In the time since last week’s seminar, “Your PPP Covered Period is About to End: Now What? – What We Know as of October 8, 2020”, the Treasury and SBA have released a new Interim Final Rule (IFR) and a simplified application for the forgiveness of PPP Loans.
This new application form — PPP Loan Forgiveness Application Form 3508S — can be used by borrowers with loan balances of under $50,000. These borrowers are also now exempt from any reductions in forgiveness based on reductions of full-time equivalent employees (FTEs) and reductions in employee salary or wages. The IFR streamlines the forgiveness process for borrowers of under $50,000 because they will not be required to perform potentially complicated FTE or salary reduction calculations. Borrowers will still need to submit documents to the lender to support the eligibility of forgiveness. The documents needed to be submitted with the application will vary based on individual lenders. The IFR also included further guidance on lender responsibilities. Here are the instructions for completing Form 3508S.
Treasury Secretary Steven Mnuchin has stated the Treasury continues to be in favor of further legislation to simplify the forgiveness process.
As a reminder, the SBA opened its forgiveness application portal with lenders on August 10th. This new streamlined process was introduced two months after and there is still strong support for further legislation. Since the application and forgiveness process remains unclear at best, most borrowers have hesitated in filing their applications. Most banks have restricted their acceptance of the application in some manner as well.
With this new streamlined process, we suspect you may see lenders open their application process to loans under $50,000. Keep in mind, as we stated in our Zoom Presentation on October 8th, the expenses paid with PPP loans at this point remain non-deductible. Thus, the loan is essentially taxable if forgiven. There continues to be support to make the expenses paid as deductible, so borrowers may still want to consider waiting to file their forgiveness applications – even with this new streamlined process. However, there may be reasons to file as soon as possible as well. Each borrower will have to work with their advisor individually to determine what is best.
As always, if you have any questions, please do not hesitate to contact us.