The SBA has updated the Frequently Asked Questions (“FAQ’s”) on the PPP.
The FAQ’s are a form of regulatory guidance to respond to borrower and lender questions concerning the implementation of the PPP. The SBA has committed to updating the FAQ’s on a regular basis. Borrowers and lenders may rely on the guidance provided in this document as SBA’s interpretation of the CARES Act and of the PPP Interim Final Rule. The U.S. government will not challenge lender PPP actions that conform to this guidance, and to the PPP Interim Final Rule and any subsequent rulemaking in effect at the time.
Among other topics, the newly added FAQs clarify and provide:
- That lenders may rely on borrower certifications as to the applicability of affiliation rules.
- That lenders do not need to re-verify beneficial ownership information for existing customers. (If participating depository institutions have not yet collected beneficial ownership information on existing customers, they are not required to do so for those customers applying for PPP loans.)
- Additional guidance on how payroll is defined under the CARES Act, including the calculation of non-cash benefits and coverage of paid leave. In short, the guidance confirms:
- PPP loans are intended to covers payroll cost, including costs for employee vacation, parental, family, medical, and sick leave;
- amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs.
- In determining the proper loan amount, payroll costs may be aggregated either from the previous twelve months or from calendar year 2019; and
- payroll costs are to be calculated on a gross basis without regard to (i.e., not including subtractions or additions based on) federal taxes imposed or withheld, such as the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and income taxes required to be withheld from employees. For example, an employee who earned $4,000 per month in gross wages, from which $500 in federal taxes was withheld, would count as $4,000 in payroll costs.
- Loan applications that were submitted in accordance with the PPP Interim Final Rule published on April 2, 2020, do not require revision based upon the updated guidance in the FAQs. The SBA has now confirmed that borrowers and lenders may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers whose previously submitted loan applications have not yet been processed may revise their applications based on clarifications reflected in the FAQs.