Paycheck Protection Program

Arguably one of the most popular programs from the Cares Act was the ability to get a loan and have a large part, if not all, of it forgiven. This became the greatest selling point for getting the Paycheck Protection Program Loan.
If you thought getting the PPP loan was full of ambiguities and difficult to navigate, buckle up because this will be one bumpy road to forgiveness. Questions abound, answers aren’t specific and that gives us heartburn when we try to plan.
In general, you should have a separate bank account for the proceeds from your PPP loan and only use it for covered costs: Payroll Costs, Rent, Utilities, and interest on certain loan payments.
The amount spent on those covered costs during the 8 weeks beginning on the day you receive your proceeds may be forgiven however, it will up to your bank to calculate and approve any forgiveness. From what we’ve seen in the application process, where each bank had their own rules to determine the loan amount, we are anticipating a wide range of interpretations on this path to forgiveness.
Follows is our basic overview:

What are Payroll Costs?

Payroll costs are gross wages paid to employees. Only wages up to an annualized total of 100,000 per employee qualify. During the 8 weeks, the maximum qualified wage, salary or compensation per employee may be no more than $15,384 ($100,000 / 52 x 8).
Employer provided health insurance and benefits are also eligible payroll costs. Employer made retirement contributions are eligible payroll costs. There are no limits to these amounts.
Sole Proprietors may pay themselves based on their 2019 net income. The same limit applies, that compensation is no greater than $100,000 on an annualized basis during the 8 week period.
Finally state unemployment tax is an eligible payroll cost.
You may not include any other employers payroll tax such as FICA or FUTA.

What Qualifies for Rent?

Rent qualifies for leases in force before February 15, 2020 and incurred and paid during the 8 week period. However, it is unclear if rent payments extend to leased equipment or merely to real estate.

What are Qualified Utilities?

The term “covered utility payment” means payment for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.

What Loan Payments Qualify?

Any indebtedness or debt instrument incurred in the ordinary course of business that is in the name of borrower; is encumbered by is a mortgage on real or personal property; and was incurred before February 15, 2020.