Recently, the Small Business Administration and the Treasury Department released its latest guidance in the form of two interim final rules on loan forgiveness: “Business Loan Program Temporary Changes; Paycheck Protection Program –Requirements – Loan Forgiveness” and “Business Loan Program Temporary Changes; Paycheck Protection Program – SBA Loan Review Procedures and Related Borrower and Lender Responsibilities.” This, coupled with Treasury’s recent Loan Forgiveness Application gives borrowers seeking forgiveness of their Paycheck Protection Program loans a better understanding of the process, subject to future regulatory or legislative changes.

Forgivable Uses of PPP Loans

The forgivable uses are:

  • You must spend at least 75% of the forgivable amount of your PPP loan on payroll costs
  • Payroll costs for U.S.-resident employees, consist of
    • Salary, wage, commission or similar compensation (up to $100,000 per employee)
    • Cash tips or equivalent
    • Payment for vacation, parental, family, medical, or sick leave (other than qualified family or sick leave wages for which a credit is allowed under Sections 7001 or 7003 of the Families First Coronavirus Response Act) Allowance for dismissal or separation
    • Payment required for the provision of group health care benefits, including insurance premiums
    • Payment of any retirement benefit
    • Payment of state or local tax assessed on the compensation of employees
  • You may not spend more than 25% of the forgivable amount of your PPP loan on nonpayroll costs, consisting of:
    • Payment of interest on a business mortgage obligation for real or personal property entered into prior to Feb. 15, 2020 (but not on principal prepayments or payment of principal),
    • Payments on business rent obligations on real or personal property under a lease agreement in force prior to Feb. 15, 2020
    • Business utility payments (for which service commenced prior to Feb. 15, 2020, consisting of:
      • Electricity
      • Gas
      • Water
      • Transportation (waste removal)
      • Telephone
      • Internet access

Read the full GT Alert “PPP Loan Forgiveness: What the Latest Guidance Means for You”