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Everything you need to know about BMD and the industry.

PPP Loan Forgiveness Application Details

As PPP loan recipients start to take stock of how they’ve used funds over the eight-week period, many businesses are eager to move ahead with the forgiveness portion of the program. How much of the loan will be forgiven is determined by the Small Business Administration (“SBA”), as provided in the CARES Act.[1] Over the weekend, the Department of Treasury released details on the forgiveness application, which can be found here.

Fund Usage

If the PPP funds are used to make payments on (1) payroll costs, (2) interest on mortgage obligations, (3) rent/lease payments for real and personal property, and (4) utility payments, those funds will be forgiven. However, a borrower’s use of PPP funds may only be forgiven if payroll costs account for 75% or more of the payments. That means only 25% of the payments forgiven can be for used for interest on mortgage obligations, rent, and utility payments.

Note that this is the first time that rent/lease payments from personal property have been indicated under the PPP forgiveness program. 

Payroll Cost Details

Eligible payroll costs are considered paid on the date payroll checks are distributed. The payroll costs are considered “incurred” on the day the employee’s pay is earned. Payroll costs incurred but not paid during the borrower’s last pay period of the covered period are eligible for forgiveness if paid on or before the next regular payroll date. Recall that the covered period as specified in the CARES Act begins at the time of receipt of the PPP funds. This may cause difficulty for many borrowers that use bi-weekly (or more frequent) pay periods if the receipt of the loan proceeds didn’t line up with the first day of their specific pay period. Under the guidance indicated in the Forgiveness Application, borrowers may elect to use an Alternative Payroll Covered Period which would begin on the first day of the first pay period occurring after their receipt of the PPP loan funds.

The Other 25%

Payments on mortgage interest, rent, and utility payments must be paid or incurred during the covered period and paid by the next regular billing date (even if payments occur after the covered period).  Utility payments include electricity, gas, water, transportation, telephone, or internet access. 

Forgiveness Formula

Any amounts forgiven under the PPP will be considered “canceled indebtedness” by the SBA. Such canceled indebtedness will not be taxed by the federal government.

The amount forgiven cannot exceed the principal amount of the financing originally made from the SBA. Additionally, the amount forgiven will be decreased proportionately based on the reduction in the number of employees on a borrower’s payroll. This reduction will only occur if the borrower does not maintain the same number of employees the borrower listed in its’ application. There is, however, an exception: if a borrower lays off an employee, offers to rehire the employee, and the employee refuses, the reduction in the number of employees of borrower will not penalize the borrower for loan forgiveness purposes. Further, the amount forgiven will be decreased proportionately based on the reduction in the salary of employees on a borrower’s payroll, if that salary decrease is greater than 25% of employee’s original salary. 

Application & Forgiveness Approval Protocol

A borrower seeking loan forgiveness must submit a forgiveness application to its SBA lender. The lender’s application must include documentation that:

  • Verifies the number of full-time equivalent employees,
  • Includes pay rates (IRS payroll taxes, state income, payroll, and unemployment insurance filings),
  • Verifies payments on mortgage interest, rent, or utilities, and
  • Certifies the use of funds is true, correct, and complies with the CARES Act.

The verification of full-time equivalents may be calculated, at the election of the borrower, on either of the following time frames: 02/15/2019 – 06/30/2019 or 01/01/2020 – 02/29/2020. The verification of pay rates will be calculated by the employee’s most recent full quarter during which the employee was employed before the covered period. All of this documentation must be maintained for at least 6 years by the borrower.

The lender must issue the borrower a decision on the amount of the loan forgiven within 60 days after the borrower files the loan forgiveness application. All loans in excess of $2 million will be reviewed by the Department of Treasury when a loan forgiveness application is received.

[1] CARE Act Section 1106: Loan Forgiveness.

Lockdowns, Landlords, & Litigation: Abercrombie & Fitch Flips The Script on Simon Property Group Inc.

Novel litigation between commercial property owners and tenants arises from COVID-19 lockdowns. Typically, owners sue for nonpayment of rent. But in Franklin County, Ohio, a large retail tenant turned the tables and sued the owner to recoup payments.

UPDATE: Ohio Businesses Remain Required to Post Exceptions to State-Wide Mask Mandate at All Entrances

On August 1, 2020, Lance D. Himes, Interim Director of the Ohio Department of Health, issued an amended order continuing the requirement that Ohio businesses post at all entrances any permitted exceptions they provide to customers, patrons, visitors, contractors, vendors and similar individuals to use facial coverings.

2020 Marcum National Construction Survey Marks a New, Post-Pandemic Construction Environment

The results of the 2020 Marcum National Construction Survey are in, and the construction industry’s outlook for the remainder of 2020 and beginning of 2021 remains cautiously optimistic despite the COVID-19 global pandemic. Ability to find skilled labor, healthcare expenses, and material costs remain the top concerns for the industry, while “lack of future work” joins the list.

Wrongful Death Lawsuits in the Wake of COVID-19

Several major “essential business” employers, including Walmart and Tyson, have been served with wrongful death lawsuits in relation to COVID-19. As many Ohio employees begin to return to work, employers should be prudent in following workplace safety practices.

We are Working in a Virtual, Video-Conferencing World – But What About Wiretapping?

Businesses and other organizations often have a need or desire to record telephone conversations related to their business interests and customer dealings; however, this practice is not always permissible as federal and state laws vary on this issue. Knowing and understanding your jurisdiction’s rules and regulations on this practice is essential to remaining in compliance with the law.