Shortly after the passage of the Consolidated Appropriations Act of 2021, the Small Business Administration (SBA) issued a new interim ruling which updates and consolidates previously issued Paycheck Protection Program (PPP) regulations related to loan forgiveness. While much of the guidance remains the same, the new rule intends to streamline the forgiveness process as directed by recently passed legislation. Additionally, the recent legislation modifies the rules for claiming the Employee Retention Tax Credit (ERC) making more businesses eligible to participate.
PPP Loan Forgiveness
Here are important highlights for PPP loan forgiveness under the latest rules:
Eligible Expenses
PPP loans may be forgiven in full if at least 60% of the loan is used on payroll costs and the remaining 40% is used on allowable nonpayroll costs. The newest guidance adds the following to the list of permissible nonpayroll costs:
- Supplier costs: payments that go to suppliers who provide essential goods.
- Worker protection expenses: expenses for employee safety during COVID-19, including personal protective equipment (PPE), drive-thru windows, sneeze guards and outside dining enclosures.
- Property damage costs: costs related to civil unrest that occurred in 2020 that were not covered by insurance.
Simplified Forgiveness Application
To receive loan forgiveness, a borrower must complete and submit a loan forgiveness application to their PPP lender. The SBA has released a new simplified form for PPP loan amounts of $150,000 or less.
The new application requires that borrowers certify that they comply rules governing the PPP at the time of application, and that the information provided in this application is true and correct. Additional supporting documentation is not required with the new application.
All forgiveness applications released by the SBA have been updated to apply to both first and second draw PPP loans.
3508S – *New* – Simplified application for loans $150,000 or lower.
3508EZ – Forgiveness Application for those who are self-employed and have no employees, or who did not reduce hours or the salaries or wages of their employees by more than 25 percent.
3508 – Forgiveness Application for all other PPP loans not qualifying for the 3508S or 3508EZ forms.
Some lenders may have their own forgiveness forms, so it is encouraged that borrowers check with their PPP lenders before starting their forgiveness application.
Employee Retention Tax Credit
The ERC is a refundable tax credit equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. To qualify for the credit, a business must have experienced a full or partial cease in operations due to government orders or display a significant decline in gross receipts.
Recent legislation retroactively changes the original rules of the CARES Act, now allowing business to qualify for both the ERC and PPP program. However, businesses cannot claim the ERC for the same wages they used PPP funds on.
For more information on the ERC from the IRS, CLICK HERE.
As always, ADVOCATE will continue to keep you informed on the issues impacting medical groups as they develop.
Kayley Jaquet
Manager, Regulatory Affairs