GBQ’s COVID-19 response team provides answers to questions submitted during the webinar COVID-19: Maximizing Debt Forgiveness On Your PPP Loan presented on April 14, 2020.


1.  Can you point us to an SBA source about the $15K limit for the EIDL loan? I have seen news coverage, but could not validate it. The SBA website still says $2M.  There was an article that suggested the SBA is creating a maximum loan amount (very low; the article said $15,000)?

    • We have also only seen news coverage.

2.  Is the $10,000 being offered within “three days” of applying for the EIDL loan grant? Will it be forgiven or is it just an advance?

    • The SBA website says “The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.” It is our understanding that the EIDL advance will not have to be repaid if you do not get approved for an EIDL, but there could be an adjustment from the PPP Loan forgiveness.

3.  We received an email today that said the EIDL advance is maxed at $1,000 per employee. We applied April 1st and have not received anything yet.

    • We have also seen articles that the EIDL advance has been adjusted downward, but no confirmation on the SBA website.


Restaurant Questions

4.  With regard to FTEEs, what happens if a restaurant permanently closed in March 2020? Do we have to include those FTEE’s in the average baseline?

    • Further clarification is needed on permanent closures.  For now, the baseline measures two periods, 2/15/2019 – 6/30/2019 or 1/1/2020 – 2/29/2020, with the option to use the lower period as the baseline.

5.  Do you know how they are looking at tips?  If we hire, and open, but sales aren’t there tips will be down, so the average wage would be down.

    • Tips are included in the definition of payroll.

6.  What do you think about restaurants who opened in the middle of the 2019 period? Can they use their average as a lower number?

    • If you opened after June 30, 2019 then you are considered a “new business” and have to use 1/1/2020 – 2/29/2020 as your average FTEEs, and you can use that same time period to determine your loan amount.  If you opened prior to June 30, 2019, you can use either 2/15/2019 – 6/30/2019 or 1/1/2020 – 2/29/2020 to establish your baseline FTEEs, whichever is more advantageous.

7.  What is your direction if we are in the restaurant industry, and we have already received approval and will likely be receiving funding in the coming days? It was mentioned that the restaurant association is lobbying for an adjustment to the 75/25 ratio, and it was also mentioned that they are lobbying for the industry to be able to pick their 8-week period. Is it too risky to wait for the outcome of their lobbying?

    • It is important to plan your spending based on what is known today.  There is no guarantee the National Restaurant Association will succeed with its lobbying.  Further discussions are needed as your spending is dependent upon your current and future liquidity needs to survive, especially if the majority of your revenues are from dining in sales.

8.  If the government doesn’t allow the economy to open up until later than anticipated, do we see them pushing back the 6/30/20 deadline to bring everyone back and obtain full forgiveness? For a restaurant group, hard to bring team members back without being able to open or anticipate open.

    • Various associations are lobbying for an extended period; however, at this point, there is no indication this will happen.

9.  Please clarify the qualified use for interest. Only mortgage interest? Interim Final Rule page 15 item r. vi. specifies “interest payments on any other debt obligations that were incurred before 2/15/20.”

    • The CARES Act and prior guidance indicates that you can use monies to pay interest on debt other than mortgages. However, while the most recent interim rules issued by the Treasury (on 4/14/2020) indicate that other debt is an acceptable use, in this list of what is an acceptable use for debt forgiveness, only mortgage interest is listed.   Further clarification is needed from the Treasury.



10.  Also, what about “rent” on personal property?

    • The CARES Act and guidance says, “rent payments on lease agreements in force before February 15, 2020,” and does not specifically limit it to real estate.

11.  Can FMV rent to related party entities be forgiven?  Is rent paid to a common owner of the business forgivable? Example: The building is owned as an S Corp by the same owner as the company receiving the PPP loan. The company pays building rent to the S Corp.

    • The CARES Act and guidance does not mention that it cannot; however, it does say that it has to be under a lease in force prior to February 15, 2020. We understand that many related-parties do not have leases in place. It may be that banks will allow this rent if you can prove that the amount paid during the 8-week period is consistent with lease amounts paid prior to February 15, 2020.

