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PPP and the Enigma of Loan Forgiveness

Updated May 6, 2020

It’s been almost a month since we wrote the first installment of our “Enigma” article, and we are happy to provide this latest installment.

We are surprised (and grateful) for the extremely warm reception our article has received, and we thank our readers for sharing their thoughts and insights with us. We think this reflects the importance of the topic to businesses around the country as the first round of forgiveness applications draws near.

Between April 14, 2020, and May 6, 2020, the SBA released a series of interim final rules (IFRs 3, 4, 5, 6, 7, and 8) and frequently asked questions (FAQs – 45 in total), as well as guidance in other formats. Yes, it is dizzying to keep track of it all. The guidance does not address directly the questions we posed regarding loan forgiveness, but it does shed some light on our favorite topic.

Here are our most recent observations, along with the details inserted into the original article below.

  • Question 1a: This new question discusses the requirement that borrowers spend at least 75% of the loan proceeds on payroll costs, and inquires whether this requirement is simply a restatement of the 25% overhead rule or a new gating requirement. See new question 1a below.
  • Question 2: Updated to reflect our recommendation on how to deal with the paid or incurred issue during the eight-week period. See discussion below.
  • Question 4: Updated to reflect how the new guidance sheds light on the types of property that are included in rent as a forgivable expense. See discussion below.
  • Question 6: Updated to reflect the IRS’ issuance of Notice 2020-32, which denies borrowers a deduction for expenses that are paid with forgiven funds. See discussion below.
  • Question 8: Updated to reflect what the new guidance reveals about partners in partnerships and how they are included in forgivable expenses. See discussion below.
  • Question 11a: This new question deals with the recent phenomenon of workers refusing to return to work because they are making more money sitting on their couch earning unemployment. It discusses the new FAQ addressing laid-off employees and how they factor into the forgiveness calculation if they refuse to return to work. See new question 11a below.

Updated April 15, 2020

On April 14, 2020, the SBA released a second interim final rule (IFR2) addressing various aspects of the PPP. This guidance is in addition to first interim final rule (IFR1) that was released on April 2, 2020.

Based on the guidance issued yesterday (IFR2), we have added the following information to the questions below:

  • Question 1: For independent contractors (ICs) and sole proprietors (SPs), the SBA imposed a new rule restricting the use of PPP loan proceeds – “at least 75% of the PPP loan proceeds shall be used for payroll costs.” This rule is separate from and in addition to the 25% overhead-expense limit relating to loan forgiveness. See discussion below.
  • Question 5a: This new question highlights the operation of the weekly determination method used in IFR2. Absent further guidance, this method will prevent all employers from obtaining full loan forgiveness on their PPP loans unless they increase their “payroll costs” (headcount, wages, or benefits) relative to the base period. This results from a computational quirk arising from the difference between the monthly determination method used to calculate the loan amount and the weekly determination method used to calculate loan forgiveness. See new question 5a below.
  • Question 7: IFR2 explains how ICs and SPs “pay” themselves and obtain loan forgiveness for the owner compensation amount. It announced a weekly determination method that prevents full forgiveness of the loan amount. The amount in issue may not be material, but it is surprising the calculation does not work as intended. See discussion below.
  • Question 7a: This new question highlights a few stacking scenarios, e.g., whether an individual can stack forgiveness benefits to exceed the $100K wage cap if he owns multiple businesses, or if he owns a business and receives PPP-funded salary from an employer. See new question 7a below.
  • Question 8: Partners may not separately apply for PPP loans; rather, they must be included in the application of the partnership. Partnerships can include the self-employment income of their general active partners in their PPP loan applications. See discussion below.

Posted April 13, 2020

Much has been written about the Paycheck Protection Program (PPP), including the scope of the program and its many requirements. The application process opened on April 3, 2020, and tens of thousands of businesses have already applied for loans.

Now that the application process is underway, and the SBA is funding loans, we wanted to turn our attention to the most important part of the PPP – loan forgiveness. While the first applications for loan forgiveness will not be filed for at least two months, the amount of loan forgiveness is tied directly to the actions that borrowers take during the eight weeks after their loans are funded. It is not too early to start planning.

Our colleague wrote a very informative article summarizing the general rules regarding loan forgiveness, and the SBA promised on April 2, 2020, that guidance would be forthcoming. For now, though, we are limited to interpreting the language of the statute and the SBA’s Interim Final Rule (IFR).

