David N. McCullough CPA PC

Financial, Tax, and Family Office Services

PPP/EIDL updates June 17, 2020

A “few” changes have occurred since my last post. Here’s a quick summary:

  • The EIDL application window has re-opened. For a while, only agricultural requests were being accepted, but now businesses that missed the original window are allowed to apply.
  • If you accepted the EIDL loan that was proposed but now were declined or now feel the amount was inadequate, you can apply for reconsideration by filling out form 3502 (attached here) and emailing the form and referencing your original SBA application number to Reconsideration@sba.gov
  • EIDL loans require that you provide a copy of the company resolution authorizing the loan to the SBA (see RESOLUTION OF BOARD OF DIRECTORS on page 7 of the agreement), provide a copy of proof of insurance (see DUTY TO MAINTAIN HAZARD INSURANCE on page 4) and (if you have employees) post the EEO notice (page 10 of the agreement). I suggest using certified mail to send the SBA documents.
  • PPP forgiveness provisions have been modified. You now have 24 weeks to spend the proceeds in approved ways (up from 8 weeks) and the payroll component has been reduced from 75% of proceeds to 60%.
  • PPP forgiveness forms have been issued, but the initial forms were done before the forgiveness provisions were modified. I suspect we will have several modifications before forgiveness is granted. The banks are going to want assurance from the SBA that the forms the applicants will fill out for the banks will be considered valid at the SBA.
  • Requirements for forgiveness of self-employed individuals’ PPP loans are still subject to interpretation. By definition, self-employed persons don’t have “payroll” expense for themselves, so the 75%/60% rule isn’t applicable. Interim final rule 19, which is scheduled to be published on June 19, 2020, indicates that owner compensation equal to the amount of the loan will qualify for forgiveness. This seems to indicate that if you obtained a $15,000 PPP loan, and you transfer $15,000 from your business account to your personal account within the 24 weeks, the loan will be forgiven. If you don’t have a separate business account…..well, hopefully there will be more clarification.
  • PPP loan applications previously disqualified due to a “yes” response to the question “Within the last 5 years, for any felony, has the applicant….” may now be eligible. The question previously disqualified you immediately; the SBA has indicated that the potential lender should contact the applicant for a letter of explanation, and that the loan request may be granted depending on type and age of the offense.
  • Still unclear at this point – are the expenses deemed paid from the PPP loan non-deductible? The IRS issued an opinion that they were non-deductible under existing policies; the language of the CARES act indicates that they should be deductible, and the courts obviously have not had a chance to weigh in. This potentially could have an effect on the expenses eligible for R&D credits as well, so consult with your tax professional before applying for loan forgiveness.
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