12.  Can property taxes and insurance be included as “rent costs” if it’s a triple net lease?

    • The CARES Act and guidance does not list property taxes and insurance when it describes rent. It says rent for leases in place prior to February 15, 2020.

13.  Do equipment lease payments qualify as mortgage interest?

    • The CARES Act and guidance do not specifically say they are not. The language states that it is “Rent, under a lease agreement in force before February 15, 2020.”


Timing of Payments

14.  Can businesses provide raises or bonuses to their employees over the 8-week window and will that be considered payroll and thus forgiven? I also assume that hiring people would apply toward payroll and forgiveness over that same 8-week window?

    • If people are hired during the 8-week period, yes they would count against payroll and the forgiveness calculation at a maximum of $100K per person on an annualized basis. Bonuses should be in the normal course of business and overall reasonable.

15.  Could you pay ahead on benefits (such as medical) in order to maximize the forgiveness? Or would it only matter for the 8-week period?

    • The CARES Act specifically indicated that pre-payment of interest would not be allowable. We do not believe pre-payments would be allowable for other expenses as well. However, you can check with your bank, as they will ultimately be who determines forgiveness.

16.  We received our loan today, 4/14/20. We pay employees every Friday. However, this Friday’s pay corresponds to time worked last week. Do we start tracking with this Friday as 1st week or next Friday as 1st week? You made a distinct point to say the clock starts now and ends 8 weeks later. I originally thought I would start with next Friday’s payroll, but now I am thinking it starts with this Friday’s payroll? Thoughts?

    • It is our understanding that it starts when the loan is originated. It appears that the practical definition of this is that it is when the loan is funded.

17.  As SUTA is paid quarterly, can the accrual during the 8 weeks be included in your payroll costs?

    • Our best interpretation is that it will be based on payments made during the time period, not on an accrual basis. However, we expect further guidance on the nuances of forgiveness.

18.  If you have a deferral for rent or interest, can you take that deferral as an expense and apply that expense to non-payroll costs even though there is no cash outflow? If you have a deferral for rent or interest, can you take that deferral as an expense and apply that expense to non-payroll costs even though there is no cash outflow?

    • We believe so. You are not allowed to pre-pay any expenses, but catching up on rent is not expressly prohibited in the CARES Act or guidance. To be clear, however, you need to pay the rent during the 8-week period. For example, if you deferred your March rent and you then pay it in May, during the 8-week period; we believe that “catch-up” payments would be allowed (subject to the 75/25 split). Pre-payments do not seem to be allowable.

19.  Can we use the money to pay Q1 payroll taxes and have it considered for forgiveness?

    • Employer portion of FICA and FUTA is not considered payroll. The payroll definition includes the gross payroll of the employee (which inherently includes the employee portion of FICA). So any payroll taxes would need to be only the employee portion. Employer SUTA would also be includable as a payroll expense if paid during the 8-week period.

20.  What if your pay periods don’t fall nicely into the 8-week time period? For example, we pay semi-monthly, and depending on when the loan is funded, we could have a pay date fall right after the end of the 8 weeks, even though employees would be paid for work/time during the 8 weeks. How does your payroll being paid semi-monthly (15th and 30th) complicate the 8 weeks of wages amount to use in your calculation depending on the funding date?

    • Unfortunately, it appears that the CARES Act looks at this on a “cash basis,” and it will be dependent on when those payrolls are paid within the 8-week period.  You could consider working with your bank to defer funding for a few days as that should help with the timing.


Utility Payments

21.  What is considered a utility payment – cell phones, internet, landlines? Would this also include cell phones? For forgiveness purposes, is the cost of internet service considered a utility payment?

    • Utility payments include electricity, gas, water, transportation, telephone and internet, and would be considered an eligible expense for debt forgiveness.


Cash vs Accrual

[One answer at the bottom for all of these questions]

22.  Is what is ‘paid’ to employees on a cash or accrual basis? What determines cash (e.g. we pay every two weeks, one month in arrears. For purposes of forgiveness, is it based on cash paid during the covered period vs expenses incurred?  i.e. based on an accrual basis? Is the forgiveness amount calculated on cash basis, actual dollars paid in 8 weeks?