This article focuses not on the general rules; rather, we focus on the areas of uncertainty, confusion and inconsistency. The rules as written remind us of Churchill’s famous quote: “It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key.”  We don’t pretend to have the key to unlocking the enigma of loan forgiveness, but we hope to expose the dark areas to sunlight so that the SBA and others can help all of us figure it out together.

If you have any questions, please contact a member of Withum’s SBA Financial Assistance Services Group.

We plan to continue updating this article as additional questions arise, and, more importantly, as guidance is provided or practical answers and solutions emerge. For convenience, we have organized the questions by topic, though they are presented in no particular order.

Costs Eligible for Loan Forgiveness

1. Is there a difference between allowable uses and forgivable expenses?

1a. Is it required that borrowers spend at least 75% of the loan proceeds in order for any amount to be forgiven?

2. Do forgivable costs need to be “incurred,” “paid” or both during the eight-week period after the loan is made?

3. To what extent can bonuses be forgiven, or salary if it exceeds the amount included in the 12-month period used to calculate loan amount?

4. Which rental expenses are included?

5. How do you determine the loan forgiveness amount and what is the ordering rule for calculating the reductions thereon?

5a. Can the loan be fully forgiven?

6. The debt forgiveness is tax-free to borrowers, but can they deduct the forgiven expenses even though the government effectively paid them?

7. How do independent contractors (ICs) and sole proprietors (SPs) “pay” themselves and calculate their loan forgiveness amount?

7a. Can an IC or SP receive more than $15,385 in loan forgiveness ($100,000 annualized of payroll costs) if the individual owns multiple businesses, or owns a business and also receives PPP-funded salary from an employer?

8. Are partners in a partnership eligible for loan forgiveness?

Headcount Reduction Rule

9. How is a full-time equivalent (“FTE”) defined and calculated?

10. The formula to calculate expense reduction does not work as written.

11. Do borrowers have to factor in headcount reductions if the employee quits or the reasons for the reduction are unrelated to COVID-19?

11a. Is the amount of forgiveness reduced if a laid-off employee is offered their job back and the employee refuses to return to work, because, for example, the employee is making more on unemployment than he earned at their job?

Wage Reduction Rule

12. Can employers exclude from the wage reduction calculation some employees who make $100,000/year or less?

13. The formula compares amounts from unequal time periods rather than an average amount, and does not work as intended.

14. How do you define the “most recent full quarter” before the covered period for purposes of the calculation?

15. How does a replaced worker factor into the wage reduction calculation?

Exception for Re-hires

16. How does the exception for re-hires work?


Costs eligible for loan forgiveness

1. Is there a difference between allowable uses and forgivable expenses?

  • What we know: The list of expenses eligible for forgiveness is narrower than the list of allowable expenses under the PPP. The expenses eligible for forgiveness generally include (i) “payroll costs,” (ii) interest (but not prepayments) on a mortgage in effect before February 15, 2020, (iii) rent under a lease in force before February 15, 2020, and (iv) utilities in effect before February 15, 2020. This list does not include (a) costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums, and (b) interest (but not prepayments) on any other debt obligations, both of which are allowable loan uses. For ICs and SPs, the SBA restricts the allowable use of the loan proceeds – at least 75% of the loan proceeds must be used for payroll costs.
  • What’s unclear: It is not clear why the statute excludes health care benefits during periods of leave but includes a different definition of health care benefits in the phrase “payroll costs.”
  • Insights: This distinction is important in planning how to maximize the amount of loan forgiveness. For ICs and SPs, the 75% allowable-use test applies to the allowable uses of the loan, and it appears to operate independently of the 25% overhead-expense limit in the forgiveness calculation.


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1a. Is it required that borrowers spend at least 75% of the loan proceeds in order for any amount to be forgiven?

