june 4, 2020 · respect to certification concerning need for ppp loan request ... o business rent...
TRANSCRIPT
MEMBER OF ALLINIAL GLOBAL, AN ASSOCIATION OF LEGALLY INDEPENDENT FIRMS © 2020 Wolf & Company, P.C.
New Guidance: Accounting for
PPP Loan Forgiveness
June 4, 2020
• Today’s presentation slides can be downloaded at
www.wolfandco.com/webinars/2020
• The session will last about one hour
• Our audience will be muted during the session
• Please send your questions in using the “Q & A” box located at the
bottom of your screen
• For up-to-date and educational information on how the
COVID-19 pandemic is impacting businesses, please visit
Wolf’s COVID-19 Resource Center2
Housekeeping
About Wolf & Company, P.C.
• Established in 1911
• We offer Audit, Tax, Risk Management, and Business Consulting services in several industries,
including:
o Financial Institutions
o Healthcare
o Investment Management
o Manufacturing, Distribution, and Retail
o Technology
• Offices located in:
o Boston, MA
o Springfield, MA
o Albany, NY
o Livingston, NJ
• Over 250 professionals
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Presenters
CYNTHIA R. BOEHMER, JDWolfPAC Compliance Manager
Wolf & Company, P.C.
Direct: (617) 933-3340
MICHAEL C. STRAVIN, CPA, MSTPrincipal
Wolf & Company, P.C.
Direct: (617) 428-5404
DANIEL F. MORRILL, CPAPrincipal
Wolf & Company, P.C.
Direct: (413) 726-6857
• Overview
• The application
• Q & A
Indicates a change made by the Paycheck Protection Program
Flexibility Act of 2020 passed by the Senate on June 3, 2020.
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Agenda
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Overview
• Paycheck Protection Program
• Affiliation Rules
• Additional Eligibility Criteria and
Requirements for Certain Pledges of Loans
for the Paycheck Protection Program
• Promissory Notes, Authorizations, Affiliation,
and Eligibility
• Seasonal Employers
• Disbursements
• Requirements – Corporate Groups and Non-
Bank and Non-Insured Depository Institution
Lenders
• Nondiscrimination and Additional Eligibility
Criteria
• Extension of Limited Safe Harbor with
Respect to Certification Concerning Need for
PPP Loan Request
• Requirements for Loan Increases for
Partnerships or Seasonal Employers
• Eligibility of Certain Electric Cooperatives
• Treatment of Entities with Foreign Affiliateso Note: This IFR is being posted in advance of
publication in the Federal Register. The official version
will appear in the Federal Register
• Second Extension of Limited Safe Harbor with
Respect to Certification Concerning Need for
PPP Loan and Lender Reportingo Note: This IFR is being posted in advance of
publication in the Federal Register. The official version
will appear in the Federal Register
• Requirements – Loan Forgivenesso Note: This IFR is being posted in advance of
publication in the Federal Register. The official version
will appear in the Federal Register
• SBA Loan Review Procedures and Related
Borrower and Lender Responsibilities7
Overview
Paycheck Protection Program Interim Final Rules
• SBA has issued several Interim Final Rules related to the Paycheck Protection Program (below)
• SBA and Treasury have issued a Q & A document
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Overview
Borrower
• Completes application and submits with required documentation
Lender
• Has 60 days to issue a decision on forgiveness to SBA
SBA
• Has 90 days to remit forgiven amount to lender (assuming no review)
General Process for Forgiveness
What is a lender required to review and confirm?
• Receipt of the borrower certifications contained in the Loan Forgiveness Application
• Receipt of the documentation to aid in verifying payroll and non-payroll costs
• The borrower’s calculations on the borrower’s Loan Forgiveness Application by reviewing
the documentation submitted with the Loan Forgiveness Application
o See rule for specific items
• The borrower made the calculation on Line 10 of the Loan Forgiveness Calculation Form
correctly, by dividing the borrower’s Eligible Payroll Costs claimed on Line 1 by 0.75
Lenders are expected to perform a good-faith review, in a reasonable time, of the borrower’s
calculations and supporting documents concerning amounts eligible for loan forgiveness.
