CLA Livestream Series: PPP Forgiveness - Part Four

Woman Gesturing by Laptop
  • 5/28/2020
  • Virtual

Our CLA professionals will be providing updates regarding the Paycheck Protection Program (PPP) forgiveness loan and travel industry with special guest, Bruce Himelstein.

Speakers:

In case you missed it

Questions and answers:

Does an owner who is a W-2 employee get included as part of Table 1 and/or 2, or under compensation to owners?

We think you should include it as part of Table 1 or 2.

Is it legal to pay out the accrued vacation pay for each employee?

Remember that it's incurred and paid up to the annualized $100,000 limit during the period.

How does the annualized $100,000 work for over compensated employees that had their overage deducted when calculated?

You would use the wages paid up to that annualized limit when you apply for forgiveness.

For utility forgiveness with the incurred or paid change, does the invoice date have to fall within your covered period (i.e. invoice date of April 7, paid April 17 with a loan date of April 10?

It's the paid date.

Is a PPP loan 100% forgiven if 90% of the funds were used for payroll? Or does the remaining 10% have to be spent on non-payroll costs like rent and utilities?

You would need to spend the remaining 10% on allowable non-payroll expenses.

Any clarification on Economic Injury Disaster Loan (EIDL) loans over $25,000 and a proposed 30 years of having to submit audited financials annually?

Term sheet does allow the Small Business Administration (SBA) to require certain financial statement requirements, including annual reviewed financial statements.

If we paid our April rent late (after we received PPP funding), can we include the full amount of the rent for April/May/June (PPP covered period ends 6/20)?

Yes,

How do we account for grant-funded people in the full-time equivalent count and calculating payroll to be forgiven and still tie to payroll reports and the forgiveness form?

You won't get forgiveness for the same amounts paid with grants.

When is the forgiveness application due to the lender?

Unless the lender has specified a deadline in your note language, there is not a set deadline for borrower application for forgiveness.

We would like to give our staff a small bonus for working at 凯发k8官方旗舰店home and also being front line workers, would this count as PPP payroll?

Yes, so long as it's paid and incurred during the period and doesn't exceed the $15K limit.

Are O-1 visa holders excluded even if they are hired as W-2 employee and are full time employees based in the US?

See the FAQs which address what constitutes “principle place of residence in the U.S.”  The definition is based on the internal revenue code.

What is an allowable amount?

Payroll up to the annualized $100,000 limit.  In the current forgiveness rules, this translates to $15,384 in the eight-week covered period.

Where can i get a copy of the most recent CLA PPP forgiveness worksheet?

/resources/tools/get-the-help-you-need-with-ppp-loan-forgiveness-2020

Is there a due date for filing the application for forgiveness??

Not unless specified by the lender in your note.

When do you apply for forgiveness?

Any time after the end of your covered period.

I received my PPP Loan May 13. Payroll is twice monthly (May 15 and May 31). Can I use the 15th as date beginning for covered period?

Yes.

Can PPP be used for safety equipment?

No.

Why does the forgiveness application have a check box for over $2,000,000?

$2 million is threshold for SBA full review during forgiveness process.

Has there been 

Still lots of questions re: utilities. No recent clarifications.

Do we know yet if cell phone bills are considered a utility?

No, new guidance.

We got the PPP funding on May 4th, but paid health May 2020 health insurance premiums on April 27th. Can I include May health insurance costs in the PPP forgiveness calculation?

I'd wait until there's something worked out in the Senate.

If our revenues have not been currently impacted, is forgiveness not an option?

Forgiveness would still be possible.

Are employees through a temp agency covered under the payroll expenses?

Yes.

If our revenues have not been current impacted, but my employee hours have increased significantly because of COVID-19 precautions, do we still qualify for forgiveness?

Yes.

What does PPP stand for?

Paycheck Protection Program

What you missed:

Boyd: Good afternoon to our CLA family members, clients, community partners, and friends. Welcome back to our livestream and Part four of our forgiveness application discussion. (timestamps of topic discussions included in parentheses):

Today’s episode will include:

  • Interim Final Rules & Paycheck Protection Program Forgiveness (14:00 – 21:15)
  • Points of the House bill (21:30 – 25:50)
  • Travel and Hospitality Impact from Covid-19 (4:20- 13:45)

As we mentioned in our Tuesday session: last Friday night, we received some new interim final rules (IFRs) and additional information that we’re going to cover today. The first of the two interim final rules (IFR) consists of 26 pages that builds upon what we learned from the Loan Forgiveness Application and Instructions. While it cleared up several items, it also resulted in several questions. A second set of IFR, also released on May 22 consisted of 19 pages, and provides guidance with respect to the Small Business Administration (SBA) loan review process as well as borrower and lender responsibilities related to forgiveness. We also have some breaking news. You may have heard that the House passed a bill today to ease restrictions on the PPP. The Senate also has a similar bill pending that has not passed. We will cover some of the points of the House bill today but remember, it has to go through Senate still and then be signed before we can fully execute on any plans.

