SBA recently issued its 11-page Paycheck Protection Program Loan Forgiveness Application, linked here. The application walks borrowers through a step-by-step process to determine loan forgiveness amounts based upon the information the borrower enters. It is of note that the application does require borrowers to provide documentation to support the payroll and non-payroll costs paid using PPP Loan funds. This includes the following information to prove the funds were properly spent on covered liabilities incurred, or which became due, during the 8-week period following disbursement of the PPP Loan funds (the application suggests that, if the funds were not actually spent, then the PPP Loan amounts are not forgivable—however, there is a bill making its way through Congress to allow for a longer period, but that has not yet passed). The application requires borrowers to provide, among other things:
- Bank account statements or payroll provider records, payroll tax forms, and state employee wage reporting, as well as payment receipts, cancelled checks or account statements showing payments to employee health or retirement plans.
- Documents showing the average number of full-time equivalent employees for either the period of February 15, 2019 through June 30, 2019, or January 1, 2020 through February 29, 2020.
- Documents showing business mortgage interest payments, copies of lender amortization schedules or cancelled checks verifying payments.
- Documents showing rent or lease payments, including copies of the current lease and receipts or cancelled checks verifying the eligible payments.
- Documents showing all utility payments with invoices from February 2020 and from the 8 weeks following disbursement of the loans, including the utility bill one month after the 8-week period (to cover the full amounts of such utilities used during the 8-week period).
The application also requires the borrower to maintain, in its records, but not submit with the application itself, documentation supporting various key forgiveness factors, including:
- Each relevant employee’s date of hire/furlough/firing and the wages and any wage reductions, or reversal of such reductions, made to that employee.
- Proof that no amounts paid to employees were in excess of the $100K annualized cap, or, if they were, that it was not paid with PPP Funds.
- Any job offers, firings, furloughs, rehires, and evidence of any employee who refused to be rehired after a written offer was provided.
Further, the application requires a certification signed by the authorized representative for the company attesting to the accuracy of the information in the application, and the documentation provided. Thus, any errors in the form, if made knowingly, or with reckless disregard for the truth, could subject the borrower to False Claims Act liability, or, in serious cases of intentional falsity, wire fraud or major fraud against the United States that carry criminal penalties. Thus, borrowers should be diligent in preparing the application and all borrowers should have all relevant information readily available in case of an audit or other review as they are required to maintain all relevant PPP records for 6 years after the loan is forgiven or repaid in full.
The application is fairly detailed and provides borrowers with a good deal of information and clarification of what is eligible for forgiveness and what may not be. Thus, we recommend that all clients review the forgiveness application very carefully to ensure they fully understand all the requirements and ensure that their in-house or outside accountants have made all required calculations correctly. We are sure more questions will arise as companies prepare their applications, and we will certainly be posting more on this in the near future.
PilieroMazza is monitoring the rapidly changing COVID-19 crisis and will provide updates when more guidance is released by the government. We also invite you to visit the Firm’s COVID-19 Client Resource Center to access further resources that will help businesses navigate the effects of the COVID-19 pandemic. If you need immediate assistance, please contact us at [email protected].