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New PPP Forgiveness Forms & Guidance on Second Draw PPP Loans Released

January 21, 2021 4 Min Read Alerts, Article, Business Tax
Vanessa A. Zang, CPA
Vanessa A. Zang, CPA Director, Audit & Accounting

Tuesday evening, the SBA and Treasury released a series of updated Paycheck Protection Program (PPP) Loan Forgiveness applications and guidance, including a simplified one-page application (Form 3508S) for borrowers with loans of $150,000 or less. No supporting documentation will be required when submitting Form 3508S; however, borrowers must maintain the documentation necessary to prove compliance with the program in the event it is requested by the SBA.

Two other loan forgiveness applications – Form 3508 and Form 3508EZ – were updated to include the four new categories of eligible expenses that were added as part of the Economic Aid Act signed into law on December 27, 2020 as well as the required documentation that must be submitted for those covered costs. Invoices, purchase orders, and cancelled checks or account statements verifying those eligible payments are among the support documentation that will be required to substantiate the costs. These new applications will be used for both First Draw and Second Draw PPP loans.

The SBA also released detailed guidance to assist businesses in calculating their revenue reduction and payroll costs for purposes of determining eligibility for and amount of a Second Draw PPP loan. The 18-page document explains how to calculate the revenue reduction and also specifies that “Gross receipts of a borrower’s affiliates (unless a waiver of affiliation applies) are calculated by adding the gross receipts of the business concern with the gross receipts of each affiliate.”

In addition, it also defines the documentation needed to corroborate the 25 percent reduction in gross receipts. Applicants have the following documentation options: 1) quarterly financial statements which, if not audited, must be initialed and dated by the borrower, attesting to their accuracy, 2) bank statements showing deposits for the relevant quarters, or 3) Annual IRS income tax filings. If not yet filed, applicants must complete the forms and sign, date, and attest that the values entered for gross receipts will be the same as those filed on the entity’s tax return.

The remainder of the document provides examples, by entity type, of how to calculate the maximum Second Draw PPP loan amount including options available for the period of payroll costs borrowers may select. Documentation requirements substantiating the payroll costs are also described.

Two SBA Procedural Notices were also published:

  • PPP Excess Loan Amount Errors – This notice outlines example scenarios of loan amounts being disbursed in excess of the borrower’s correct maximum loan amount under the CARES and the Economic Aid Act and the effect of an excess error on loan forgiveness. Most notably, the notice indicates borrowers may not receive loan forgiveness for any amount that exceeds the correct maximum loan amount permitted under the laws, whether caused by borrower or lender error.
  • PPP Borrower Resubmissions of Loan Forgiveness Applications Using Form 3508S, Lender Notice Responsibilities to PPP Borrowers, and Offset of Remittances to Lenders for Lender Debts – This notice covers a variety of lender processes and responsibilities related to loan forgiveness decisions and communication thereof to borrowers. Lenders must inform borrowers within five days of the SBA’s decision on denial of full forgiveness, SBA’s declining of a borrower’s request to review the lender’s decision to deny forgiveness in full, a final SBA loan review decision, and remittance by the SBA to the lender of partial or full forgiveness. This notices also provides information on the SBA loan review process and circumstances in which a borrower may appeal a SBA loan review decision to the SBA’s Office of Hearings and Appeals (OHA).

As always, if you have any questions about these or any other matters, please contact your Kreischer Miller relationship professional or any member of our team. For additional news and resources, visit our COVID-19 Resource Center here.

Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.

Contact the Author

Vanessa A. Zang, CPA

Vanessa A. Zang, CPA

Director, Audit & Accounting

ESOPs Specialist, Owner Operated Private Companies Specialist, Private Equity-Backed Companies Specialist

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