We have detailed PPP & EIDL updates from our SCORE mentor Chris Reed —

The SBA EIDL loan program has reopened for new applications, and the deadline for a new PPP application is June 30.

https://www.sba.gov/funding-pr…/…/coronavirus-relief-options

If you never applied for the EIDL loan you may want to evaluate doing so now. The most attractive provision is the Emergency Economic Impact Grant – up to $10,000 grant ($1000 per employee). Note that if you also have PPP the amount of this EEIG grant will be deducted from your PPP forgiveness amount but you can keep those unforgiven funds as a 1% loan. Application here:

https://covid19relief.sba.gov/#/

The PPP program terms have been substantially loosened in a way that benefits all businesses but especially sole-proprietors/LLCs and seasonal businesses like many on the islands. Now the actual forms for applying for forgiveness have been released so you know what you need to convert the PPP loan into a grant.

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Here is a useful summary with links to the new applications from the Bellevue law firm of Berntson Porter and Co.

(**Berntson Porter & Co is not affiliated with San Juan County EDC, this information is presented here as informational-only, please consult with your CPA or bank lender on appropriate action for your business**), original link here:

https://www.bpcpa.com/newsletters/sba-issues-updated-ppp-loan-forgiveness-application-and-alternative-application-in-form-3508ez/

“SBA Issues Updated PPP Loan Forgiveness Application and Alternative Application in Form 3508EZ

Less than two weeks after the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law, the SBA has issued an updated loan forgiveness application that integrates the flexibilities allowed under the law – including a 24 week allowable covered period and 60/40 ratio on payroll/other allowable costs – along with other guidance issued via Interim Final Rules by the SBA and the Treasury.

In addition, the SBA has also published an EZ version of the loan forgiveness application. Form 3508EZ will likely be the application of choice for borrowers who efficiently deployed PPP loan proceeds, without a significant reduction in employee headcount or pay rates during their applicable covered period of 8 or 24 weeks. This summary will provide an overview of the Form 3508EZ and cover some of the changes in the full forgiveness application. The June 16 revised Form 3508 can be viewed here:

https://home.treasury.gov/…/3245-0407-SBA-Form-3508-PPP-For…

and the Form 3508EZ can be seen here:

https://home.treasury.gov/…/PPP-Forgiveness-Application-350…

Before discussing the details of the forms, remember that as part of the PPPFA, companies now have the option of choosing an 8 or 24 week covered period, are only required to use 60% of loan proceeds on payroll costs, gives borrowers until December 31, 2020 to restore FTE headcounts, and any loan proceeds unforgiven will have a repayment period of 5 years. See our detail summary of the PPPFA here:

https://tinyurl.com/yb4vzuek

Starting with the Form 3508EZ, the question is: Who will be able to take advantage of this streamlined process? If one or more of the following 3 conditions exist, the EZ form can be used:

· The borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees when applying for the PPP loan.

· The company did not reduce the annual salary or hourly wages of any employee by more than 25% during the company’s chosen covered period compared to a measurement period of January 1, 2020 through March 31, 2020, and the company did not reduce headcount or the average hours paid to employees from a measurement date of January 1, 2020 through the end of the chosen covered period.

· The company did not reduce the annual salary or hourly wages of any employee by more than 25% during the company’s chosen covered period compared to a measurement period of January 1, 2020 through March 31, 2020 and the company was unable to operate during the covered period at the same level of business activity as it was able to before February 15, 2020 due to the following: Compliance with guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to maintaining standards of safety, sanitation, social distancing or any workplace or customer safety precautions related to COVID-19.

In simple terms, if a company avoids a 25% reduction in wages or salaries and avoids reducing headcount, the EZ form should be available for use. The third bullet point above is a win for hospitality, service and other industries that have been deeply impacted by COVID-19. If the company continued to pay employees using PPP loan proceeds but are unable to meet other forgiveness thresholds such as FTE headcount at the measurement dates because you can’t re-open your business due to compliance with state or local directives, the allowable expenses are eligible for forgiveness and you are eligible to use the EZ form. All-in-all this is substantial relief for borrowers who cannot restore their headcount by December 31, 2020. The EZ form should also be a slam-dunk for Schedule C taxpayers without employees.

If you are unable to apply for forgiveness using the EZ Form, the full application has also been revised for PPPFA. Most features of the original loan forgiveness application are still in place. There were some significant changes to the instructions to completing the application form. Here are some of the more important updates to be aware of:

· The instructions clarify confusion around certain health insurance contributions, and we now know for certain health insurance premiums paid for general partners, owner-employees of S-Corps, and self-employed individuals are not forgivable expenses.

· Similarly, employer funded retirement contributions made for self-employed individuals or general partners are not forgivable expenses.

· The maximum allowable compensation for owner-employees/general partners and self-employed individuals is capped at $20,833 ($100,000 * 2.5/12). However, note that employees can have maximum allowable compensation of $46,152 ($100,000 * 24/52) if you elect to use a 24 week covered period.

· The instructions clarify that state unemployment tax benefits paid by the employer are a forgivable expense.

· An important update to the instructions is a new worksheet to calculate salary or wage reductions. The goal here is to stay above 75% of base period wages & salary levels.

· Regarding FTE measurements, the instructions define 40 hours as 1.0 FTE, and reductions from that threshold are rounded to the nearest tenth. Additionally a simplified method of assigning a value of 0.5 to part time employees is allowed – this may be advantageous for businesses with a lot of part-time employees.

· Regarding FTE reduction safe harbors, if the applicant can document their business activity level was reduced through December 31, 2020 due to the reasons noted above (closures or restrictions due to health official guidance) the FTE “penalty” will be relieved. Alternatively, if your workforce FTE headcount was reduced from February 15th to April 26, 2020, your business has until December 31, 2020 to restore them.

· Schedule A instructions define the documentation that will be required to submit with your application, and the documentation you will need to retain for the business. The instructions vary by entity type. We recommend reviewing for your specific circumstances.

We are expecting more Interim Final Rulings, SBA FAQs, and other guidance related to loan forgiveness in the coming days and weeks. The BP team is here to help with additional service offerings as you navigate the loan forgiveness process here. We will continue to provide updates as the information is released. Berntson Porter is here to help businesses navigate these unprecedented times. Visit our  Resource Center for up-to-date information about COVID-19 legislation that impacts you and your business.

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If you are not familiar yet with the PPPFA (Paycheck Protection Program Flexibility Act), here is a quick overview —

There are inconsistencies between what has been reported in the news and what is on the websites of SBA and Treasury for PPPFA guidance as the websites have been slow to update. This article summarizes the impacts that make it both easier to get full forgiveness as well as the ability to spend more of the money on non-payroll expenses. These changes make the program much more attractive.