On Tuesday June 16, 2020, the SBA posted a new short-form Paycheck Protection Program PPP Loan Forgiveness Application Form 3508 EZ, together with instructions (“PPP New Forgiveness Application EZ”), and a revised Form 3508 Paycheck Protection Program Loan Forgiveness Application, together with instructions (“PPP Revised Forgiveness Application”).  Copies of the PPP New Forgiveness Application EZ and the PPP Revised Forgiveness Application, and the instructions for each, are available by clicking on the respective link below:

PPP New Forgiveness Application EZ

Instructions to PPP New Forgiveness Application EZ

PPP Revised Forgiveness Application

Instructions to PPP Revised Forgiveness Application

PPP New Forgiveness Application EZ
The PPP New Forgiveness Application EZ is a short-form application for borrowers who will not have reductions in forgiveness due to FTE and salary/wage reductions. These borrowers can use the PPP New Forgiveness Application EZ to apply for forgiveness to the extent they certify as to at least one of the following three items (otherwise they must use the PPP Revised Forgiveness Application):

  1. The borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the borrower application form.
     
  2. The borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the covered period or the alternative payroll covered period compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);

    AND

    The borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the covered period. (Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also ignore reductions in an employee’s hours that the borrower offered to restore and the employee refused (see 85 FR 33004, 33007 (June 1, 2020).
     
  3. The borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the covered period or the alternative payroll covered period compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);

    AND

    The borrower was unable to operate during the covered period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 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, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.

PPP Revised Forgiveness Application
The PPP Revised Forgiveness Application, for the most part, follows the same format and calculations as the original application form, and incorporates the changes relative to forgiveness in the Paycheck Protection Program Flexibility Act enacted June 5, 2020 (“PPP Flexibility Act”), including the 24 week covered period, the payroll cost 60% requirement and the new safe harbor and exceptions relative to FTE reduction forgiveness  A couple of takeaways of interest with respect to the PPP Revised Forgiveness Application are:

  • Election of 8-week covered period.  The covered period for forgiveness is either (1) the 24-week (168-day) period beginning on the date the PPP loan proceeds were received from the lender, or (2) if the borrower received its PPP loan before June 5, 2020, the borrower may elect to use an eight-week (56-day) covered period beginning on the date the PPP loan proceeds were received from the lender.  The election is made by entering the dates of the covered period on the PPP Loan Forgiveness Calculation Form in the application. 
  • FTE Reduction Safe Harbor 2.  Under the initial forgiveness application, borrowers who reduced total average FTE between February 15, 2020 and April 26, 2020 were exempt from any related loan forgiveness reduction, so long as their February 15, 2020 total FTE levels were restored as of June 30, 2020.  This was consistent with the FTE reduction safe harbor set forth in the CARES Act as originally enacted, which required that February 15, 2020 full-time equivalent employee levels be restored by “not later than June 30, 2020” (“Original FTE Reduction Safe Harbor”).  The PPP Flexibility Act amended the Original FTE Reduction Safe Harbor to provide that the February 15, 2020 full-time equivalent employee levels be restored by “not later than December 31, 2020”.  The PPP Revised Forgiveness Application has implemented this change as “FTE Reduction Safe Harbor 2”, which requires that borrowers restore their FTE employee levels by the earlier of December 31, 2020 and the date the PPP Revised Forgiveness Application is submitted.  
  • Salary/Hourly Wage Reduction Safe Harbor.  Under the initial forgiveness application, borrowers who reduced salary/hourly wages of employees between February 15, 2020 and April 26, 2020 were exempt from any related loan forgiveness reduction, so long as February 15, 2020 salary/hourly wage levels were restored as of June 30, 2020.  This was consistent with the salary/wage reduction safe harbor set forth in the CARES Act as originally enacted, which required that February 15, 2020 salary/wage levels be restored by “not later than June 30, 2020” (“Original Salary/Wage Reduction Safe Harbor”).  The PPP Flexibility Act amended the Original Salary/Wage Reduction Safe Harbor to provide that the February 15, 2020 salary/wage levels be restored by “not later than December 31, 2020”.  The PPP Revised Forgiveness Application has implemented this change by requiring that borrowers restore their February 15, 2020 annual salary/hourly wage levels by the earlier of December 31, 2020 and the date the PPP Revised Forgiveness Application is submitted.

___________

Sign up for future alerts from Rogers Towers

< View All Posts