  • What we know: The Act makes no mention of the 25% requirement or the 75% requirement. The 75% rule was introduced with IFR1, which indicated ”not more than 25 percent of the loan forgiveness amount may be attributable to non-payroll costs.” IFR1 also provided that the 75%/25% requirement for forgiven amounts would align the overall goal of the Act to keep employees on staff. Since then, some have interpreted this to mean that the test is a gating mechanism, meaning that no forgiveness will be had if less than 75% of the loan amount is spent on payroll costs.
  • What’s unclear: Can a borrower obtain forgiveness for its permitted expenditures during the 8-week period if it spends less than 75% of the loan amount on payroll costs?
  • Insights: We do not believe the 75% test should be interpreted in this manner; rather, we believe borrowers will not be punished if circumstances beyond their control prevent them from spending at least 75% of the loan amount on payroll costs. In addition, the weekly measurement period for forgiveness purposes (see question 5a) makes it more difficult for borrowers to meet the 75% test unless they have increased their FTE count or total wages from their original measurement period.

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2. Do forgivable costs need to be “incurred,” “paid” or both during the eight-week period after the loan is made?

  • What we know: The statute states that forgivable expenses include “costs incurred and payments made during the covered period. . . .”
  • What’s unclear: This goes to the issue of back payments and forward payments (prepayments) – to what extent are they forgivable? Is there a difference between incurred and accrued?
  • Insights: The statute is unclear. There is often a timing difference between when an expense is incurred and paid. If the interpretation is to include only expenses incurred and paid, then borrowers should plan to make final expense payments on the last day of the eight-week period or they will suffer a reduction in forgiveness and have to repay parts of the loan for which forgiveness was expected. If the interpretation is to include expenses incurred or paid during the eight-week period, then we expect there might be some exceptions for previously-accrued or prepaid items. We believe a commonsense approach would permit forgiveness to the extent of the lesser of payments made during the 8-week period or costs incurred during the period. For example, if $10,000 were incurred during the covered period but the borrower paid only $2,000, then $2,000 would be eligible for forgiveness because the funds were not spent as Congress intended. And if $2,000 were incurred during the covered period but the borrower spent $10,000, then $2,000 would be eligible for forgiveness because the excess likely represents either a payment of previously-accrued amounts or a prepayment.

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3. To what extent can bonuses be forgiven, or salary if it exceeds the amount included in the 12-month period used to calculate loan amount?

  • What we know: Salary is a forgivable expense.
  • What’s unclear: Can bonuses paid during the eight-week period be forgiven? What if the bonus causes the employee’s annualized salary to exceed the 12-month salary that was used to determine the loan amount (excess salary)? Is back pay or forward pay included in the forgiveness amount?
  • Insights: It is unlikely that forgiveness was intended to cover excess salary or forward pay, unless perhaps forward pay is the norm for the employer and it becomes due during the eight-week period.

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4. Which rental expenses are included?

  • What we know: Rent is forgivable if pursuant to a lease in force before February 15, 2020, and recent guidance states that this includes personal property as well as real property. IFR3 provides an example of business rents (for a Schedule C borrower) that included the “vehicle you use to perform your business.”
  • What’s unclear: Does the lease need to be in writing? Are related-party leases included? Are payments covered if they relate to a period before the loan is made (back rent), or a period after the eight-week period (prepaid rent)? If vehicles are included, does this mean that other personal property such as office or equipment leases also are included?
  • Insights: We expect that rent will include leases of all real property and personal property which are used in the borrower’s trade or business. It is possible that written leases may be required for substantiation of the dates and amounts.

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5. How do you determine the loan forgiveness amount and what is the ordering rule for calculating the reductions thereon?

  • What we know: The statute lists the expenses eligible for forgiveness, i.e., it establishes a tentative or gross forgiveness amount. It then requires 3 possible reductions from that amount for the following items: (i) headcount reductions, (ii) wage reductions, and (iii) the limit regarding the principal amount of loan. The SBA’s IFR added a fourth possible reduction – the limitation that overhead (i.e., non-payroll) expenses cannot exceed 25% of the loan forgiveness amount.
  • What’s unclear: The order of the calculations will affect the amount of loan forgiveness, but there is no ordering rule for the calculations in the statute or in the IFR.
  • Insights: Until guidance is issued, we surmise the calculation will involve a 5-step process that looks something like this:
    • Step 1: add up the expenses eligible for forgiveness that are incurred and paid during the eight-week period, keeping track of the ratio between payroll and non-payroll expenses.
    • Step 2: reduce the amounts determined in step 1 by the amount of any reduction under the headcount reduction rule, and applying the reduction pro rata between payroll and non-payroll expenses.
    • Step 3: reduce the amounts determined in step 2 by the amount of any reduction(s) under the wage reduction rule, and applying the reduction(s) pro rata as above.
    • Step 4: if the amounts determined in step 3 exceeds the principal amount of the PPP loan, then reduce the amounts determined in step 3 by the amount of such excess on a pro-rata basis as above.
    • Step 5: reduce the amounts determined in step 4 to the extent the non-payroll expenses in step 4 exceed 25% of the total amount of expenses determined in step 4.

