Paycheck Protection Program
Paycheck Protection Program (PPP) Loan Forgiveness Information
What is a First Draw PPP Loan and what is a Second Draw PPP Loan?
In general, a First Draw PPP loan is for eligible borrowers who did not receive a PPP loan before the program closed in August 2020. A Second Draw PPP loan is for certain eligible borrowers that previously received a PPP loan, generally have 300 employees or less, and have suffered a 25% reduction in gross receipts.
Who Can Apply
The following entities affected by Coronavirus (COVID-19) may be eligible:
- Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)
- Sole proprietors, independent contractors, and self-employed persons
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
State funding available for restaurant and bar member businesses
The State of Ohio is also freeing up resources to provide further financial assistance. Recently, Governor DeWine designated $38.7 million in federal CARES Act funding to provide $2,500 assistance payments to on-premise liquor permit holders facing financial difficulties. Each business with an active on-premise liquor permit is eligible, and the deadline to apply for the Bar and Restaurant Assistance Fund has been extended to Jan. 31. While the program is referred to as the Bar and Restaurant Assistance Fund, more than just bars and restaurants have eligible permits. Movie theaters, bowling alleys, sports and concert venues, and even some hair salons, may be eligible for this funding. Visit businesshelp.ohio.gov to apply today. An active liquor permit number and federal tax information is required for the application process.
Recent legislation has eliminated the original requirement to deduct the amount of EIDL Advance you may have received from your PPP loan forgiveness. Additional guidance and updated forms are forthcoming.
How and when to apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.
To apply for loan forgiveness:
1. Contact your PPP Lender and complete the correct form:
Your Lender can provide you with either the SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S, or a Lender equivalent.
The 3508EZ and the 3508S are shortened versions of the application for borrowers who meet specific requirements. Your Lender can provide further guidance on how to submit the application.
2. Compile your documentation:
Payroll (provide documentation for all payroll periods that overlapped with the Covered Period or the Alternative Payroll Covered Period):
- Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees
- Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
- Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
- State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state
- Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount
Non-payroll (for expenses that were incurred or paid during the covered period and showing that obligations or services existed prior to February 15, 2020):
- Business mortgage interest payments: Copy of lender amortization schedule and receipts verifying payments, or lender account statements
- Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments
- Business utility payments: Copies of invoices and receipts, cancelled checks or account statements
This list of documents required to be submitted to the Lender is not all-inclusive.
3. Submit the forgiveness form and documentation to your PPP Lender:
Complete your loan forgiveness application and submit it to your Lender with the required supporting documents and follow up with your Lender to submit additional documentation as requested. Consult your Lender for additional guidance and provide requested documentation in a timely manner.
4. Continue to communicate with your Lender throughout the process:
If SBA undertakes a loan review of your loan, your Lender will notify you of the review and the SBA loan review decision. You have the right to appeal certain SBA loan review decisions. Your Lender is responsible for notifying you of the forgiveness amount paid by SBA and the date on which your first payment will be due, if applicable.
Updated January 12, 2021
The Treasury Department and the Internal Revenue Service issued guidance allowing deductions for the payments of eligible expenses when such payments would result (or be expected to result) in the forgiveness of a loan (covered loan) under the Paycheck Protection Program (PPP).
Today’s guidance, Revenue Ruling 2021-02, reflects changes to law contained in the COVID-related Tax Relief Act of 2020, enacted as part of the Consolidated Appropriations Act, 2021 (Act), Public Law 116-260, which was signed into law on Dec. 27, 2020.
The COVID-related Tax Relief Act of 2020 amended the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to say that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan. This change applies for taxable years ending after March 27, 2020.
Revenue Ruling 2021-02 obsoletes Notice 2020-32 and Revenue Ruling 2020-27. This obsoleted guidance disallowed deductions for the payment of eligible expenses when the payments resulted (or could be expected to result) in forgiveness of a covered loan.
For more information about this, the COVID-related Tax Relief Act of 2020, and other tax changes, visit IRS.gov.
To learn more about how to apply and qualify for PPP loan forgiveness, see the SBA’s Frequently Asked Questions on PPP Loan Forgiveness document.
In the event that there are discrepancies between the information on this in this email and the SBA’s site, please follow the SBA guidance.