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COVID-19: PPP Loan Forgiveness Application Released

The ability to have a Paycheck Protection Program (PPP) loan forgiven is perhaps the most important part of the program—turning a low-interest loan into a grant. For the basic requirements regarding loan forgiveness, please click here to view our alert on that topic. 

Despite the critical importance of forgiveness, the process for applying for forgiveness, and some of the details on how it is calculated, have been murky. The Small Business Administration (SBA) has now provided some clarity by releasing the PPP Loan Forgiveness Application. 

Here are some of the key takeaways from the application:

  • Flexibility on Covered Payroll Period and Paid/Incurred Tests. Payroll costs that can be forgiven are those paid and incurred in the eight weeks beginning with the disbursement of the loan. The application provides for an alternative eight-week period that begins on the first day of the applicant’s first pay period following loan disbursement. Payroll costs incurred, but not paid, during the last payroll period during the eight-week period, are eligible to be forgiven as long as they are paid on or before the next regular payroll date. 
  • Payroll Reduction. As a general matter, borrowers are required to maintain their headcount or the forgiveness amount is reduced. The SBA provided an exception for (1) employees for which the borrower made a good-faith written offer to rehire during the eight-week period that was rejected by the employee, and (2) employees who during the eight-week period were fired for cause, voluntarily resigned, or voluntarily requested a reduction in hours. 
  • Loans Exceeding $2 million. If the borrower received $2 million or more, together with its affiliates, it will be required to check a box, thereby triggering the SBA review indicated in Question #46 in SBA’s Frequently Asked Questions.   
  • 75/25 Split Remains. There had been some speculation that SBA would relax the requirement that 75% of the forgiveness amount be used for payroll costs, but there has been no change in that regard. 
  • Necessity Determination. The requirement that a borrower certify as to the necessity of a PPP loan has created a fair deal of consternation, leading the SBA to provide safe harbors on the issue, as outlined in our safe harbors alert. The forgiveness application does not require a new certification as to need.
  • Certifications Galore. Although “necessity” is not among them, the application does require various certifications regarding the accuracy of the information in the application and that the PPP loan proceeds were used solely for allowable purposes. As with the initial loan application, knowingly making a false certification can result in various levels of enforcement, including criminal enforcement. 

We expect that the U.S. Department of the Treasury will provide further guidance regarding loan forgiveness in the coming weeks. When that guidance is issued, we will send out an additional alert. 

©2020 Pierce Atwood LLP. All rights reserved.

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Christopher E. Howard Corporate Finance Attorney Pierce Atwood Law Firm Portland Maine
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Chris Howard has a unique combination of technical legal skills and hands-on business and finance experience, enabling him to integrate these disciplines into strategies that match client objectives and provide clients with a competitive advantage. His forte is in managing complex commercial transactions and development projects in time-sensitive environments, and in accessing all sectors of the capital markets.

Chris' practice has four areas of focus:

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Kris J. Eimicke, tax lawyer, Pierce Atwood
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Kris Eimicke concentrates his practice on tax issues and economic development programs, with a special emphasis on state and federal new markets tax credit (NMTC) programs, renewable energy tax credits, historic rehabilitation tax credits, and the newly created opportunity zone program. Kris also regularly advises businesses, tax-exempt organizations, and individuals on tax issues related to a variety of business transactions, as well as representation before the Internal Revenue Service, state revenue agencies, and the courts on tax matters. 

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Andrea K. Suter Finance and Corporate Attorney Pierce Atwood Portland, ME
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Andrea Suter represents start-up, family owned, and established companies in a wide range of businesses and industries. Her practice focuses on commercial transactions and contracts, mergers and acquisitions, finance and general corporate law matters.

Prior to joining Pierce Atwood, Andrea worked at well-respected law firms in California’s Bay Area and New York where she gained extensive experience advising clients on growing and realizing value through strategic mergers and acquisitions; efficiently raising capital through private placements, venture round financing and traditional...

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Kathleen Hamann is an internationally recognized authority in the field of white collar enforcement and compliance matters. Drawing on her nearly 20 years of service to the federal government, in roles at the US Department of Justice and Department of State, Kathleen helps clients navigate the complexities of U.S. and transnational criminal liability and multijurisdictional government investigations.

Since returning to private practice, Kathleen has represented clients in a number of transnational matters, conducting global risk assessments, designing compliance programs, and...

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