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5a. Can the loan be fully forgiven?

  • What we know: The SBA uses a weekly determination method in the forgiveness calculation (at least with respect to ICs and SPs), but a monthly determination method in calculating the loan amount.
  • What’s unclear: Whether the SBA will apply the weekly determination method for the forgiveness calculation to employers in addition to ICs and SPs.
  • Insights: : If payroll costs are held constant relative to the period used to calculate the loan amount, then payroll costs can only reach 73.85% of the loan amount spent during the 8-week covered period (8 weeks / (52 weeks x 2.5/12)). Because overhead expenses cannot exceed 25% of the forgiveness amount, there is a gap (1.53% of the loan amount, or 73.85% / 75%) for which forgiveness becomes impossible. The only way to bridge this gap, and obtain full loan forgiveness, would be to increase “payroll costs” in the 8-week covered period relative to the base period (subject to the $100K cap). This may come as a surprise to employers, who may not be expecting a repayment obligation.

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6. The debt forgiveness is tax-free to borrowers, but can they deduct the forgiven expenses even though the government effectively paid them?

  • What we know: The Act provides that the debt forgiveness is tax-free, and IRS Notice 2020-32 (issued April 30, 2020) provides that no deduction is allowed for expenses paid with forgiven funds.
  • Insights: The IRS guidance is consistent with what most practitioners had expected. The borrower is denied a deduction to the extent an expense if funded with forgiven, tax-free income. This is the same result that would obtain if the debt forgiveness were includible in income and the expenses were deductible from income. Either way, it is a wash from the borrower’s perspective and this is consistent with Federal tax policy. Despite this, we understand this is on the agenda for a legislative fix in the next round of legislation.

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7. How do independent contractors (ICs) and sole proprietors (SPs) “pay” themselves and calculate their loan forgiveness amount?

  • What we know: ICs and SPs are eligible for PPP loans up to the $100K wage cap, but no other expenses can increase the maximum loan amount. Thus, their maximum loan amount is determined on a monthly basis, and is $20,833 ($100,000 / 12 x 2.5). The maximum forgiveness amount for owner compensation is determined on a weekly basis and must be based on the taxpayer’s 2019 Schedule C, line 31 (net profit or loss). The maximum amount of owner compensation is $15,385 ($100K x 8/52).
  • What’s unclear: Whether it will be possible for ICs and SPs to obtain full loan forgiveness.
  • Insights: Under the present calculation, every IC and SP without employees will have to repay some amount of their loan. This is because the maximum loan amount is determined on a monthly basis, but the maximum forgiveness amount is determined on a weekly basis. For example, assume an IC made $100K on her 2019 Schedule C, line 31. Her maximum loan amount is $20,833 and her maximum forgiveness amount for owner compensation is $15,385 (or 73.85% of the loan amount). Assuming she spends the remainder of the loan amount on forgivable overhead expenses, and applies the 25% overhead (non-payroll) limitation to the maximum forgiveness amount, there is a gap of 1.53% of the loan amount (73.85% / 75%) for which forgiveness becomes impossible. In this example, that amount is $319 ($20,833 x 1.53%), which must be repaid to the government. More broadly, the SBA’s formula effectively precludes an IC or SP from ever reaching 100% loan forgiveness and some amount of the loan will always need to be repaid. There are at least two ways to mitigate this computational quirk: (i) an IC or SP can add an employee or if they have employee(s), the IC or SP can increase “payroll costs” during the 8-week covered period relative to the base period (subject to the $100K cap), or (ii) the SBA would have to increase the 25% overhead limit to 26.53%.

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7a. Can an IC or SP receive more than $15,385 in loan forgiveness ($100,000 annualized of payroll costs) if the individual owns multiple businesses, or owns a business and also receives PPP-funded salary from an employer?