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Overview
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The Application
• Covered period
o 8 weeks from date of
disbursement
• Alternate payroll covered
period
o The 8-week (56-day)
period that begins on
the first day of the first
pay period following
the date of
disbursement
• Extended to 24 weeks in
the PPP Flexibility Act
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The Application
• To be eligible for
loan forgiveness,
60% of the loan
amount must be
used for payroll
costs (creates a
cliff)
• 75% of loan
forgiveness must
be attributable to
payroll costs
• Payroll costs paid or incurred during the covered period (or alternate covered period)
are eligible for forgiveness
o Payroll costs are considered paid on the day that paychecks are distributed or the borrower
originates an ACH credit transaction
• Documentation required to be submitted:
o Bank account statements or third-party payroll service provider reports
o Tax forms (or equivalent third-party payroll service provider reports) for the periods that
overlap with the Covered Period or the Alternative Payroll Covered Period
o Payment receipts, cancelled checks, or account statements documenting the amount of any
employer contributions to employee health insurance and retirement plans that the Borrower
included in the forgiveness amount (PPP Schedule A, lines (6) and (7))
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Line 1 – Payroll Costs
• Eligible payroll costs for an “owner-employee” = lesser of:
o Prorated share (8/52) of 2019 payroll costs (includes health insurance & retirement)
o $15,385
• Eligible payroll costs for a partner = lesser of:
o 92.35% of net earnings from self-employment reduced by Section 179 deduction,
unreimbursed partnership expenses, and oil/gas depletion
o $15,385
• Amounts includable in partnership payroll costs
o Guaranteed payments for services
o Draws of distributive shares of ordinary business income/(loss)
• Health insurance and retirement contributions paid on behalf of partners are
excluded from partnership payroll costs
• No definitive guidance for documentation of amounts paid to partners
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Line 1 – Payroll Costs
• Eligible payroll cost for independent contractors, sole proprietors, or members of a single-
member LLC = “owner compensation replacement”
o 8/52 x net profit reported on 2019 Schedule C (line 31)
− Net profit capped at $100,000 = maximum qualifying amount of $15,385
o Heath insurance and retirement contributions are excluded
o Excludes Qualified Sick Leave Equivalent Amount and Qualified Family Leave Equivalent
Amount for which income tax credits are claimed under Families First Coronavirus Response
Act
o No definitive guidance for documentation of “owner compensation replacement” = 2019
Schedule C
• Non-payroll costs for independent contractors, sole proprietors, or members of a single-
member LLC must have been claimed, or been eligible to be claimed, as a deduction on
2019 Schedule C
o Business mortgage interest = Schedule C line 16a/16b
o Business rent or lease payments = Schedule C line 20a/20b
o Business utility payments = Schedule C line 25 14
Line 1 – Payroll Costs
• Business mortgage interest payments
o Paid or incurred during covered period
o Cannot be prepaid
• Business rent or lease payments
• Business utility payments (electric, gas, water, transportation, phone, internet)
o Paid or incurred during covered period
− Example: A borrower’s covered period begins on June 1 and ends on July 26. The borrower pays its
May and June electricity bill during the covered period and pays its July electricity bill on August 10,
which is the next regular billing date. The borrower may seek loan forgiveness for its May and
June electricity bills, because they were paid during the covered period. In addition, the
borrower may seek loan forgiveness for the portion of its July electricity bill through July 26
(the end of the covered period), because it was incurred during the covered period and paid on the
next regular billing date.
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Lines 2, 3, and 4
Documentation to be submitted
• Business mortgage interest payments
o Copy of lender amortization schedule and receipts or cancelled checks verifying eligible
payments from the Covered Period
o Lender account statements from February 2020, and the months of the Covered Period,
through one month after the end of the Covered Period verifying interest amounts and eligible
payments
• Business rent or lease payments
o Copy of current lease agreement and receipts or cancelled checks verifying eligible
payments from the Covered Period
o Lessor account statements from February 2020, and from the Covered Period, through one
month after the end of the Covered Period verifying eligible payments
• Business utility payments
o Copy of invoices from February 2020, and those paid during the Covered Period, and
receipts, cancelled checks, or account statements verifying those eligible payments 16
Lines 2, 3, and 4
Total loan forgiveness may be reduced if either:
• There is a reduction in your Full Time Equivalent Employee’s (FTE’s) during the 8-week
covered period (or alternative covered period) in comparison with reference period, as
defined
o FTE’s - 40 plus hours = 1; 30 hours = .75, etc.
o Simplified method - full time (40 hours) = 1, part-time = .50
• There is a reduction in salary/hourly wage on an employee basis
o Comparison of all employees with < $100K in wages in 2019 with most recent full quarter that
employee was employed
o For each employee whose salary/hourly wage decreased by more than 25%, there is a
corresponding decrease in forgiveness amount
• “Safe Harbor” extended to December 31, 202017
Lines 5, 6, and 7
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Lines 5, 6, and 7
• Added a clause that eliminates the proportionate reduction in loan forgiveness based on FTE’s if the business is able, in good
faith, to document:
o Inability to rehire individuals who were employees on February 15, 2020 and wasn’t able to hire a similarly qualified
individual to fill the position
o Inability to return to the same level of business activity as such business was operating at before February 15, 2020 due
to compliance with requirements or guidance issued by the Secretary of Health and Human Services, the Director of the
Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period
beginning on March 1, 2020 and ending December 31, 2020, related to the maintenance of standards for sanitation,
social distancing, or any other worker or customer safety requirement related to COVID-19
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Lines 5, 6, and 7
Q & A
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Contact Us
CYNTHIA R. BOEHMER, JDWolfPAC Compliance Manager
Wolf & Company, P.C.
Direct: (617) 933-3340
MICHAEL C. STRAVIN, CPA, MSTPrincipal
Wolf & Company, P.C.
Direct: (617) 428-5404
DANIEL F. MORRILL, CPAPrincipal
Wolf & Company, P.C.
Direct: (413) 726-6857
If you have further questions, please
send them to [email protected].
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We also invite you to explore
Wolf’s COVID-19 Resource Center
for up-to-date information.