23.  Also, can accrued interest be added to the forgiveness amount or must it also be paid during the 8 weeks?

24.  What about accrued vacation time during the 8 weeks, can that be added as a payroll expense or must the vacation pay be paid out during the 8 weeks?

25.  Can we pay out eligible PTO accrued in addition to regular payroll?

26.  Is this actual paid payroll or is it owed?  We pay 2xs per month but depending on the date of loan received, it could be more or less based upon dates paid.

27.  Is this cash basis? Like is it the payroll payment date or the period date of the payroll?

28.  Do you know if the amount spent is calculated by when the cash is spent during the 8-week period or when the payroll period ends?

    • It appears that the CARES Act looks at this on a “cash basis” as the language is payroll incurred and paid in the 8-week period. Keep in mind in an 8-week period, that timing difference will work itself out as well. There may be payroll you are paying at the early end that wasn’t “accrued” in that period but at the end of the period, you will have payroll you “accrue” that will not be paid until outside the 8-week period.


Headcount/Percentage Questions

29.  For FTEE, do you analyze each employee and whether they worked 30 hours a week, and count those numbers of employees at 30+, or do you take all hours worked and divide by 30 hours to get the FTEE?  How do you calculate an FTE?  Is that 30 hours per week for each week during 2/15/19 to 6/30/19 or 1/1/20 to 2/29/20?  Or, is that for 1 week within those timeframes?  Is the FTEE as easy as taking the total hours for the payroll and dividing by 30?  Or, do you have to consider each person and once they hit 30 for the week, you can’t use any of the hours over 30?

    • You can do the latter, sum all the part-time hours/30 (or 60 if it is a 2-week pay period) to get to your FTEEs.

30.  We had a call last week where someone told us to exclude all those over $100k from our FTEE calculation. When calculating FTEEs, do you exclude all those individuals that are over your cap of $100k?

    • There was some confusion as to what the $100,000 threshold applied to. All employees, regardless of their salary levels, are included for the FTEE count.

31.  Are part time employees considered FTEEs in this scenario? Are fractional FTEEs considered in the FTEE count?

    • Part time employees are included as a partial FTEE based on the number of hours worked compared to 30. Someone who works 15 hours a week will be a 0.5 FTEE.

32.  For the FTE period calculation, what does “average” mean? Do you have to run every payroll separately during that time period and then average them, or can you run the entire timeframe to calculate the FTEE?

    • Average per pay period is our understanding of the calculation.

33.  Does FTEE exclude partners/owners who get paid by draws and not by payroll? Are owners counted in the FTEE count?

    • We do not have guidance on that particular issue. There was guidance issued by the Treasury on April 14, 2020, that indicates that partners/owners self-employment income, up to $100,000, can be included as “payroll” for purposes of calculating the loan and thus would imply that those same owners would be considered as FTEEs.

34.  With shared work Ohio program, could you bring employees back at 30 hours a week and have them claim unemployment for 10 hours a week. Could this work for the FTEE calculation?

    • We are not experts in the unemployment arena, but the actual hours worked and paid for by the company would count towards the FTEE calculation and would likely be 1 FTE.

35.  Does it not matter which FTEE time period was used to calculate the loan amount?

    • In calculating the “base” time period, the employer has the option to pick the more advantageous one.

36.  We were told by our lender that when we calculate our final FTE we can calculate the FT equivalent of all our PT employees in aggregate, is that your understanding?

    • We certainly would defer to your lender as they are the ultimate determiner of debt forgiveness but we do think that is an acceptable method.

37.  If we get our Employee Count over the average FTE on 6/30, do we get 100% of our loan forgiven no matter what our payroll, rent, or utility breakdown is?

    • The 75/25 rule still applies even if you hit the 100%.  Also, you can only be forgiven for what was actually spent on eligible expenses while still maintaining the 75/25 split.

38.  Part-time employees.  Are part-time employees considered as an FTE in this scenario?

    • Yes, see answers about how to convert part-time employees into an FTEE.

39.  If an employee works more than 40 hours per week average are they still 1 FTE? If an employee works 48 hours in a week, is that still 1 FTE?

    • Yes

40.  I understand that employees who make over $100,000 are not included in the Payroll Reduction calculation, but are they also excluded from the Workforce Retention calculation?

