Posts made in May 2020

Paycheck Protection Program Update May 8, 2020


An additional $ 310,000,000 has been allocated to the SBA for use in funding the PPP  with an additional  $60,000,000 allocated to the smaller EDIL program. No changes were made to the procedures for applying for the loans.  The Monday morning technical problems seem to have been resolved. Clients continue to submit loans with one client submitting hers on Thursday afternoon. Most clients have been successful or are waiting for funding after approval. Two client even report a successful applications with a Big Bank! If you have not sent in an application, there is still time.


Loan Forgiveness- Clients who have received PPP loans are trying to figure out when to call their employees back. The extra $600 of Unemployment Benefit has created a problem. Many employees would receive less by returning to work. Should just the higher paid employees be recalled? Should  an employer wait until he reopens (May 15 or June 1) and pay overtime in anticipation of pent up demand? The employer only has an eight week period to use the funds. Of course, the employer can repay any unused funds.


What documentation will the lending bank want to support the Forgiveness application? We intend to send payroll information, health insurance , retirement deposits and Rent/Occupancy information. The bank may need copies of paid checks.  We expect significant scrutiny from our bank during the forgiveness process. We expect that our bank will want clear standards from the SBA before they proceed. 


The Treasury Department has announced that all PPP loans above $2 million will be audited with emphasis on a determination that the PPP loan was necessary.


Income Tax Treatment of Loan Forgiveness- The CARES act specifically says that a forgiven PPP loan is not taxable income. (Normally, under IRS rules a forgiven loan results in taxable income to the debtor.) The IRS announced today that although the Forgiven PPP loan does not create income, no deduction will be allowed for normally deductible payroll and occupancy expenses. Looks like the IRS wants to take back the tax advantage of the PPP loans. Here is  IRS Notice 2020-32 …maybe your CPA does not agree with the IRS interpretation. The PPP loan forgiveness specifically states that the forgiven PPP loan was not income…Interesting tax law question…we shall see.


Your thoughts on how to meet the Forgiveness Standard are welcome.

I suggest that you put your firms current Economic Uncertainty in writing. (There are many current events that you will want to forget!) What changes did you make? What changes did you contemplate but not make? Did any prospective clients or customers reduce, postpone or cancel orders? Keep a list of them. Since the standard is Uncertainty, did any clients or customers contact you to discuss reducing, postponing or canceling business. List them as well.

Did any employees or their families get the virus or were any worried about getting the virus?

Did you worry about paying your suppliers and getting paid by your clients and customers? These expenses are are not part of the PPP loan or forgiveness provisions but certainly would create uncertainty.

We should write a memo to ourselves in order to remember each financial event as we work through these uncertain times.

As always, if you have any thoughts or comments, please send them to me.