  • What’s unclear: Whether an individual with multiple businesses and that files more than one Schedule C can stack the forgiveness benefits and exceed the $100K wage cap by obtaining loan forgiveness for each business separately? Whether an IC or SP that is also an employee of a third party can obtain forgiveness as a business owner while also receiving a PPP-funded salary from an employer? Whether a husband and wife who operate separate businesses can each obtain loan forgiveness up to $100K?
  • Insights: It seems likely that a husband and wife each would be able to claim a forgiveness benefit with regard to their separate business, but the result is less clear in the other two cases.

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8. Are partners in a partnership eligible for loan forgiveness?

  • What we know: IFR2 states that partners may not submit separate PPP applications, but they can be included in the partnership’s loan application to the extent of the self-employment income of the “general active partners” up to $100,000 annualized. The SBA also issued a document on April 24, 2020 entitled “How to Calculate Maximum Loan Amounts – By Business Type.” With regard to partnerships, that document includes in the calculation net earnings from self-employment as reported on box 14a of the Schedule K-1, reduced by certain items and multiplied by .9235 to remove the employer’s share of self-employment tax, and limited to $100,000 on an annualized basis. Box 14a includes guaranteed payments for services, so these payments are included in the calculating the maximum loan amount, and presumably would be included in the forgiveness calculation too.
  • What’s unclear: Whether a partnership will be required to make distributions to its partners within the 8-week period, or whether the “owner compensation replacement” model for Schedule C will prevail. If payments are required to be made, should the partnership gross-up the amount of the distribution by (1 – .9235), subject to reaching $15,385? Do the rules above apply in the same manner to members of LLCs taxed as partnerships as they do to “general active partners” in ordinary partnerships?

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Headcount Reduction Rule

9. How is a full-time equivalent (“FTE”) defined and calculated?

  • What we know: Unlike the test for PPP loan eligibility, the headcount reduction rule is based on an FTE concept. FTE is not defined in the statute.
  • What’s unclear: How do we calculate the number of FTEs? Is it based on hours? How do we aggregate part-time employees? We believe the SBA treats a full-time employee as any employee who is employed on average at least 30 hours/week, and that an FTE is a combination of employees, each of whom is not full-time because they do not work at least 30 hours/week, but who, in combination, are counted as the equivalent of a full-time employee.

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10. The formula to calculate expense reduction does not work as written.

  • What we know: The amount of forgiveness is reduced by multiplying the forgivable expense amount by the quotient of (i) the average number of FTEs per month during the eight-week period, divided by (ii) the average number of FTEs per month during either of the following periods, at the borrower’s election: (a) 2/15/2019 – 6/30/2019 or (b) 1/1/2020 – 2/29/2020.
  • What’s unclear: The formula does not work as written because even if headcount remains the same, it produces a 100% reduction in the forgiveness amount. For example, if there is $100 in forgivable expenses and no headcount reduction, then the reduction amount is $100 x 1 / 1 = $100.
  • Insights: This is likely a drafting error, and we expect the formula will be modified. An easy fix would be to change the formula to multiply the forgivable expense amount by the difference between 1 and the quotient listed above. Continuing the above example, $100 x (1-1) = 0, or no reduction in forgivable expenses.

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11. Do borrowers have to factor in headcount reductions if the employee quits or the reasons for the reduction are unrelated to COVID-19?

  • What we know: The statute is silent and requires the calculation to include all headcount reductions regardless of the reason.
  • What’s unclear: Will there be any exceptions to the strict statute definition for non-COVID-19 related reductions?
  • Insights: The reduction applies regardless of the reason for the reduction in headcount, and the only exception announced to date is for the instance described below in question 11a.

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11a. Is the amount of forgiveness reduced if a laid-off employee is offered their job back and the employee refuses to return to work, because, for example, the employee is making more on unemployment than he earned at their job?

  • What we know: FAQ 40 states that a borrower’s forgiveness will not be reduced provided the employer makes a good faith, written offer of employment and the employee’s rejection of the offer is documented. It also states that an interim final rule will be issued to address this situation. The FAQ confirms the view that the offer of employment and subsequent rejection may render the employee ineligible for continued unemployment compensation benefits.
  • What’s unclear: When does the offer need to be made – before the eight-week period? Can it be made during or after the period? Does the employee’s rejection need to be in writing? What should the employer do if the employee does not respond to the written offer? If no response is received, is the employer required to engage in additional outreach? What if the employee was furloughed as opposed to laid-off?
  • Insights: The FAQ is welcome guidance, but it should be expanded to cover other situations, such as where the employee resigned or was fired for cause.

