Overview of SBA’s Most Recent Round of FAQs

The Small Business Administration released another round of frequently asked questions related to Payroll Protection Program loan forgiveness. The FAQs are the first since the end of June and clear up a few more areas for businesses. However, there still some questions that remain.

Below is a high-level overview of the FAQs that will most likely affect businesses in our area. You can see a full list of the questions and answers here.

• The new FAQs clear up questions regarding costs that businesses paid and accrued. Payroll and non-payroll costs that a business accrued before the covered period— but the business paid during the covered period — are forgivable.
• The latest FAQs also clear up ownership compensation and how it should be presented on the forgiveness application, depending on the entity’s tax structure. Businesses that are flow-through entities — e.g., S-Corp, Sch C/F, Partnership, etc. — that made payments for the owner’s benefit to health insurance, retirement, or state and local taxes will include these amounts in the owner’s cash compensation. This also means ownership income that a business spent on these items can’t be included as part of ownership cash compensation and then included again as a health/retirement/tax cost.
• The alternative period does not apply to non-payroll costs. The non-payroll cost period begins with the loan funding date and ends 56 or 168 days later — i.e., the eight or 24-week period (whichever the business chose).
• It was previously believed that payments for an owner-employee’s benefit on forgivable state and local taxes were separate from the owner’s cash compensation. The latest FAQ clarified that these costs are included in an owner-employee’s cash compensation. That makes those amounts subject to the limitations on the amount of owner compensation that can be forgiven.
• There’s still no clarification about how FTEs are calculated on the day of filing. It’s not clear if it’s the average FTEs from hours worked during the single payroll period including the filing date, the average FTEs from hours worked between the loan funding date and filing date, or something else entirely.

We’ll continue to monitor the situation and guidance and provide analysis as it becomes available. In the meantime, please reach out to us with any questions.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.