    • They are included in the workforce retention calculation.

41.  The one question I’ve had the most trouble answering is whether or not payments to temporary agencies is includable in payroll costs.

    • Clarification is still needed on this matter.

42.  What can be done to influence when the testing period begins?

    • The testing period begins when you receive your cash (i.e. the origination of the loan). You can try to work with your lender on this date but the lenders do not have a lot of flexibility with respect to the date as the SBA/Treasury has asked them to disburse within 10 days of approval.

43.  We are an ESOP company.  Will payment of ESOP contribution be considered a retirement benefit?

    • While there is not any specific guidance, we believe that if it would be reported as retirement on your financial statements normally that it would be.  Further, if your bank approved your loan based on these be included as retirement contributions it is good evidence they will include it on the forgiveness side.



44.  Is the 25% reduction of salaries based on overall payroll paid in total or each employee individually? I think the one example you gave seemed like based on individual employee salary.

    • The CARE Act specifically says for any individual so we believe this to be based on reducing an individual’s salary.


45.  The following four questions are related and have one answer at the end:

—  When calculating payroll costs over the next 8 weeks, is there any special treatment for employees whose base salary is greater than $100K? 

— When calculating the payroll during the 8-week period are employees capped at $100,000 annualized?  What if a person makes $200,000 per year?  When it comes to loan repayment, do the salaries OVER $100K count?

— For those making over $100K, is payroll cost for purposes of forgiveness capped at 8 weeks of $100K salary per person? In other words, can we only include a max of $15,384 per person for actual payroll cost (100,000 / 52 x 8)?

— Are “payroll costs” in the 8-week period limited by the $100k salary cap?

    • Salaries are capped at $100,000 on a pro-rata basis. So 8 weeks of $100,000 is equal to $15,384.  Any salary paid above that would not be included for purposes of forgiveness.

46.  Is overtime allowed for employees?

    • It is our understanding that it is, up to a prorated basis of $100,000 of annual salary.

47.  Is there a cap on the number of hours per employee based on other pay periods?

    • Not to our understanding, but no matter the number of hours, if over 30 they count as 1 FTEE.

48.  If you have people who have a large % of their comp that is based on business volumes, if we pay employees as a bonus (e.g. in lieu of commissions that may have not been earned due to lower business volumes) does that could toward the total payroll?  If you have people who have a large % of their comp that is based on business volumes, if we pay employees as a bonus (e.g. in lieu of commissions that may have not been earned due to lower business volumes) does that could toward the total payroll?

    • The CARES Act does indicate that bonuses do count towards payroll. We believe that if it is done for reasonable business purposes, that will be defensible.


Forgiveness is reduced if wages are reduced by more than 25% for any employee making less than $100,000 in 2019. A few questions related to this:

49.  What period is used to measure in comparison to current compensation? I believe there was a reference to the prior full quarter (so Q1 2020 if receiving loan during Q2)?

    • The period is that last full quarter before the loan is funded, so that would be Q1 2020.

50.  I think it was $8,333 per month that can be included in the forgiveness calculation?  Is this measured only at the individual employee level (and not on overall payroll)?

    • This question appears to be asking about the $100,000 limit. The $100,000 is limited on a prorated basis and per individual employee basis.

51.  How does it impact the forgiveness amount if any employees have experienced a decrease of more than 25%?

    • A further reduction in forgiveness is required for the amount in excess of 25%.  The math is not entirely clear and we are awaiting further guidance.

52.  How are you computing Maximum? How are you computing Max NonPayroll?

    • Maximum nonpayroll can only be 25% of the total loan forgiveness. If you are spending the entire loan, then it is 25% of the entire loan amount. If you are not spending the entire loan, then you have to solve for the maximum by taking payroll, dividing by 75%, and then multiplying by 25% which will then equal the maximum non-payroll amounts.

53.  As the owner of an S Corp who took a $50k W-2 in 2019, can I “give myself a raise” to use up the 2.5x monthly salary amount to have the entire loan forgiven (assume no rent/utilities for simplicity)?

    • The CARES Act and guidance does not explicitly say you cannot, but we would caution against practices that are not consistent with prior practices to simply “use up” the funds and increase forgiveness, particularly if they do not have a reasonable business justification.

