Who determines whether affiliation applies for the $2.0M? Our lender? The SBA?

The college has its own board and governance independent of us, though we do produce annual consolidated financials. Both, there is a test that if you fail you have to prove no affiliation, start with your bank as they are the gateway.  We also recommend consulting your attorney to assist with application of the affiliation rules to your business.

Do utility costs that are incurred by employees working from 凯发k8官方旗舰店home count towards the forgivable utility costs?

It may depend on whether the company had a lease agreement prior to the February 15 deadline on such costs.  The more likely scenario is that there would be some type of compensation to employees for payments of these costs and it would possibly be allowable as a payroll cost.

How do the payroll cut offs work? We pay semi-monthly and received loan 4.15...our 8 weeks ends 6.9.

There are allowances for payroll that is incurred during the 8 weeks but paid in the subsequent pay period – no need for a “special” payroll per se. See the forgiveness application for examples.

What is the time window to submit application for forgiveness?

You can do it as soon as the 8 week runs, but there is no prescribed timeline for submission.

Can an organization take only a portion of forgiveness and not all forgiveness that it is eligible for?

You can just submit what you want forgiven.

Payment of a vehicle allowance via wages - is this counted as payroll cost or 'transportation' under utilities?

Normally that is a payroll cost.

For the 8 weeks, is it payrolls run in that 8 weeks or hours worked the 8 weeks?

Worked and then paid. See the guidance for payroll incurred during the eight weeks and paid during the next payroll run immediately following the eight week period.  There are some practical rules to alleviate timing issues.

What if we retain employees during the "covered period" but need to let employees go after that? Will forgiveness be in jeopardy?

There are no restrictions following the 8 weeks.

What if you add employees during this period?

It won't hurt your FTE count and you’ll likely have more payroll during this timeframe. Therefore, this should be fine.Any employees who resigned during the covered period do not reduce the Borrower’s loan forgiveness.

What if the employee resigned right before that period and left two weeks later?

Document with your HR department. Exceptions for FTE reductions include: fired for cause; voluntarily resigned; requested and received hours reduction.

If a business is dissolved the day after the 8 weeks, would that impact forgiveness?

Talk with your legal counsel.

If the loan amount is not fully used do we just pay back the portion that is not used? What are the repayment parameters?

You can pay it back immediately or over a two year window.

When can we apply for forgiveness? Can we apply immediately after the 56 days have passed since the distribution?

Yes, as soon as you have the application ready.

For utilities, can we count printers and software?

It is not clear.

Should we prepay our incurred SUTA liability if our 8 week period ends before the end of the quarter?

While not addressed, it would seem if incurred and paid post 8 weeks it would qualify if paid on the next payroll run, similar to the timing rules related to employee compensation that are addressed in the application instructions.

If I receive the Loan Agreement on April 29th, and my payroll pays on April 30th. Can I use the alternative 8 week period to start on April 16th for the forgiveness period?

Your alternative period would start after you get the money, not before.

What if our payroll consists of payments to independent contractors?

It has to be for W-2 wage employees.

What happens when a salesperson is going to earn commission greater than the $15,000+ amount in the 8 weeks?

You can pay them over the limit - the forgiveness will still be capped.

What qualifies for transportation?

We are not sure, no definition yet.

Is the forgiveness due once the 8 weeks has been completed?

There is no defined timeline.

What about paid but not incurred from the first payroll?

You can adjust the start date.

So we can pay a day early to include an extra week of payroll?

There are allowances for payroll that is incurred during the 8 weeks but paid in the subsequent pay period – no need for a “special” payroll per se.

If I receive money on April 29th, can I start the 8 week period on April 16th?

The 8 weeks starts the day the loan is funded.

If funding date is April 14th and two days later is the first payroll check date for the two weeks prior to the funding date, can I count that first payroll in the eight week period?

No, your amounts paid have to be incurred during the 8 weeks.

If a company received both PPP and EIDL Advance, does the advance reduce the amount of forgiveness of the PPP? It is asked for at the top of the application, but does not appear to affect the calculation.

We believe the advance reduces the forgivable portion of the loan based on the application and instructions.

Owners who are employees are not allowed, right?

Employees are limited to $100K or an annualized 8 weeks of 2019 salary.  That said, there are some special rules that limit the forgiveness of the owner-employee to either the 100K annualized limit or the 2019 salary.

If we do not use 75% of the loan for payroll, can we just pay back what we do not use? Our number of workers has substantially decreased because we are construction and we do not have as many projects.

You can pay back whatever you want. I would run the forgiveness calculation first.

Does the $15,385 only apply to owner compensation? We have employees paid under $100k/year but maybe over $15,385 for the 8 weeks (severance, bonus, etc. payments)

Owner compensation – it is limited to $15,385 during covered period or equivalent of 8 weeks of 2019 compensation.

Do employer contributions to HSA and HRA accounts count as health insurance?

HSA/HRA do not count.

Are cell phones considered telephones?

We do not have clear guidance, but we do not believe so.

Would text messages costs be treated as a utility cost?

It is not clear.

Can both my landline and cell phone bill be counted as utilities?

It is unclear if cell phones qualify - landlines do qualify.

Severance pay is allowable?

Yes.

Can you prepay rent?

You cannot pre-pay.

Our semi-monthly payroll paid on 4/15 and funded on 4/10. Do we need to prorate that payment for the 5 days after funding?

There are allowances for payroll that is incurred during the 8 weeks but paid in the subsequent pay period – no need for a “special” payroll per se.

Has workers’ compensation been addressed as a forgivable expense, since it's calculated on payroll?

Workers’ compensation doesn't qualify.

If transportation is a utility, does that include gas for employees and other related transportation expenses...oil changes, auto payments etc.?

Transportation is not defined.

So the payroll, we will have to split payroll periods but we can pay outside of 8 weeks. Am I understanding that correctly?

You can elect to use your next payroll date post funding, then you will only have a cut off at the end.

Is workers’ compensation being considered? This is not optional.

Workers’ compensation does not count.

Once you submit application, how long until you are notified if forgiven?

Banks will have 60 days to review your application.

For a Company that has most of its employees over a salaried wage of $100K, should we just use $3,846.15 for each pay period ($100K / 26 pay periods), since that is the max amount per person?

As long as you stay within the $15K limit, there is not guidance how the $15K is spread out over the 8 weeks.

Is trash hauling considered a utility?

The application is silent on trash.

Is office storage rental and copier lease considered rent as well as office space rent?

Rents on real and personal property qualify.

If we are paying for employees insurance, all of that can be added into the employees payroll correct?

Yes. How do you determine to use a covered period or alternative payroll period when you have both a semi-monthly and a bi-weekly payroll? You elect it on the application. You elect the alternative start date and then you have 56 days and a cut off at the end. You elect your incurred date to be post funding that will be in line with your next regularly scheduled payroll period.

If our payroll only gets to 70% is that portion still forgivable? There was some earlier discussion about 75% being a gateway. Please clarify. Thank you!

Yes.

Event materials

  • Webinar: PPP Forgiveness - Part One

For more information:

  • Heather Kloster
  • Marketing Senior