New information, clarifications, and updates continue to be released regarding COVID-19 relief programs, and specifically for the CARES Act, PPP Loans, and Families First Coronavirus Response Act.

Following is an overview of some of the most important updates and reminders for staffing company owners, including expenses that are forgivable under a PPP loan.

Important Updates & Reminders:

As of May 14, 2020 the US Treasury and SBA have not released the Interim Final Guidance on the PPP Loan Forgiveness. This is what we do know as of today:

• The CARES Act lists four categories of expenses that are forgivable. This means that your PPP loan is forgivable to the extent you spend the proceeds of your loan on these four categories, provided you maintain your company’s headcount and employee salaries at the same pre-Covid-19 level.

1. Payroll costs
2. Rent obligations in force prior to February 15, 2020
3. Utilities for which service began before February 15, 2020
4. Interest payments on any mortgage incurred prior to February, 15, 2020

A minimum of 75% of the PPP loan funds must be used on payroll costs, which means that not more than 25% of the loan forgiveness amount may be for non-payroll costs.

• Forgiveness of a PPP loan depends on the borrower’s payroll cost over an eight-week period beginning on the date the lender makes the first disbursement of the PPP loan to the borrower.
  
  You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020, and thus eliminate the potential reduction in loan forgiveness. Please note that the American Staffing Association and other groups are urging that the June 30th date be extended to give employers more time to restore their workforces.
  
• Other important notes about PPP Loan forgiveness:
  • Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels
  • Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease
• Two major components to the forgiveness calculation:
  • The measurement of your number of Full Time Equivalents (FTEs)
  • The measurement of your actual salary expenses
• Headcount Analysis: The average number of FTEs during the covered period divided by the average number of FTEs during the base period described below.
  • There are three different options to determine the base period, and borrowers can select the one most favorable to them:
    • Using 2019 Information – the average number of FTEs per month from February 5, 2019, through June 30, 2019
    • Using 2020 Information – the average number of FTEs per month from January 1, 2020, through February 29, 2020
    • Seasonal Businesses – the average number of FTEs per month from February 15, 2019, through June 30, 2019
• IRS denies deductions paid with forgiven PPP loans. On April 30, 2020 the IRS issued Notice 2020-32 to provide guidance regarding the deductibility for Federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s business when the taxpayer receives a PPP loan. Click here to read Notice 2020-32.
• US Treasury added FAQ #31 related to the borrowers required certification. The SBA added some significant clarifications, including that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.
  
  Borrowers that obtained PPP funds have until May 18, 2020 to return funds for this safe harbor. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. The SBA intends to provide additional guidance on how it will review the certification prior to May 18, 2020.
• The U.S. Small Business Administration has announced that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application. Regulatory guidance implementing this procedure will be forthcoming. Check out FAQ #39 for more details.
• US Treasury added FAQ #40 - Question:  Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?
  
  Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.
  
  To review the full US Treasury PPP FAQ: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf
  
  Employer Tax Deferral: The CARES Act allows employers to defer the deposit and payment of the employer’s share of Social Security taxes through December 31, 2020. Important Reminder – If you elected deferral and received a PPP loan, you can only defer deposit and payment of the employer’s share of Social Security tax through the date the lender issues a decision to forgive the loan in accordance with paragraph (g) of section 1106 of the CARES Act, without incurring failure to deposit and failure to pay penalties. Once an employer receives a decision from its lender that its PPP loan is forgiven, the employer is no longer eligible to defer deposit and payment of the employer's share of Social Security tax due after that date. However, the amount of the deposit and payment of the employer's share of Social Security tax that was deferred through the date that the PPP loan is forgiven continues to be deferred and will be due on the "applicable dates." The deferred deposits of the employer's share of Social Security tax must be deposited by the following dates (referred to as the "applicable dates") to be treated as timely (and avoid a failure to deposit penalty):
  
  1. On December 31, 2021, 50 percent of the deferred amount; and
  2. On December 31, 2022, the remaining amount
  
  **If you are a TRICOM client and are interested in the Employer Tax Deferral program, please reach out to Mary Jo Heim at 262-509-6214 for additional information. **
  
  Families First Coronavirus Response Act (FFCRA) requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. These provisions will apply from the effective date through December 31, 2020.
  
  However, if you have received a PPP loan, the CARES Act excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the FFCRA. Do not include these wages in your payroll cost for the PPP loan application or the calculation of payroll cost over the eight-week period to determine forgiveness.

We will continue to update our social media pages and TRICOM.com as more updates become available. Also check out TRICOM’s COVID-19 Reference Center for the latest updates and reference tools.