Loan Forgiveness PPP loans may be forgiven if the loan is used to cover the permissible expenses over the “covered period” beginning on the origination date of the loan and ending on the earlier of 24 weeks or December 31, 2020 and employee retention and compensation levels are maintained. If an employer received a covered loan before June 5, 2020, the employer may elect for the covered period to end eight weeks after the origination date of the loan.
Permissible Expenses for Loan Forgiveness:
• Payroll costs (as defined below), including benefits • Interest on mortgage obligations incurred before February 15, 2020 • Rent under lease agreements in force before February 15, 2020 • Utilities, for which service began before February 15, 2020 Permissible payroll costs include: • Salaries, wages, commissions, or tips (capped at $100,000 on an annualized basis per employee) • Employee benefits including costs for vacation, parental, family, medical or sick leave, allowance for separation or dismissal; payments required for the provision of group health care benefits including insurance premiums; and payment for retirement benefits • State and local taxes assessed on compensation • For a sole proprietor or independent contractor, wages, commissions, income or net earnings from self-employment, capped at $100,000, on an annualized basis for each employee Excluded from payroll costs are: • Payroll taxes (Social Security and Medicare), railroad retirement taxes, and income taxes • Any compensation of an employee whose principal place of residence is outside of the United States • Qualified sick leave wages while an employee is taking emergency paid sick leave for which a credit is allowed under the Families First Coronavirus Response Act • Qualified family leave wages while an employee is taking emergency FMLA leave for which a credit is allowed under the Families First Coronavirus Response Act In order to receive loan forgiveness, an employer must use at least 60 percent of the covered loan amount for payroll costs, and may use up to 40 percent of such amount for any payment of interest on any covered mortgage obligation (which shall not include any prepayment or payment of principal on a covered mortgage obligation), any payment on any covered rent obligation, or any covered utility payment. The amount of loan forgiveness is reduced if the average number of full-time equivalent employees working during the loan covered period is less than the average number of full- time equivalent employees prior to origination. This is measured over the 24-week period, or until December 31, 2020, whichever is earlier (or eight-week period for eligible employers), after the loan origination. At the employer’s option, the number of employees before the loan origination can be the average number of employees between February 15, 2019, and June 30, 2019, or the period between January 1, 2020, and ending February 29, 2020. The
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