Today, we’re bringing in the former Chief Marketing Officer of Ritz-Carlton brands who also serves as an advisor to CLA. He will be discussing the travel and hospitality impact of the COVID-19 relief packages.

Let’s start today with Bruce Himelstein. Bruce is a globally recognized brand marketing expert with over 30 years in the travel and hospitality industry serving some of the most prestigious domestic and global hospitality brands. As I mentioned earlier, he is the former Chief Marketing Officer of Ritz-Carlton and also serves as an advisor to CLA.

Bruce, thanks for joining us today and welcome to the livestream. We’ve called on you to discuss the hotel and travel industry in times of COVID-19. We know that it is one of the biggest industries and is key to indicating where the economy is headed and it will be helpful in stimulating economic recovery. Can you please give us an update on what has happened in this space since March as well as what you anticipate in the coming months?

Himelstein: This situation is different. It’s not going to be a pendulum swing. It is going to be incremental movements towards a pre-COVID-19 level. We are starting to see signs of optimism.

  • The airlines are reporting a reduction of cancellations and an increase in bookings.
  • Yesterday, Disney announced they will be opening in July and Universal studios is opening in two weeks.
  • Expect hotel rates to maintain. The owners are spending up to $400,000 of incremental costs just to get the hotels ready with plexi-glass, sanitizing equipment, and masks. The operating and staffing models will change, and the business will take a bit to shift back.

Boyd: What are some of the projections you are seeing by segment – leisure, business travel, group meetings, for example?

Himelstein: Hotels have three segments within their marketing plan.

  • Leisure travel: Starting to show signs of strength, seeing people want to travel again, the mode of travel is shifting. The drive market is getting re-defined.
  • Business travel: The drive market is starting to apply to business travel. There is still a strong percentage of people who want to have in-person meetings with clients. We think the business travel trend will come back Q1 of 2021.
  • Group/Meeting Segments: People who gather for meals, meetings, or to go golfing, this segment has been hit the hardest.
    • Instead of eight people at a table, there will be only four to six people
    • No buffets, grab and go meals
    • Reserve a time to go into fitness center
    • Reduction of chairs around pools

The protocols are going to change. The good news is the groups that cancelled their meetings are starting to rebook in 2021. The industry is self-policing, so there are standards across the industry that everyone has to follow.

Boyd: Finally, what is the impact of these changes on any other ancillary businesses?

Himelstein: A lot of people in the travel industry are being furloughed, as well as speakers, production or A/V companies, tour business, and rental cars. It’s a trickle-down effect. These folks will come back incrementally.

Boyd: Thank you, Bruce. I’d like to pivot the discussion back to the topic that is taking so much focus for our clients and for you in the audience, and that is the PPP forgiveness application. We are bringing back our friends Jack Rybicki and Rick Krueger, who have been at the forefront of this for CLA. Welcome back guys!

Rick, let’s start with you. We have a lot of requests to talk through the time periods involved and how that impacts forgiveness. Could you spend your time today doing an even deeper dive into this?

Krueger: That sounds great, Leslie. Let’s start with one of the examples the SBA gave us in last Friday’s IFR. Then we can pick it apart a bit and understand what it means.

One of the examples they gave was for a covered period that starts June 1 and ends July 26. During that eight-week period, the borrower pays its May and June electricity bill. After the eight weeks, the borrower pays its July electricity bill in August by the next regular billing date.

The IFR states the borrower may seek loan forgiveness for the May and June payments (which occurred during the covered period) and for the portion of the July bill that was incurred during the covered period. Assuming the service dates align with the months, then the borrower could take 26 days’ worth of electricity cost for July.

So that’s the SBA’s example — now what does it mean?

