SBA Issues New PPP Loan Forgiveness Forms

npaofficeadmin Coronavirus Alerts, NPA News


June 22, 2020

On June 17, 2020, the Small Business Administration (SBA) published two new loan forgiveness forms that conform to the changes in the Paycheck Protection Program enacted by H. R. 7010. (View June 5, 2020 GRC Update Congress Modifies Major CARES Act’s Provisions on Loan Forgiveness and Payroll Taxes.)

We now focus on PPP forgiveness for pawnbrokers who applied and received PPP funds before June 5, 2020. We also describe which PPP borrowers may use the SBA’s new short-form Forgiveness Application Form 3508EZ, which is just two pages and you can download HERE.

The third page asks for demographic information, which you are not required to give. The SBA also published a revised June 16, 2020 long-form PPP forgiveness application with instructions.

Changes to PPP Loan Forgiveness:

  1. Full forgiveness of PPP loans depends on borrowers’ ability to demonstrate that they used at least 60% of the PPP funds on payroll and payroll-related expenses paid or incurred during the “covered period” selected by the borrower.
  2. Borrowers now may choose one of three options as their “covered period:”a. An 8-week period following receipt of the PPP funds,b. An “Alternate Covered Period” that aligns with your actual payroll schedule, orc. A new 24-week period beginning upon receipt of the PPP loan funds so long as this period’s end is not later than December 31, 2020. This is the new option the PPPFA allows all borrowers to choose.
  3. During their covered period borrowers who were unable to rehire employees back to pre-February 15, 2020 levels will not face PPP forgiveness “reductions” if they can document that their inability to rehire a. employees falls under one of three “safe harbors.” These “safe harbors” cover cases in which:a. One or more employees opted not to come back to the borrower’s employ, orb. One or more employees were not rehired because the borrower was unable to operate between February 15, 2020 and the end of the covered period selected by the borrower due to compliance with federal agency requirements or guidance issued between March 1, 2020 and December 31, 2020 by federal agencies related to maintenance of standards of sanitation, social distancing, or other work or customer safety requirements related to COVID-19, orc. The employer is unable to hire replacement employees qualified for the positions it had prior to February 15, 2020.

Eligibility for the SBA Form 3508 EZ Forgiveness Application: PPP borrowers may use the new EZ application only if they are:

  • Sole proprietors, independent contractors, and self-employed persons with no employees at the time they applied for their PPP loans.
  • Employers who (a) did not reduce by more than 25 percent the salaries or hourly wages of employees who earned less than $100,000 per year and (b) did not reduce the number of FTE employees. These employers also must be able to document that (i) they were unable to rehire employees to whom they made offers or to hire similarly qualified persons and (ii) had reduced salary or wage figures at the end of their covered periods because their former employees did not take offers of restored hours.
  • Employers who meet another combined test that they (a) did not reduce salaries or hourly wages of employees who earned less than $100,000 per year by more than 25 percent and (b) were unable to do business at their level on February 15, 2020 because of federal agencies’ COVID-19-related health and safety regulations.

Certifications Required for Form 3508EZ: Page two of Form 3508EZ lists the certifications that PPP borrowers seeking forgiveness must make. Note that there are special limits on payroll costs for owner-employee, self-employed persons, and general partners. Borrowers must have documentation supporting each certification.

Instructions for Form 3508EZ: The instructions include new guidance on forgiveness for business mortgage interest, rent or lease payments, and utilities. In each case, use the same expense figures you list on Schedule C of your IRS Form 1040 tax returns for the 8-week or 24-week covered period you selected.

Page three of the Form 3508EZ contains a request for your demographic information. Providing this information is strictly optional with no bearing on whether the loan can be forgiven in whole or part. If you are undecided about whether to apply for PPP forgiveness, you have at least ten months to decide. The PPPFA provides a period for discussions with your local lawyer or accountant about your business situation and comfort level with required certifications. Interest at 1 percent will accrue on your PPP loan until the lender receives any forgiveness payment from the SBA, but loan forgiveness will include all interest accrued to that point. So, take the time you need to feel comfortable with your decision to apply for forgiveness or not.

FORMS AVAILABLE TO DOWNLOAD

PPP Forgiveness App 3508EZ_06.16.2020
PPP Loan Forgiveness App Form EZ Instructions_Revised 6.16.2020
PPP Loan Forgiveness App (Revised 6.16.2020)
PPP Loan Forgiveness App Instructions (Revised 6.16.2020)

If you have questions about the new Form 3508EZ or other issues covered in this Alert, please email us at grc@nationalpawnbrokers.org. We will do our best to answer them.

 

This GRC Update is not intended and should not be construed as legal advice to NPA members.

Members should consult their own lawyers for legal advice.
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