The US Treasury and the Small Business Administration (SBA) released FAQs addressing certain questions regarding the Paycheck Protection Program (PPP). The 29-point FAQs can be found here:
Notable highlights of the FAQs include:
- Payroll costs are calculated on a gross basis without regard to federal taxes imposed or withheld, such as the employee’s and employer’s share of FICA and income taxes required to be withheld from employees.
- The $100,000 salary limit per employee applies only to cash compensation and not to non-cash benefits, including healthcare, retirements benefits, and state and local taxes assessed on compensation of employees.
- Any amounts that an eligible business has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor may itself be eligible for a PPP loan.
- For purposes of determining the maximum loan amount, applicants can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019.
- For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019.
- An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020.
- An applicant who uses a Professional Employer Organization (PEO) can provide supporting payroll documentation from the PEO in certain cases for consideration in determining payroll costs and employment numbers.
As of this update, it should also be noted that businesses, lenders and practitioners are still waiting on guidance from the US Treasury and SBA to clarify other unanswered questions including, but not limited to, rules for calculating the loan forgiveness amount, eligibility requirements for self-employed individuals (sole proprietors/independent contractors) and the impact of certain loan provisions on these applicants.
Disclaimer: This post was current as of the date of posting. Any changes made to the law or regulations since original posting has not been incorporated. Please view the recent postings for current information or contact us directly with any questions.