54.  Is overtime allowed for employees? Is there a cap on the number of hours per employee based on other pay periods?

    • There is not a cap on the hours but once over 30 hours, regardless of how much over, the employee only counts as 1 FTEE. If overtime is part of your normal practice, then overtime also counts towards payroll expenses.

55.  Can you prepay wages?

    • We do not believe so. The CARES Act specifically indicated no prepayment of interest and we would expect the same of other expenses. The language is incurred and paid which seems to suggest prepayment is not allowable.

56.  If we restrict overtime during 8-week forgiveness period, is this considered a wage reduction?

    • Assuming this is an hourly employee, we do not interpret a reduction in hours as a wage reduction, but this is subject to further guidance.

57.  What about 100% commissioned employees for 25% pay reduction?

    • The CARES Act and guidance does not differentiate. It simply states that any individual whose pay is reduced by more than 25% would need to be evaluated for further reduction in forgiveness.

58.  Can we hire our subcontractors as employees during the qualification period?

    • There is no guidance on whether you can convert subcontractors to employees and if that will be allowable.

59.  When looking at salary reductions, is it based on salary only or bonus too? If we suspend bonus only, is that viewed as a reduction in salary?

    • Payroll equals all compensation including bonuses.

60.  Will a profit-sharing contribution qualify for payroll related?

    • We believe that fits the definition of retirement and if paid during the 8 weeks would qualify.

61.  Depending on when the loan is funded, I may have four or possibly five payroll runs. Can I accelerate a payroll run to fit within the eight weeks? Can you early pay payroll to get it included in the eight week period?

    • We do not believe pre-payment is allowable.

62.  Are items such as salesperson commission part of payroll dollars? Are we okay to pull ahead our normal Q2 commission payment ahead by 2-3 weeks to pay Q2 commissions in June?

    • Commissions are includable in the definition of payroll. If the expense is incurred in that time period and also paid, then it may be okay. So long as you are not pre-paying an expense it may be allowable.

63.  Could you pay ahead on benefits (such as medical) in order to maximize the forgiveness? Or would it only matter for the eight-week period?

    • We do not believe prepayment is allowable.



64.  So it doesn’t matter how little we spend on payroll, rent, and utilities as long as we get our Employee Count up to 100%+ on 6/30/20, and all our debt is forgiven?

    • The amount of the available pool of forgiveness will depend on how much you spend during the eight weeks as well as headcount. If you only spend $500,000 of an $800,000 loan, the maximum amount you can be forgiven is $500,000. Then the next step is to look at headcount retention. The PDF document – Debt Forgiveness FAQ explains the calculation in detail.

65.  If you know that you will be down 20% on the employee side, (going from five employees to four) should you reduce the amount you borrow to equal the amount of payroll expected?

    • If you have a 20% reduction, then only 80% of the amount spent (100% less 20%) of the dollars spend will be forgivable regardless of the loan amount taken.


Self Employed

66.  How do PPP loans work for Self Employed individuals?

    • How you calculate your maximum loan amount depends upon whether or not your employee—

If you have no employees, the loan amount is based on your 2019 IRS Form 1040 Schedule C line 31 net profit amount. If this amount is over $100,000, reduce it to $100,000, then calculate the average monthly net profit amount (divide by 12 months) and multiply the average monthly net profit amount by 2.5. The loan amount would be reduced by any EIDL proceeds received between January 21, 2020, and April 3, 2020.

If you have employees, use the average net profit calculated above and compute average monthly payroll costs for employee’s and multiply by 2.5.  The net profit and payroll calculations are added together to determine the loan amount.

67.  How should owners pay themselves?  We currently just take draws out of the bank account, not on payroll. Is the owner’s pay forgivable?

    • Owner’s compensation replacement is calculated based on the net profit calculation portion of the max loan calculation. At least 75% of the PPP loan proceeds shall be used for payroll costs.

68.  How does the PPP work if you are a self-employed single LLC that does not run a payroll but just pays taxes on the Schedule C net income and takes distributions?

