The Small Business Administration (SBA) and Treasury Department have issued a new interim final rule following the June passage of the Paycheck Protection Program Flexibility Act (PPPFA). The SBA also issued an updated Paycheck Protection Program (PPP) loan forgiveness application with instructions.

Here are key highlights of recent improvements:

The PPPFA expanded the Covered Period during which expenses eligible for forgiveness can be incurred from eight to 24 weeks, at the borrower’s option. It also allows borrowers to use the Alternative Payroll Covered Period (APCP), which simply ties the beginning of the eight- or 24-week eligibility window to the first payroll date following loan disbursement.

On June 17, the SBA released the new EZ Application. While borrowers applying using the EZ Application still need to retain payroll and employment information to substantiate forgiveness eligibility, the streamlined three-page form generally requires less calculation and documentation. The EZ application alternative is available to borrowers that meet any one of the following three tests:

  1. Borrower is self-employed and has no employees
  2. Borrower both
    1. did not reduce the wages/salaries of employees by more than 25% during the Covered Period/APCP, and
    2. did not reduce the employee count or average employee hours between 1/1/2020 and the end of the Covered Period/APCP
  3. Borrower both
    1. Had reduced business activity as a result of COVID-19 health directives, and
    2. Did not reduce wages/salaries of employees by more than 25%

The PPP capped salary expenses eligible for forgiveness on a per employee basis. Those borrowers who choose the 24-week loan forgiveness window are subject to the following caps:

  • Employees: for each employee earning an annual salary over $100,000, a cap of $46,154 (24/52 times $100,000)
  • Self-Employed Individuals, General Partners, S-Corp Owners, “Owner-Employees:” each of these is limited to the lower of:
    1. $20,833 (2.5 months / 12 times $100,000) OR
    2. 2.5 month equivalent of their 2019 compensation
    3. NOTE: the term “owner-employee” remains undefined.


SBA Form 3508EZ & Instructions – 

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