SBA Releases New PPP Forgiveness Applications, Guidance

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

For questions regarding your PPP loan and related forgiveness, contact your HBK Advisor.

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About the Author(s)

Amy M. Reynallt, MBA
Amy Reynallt is a Manager with the HBK Manufacturing Solutions Group in the Youngstown, Ohio office of HBK CPAs & Consultants. She is experienced in navigating the strategic and financial matters associated with manufacturing and works closely with manufacturers to help them plan, execute, and meet their short- and long-term financial goals. Amy can be reached at 330-758-8613 or by email at areynallt@hbkcpa.com.

Ben DiGirolamo, CPA, JD
Ben DiGirolamo is a Principal in the HBK Tax Advisory Group and works in the Youngstown, Ohio office. He has been with the firm since 2009 and focuses on entity tax issues, entity planning and flow-through taxation. Ben can be reached at 330-758-8613 or by email at bdigirolamo@hbkcpa.com.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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