Loan Forgiveness Worksheets Are Available

• May 17, 2020
• Paul Neiffer

The Treasury Department late Friday issued the Loan Forgiveness Application for Paycheck Protection Program loans.   This is the form that you fill out and provide to the bank/SBA to determine the amount of your loan that is forgiven.

We will be posting on various details from the application over the next few days, but here is a summary of the key details that you should be aware of:

• Don’t plan on filing the application before at least the middle of June.  The application requires you to provide copies of Form 941(s) and state unemployment reports.  This is likely to be problematic for many farmers since you don’t file a Form 941 and in many cases you do not pay state unemployment taxes.  We will need further guidance on what farmers need to provide in this situation.
• You are allowed to either use the payroll that is accrued during the 8 week covered period as long as it is paid by the next payroll due date or you can use what is termed an alternative payroll covered period.  This allows you to determine which method gets you the highest amount of covered payroll costs.
• All of the costs appear to be based on “earned” amounts during the 8 week covered period.  This allows you to pay certain items after the covered period ends, however, it does not allow you to prepay any costs including extra labor.  It is silent as to whether raises or bonuses during the covered period are allowed.  Further guidance on this is needed.
• The covered period (for now) is a strict 56 days.  For example, if you received your loan on Monday, April 20, your covered period ends 56 days later on Sunday, June 14.  It does not carry over to Monday.
• The reduction in forgiveness for wage reductions is much more generous than based on some interpretation of the CARES Act details.  You simply look at any employee whose average salary or hourly wage declined by 25% or more.  You don’t look at total wages during either period, you simply determine averages and compare them.  However, if there is a more than 25% reduction in average wage or salary the multiplier appears to be based on average hours worked during the first quarter, not hours worked during the 8 week period.  This could result in a greater reduction in forgiveness.
• It appears that gasoline or diesel are not a business utility.  However, this is not specifically addressed in the application and they will need to provide better guidance on this.  
• If your loan amount is over $2 million (including affiliated companies) you must check a box to indicate this.  This lets the SBA know that your loan will be audited.
• You can provide optional demographic information on your employees.
• It appears that self-employed taxpayers must “pay” themselves during the 8 week period to get forgiveness.  How this is accomplished is not explained in the application.
• It appears that only cash compensation will qualify for forgiveness.  This means that commodity wages do not qualify unless further guidance it given.  If you applied for an original PPP loan using commodity wages, this may result in an adjustment to the allowed loan amount.  Further guidance is needed.
• There is chatter in Congress about expanding the covered period or allowing more costs to qualify.  For now, we are stuck with 8 weeks, but again don’t get in a hurry to file.  You are not required to pay anything for the first 6 months and by waiting you may find out more of your loan can be forgiven.

We will keep you posted.

 

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