Small Business Administration and Treasury Release Updated PPP Loan Forgiveness Applications, Rules, Calculations

January 20, 2021

The U.S. Small Business Administration (SBA) and Treasury recently released updated Paycheck Protection Program (PPP) loan forgiveness applications, rules and calculations.

Among the applications released was a one-page form for borrowers that received a PPP loan of $150,000 or less, Form 3508S. The form seeks information such as the loan amount, disbursement date, employee totals, covered period dates, amount spent on payroll and amount for which forgiveness is being sought. Borrowers are not required to submit supporting documentation but are mandated to maintain payroll, nonpayroll and other documents that could be requested during a loan review or audit.

Two other forgiveness applications were also released, Form 3508 and Form 3508EZ. Borrowers must submit payroll and nonpayroll documentation when applying for forgiveness with the forms. The SBA and Treasury also released Form 3508D, which certain individuals must use to disclose controlling interest in an entity applying for a loan.

All four forms apply to first-draw or second-draw PPP loans.

The SBA and Treasury also published an 18-page document on how borrowers should calculate revenue reduction and maximum loan amounts for second-draw PPP loans, along with a list of documents borrowers must provide to support the calculations.

The second-draw guidance consists of 24 questions and answers on a variety of situations involving different types of organizations. Eight questions relate to how to determine if a borrower experienced the 25 percent decline in gross receipts required to apply for a second loan of up to $2 million. The other questions deal with how a borrower can calculate the maximum amount it is eligible for in a second-draw loan.

The guidance also addresses a frequently asked question regarding the relationship between calculating gross receipts and the accounting method the borrower uses. The guidance defines gross receipts for a for-profit business as generally all revenue in whatever form received or accrued.

The SBA and Treasury also released several other pieces of PPP guidance recently:

  •          A 12-page document detailing calculation processes and required documentation for first-draw loans by business type. The guidance covers 14 questions and answers on issues including which pretax employee contributions for fringe benefits that may have been excluded from IRS Form 941, Employer’s Quarterly Federal Tax Return, taxable Medicare wages and tips should be part of employee gross pay as well as how borrowers should account for federal taxes when determining payroll costs for purposes of the maximum loan amount, allowable uses of a loan, and the amount of a loan that may be forgiven.
  •          A procedural notice explaining what borrowers must do if they or their lender made an application error that resulted in a borrower receiving a loan amount exceeding the borrower’s correct maximum loan amount.
  •          A procedural notice detailing the requirements and processes for borrower resubmission of a loan forgiveness application using SBA Form 3508S when forms 3508 or 3508EZ were previously submitted. A borrower eligible to use Form 3508S but applied for forgiveness using Form 3508EZ or 3508 may resubmit the application to its lender using Form 3508S at any time until the SBA notifies the lender of a final SBA loan review decision or remits to the lender the loan forgiveness payment.
  •          An interim final rule (IFR) consolidating prior PPP loan forgiveness rules and including changes made by The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260, which provided the PPP with $284 billion in new funds and created second-draw loans.

The PPP began accepting applications Jan. 11 from community financial institutions that loan primarily to underserved businesses. Applications opened Jan. 14 for lenders with $1 billion or less in assets and for all lenders Jan. 19.

For more information, visit tscpa.com/covid19.