69.  As owners, can we add ourselves to payroll if we don’t currently take W-2 income?


Scenario Questions

70.  In scenario #1 would you also have to look at the wage reduction factor?

    • Yes, you would. Our hypothetical assumed none for ease in calculating.

71.  Is workforce retention factor based solely on the number of employees, or on the percentage of employee wages calculated and paid under the loan? Not all employees make the same wage. For example, if I layoff two low-wage employees and replace them with one high-wage employee who earns as much as the two layoffs combined, shouldn’t that count as 100%?

    • The FTEE calculation is simply based on the individual without regard to their pay.

72.  A specific example is Person X. Person X is currently on unemployment. What is the minimum we have to do to get Person X to qualify as a head when doing our forgiveness calculation? Do we need to hire back by June 30th? Do we need to hire back sometime within the 8-week window of the program? Do we need to hire back immediately at the start of the eight weeks and pay at 75% or higher?

    • The rehire provisions seem to state that you have to rehire the person back by June 30th, which would seem to be the minimum that would need to be done.  As we mentioned on the webinar, it is likely that there are additional requirements that come along with that provision, but no guidance has been released.

73.  I have seen some commentators say that the accrued interest on the loan is forgiven also. Slide 23 indicates the amount forgiven cannot exceed the principal amount. Does this mean GBQ does not believe interest is forgivable?

    • The CARE Act does say that the maximum amount is the principal amount of the loan but there is also guidance and information that seems to say that the interest will also be forgiven.

74.  Hypothetical: We get the loan amount on 4/17. We use the loan from the PPP to cover payroll/rent/utilities from February 15, 2020 – April 10, 2020 (8–weeks)? We can provide proof of payroll dollars, utility payments, and rent.  At some point, after April 10 we lay off 10% of our employees and bring them back on payroll in mid-June. So by June 30, we are back at full employment. Would the entirety of the loan be forgiven? How long do we need to maintain that level of employment?

    • It is our understanding that the 8-week period you can spend the money to be eligible for forgiveness, in your scenario, would start on 4/17. Therefore, the payments prior to that date would not count.
    • If you bring everyone back by June 30th then the workforce reduction factor would not apply. How much of the loan is actually forgiven further depends on how much you spend during the 8-week period. If you do not spend the entire loan amount, then not the entire loan amount would be forgivable. Any amounts you do not spend you can either pay off early with no prepayment penalty or you can keep that amount as a loan at 1% interest due in two years.

75.  Example #2 leads me to believe it’s best to just pay your people, maximize the loan, and also get your non-payroll costs forgiven?

    • Each company has a very specific set of facts and goals. For some companies that will be the best path forward, for others it may not be.

76.  Any thoughts on why anyone would not maximize the loan and retain their workforce as much as possible for the 8-week period and reassess at the end of the eight weeks? (Assuming cash is available from the bank and the tracking to ensure the forgiveness happens.)

    • Each company has different objectives. Some companies will need these dollars to last longer in order to fund operations and stand a chance of survival. This is a very fact-specific situation and the path forward for companies will be different.


Other Questions

77.  If your employees signed up for unemployment and then you rehired them would they have to return the unemployment?

    • Unfortunately, we are unable to answer this question, as it is a legal question. We would suggest consulting with your employment counsel.

78.  What about the challenge of getting some employees back on payroll since they will make more money staying on unemployment? What if our employees went on unemployment and make more on unemployment with the extra $600 weekly? We want to hire them back, but they are making more on unemployment. What do we do?

    • Some of our clients are enticing workers to return with hourly premiums or other incentives. If there is a reasonable business justification for increased pay we believe that provides a defensible position should it be questioned.

79.  What are GBQ’s thoughts on debt forgiveness and the disallowance of expenses related to non-taxable income?

    • Updates as of April 30th from the IRS have changed our understanding of the accounting and taxability. We will provide further guidance detailing the resulting updates as soon as more information becomes available.

80.  The 25% non-personnel costs: can insurance expenses be included (liability, vehicle, cyber, etc.)?

    • We do not understand insurance to be defined as a utility.

81.  After the 8-week period, can you use the funds for anything or do they still have to go to payroll?

    • While fundamentally a legal question, the PPP loan is a subsection of the SBA 7(a) program and the CARES Act states that in addition to the normal uses under 7(a) that the funds can be used for payroll, utilities, etc. suggesting that the funds can be used consistent with the SBA 7(a) loans.

