The Consolidated Appropriations Act, 2021 includes several changes to the CARES Act’s Paycheck Protection Program (PPP) loan forgiveness process. The changes are reflected in new forgiveness applications issued January 19 by the Small Business Administration (SBA). The two applications can be found at:
Standard Application: https://home.treasury.gov/system/files/136/PPP--Loan-Forgiveness-Application-and-Instructions--Form-3508-1192021.pdf
EZ Application: https://home.treasury.gov/system/files/136/PPP--Loan-Forgiveness-Application-Instructions--Form3508EZ-1192021.pdf
Criteria for using the standard application versus the EZ application remain the same.
Key changes to the applications include:
- Checkboxes were added to select whether the forgiveness application is for the first draw or second draw loan.
- The Economic Industry Disaster Loan (EIDL) Advance Amount and EIDL Application Number fields were removed. Per the Act, the EIDL Advance no longer reduces the amount of PPP forgiveness.
- Lines were added to report new nonpayroll costs: covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures.
On the standard application, the safe harbors for the FTE Reduction (Safe Harbor #2, Step 4), and Salary/Hour Wage Reduction (Step 2c) were updated so that borrowers who received a loan before December 27, 2020 (the date the Consolidated Appropriations Act was passed) have until December 31, 2020, to eliminate any reduction to their forgiveness amount, while those receiving a loan after December 27, 2020, have until the last day of their covered period to take this action.
In addition, an updated 3508S application was released for borrowers who received loans of $150,000 or less: https://home.treasury.gov/system/files/136/PPP--Loan-Forgiveness-Application-Instructions--Form-3508S-1192021.pdf. Borrowers using the form are required to make two certifications: 1) confirm that they complied with the rules regarding the use of the funds, the proportion of funds used for payroll costs, and their calculations regarding forgiveness, and 2) that the information they are providing in the application is “true and correct.”
Borrowers who received a PPP loan between $50,000 and $150,000 and borrowers of a loan of $50,000 or less who received, together with their affiliates, loans of $2 million or more are required to complete FTE and Salary/Wage Reduction tests that may reduce forgiveness. While the borrower is not required to submit this documentation, they are required to maintain it in order to provide it to the SBA upon request.
Other Guidance
- An Interim Final Rule (IFR) on PPP Loan Forgiveness was issued in conjunction with these applications. The rule combines a number of previous IFRs and explains changes associated with the Consolidated Appropriations Act, 2021 and new forgiveness applications. A copy of the IFR can be found at https://home.treasury.gov/system/files/136/PPP--IFR--Loan-Forgiveness-Requirements-Loan-Review-Procedures-Amended-Economic-Aid-Act-1192021.pdf
- Borrowers of first draw PPP loans who received those loans before December 27, 2020, are also required to disclose if the U.S. President, Vice President, head of an Executive department as defined in 5 USC 101, or a member of Congress, or the spouse of any of these individuals directly or indirectly held a controlling interest in the borrowing entity at the time the PPP application was submitted to the lender. The SBA released a Disclosure of Certain Controlling Interest Form (Form 3508D) which can be found at https://home.treasury.gov/system/files/136/PPP--Borrowers-Disclosure-Certain-Controlling-Interests-1192021.pdf. Disclosures must be made by January 26, 2021.
For questions regarding your PPP loan and related forgiveness, contact your HBK Advisor.
