as of April 1, 2020 4:37pm

The short answer is YES! and no.

The amount of the loan that is eli­gi­ble for for­give­ness is equal to the amount the bor­row­er spent on the fol­low­ing items dur­ing the 8‑week peri­od begin­ning on the date of the orig­i­na­tion of the loan (IE. the date the loan clos­es):

  • Pay­roll costs
    • Salary, wage, com­mis­sion or sim­i­lar com­pen­sa­tion (com­pen­sa­tion over $100,000 annu­al­ized is exclud­ed)
    • Cash tips or equiv­a­lent
    • Pay­ment of vaca­tion, parental, fam­i­ly, med­ical or sick leave
    • Allowance for dis­missal or sep­a­ra­tion
    • group health care ben­e­fits, includ­ing insur­ance pre­mi­ums
    • pay­ment of retire­ment ben­e­fit
    • pay­ment of state or local tax assessed on the com­pen­sa­tion of the employ­ee
  • Inter­est on the mort­gage oblig­a­tions incurred before the cov­ered peri­od
  • Rent or leas­ing agree­ment
  • Pay­ments on util­i­ties (elec­tric­i­ty, gas, water, trans­porta­tion, tele­phone or inter­net)

Due to high par­tic­i­pa­tion in the pro­gram, the gov­ern­ment is advis­ing that not more than 25% of the for­give­ness amount be for non-pay­roll costs. Also, the for­give­ness can­not exceed the prin­ci­pal.

Let me guess, your next thought is, “noth­ing is ever real­ly free, this is going to real­ly increase my tax­es next year!” While we can’t say for sure yet, from all of our research, unlike most debt for­give­ness income, it appears this for­give­ness will be tax exempt.

How­ev­er, there are def­i­nite­ly some things you need to be on top of to max­i­mize your for­give­ness.

  1. DOCUMENTATION! You will need sup­port­ing doc­u­men­ta­tion for all of the expens­es paid via the Pay­check Pro­tec­tion Pro­gram. Now, more than ever, you need con­sis­tent­ly clean books & finan­cials, well man­aged AP & AR process­es and a secure way to store all of this sen­si­tive infor­ma­tion. We encour­age you to reach out to a trust­ed advi­sor to make sure all of your ducks are indeed in a row.
  2. No Dou­ble Dip­ping.… Part 1. You can­not use EIDL funds AND PPP funds for the same expens­es. If so, you are at risk of los­ing the loan for­give­ness, which is what you want in the first place.
  3. No Dou­ble Dip­ping.…. Part 2. The refund­able tax cred­it, for­mal­ly named the “Employ­ee Reten­tion Cred­it for Clo­sures Due to Covid-19”, is not avail­able to those receiv­ing assis­tance through the Pay­check Pro­tec­tion Pro­gram.
  4. The amount of loan for­give­ness cal­cu­lat­ed above is reduced if there is a reduc­tion in the num­ber of employ­ees or a reduc­tion of greater than 25% in wages paid to employ­ees.

If you know your busi­ness needs these funds, but feel over­whelmed try­ing to nav­i­gate all the ins and outs, please con­nect with our team. We are offer­ing a com­pli­men­ta­ry 15 minute con­ver­sa­tion to help you feel more con­fi­dent in your options now & in the future.

There are a num­ber of incred­i­ble resources avail­able to learn more about the Pay­check Pro­tec­tion Pro­gram. Here are a few we rec­om­mend:

  1. The US Cham­ber 4 Pager Guide & Check­list
  2. Info­graph­ic on the basics of the Pay­check Pro­tec­tion Pro­gram
  3. SBA Overview on the PPP

We are work­ing hard to keep our blog up to date as we all move through this incred­i­bly tumul­tuous time. To check out any COVID-19 relat­ed con­tent please vis­it: mackeyadvisors.com/category/covid-19/

Please note that all of the above is our best infor­ma­tion at this time.  The final reg­u­la­tion on the CARES Act are still in process, so more infor­ma­tion will fol­low.

Stay safe & healthy,
Sarah Grace
Chief Oper­at­ing Offi­cer
MACKEY