Haas & Reaney, LLP

• The deadline for re-hiring workers in order to qualify for safe harbor from the reduction factors was moved from June 30 to December 31
• Employers can exclude from the FTE Reduction Factor calculation any positions that, during the period between February 15 and December 31, they were unable to fill because they either: could not find qualified employees to hire; or, could not restore their business to a comparable level of activity because of social distancing or other federal health guidance
• For new loans issued after this amendment takes effect, the payback period for any unused funds was extended from 2 years to 5, with repayments to begin upon receipt of a final forgiveness determination from the SBA
• For existing PPP loans, any request for a term extension requires the lender’s consent, which is not automatic
• Granting of forgiveness will no longer disqualify a business from electing to take Payroll Tax deferrals under the CARES Act

As we have seen all along, expect further changes and clarifications to be issued. Please stay tuned as we will keep you posted.

  Here is a link to an informative article from Forbes regarding the new law.  Congress Agrees on Favorable Changes to the PPP Loans: What Does It Mean For The Borrowers? Most of you are in the process of paying bills in your 8 week forgiveness period As you know, payroll and covered expenses paid during this period can be applied towards PPP loan forgiveness

The SBA just came out with their Loan Forgiveness Application We wanted to reach out and let you know that guidance on forgiveness from SBA is still lacking and lawmakers and administration officials are expected to make more revisions this week There is talk about extending the 8-week period to allow for more flexibility For the time being we will continue to plan forgiveness as outlined in the application

Here is the Loan Forgiveness Application as released from the SBA on Friday for your review

Ultimately, it will be the lenders (with the SBA) who will determine what portion of the loan is forgiven It would appear the borrower will be submitting the completed application for forgiveness to the lender

One critical element for most of you is you did not start back to work and pay staff right at the outset of the PPP loan disbursement due to mandatory office closures Most left their employees on unemployment since the business was not open A provision in the CARES Act regarding forgiveness requires that to get full forgiveness the employer needs to have the same size staff (FTE-full time equivalent) in place during the 8 weeks as there were prior to COVID-19 In the above scenario, that won't happen There is a provision in the law that overrides that requirement and allows full forgiveness assuming the same number of FTE employees on payroll pre-COVID-19 are employed again by June 30th How long after June 30th must those same employees remain? The law does not address that question This is a simplified description of the issue and we want you to be aware of it as you navigate through this process Keep in mind, if lawmakers extend the 8-week period the above will change dramatically

There are a number of significant questions about forgiveness remaining to be clarified We believe it will be a messy process and it's conceivable (and likely) different lenders will have different interpretations More guidance and clarification and perhaps new law from SBA, Treasury, and Congress is needed and probably forthcoming

Know that we are vigilant in staying updated as new information becomes available We will do our best to keep you apprised through emails and our website

Tony Nitti writes a great article on the forgiveness application that was just released I am sharing that with you below because it gives you a good idea how complex this whole process is

Forbes article on Loan Forgiveness A sample application for the Payroll Protection Program loan has been posted on the SBA website and additional information on the PPP loan has been posted It appears some of the terms of the loan have changed Applications will be accepted starting Friday, April 3, 2020 Check with your bank to see if they are processing these loans

SBA sample PPP application The SBA just issued a press release SBA lenders should be able to accept applications for the PPP 7(a) loans on Friday, April 3, 2020

Today Treasury Secretary Mnuchin said the SBA site would be updated with details on what documents you would need to apply for the 7(a) loan and instructions This afternoon the SBA website was updated and a section called the Paycheck Protection Program was added However, as of now, there are no details on what paperwork you will need He also said that beginning Friday, business owners can go to (I am hopeful this can be done remotely) any existing SBA lender, as well as any FDIC insured institution that has signed up for the program, and apply for the loan

I also want to pass along an information  sheet on the CARES Act SBA 7(a) loan that the ADA has put out This information sheet gives a great explanation on how to apply for the loan, what  Information you need and how the loan will be forgiven

ADA information sheet on SBA 7(a) loans We have been in contact with a couple of our SBA lenders and as of this morning they did not have any additional information to process these loans They expected to receive something from the SBA this afternoon or tomorrow morning We will keep you posted as we find new information

If you still have questions on how this all with fit together with your practice, please give Mike, Tammy or David a call, or you can reach out to them via email

The SBA loan that has loan forgiveness provisions is called the SBA (7a) Paycheck Protection Program This funding is available through your local SBA lender and then will be expanded to other lending institutions The SBA is currently drafting guidelines for the lenders, and we should know more this week Some of what we know is: The amount you can borrow is based on the previous 12 months of payroll looking back from the loan date It limits each individual on your payroll to $100,000 of wages for this 12-month period It appears that net profit from Sole Proprietorships and Partnerships can be added to this payroll with a maximum of $100,000 per partner or proprietor We cannot determine yet how they are going to treat  S-Corps They might just allow the wages that are reported in the Corporation I am sure more clarification on this will be coming

The maximum loan amount appears to be 2 1/2 times the monthly average of this calculated 12-month payroll figure and other payroll related expenses The lender will have a list of required information and will request documentation from you

The debt forgiveness calculations will look at the 8-week period following the loan They will total the allowed expenses and that will be your maximum debt forgiveness This forgiveness is limited to the loan amount itself, so you can't go below zero

The maximum debt forgiveness figure will be adjusted down if you have decreased the number of full time equivalent (FTE) employees during this 8-week window Essentially, they want you to maintain the same FTE employees you had before this disaster specifically during this 8-week period subsequent to the loan

Based on the calculation above and based on what we know this moment, it looks like if you are not going to be paying your staff immediately after obtaining your loan, you are likely going to lose some debt forgiveness

This is a very brief summary and there are many more details and further questions to be answered over the coming weeks and timing decisions of when to secure your loan