August 26, 2020
On August 24, the Small Business Administration and Treasury made available a new set of guidance regarding the Paycheck Protection Program (PPP) forgiveness issues. The new interim final rule covers two areas: owner-employee compensation and the eligibility of non-payroll costs. A recent article from the Journal of Accountancy offers a concise summation of the new regulations.
Owner-employee compensation – For the purposes of calculating loan forgiveness, C-corporation and S-corporation owners who hold less than a 5% stake qualify as exempt from the PPP rule regarding owner-employee compensation. This is because they are deemed to not have a meaningful ability to influence the allocation of PPP loan proceeds.
Eligibility of non-payroll costs – The new interim rule addresses situations where a business owner holds property in a separate entity and where a business owner holds property in the same entity as its business operations. The goal of the guidance is to establish equitable treatment for these situations.
For further details, including a number of hypothetical scenarios illustrating various non-payroll cost situations, click here to read the article in full at the Journal of Accountancy.