Monthly Archives: June 2020

June 19, 2020 Anne

New EZ and Revised PPP Forgiveness Applications for the Paycheck Protection Program (PPP) Released

New EZ and Revised PPP Forgiveness Applications for the Paycheck Protection Program (PPP) Released

On June 17, 2020, the Small Business Association (SBA) in consultation with the Department of the Treasury, posted a revised PPP loan forgiveness application and instructions (Form 3508 – revised June 16, 2020), which implements the PPP Flexibility Act of 2020 that was signed into law on June 5, 2020. In addition, the SBA also published a new “EZ” version of the loan forgiveness application – Form 3508EZ. Links for these forms are provided below.

Do You Meet the Requirements to File Form 3508EZ?

The EZ application form requires fewer calculations and less documentation for eligible borrowers. The EZ loan forgiveness form does not include a calculation for the FTE Reduction Quotient or the 25% pay rate reduction for employees who made up to $100,000 annualized in 2019. However, Borrowers using this form must still maintain documentation that supports these assertions.

Borrowers can use the EZ form if they meet one of the following criteria:

  • The Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees when they applied for the PPP loan and did not include any employee salaries in the computation of average monthly payroll in the PPP loan application Form 2483; OR
  • The Borrower did not reduce the salaries or wages of their employees by more than 25% during the Covered Period or Alternative Payroll Covered Period as compared to January 1, 2020 through March 31, 2020 for employees who did not earn more than $100,000 at an annualized rate during 2019, AND the Borrower did not reduce the number of employees or the average paid hours between January 1, 2020 and the end of the Covered Period. (Borrowers can ignore certain headcount reductions as defined in the instructions); OR
  • The Borrower did not reduce the salaries or wages of their employees by more than 25% during the Covered Period (same as bullet above), AND the Borrower was unable to operate during the Covered period at the same level of business activity as before February 15, 2020, due to the issuance of health directives (as issued by the CDC, OSHA and Health and Human Services) between March 1, 2020 and December 31, 2020 related to COVID-19.

Covered Period Can Be 8 Weeks or 24 Weeks

Both applications (Form 3508 and Form 3508EZ) give Borrowers the option of using the original 8-week covered period (if the loan was made before June 5, 2020) or an extended 24-week covered period.  There is no current guidance providing an option to use a covered period that is between 8 and 24 weeks.  Therefore, if the Borrower believes they will qualify for 100% forgiveness before the end of the 24-week period, it is not yet known whether they will be able to apply at that time or if they will instead need to wait the full 24 weeks.

What are the Maximum Payroll Costs For Employees and Owners?

For both applications, the maximum amount of cash compensation (wages, salary, tips, etc.) that is eligible for forgiveness for each individual employee is $15,385 ($100,000 x 8/52) for the 8-week period and $46,154 ($100,000 x 24/52) for the 24-week period.

Owner compensation (i.e., sole proprietors, general partners and owner-employees) is limited to 2019 net profit up to $15,385 ($100,000 x 8/52) for the 8-week period and $20,833 ($100,000 x 2.5/12) for the 24-week period.  The owner compensation cap is inclusive of all payroll costs.  In its related Interim Final Rule, the SBA stated that they did not want Borrowers to qualify for additional forgiveness based on owner compensation exceeding the amount they were able to borrow against their compensation, which you may recall was 2.5 months of compensation, capped at $100,000 per annum.

The 60% Rule for Payroll Costs

At least 60% of the PPP loan proceeds shall be used for payroll costs. This rule applies to both the 8-week and 24-week covered periods. The 60% requirement for payroll costs is not an all or nothing rule. The Borrower’s eligible nonpayroll costs cannot exceed 40% of total costs eligible for forgiveness, which includes payroll and nonpayroll costs.

Haven’t Applied for a PPP Loan Yet?

Time is of the essence. The last day to file for a PPP Loan is June 30, 2020. See the revised PPP Loan Application link here.

Links to Updated and New Forms

SBA Form 3508 Application (Revised 6-16-2020) – Link here

SBA Form 3508 Instructions (Revised 6-16-2020) – Link here

SBA Form 3508EZ Application (Issued 6-16-2020) – Link here

SBA Form 3508EZ Instructions (Issued 6-16-2020) – Link here

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June 15, 2020 Anne

We’re hiring! Economic and Community Development Specialist

Job Summary: The primary focus of this individual will be to support Schuyler County Partnership for Economic Development (SCOPED) and the Schuyler County Industrial Development Authority (SCIDA) in efforts to leverage public & private sector relationships and decision-makers to assist the Villages, Towns and the County improve the local and regional economy. This individual will be responsible for providing technical support related to business development, community development, grant funding, real estate development and community engagement.  This includes, but is not limited to: growing and maintaining the financial resources (local, state and federal grants & loans) necessary to address the needs of new and existing small businesses; providing start-ups and existing companies with knowledge and access to a wide variety of resources critical to their formation and growth; working with local officials. This individual will be responsible for the organization’s social media including posting of legal notices and other regularly updated information on the website.