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Wage Reduction Rule

12. Can employers exclude from the wage reduction calculation some employees who make $100,000/year or less?

  • What we know: Employees making more than $100,000/year are excluded from the wage reduction calculation because of the provision that includes only employees “who did not receive, during any single pay period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000.”
  • What’s unclear: The intent seems to be to exclude persons making more than $100,000/year, but the statute uses the words “during any single pay period.” This wordings seems to cover (i.e., exclude from the calculation) a person making less than $100,000/year if they received a bonus or other lump sum payment that puts them over the limit during any single pay period. For example, if a person is paid bi-weekly and received a one-time bonus of $5,000 last year, then their pay for that period would be $5,000 plus their regular compensation, which is more than $100,000 on an annualized basis ($100,000/year = $8,333/month = ~$4,167 every 2 weeks).
  • Insights: This is likely a drafting error, and we expect it will be modified.

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13. The formula compares amounts from unequal time periods rather than an average amount, and does not work as intended.

  • What we know: The statute requires a reduction for “total salary or wages” during the eight-week covered period that exceeds 25% of the “total salary or wages” during the most recent full quarter.
  • What’s unclear: The forgiveness period is 8 weeks but the base period is 3 months, so a straight comparison would always result in a reduction even if wages remain constant. For example, if someone earns $5,000 a month, then they would earn approximately $10,000 in the eight-week period ($5,000 x 2), and they would have earned about $15,000 in the base period ($5,000 x 3). This results in a wage reduction of 33%, even though wages remained constant, and the forgiveness amount would be reduced by $1,250 ($15,000 x .75 – $10,000).
  • Insights: This is likely a drafting error, and we expect the formula will be modified to require a comparison of average wages, either by month or by pay period.

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14. How do you define the “most recent full quarter” before the covered period for purposes of the calculation?

  • What we know: The statute does not define the phrase other than to say the most recent full quarter before the eight-week covered period. The statute uses the phrase “calendar quarter” in other contexts.
  • What’s unclear: It is not clear whether this refers to the most recent calendar quarter or the most recent three months.
  • Insights: Until guidance is issued, we believe either approach would be reasonable.

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15. How does a replaced worker factor into the wage reduction calculation?

  • What we know: If an employee is included in the base period – the most recent full quarter, but is not included in the eight-week covered period, then there would be a 100% reduction in that employee’s wages, but there would be no headcount reduction if the employer replaced the employee within the relevant time period.
  • What’s unclear: The interaction between the wage reduction rule and the headcount reduction rule is unclear. If an employee is replaced, then there is no headcount reduction and the wage reduction rule should not apply because the purpose of the statute has been met, i.e., keeping workers employed. It seems incongruous to reduce the loan forgiveness in this context by the wage reduction formula relative to the former employee (i.e., by 75% of the wages of the former employee).
  • Insights: Employers should not have to navigate this level of complexity as they manage a mobile and dynamic workforce. We believe the wage reduction rule should be limited to employees who remained on payroll during the 8-week covered period. This would eliminate the application of both the headcount and wage reduction rules from applying to the same individual employee, If they both applied, then there could be a reduction in forgiveness in an amount that exceeds 175% of the former employee’s salary during the eight-week period.

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Exception for Re-hires

16. How does the exception for rehires work?

  • What we know: Loan forgiveness is calculated without regard to reductions in headcount or wages during the period from February 15, 2020 to April 26, 2020 (the “window period”) if no later than June 30, 2020, the borrower eliminates the reduction in FTE headcount or the reduction in any individual employee’s wages beyond the 25% threshold, as applicable.
  • What’s unclear: The rehire rule appears to allow for a disproportionate elimination of reductions in forgiveness. Consider the following example: a borrower with 300 employees eliminated 280 of them on February 1st, but if one additional employee left during the window period and the borrower rehires that person by June 30th, then the reduction in forgiveness relating to all 281 employees would be eliminated. Alternatively, if there was no reduction in headcount during the window period, then the rehire rule has no applicability and the only way for the employer to get full forgiveness is to rehire all 280 employees for the full eight-week covered period.
  • Insights: We expect the rehire rule to be fixed because it can create unintended results. It seems to us that the rehire rule should eliminate only those reductions that were cured by the restoration.

SBA Financial Assistance Services

Here are links to relevant source material for this article:

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