On March 3, 2021, the SBA released new FAQs as well as various updates to the previously existing Paycheck Protection Program (PPP) Loans FAQs. The updated document incorporates the changes resulting from December’s Consolidated Appropriations Act and is applicable to all PPP loans.
Below is a high level look at the most recent updates to the FAQs document:
- FAQ#46 related to good-faith certifications was updated to address Second Draw PPP loans. The FAQ states, "Because Second Draw PPP Loan borrowers must demonstrate that they have had a 25 percent reduction in gross revenues, all Second Draw PPP Loan borrowers will be deemed to have made the required certification concerning the necessity of the loan in good faith."
- New FAQ#62 clarifies that First Draw borrowers are not precluded from eligibility for a Second Draw PPP loan if they only received partial forgiveness on their First Draw PPP loan, as long as the full amount of that loan was spent on eligible expenses.
- New FAQ#62 states that applicants may not use the SBA's established size standards (either revenue-based or employee-based) or the SBA's alternative size standards to qualify for a Second Draw PPP loan. It includes further detail about the limited exceptions to the 300 employee maximum eligibility requirement.
- New FAQ#65 addresses the eligibility of PPP loan borrowers for the Employee Retention Tax Credit, and it includes a link to recently-released IRS guidance which outlines seven detailed examples of the interplay between PPP loan forgiveness and the Employee Retention Tax Credit. We issued additional information about the IRS guidance in this alert; you can also watch a rebroadcast of our recent webinar “What Every Business Needs to Know About the Employee Retention Tax Credit.”
The SBA also issued IFR: Revisions to Loan Amount Calculation and Eligibility on March 3. This IFR removes certain PPP loan eligibility restrictions related to business owners with non-financial fraud felony convictions and those with delinquent federal student loans.
More notable are the changes for sole proprietors, independent contractors, and self-employed individuals (Schedule C Filers) which allow for an alternative loan calculation methodology aimed at expanding funding to the smallest businesses.
Two new applications for Schedule C Filers were released in tandem with this IFR. The updated applications allow for individuals who file an IRS Form 1040 Schedule C to calculate their maximum loan amount using gross income instead of net profit.
- Form 2483-C: New First Draw loan application for Sch. C borrowers using Gross Income
- Form 2483-SD-C: New Second Draw loan application for Sch. C borrowers using Gross Income
As always, if you have any questions about these updates or would like assistance as you navigate the PPP loan process, 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.