Apple Growth Partners

SBA Releases Long-Awaited Guidance on PPP Forgiveness in the form of Frequently Asked Questions

August 5, 2020

On August 4th, SBA released guidance regarding the Paycheck Protection Program (PPP) loan forgiveness. Critical takeaways include:


  • No payments on PPP loans are required until the forgiveness amount is known and submitted to the lender by the SBA. Interest accrues at 1% from the date of loan disbursement on any unforgiven loan amounts.
  • Confirms that sole proprietors without employees, self-employed and independent contractors file on the EZ form.


  • Payroll costs paid or incurred during the covered period are eligible for forgiveness which means that many borrowers may have more than either 8-or-24-weeks of payroll included in their forgiveness calculations.
    • The SBA confirmed previous guidance specifically limiting the use of the Alternative Payroll Covered Period to borrowers who have a biweekly or more frequent payroll cycle. This option is not available to borrowers who pay twice a month or less frequently.
    • For cash compensation, the gross amount is used, not the net, and includes bonuses, hazard pay, tips, and commissions and is subject to the limit of $100,000 per employee on an annualized basis.
  • Prepaid health care and retirement benefits are not eligible for forgiveness.
  • Owner’s compensation is defined as:

24-Week Covered Period

 Self-employed/ General PartnersOwner Employee – C CorporationOwner Employee – S corporationsEmployees > $100,000
CompensationLesser of $20,833 or 2.5/12 of net profit from line 31 of 2019 Schedule C or F General partners – Lesser of $20,833 or 2.5/12 of 2019 net earnings from self-employment (reduced by Section 179 deductions, unreimbursed partnership expenses and depletion.Lesser of $20,833 or 2.5/12 of 2019 cash compensation (+ 2019 employer paid health care plans + qualified plan contribution)$20,833 ($100,000/12*2.5)$46,154 ($100,000/52 * 24)
+ employer paid health care plansNoYesNoYes
+ qualified plan contributionsNo2.5/12 * 2019 contribution2.5/12 * 2019 contributionYes

For 8-week covered period – substitute $15,385 for $20,833.

Non-payroll costs

  • Nonpayroll costs incurred prior to the covered period but paid in the 8 or 24 weeks covered period will be eligible for forgiveness; thus, no proration is needed. Likewise, when a nonpayroll expense is incurred during the covered period but paid in the next billing cycle outside the covered period, it is includable. 
    • The Alternative Payroll Covered Period, used to align payroll with a biweekly or more frequent payroll schedule, cannot be used for non-payroll costs.
  • Interest expense is forgivable only on debts secured by business assets.             
  • Forgivable transportation expenses seem to be only for utility transportation distribution fees assessed by state and local governments per the FAQs. (See below.)

Loan Forgiveness Reductions

  • Employers making an offer to rehire an employee who refuses that job or if they cannot locate a qualified employee to fill an open position, are not negatively impacted on their forgiveness calculation. 
    • The employer must document these issues and notify the state unemployment office of a furloughed employee’s refusal of an offer to return to work.
    • The FTE reduction calculation does include employees who earned more than $100,000 in 2019, and their compensation should be included in Table 1 of the PPP Schedule A. 
      •  Pay reductions to these same employees do notnegatively impact forgiveness calculations.
    • For purposes of calculating salary and wage reductions of more than 25%, borrowers should only include those forms of compensation and not bonuses, commissions, etc. 

Open Matters

No clarification was given as to whether CAM charges are includable as rent.

As outlined in previous guidance business vehicle fuel is includible as a nonpayroll cost as was included as illustration of utility cost. Is this still applicable?

Secretary Mnuchin has suggested that no forgiveness application be completed if loan is < $150,000.

Congress is debating a provision that would make loan forgiveness tax free and the expenses deductible. This would have a positive impact on the business community. Make your voice heard.

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