  • First, it clearly shows it’s okay if non-payroll costs include more than eight weeks’ worth of expense. In SBA’s example, the borrower includes almost three full months. The flexibility this provides is great for borrowers.
  • It’s not exactly clear though exactly what that flexibility means, but we tend to believe a reasonable, common sense approach is what SBA has in mind.
  • The IFR does not specifically address prepayments nor does it address payment of expenses in arrears (such as for a borrower that had fallen behind on rent payments).
  • However, one strong indicator of their intention is the documentation requirements for non-payroll costs. For example, business rent or lease payments require a borrower to submit lessor account statements “from the covered period through one month after the end of the covered period verifying eligible payments.” That would seem to imply the SBA doesn’t expect payments of rent that fall well outside the covered period.
  • In any case though, it’s worth remembering the 25% cap applies to non-payroll items as a percent of total loan forgiveness.

Boyd: Thanks Rick. Jack, we’ve also had some similar requests to dive a little deeper into the payroll costs. Do you want to take us through that discussion?

Rybicki: I’d be happy to, Leslie. While the wording for payroll costs has similarities to what Rick discussed with non-payroll costs, there are some important nuances.

  • The general requirement in the IFRs is similar to non-payroll. Basically, payroll costs paid during the eight weeks are eligible and payroll costs incurred and paid by the next regular payroll date are eligible.
  • However, the example that Rick described was notably absent for payroll costs. The IFR doesn’t specifically address whether or not a borrower can include more than 8 weeks’ worth of payroll costs.
  • So, we’re still left with many questions that we hope will be addressed in upcoming FAQs. For example:
    • Would a 2019 retirement contribution paid during the eight weeks count?
    • What about wages in arrears from past periods?
    • Or what about paying payroll costs now that won’t be earned by employees until a future date?
  • One potential concern would be the formulas provided by the SBA so far for the cash compensation limit seem to assume eight weeks’ worth of wages. Additionally, there are the same concerns about lawmakers’ intentions and documentation requirements.

Boyd: I mentioned at the beginning of the session that the house has passed a bill to make some favorable changes to the PPP. Rick, what are some of the key points of the house bill?

Krueger:

  • Reduce the share of aid money small business are required to spend on payroll from 75% to 60% (the PPP’s architects aimed to encourage companies to keep workers employed)
  • Extend the window businesses have to use the funds from two months (eight weeks) to six months (24 weeks)
  • Push back a June 30 deadline to rehire workers
  • Extend the time recipients have to repay the loan • Let companies that get loan forgiveness defer payroll taxes

Boyd: We know the Senate has some similar themes. We will bring in Omar Nashashibi next Tuesday for a full D.C. Update. That said, assuming the Senate and the House reach some consensus, is there any strategies Jack that companies should consider?

Rybicki: Clearly there are risks with these bills. Likely will have a longer time to deal with it. Make prudent business decisions to maximize forgiveness. We are telling everyone to pause things right now and don’t be in a hurry to apply for forgiveness, you have some flexibility. We don’t want to act too quickly.

Boyd: A question from chat — in the House bill if we have the six-week extension would that extend the cap of $15,385 up to $30,770? Krueger: It appears that way — it would expand the amount you are prorating to 24 of 52 weeks. Boyd: Another question from the chat, what do the health benefits include: does it include dental, vision, life insurance — can you clarify what’s included?

Rybicki: We do believe things like health, vision, dental, mental wellness programs — all health components are definitely included. However, things like life insurance, short term and long term disability — these are income protection policies, not health benefits.

Boyd: Another question around the House bill, with the new cap going to 40% for non-payroll do they introduce a new cost or are we just providing more flexibility?

Krueger: It looks like just more flexibility.

Boyd: One last question we are going bring back to Bruce – one of the ancillary items is also corporate gifts, what is the activity like in this area for 2020?

Himelstein: Not a lot of discussion around corporate gifts. Maybe take on a different format, like a contribution.

Boyd: Unfortunately, that’s all we have time for today. Thank you to our guests today, to you for your questions, and to our moderators in the chat for all the support and great information and answers.

We’d like to remind you to continue to visit our COVID-19 Landing page at wpbeijing.com for more information on PPP forgiveness as well as other hot topics. You should also take a minute to subscribe to our emails so we can continue to share up-to-date information with you around the forgiveness tool, including a demo of the tool itself and how we can continue to provide professional support during this time. Our services are available online, so you can meet with us from the comfort of your 凯发k8官方旗舰店home. Thanks for watching, and be well.

Event materials

  • Webinar: PPP Forgiveness - Part Four

For more information:

  • Heather Kloster
  • Marketing Senior