New rules on PPP loan forgiveness issued

On May 22, 2020, the Small Business Administration (SBA) and the U.S. Department of the Treasury issued an interim final rule addressing loan forgiveness for the Paycheck Protection Program (PPP), which provides loans to small businesses affected by the COVID-19 pandemic. The long-awaited guidance on loan forgiveness is consistent with the PPP application and instructions, which were released on May 15. Employers finally have answers to questions about loan forgiveness and can calculate the amount of their PPP loans that will be forgiven.

Forgiveness of payroll costs

Payroll costs paid or incurred during the eight consecutive weeks (56 days) from the date of a lender's disbursement of an employer's PPP loan proceeds (the covered period) are eligible for forgiveness. Employers with a biweekly or more frequent payroll cycle may elect to have the eight-week period begin on the first day of the first payroll cycle in the covered period (the alternative payroll covered period). Thus, employers with semimonthly pay periods will not be able to elect an alternative payroll covered period.

The guidance clarifies that payroll costs do not need to be paid or incurred during the covered period or the alternative payroll covered period. Payroll costs are considered "paid" on the day paychecks are distributed or the employer originates an ACH credit transaction. Payroll costs are considered "incurred" on the day the employee's pay is earned (i.e., on the day she worked).