For a complete job description, click here. If interested in the position, please email a complete resume and coverletter to Judy McKinney Cherry, CEcD FM at judy@flxgateway.com

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June 9, 2020 Anne

PPP Flexibility Act Becomes Law

The U.S. government has enacted changes to the Paycheck Protection Program (“PPP”) including the relaxation of PPP Loan Forgiveness rules with the goal of making it easier for many businesses to qualify for loan forgiveness on a larger portion of their loans. These changes were signed into law on Friday through the Paycheck Protection Program Flexibility Act of 2020 (PPPFA). This new legislation contains many important changes to the PPP.
  • Loan Forgiveness
The PPPFA extends the “covered period” from 8 weeks to 24 weeks from the date of the origination of the covered loan, or December 31, 2020, whichever is earlier. A borrower under an existing PPP loan may elect to keep the original 8 week covered period. The requirement that the Borrower use at least 75% of the forgivable amount of the PPP Loan on payroll costs was lowered to 60%. The Borrower may now use up to 40% on nonpayroll costs (mortgage interest, rent and utilities) for its loan forgiveness amount. However, the way the PPPFA is written, the new threshold is now a “cliff”, meaning that at least 60% of the loan amount must be spent on payroll costs in order to be eligible for forgiveness. It is not yet clear whether a Borrower electing to use the 8 week covered period should follow the new 60/40 rules or the original 75/25 requirement.
The Safe Harbor date to restore reductions in Full-time Equivalent (FTE) employees and wages has been changed from June 30, 2020 to December 31, 2020.
The PPPFA adds an exemption to the FTE Reduction calculation, if for the period beginning February 15, 2020, and ending December 31, 2020, the Borrower can document:
  1. An inability to rehire employees who were employed as of February 15, 2020, and
  2. An inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020, or
  3. An inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements and guidelines issued by Health and Human Services, CDC or OSHA during March 1, 2020 to December 31, 2020 related to certain protocols for responding to COVID-19.
  • Deferral of Employer Payroll Taxes
Recipients of PPP loan forgiveness are no longer excluded from the deferral of the employer’s half of federal social security and Medicare taxes. Borrowers may now continue to defer payroll taxes through the end of 2020.
  • Loan Term and Deferral Period
The CARES Act (Section 1106) initially provided that a PPP loan would have a maximum maturity of 10 years from the date on which the Borrower applies for loan forgiveness. In its first Interim Final Rule (IFR) issued in early April 2020, the SBA reduced the loan maturity to two years. The PPPFA requires all new PPP loans made on or after the effective date (June 5, 2020) to have a minimum maturity of 5 years, up to a maximum of 10 years. The PPPFA also does not “prohibit lenders and borrowers from mutually agreeing” to modify the two-year term of existing PPP loans to conform with this new section. The six month deferral period before payments are due has been replaced. The deferral period now begins on the loan date and ends on the date that the SBA remits the amount of forgiveness to the lender.
If a borrower does not apply for forgiveness within 10 months after the last day of the covered period, the deferral period ends on that same date.
  • What’s Next?
The SBA will need to update the Loan Forgiveness Application released on May 15, 2020 for the changes enacted by the PPPFA. Additional guidance may also be released in the form of Frequently Asked Questions and new interim final rules to help borrowers and lenders implement all of the modifications required.
Some companies have already applied for and received forgiveness of their PPP loan amounts. With more than one million borrowers finishing their initial 8 week covered periods this week, time is of the essence to evaluate these options. If you wish to use the 8 week covered period, please contact your lenders about the appropriate steps to take to apply.
It remains unclear whether you can apply for forgiveness and prepare your FTE and salary reduction tests as of the date that you have fully used your loan proceeds towards qualified expenses. If businesses must wait to apply for forgiveness and perform these tests at the end of the 24 weeks, they will be faced with the challenge of having to maintain headcount and salary levels for full loan forgiveness, while not having the benefit of additional loan proceeds.
If you have not previously applied for a PPP loan, or you previously returned or did not accept your loan amount, you are still eligible to apply up until the loan application deadline of June 30, 2020. Of course, you still must meet the requirements of the program including the certification.

SBA Lenders accepting PPP Applications: (updated 6/9/2020)

NOTE: All changes above are retroactively applicable as if they were included in the original CARES Act, except for the change in loan term, which is prospective. As usual, please make sure to stay in contact with your accounting firm.

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June 9, 2020 Anne

June 12th: Phase 3 Reopening Guidance for Indoor Dining, Personal Care, Child Care, and Day Camps

Phase 3 guidance for indoor dining and personal care can be found on the New York Forward Webpage or by clicking here.

Guidance for child care and day camps is also available and can be found here.

If you have any questions regarding completing the safety plan or affirmation, please contact us at 607-535-4341.

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