By Heather Kloster, Marketing Senior CliftonLarsonAllen, Email T. 626.387.8281

In case you missed it:

CLA LivestreamSeries: PPP Update: Unpacking the Latest Guidance

We will be discussing the latest PPP guidance released June 16th and it’s implications for your business.

Speakers:

• Jennifer Rohen, CLA Principal, WOTC Practice Leader
• Jack Rybicki, CLA Managing Principal of Industry, Real Estate
• Rick Krueger, CLA Principal
• Brendan Kurvers, CLA Manager, M&D

What you missed:

Jen Rohen: Hello CLA family, friends, colleagues, and community partners. Welcome back to our livestream. We sincerely hope that you are continuing to stay safe and healthy at this time. On June 16 and 17, SBA released new loan forgiveness applications and a new interim final rule (IFR).

Today, we have Jack Rybicki and Rick Krueger to help understand key takeaways from these new documents. In addition, we have Brendan Kurvers, from our Manufacturing and Distribution team, to walk us through a specific example as it relates to food and beverage and how your consumer experience will be impacted as a result of Paycheck Protection Program (PPP) changes. Welcome, guys!

Rick, I’d like to start with you talking about the new Form EZ. What are the criteria that an organization needs to meet in order to utilize this form?

Rick Krueger: Thanks, Jen. You need to meet one of three criteria in order to complete Form EZ.

1. Self-employed individuals, independent contractors, or sole proprietors that had no employees at the time of application and did not include any employee salaries in the average monthly payroll of the borrower application form.
2. Borrowers who did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period (or alternative payroll covered period) compared to Q1 2020 AND did not reduce the number of employees or average paid hours of employees between January 1, 2020 and the end of the covered period. Note that for this certification, borrowers should ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020, if the borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also, borrowers should ignore reductions in an employee’s hours that the borrower offered to restore and the employee refused.
3. Borrowers who did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period (or alternative payroll covered period) compared to Q1 2020 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 compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.

Rohen: Jack, why might this not be as “EZ” as it seems?

Jack Rybicki: Note that while the EZ form is significantly shorter, the documentation instructions still require the borrower to submit information to support each assertion made. So unfortunately, this doesn’t necessarily decrease the effort required by a borrower to comply with the requirements.

For borrowers with employees, this would include payroll records that separately list each employee and show the amounts paid to each employee during the period between January 1, 2020 and March 31, 2020, and the amounts paid to each employee during the Covered Period or Alternative Payroll Covered Period. It would also include payroll records that separately list each employee and show the amounts paid to each employee between January 1, 2020 and the end of the Covered Period.

Additionally, borrowers may need to include information regarding any employee job offers and refusals, refusals to accept restoration of reductions in hours, firings for cause, voluntary resignations, written requests by any employee for reductions in work schedule, and any inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.

If applicable, borrowers may also need to include documentation supporting the certification that it was unable to operate between February 15, 2020 and the end of the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19. This documentation must include copies of the applicable requirements for each borrower location and relevant borrower financial records.

Rohen: Thanks, Jack. Rick, another really important thing that happened with the application and the new IFR is that we have some clarity on limits for both the 8- and 24-week covered periods. Can we please talk about that for a little while?

Krueger: Sure, Jen. Borrowers had many questions about how limits in effect for the eight-week covered period would apply to the 24-week covered period. The new applications and IFR include that detail and answered some outstanding questions we had for both periods (e.g. health insurance for owner-employees of an S-corporation).

• $100,000 cash compensation limits updated for 24-week covered period
  • Employees are capped at $15,385 for 8 weeks or $46,154 for 24 weeks
  • Owner compensation is capped at $15,385 for eight weeks or the lower of $20,833 or 2.5-month equivalent of their applicable compensation in 2019 for the 24-week period.
• Employee benefits for employees who are not owners include
  • Employer contributions for employee health insurance, including employer contributions to a self-insured, and employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees.
  • Employer contributions to employee retirement plans, excluding any pre-tax or after-tax contributions by employees.
  • Employer, state, and local taxes paid by the borrower and assessed on employee compensation (e.g., state unemployment insurance tax), excluding any taxes withheld from employee earnings.
• Employee benefits for owners include further restrictions
  • Borrowers must exclude employer health insurance contributions made on behalf of a self-employed individual, general partners, and owner-employees of an S-corporation. The SBA has stated these are excluded because such payments are already included in their compensation.
  • Borrowers must exclude employer retirement contributions made on behalf of a self-employed individual or general partners. The SBA has stated these are excluded because such payments are already included in their compensation.
  • Employer retirement contributions on behalf of owner-employees are capped at 2.5 months’ worth of the 2019 contribution amount

Rohen: Thanks, Rick. We do have one more key change that I’d like to have us talk through. Jack, can you please talk us through the application of the new December 31 safe harbor date?

Rybicki: Absolutely. Safe harbors for both salary/hourly wage reduction and FTE reductions include a new option: