Last week, ATKG released a newsroom update on Congress’s attempt at a fourth stimulus package as well as updates on the Paycheck Protection Program (PPP). Several developments have happened since the release of that article, and we wanted to provide you with an update.
Last weekend, after negotiations on stimulus packages stalled between the House and the Senate, President Trump signed a series of memorandums and one Executive Order:
Despite these directives, House Democrats and Senate Republicans are still negotiating the provisions we discussed in our last newsroom update (link above).
Meanwhile, after nearly a month and a half of silence, the SBA released 26 new FAQs for its Paycheck Protection Program (PPP). The highlights of these are listed below:
The employer’s expenses for employee group health care benefits are considered payroll costs and are eligible for loan forgiveness. Payroll costs do not include expenditures for group health care benefits paid by the employees (such as the employees’ share of their healthcare premiums). Furthermore, forgiveness is not provided if the expenses are accelerated from periods outside the Covered Period or Alternative Payroll Covered Period. (Refer to FAQ #6 on page 3 of the FAQs linked above.)
Generally, employer contributions for employee retirement benefits are eligible payroll expenses. Like group health care benefits, retirement contributions do not qualify for forgiveness if they are accelerated from periods outside the Covered Period. Also, retirement contributions paid by the employee are not eligible for forgiveness. (Refer to FAQ #7 on page 4.)
Across all business types, the amount of loan forgiveness for owner-employees and self-employed individuals is capped at $20,833 per individual if using a 24-week Covered Period or $15,385 for an 8-week Covered Period. This newest round of FAQs provides explicit instruction on how to calculate owner compensation for different business structures:
The rules for C corporation owners also apply to the owners of S corporations with one crucial exception.
Self-Employed Schedule C (or Schedule F) Filers
(Refer to FAQ #8 on page 4.)
The new FAQs provide clarification on allowable nonpayroll costs:
Suppose the salary or hourly wage of a covered employee is reduced by more than 25% during the Covered Period. In that case, the portion over 25% reduces the eligible forgiveness amount unless the borrower satisfies the Salary/Hourly Wage Reduction Safe Harbor. A new FAQ provides three specific examples on this issue:
(Refer to FAQ #4 on page 8.)
A week ago, it seemed Congress was poised to pass a stimulus package of some sort. However, President Trump’s Memorandums and Executive Order certainly changed the dynamics of bipartisan negotiations. At a minimum, PPP borrowers are hoping that Congress will make forgiveness more streamlined. ATKG promises to keep you informed as developments unfold. Please contact your ATKG advisor with any questions you may have.
For our latest news on the financial impact of COVID-19, visit ATKG’s Coronavirus Newsroom.
Kristina Dravis is a tax senior with ATKG. She began her career at ATKG as an intern in 2016. She graduated Cum Laude from The University of Texas at San Antonio with a double major Bachelor of Business Administration in Accounting and Finance.
Image Credits: Fox Business