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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.

El Contrato Escrito: La Herramienta Predilecta

No existe mejor herramienta a una disputa contractual que un documento firmado por las partes en el cual se expongan las obligaciones y acuerdos entre éstas.

New State Budget Institutes Licensure Requirement for Ohio’s Hospitals

On July 1, 2021, Governor Mike DeWine signed Ohio’s final budget codified at Ohio Revised Code 3722.01 et seq., which includes a new licensing requirement for Ohio’s hospitals. For years, Ohio was the only state in the country that did not license its hospitals. This approach will now be replaced with new, detailed requirements that will require careful review and compliance. Here are some of the highlights concerning these new changes:

Healthcare Provisions in the Ohio FY 22-23 Budget

Governor Mike DeWine signed Ohio’s Fiscal Year 2022-2023 budget bill (HB 110) into law on July 1, 2021. At almost 1,000 pages and 74.1 billion dollars, the budget lays out the State’s spending for the next two years. Below are a few highlighted provisions from the budget that will be important for the healthcare industry in Ohio

Interim Final Rule for Surprise Billing

In an effort to implement the new bipartisan No Surprises Act, on July 1, 2021, the Department of Health and Human Services (HHS), along with the Departments of Labor and Treasury, issued an interim final rule to safeguard patients against unforeseen medical bills arising from out-of-network care.

President Biden Seeks to Limit Non-Compete Agreements

Today, President Biden announced he would issue an Executive Order that calls on the Federal Trade Commission (FTC) to adopt rules to curtail worker non-compete agreements. Interestingly, a week ago, the FTC approved changes to its Rules of Practice to modernize and expedite the way it issues Trade Regulation Rules. If you have followed our alerts, we predicted the elimination of non-competes would probably happen. In 2016, then-Vice President Biden was a vocal opponent against non-compete agreements. He led the Obama administration’s initiative seeking to limit or eliminate non-compete agreements. In his presidential campaign, Biden promised to “work with Congress to eliminate all non-compete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets . . ..”