New PPP Guidance Released

Late in the evening of June 10, 2020, Treasury released the “Interim Final Rule on Revisions to First Interim Final Rule.”  What a mouthful!  Recall that Treasury originally released an Interim Rule on April 2, 2020 relating to the implementation of the Paycheck Protection Program (PPP).  With the passage of the Paycheck Protection Program Flexibility Act of 2020 last week, some of the original guidance is no longer relevant.  Hence, Treasury released this Revisions to First Interim Rule last night to clarify the new rules.  Most of the changes are detailed in the newsroom article we released last week, but here are the most notable clarifications:

• Per the Flexibility Act, the Covered Period begins on “the date of the origination of a covered loan.” The language in the new Act differed from what we learned in the Interim Final Rule on Loan Forgiveness, which states that the Covered Period begins on the “the date of disbursement of the borrower’s PPP loan proceeds from the Lender.”  The new Revisions to First Interim Rule confirms that the Covered Period begins on the date of disbursement, contrary to what the Flexibility Act states. 
• Recall our discussion about a “cliff effect” in this article.  The Revisions to First Interim Rule clarify that partial loan forgiveness is allowable if a borrower spends less than 60% of the loan proceeds on payroll costs.  The maximum amount eligible for forgiveness will depend on how much a borrower spends on payroll costs.  The Revisions to First Interim Rule provide this useful example:
  • For example, if a borrower uses 59 percent of its PPP loan for payroll costs, it will not receive the full amount of loan forgiveness it might otherwise be eligible to receive. Instead, the borrower will receive partial loan forgiveness, based on the requirement that 60 percent of the forgiveness amount must be attributable to payroll costs. For example, if a borrower receives a $100,000 PPP loan, and during the covered period the borrower spends $54,000 (or 54 percent) of its loan on payroll costs, then because the borrower used less than 60 percent of its loan on payroll costs, the maximum amount of loan forgiveness the borrower may receive is $90,000 (with $54,000 in payroll costs constituting 60 percent of the forgiveness amount and $36,000 in non-payroll costs constituting 40 percent of the forgiveness amount).

Since early April, Treasury has released 48 frequently-asked questions on the Paycheck Protection Program, but the last FAQ was posted on May 27^th.  A lot has happened since then so ATKG expects more FAQs to be released in the near future.  ATKG is committed to keeping our clients informed and will post updates to our Coronavirus Newsroom when necessary.