- For loans made before December 27, 2020: December 31, 2020.
- For loans made after December 27, 2020: the last day of the covered period.
- Fired for cause
- Voluntarily resigned
- Voluntarily requested and received a reduction of their hours
You should refer to the SBA Form 3508 instructions for details about FTE reduction exceptions.
Can 100% of the PPP loan be used for payroll costs?
Yes, you can receive full loan forgiveness if all PPP loan proceeds are used for eligible payroll costs. If so, you do not need to document any non-payroll costs during the covered period.
What is the difference between payroll costs being paid vs. incurred?
Payroll costs are considered paid on the day that paychecks are distributed, or you originate an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the last pay period of your covered period are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the covered period.
Is there a cap on annual salary when considering payroll costs?
For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed a gross annual salary of $100,000, as prorated for the covered period. For an 8-week covered period, that’s a maximum of $15,385 per employee; $46,154 per employee for borrowers using a 24-week covered period. Note: the cap does not include eligible non-cash benefits.
What payroll costs are eligible for forgiveness?
- Salary, wages, commissions or similar compensation
- Cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips)
- Payment for vacation, parental, family, medical, or sick leave (not covered by Families First Coronavirus Response Act)
- Allowance for separation or dismissal
- Independent contractor or sole proprietors only: wages, commissions, income or net earnings from self-employment, or similar compensation
Employee benefits, the total amount paid by the borrower for:
- Employer contributions for employee group health, life, disability, vision or dental insurance, including the employer contributions to a self-insured, employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees. Borrowers are not to add contributions for these benefits made on behalf of a self-employed individual, general partners, or owner-employees of an S-corporation, because such payments are already included in their compensation.
- Employer contributions to employee retirement plans, excluding any pre-tax or after-tax contributions by employees. Borrowers are not to add employer retirement contributions made on behalf of self-employed individual or general partners, because such payments are already included in their compensation.
- Employer state and local taxes paid by the borrower and assessed on employee compensation (e.g., state unemployment insurance tax), excluding any taxes withheld from employee earnings.
What common payroll costs are NOT eligible for forgiveness?
- Any compensation of an employee whose principal place of residence is outside of the United States
- The compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary
- Employer’s share of payroll taxes
- Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Pub. L. 116–127)
How much of the loan forgiveness amount can be attributed to non-payroll costs?
Up to 40% of the forgiveness amount can come from eligible non-payroll costs.
What is the difference between non-payroll costs being paid vs. incurred?
An eligible non-payroll cost must be paid during the covered period or incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period. Amounts due for services or obligations during the covered period must be prorated to align with the covered period window.
What non-payroll costs are eligible for forgiveness?
Eligible expenses, incurred or paid during the covered period:
- Business mortgage interest payments for mortgage obligations that existed prior to February 15, 2020
- Business rent or lease payments for real or personal property under lease agreement in force before February 15, 2020
- Business utility payments for utilities in service prior to February 15, 2020
- Covered operations expenditures
- Covered property damage costs
- Covered supplier costs
- Covered worker protection expenditures
What can be counted as a utility?
- Electricity
- Water
- Gas
- Telephone & cell phone
- Internet access
- Transportation
What can be included for business rent or lease payments?
Any rent or lease payments made pursuant to lease agreements for real or personal property that were in force prior to February 15, 2020. This includes equipment leases.
What is included for transportation?
A service for the distribution of transportation refers to transportation utility fees assessed by state and local governments.
What is a covered operations expenditure?
Payment for any business software or cloud computing services that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.
What is considered a covered property damage cost?
Cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that were not covered by insurance or other compensation.
What is considered a covered supplier cost?
This includes an expenditure made by an entity to a supplier of goods for goods that are essential to the operations of the entity at the time at which the expenditure is made, and is made pursuant to a contract, order or purchase order that was in effect at any time before the covered period, or, with respect to perishable goods, in effect before or at any time during the covered period.
What is included as covered worker protection expenditure?
An operating or capital expenditure to facilitate the adaptation of the business activities of an entity to comply with requirements or guidance issued by HHS, CDC or OSHA, or any equivalent requirements issued by state or local government from March 1, 2020, until the President's declaration of an end to the national emergency for COVID-19. Expenses may include the purchase, maintenance or renovation of assets that create or expand:
- A drive-through window facility
- An indoor, outdoor or combined air or air pressure ventilation or filtration system
- A physical barrier such as a sneeze guard
- Expansion of additional indoor, outdoor or combined business space
- On- or offsite health screening capability
- Other assets relating to the compliance with requirements or guidance from HHS, CDC or OSHA, including personal protective equipment (PPE)
What documentation will be required to demonstrate the 25% revenue reduction?
Quarterly “gross receipts” for one calendar quarter in 2020 and the “gross receipts” for the corresponding calendar quarter in 2019. Per the U.S. Treasury borrower guidance for Second Draw loans, the following are the primary sets of documentation that can be provided to substantiate your certification of a 25 percent gross receipts reduction (only one set is required):
- Quarterly financial statements for the entity. If the financial statements are not audited, the Applicant must sign and date the first page of the financial statement and initial all other pages, attesting to their accuracy. If the financial statements do not specifically identify the line item(s) that constitute gross receipts, the Applicant must annotate which line item(s) constitute gross receipts.
- Quarterly or monthly bank statements for the entity showing deposits from the relevant quarters. The Applicant must annotate, if it is not clear, which deposits listed on the bank statement constitute gross receipts (e.g., payments for purchases of goods and services) and which do not (e.g., capital infusions).
- Annual IRS income tax filings of the entity (required if using an annual reference period). If the entity has not yet filed a tax return for 2020, the Applicant must fill out the return forms, compute the relevant gross receipts value (see Question 5 of the U.S. Treasury borrower guidance for Second Draw loans), and sign and date the return, attesting that the values that enter into the gross receipts computation are the same values that will be filed on the entity’s tax return.
What are “gross receipts”?
SBA defines gross receipts as all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees or commissions, reduced by returns or allowances. Generally, receipts are considered “total income” (or in the case of a sole proprietorship, independent contractor, or self-employed individual “gross income”) plus “cost of goods sold,” and excludes net capital gains or losses as these terms are defined and reported on IRS tax return forms.
Gross receipts do not include the following: taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees); proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker. All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts.