82.  As a small business owner with few employees, that by the way now have been furloughed, thoughts on hiring owner’s kids to fill in the gap to use all of the loan amount (to be forgiven)?

    • The CARE Act does not specifically prohibit hiring family. However, as with any related party transaction, it is best practices that the family members are actually working and contributing to the business at a rate that is commensurate with what an unrelated third-party would be paid. We do not believe simply adding family to the payroll without a business purpose would be appropriate.

83.  Our payroll master is a holding company, and where the loan was deposited. Typically, we transfer funds from both subs to the holding company to meet payroll. We expect to qualify for forgiveness, is it okay to continue to transfer funds from the subs to the holding company for payroll to get money out of the subs? Or do we really need to use the actual loan money they deposited?

    • This is a question that I would consult with your bank as to. We have seen different guidance from the banks as to whether you can commingle the funds or not.

84.  If during this period, you pay a contractor for services that will generate a 1099 at the end of the year, does that amount you paid count towards the loan that can be forgiven?

    • No. At points and time during this process, it was unsure if 1099 contractors were included. However, 1099 contracts can apply for their own PPP loan, thus, they cannot be included in payroll.

85.  Could you review again how the accounting side of the transaction will work as it pertains to the forgiveness portion? Nontaxable?

    • Updates as of April 30th from the IRS have changed our understanding of the accounting and taxability. We will provide further guidance detailing the resulting updates as soon as more information becomes available.

86.  Would insurance for the company, not health, be a permitted expense for forgiveness?

    • We do not believe so, the CARES Act specifically said health insurance for employees.

87.  What happens if your loan is funded April 20th and the 8 weeks end June 7th? Can you still re-hire by June 30th for full forgiveness?

    • Yes, that is our understanding.

88.  What about the case where we have an employee from Japan who gets paid a total of more than $100K/year (including the payroll in Japan being paid $70K in Japan) but only gets paid about $30K here in the US?

    • Compensation does not include any payroll for an employee whose principal residence is outside the US. So first you would need to determine if the principal residence was outside the US. If they pass that test, then the wages are capped to $100,000 in total.

89.  Are there any stipulations that require you to spend 100% of the PPP proceeds? If you only spend half of the proceeds, does the 25% ratio get applied to the amount spent or to the entire loan amount?

    • There is not a stipulation that you have to spend all the proceeds and the 25% ratio gets applied to the amount spent not the face amount of the loan.

90.  If we have folks on the FFCRA (federal paid sick leave), what happens to those expenses in relation to PPP forgiveness? How do we avoid double-dipping with the Federal government (e.g. them providing relief from the FFCRA and the PPP that overlap some of the same payroll costs)? I’ve seen a lot of guidance that says no compensation for those employees can be included in forgiveness, but that didn’t make sense to me.

    • The CARES Act states that payroll expenses do not include any qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act. Therefore, it does seem as if the wages for those employees cannot be forgiven. The rational, as we understand it, is that you are getting a credit for those wages and thus you cannot “double-dip.”


Bank Matters

91.  Why did they base the calculation on a 10-week period (250%), but require forgiveness in 8 weeks?

    • The CARES Act intended that you would spend 25% of the funds on non-payroll related expenses. The loan was for two months of payroll and two months of occupancy costs to “keep the lights on.”

92.  Taking the loan within 10 days from the loan authorization, is that business days or calendar days?

    • The guidance from the Treasury said 10 days but did not specify. We would suggest you discuss it with your banker.

93.  Please clarify qualified use for interest. Only mortgage interest? Interim Final Rule page 15 item r. vi. specifies “interest payments on any other debt obligations that were incurred before 2/15/20.”

    • We agree that some of the early information also specified interest on other debts. However, recent releases by the Treasury indicate that other interest is eligible for spending the loans on, but does not list that as an expense for forgiveness. We suggest consulting with your bank on their interpretation.

94.  What happens to the loan amount that you do not use in 8-weeks? Return it?

    • You have an option to return it or you can continue to use it, then it will be a loan with 1% interest and a 2-year period.



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