Paycheck Protection Program 103:How Nonprofits Can Navigate the Forgiveness Process & Application
With Updates as of June 1, 2020Continue to Check SBA’s Website
This information is provided for general informational and educational purposes only and does not constitute legal, accounting or financial advice. Please note guidance is changing regularly. We encourage you to check with the SBA and your lender for updated guidance and check our FMA toolkit for updated materials.
Introduction to Audited What are we covering today?
1) What should we expect from the Application and the process?
2) What do we need to Collect, Calculate, and Complete for each section of the application?
3) What do we need to do post-forgiveness?
Introduction to Audited What We Assume You Know Or Could Read More About After Today
1) Details of Eligible Expenses for Forgiveness
2) Details of Expense Timing
(Paid and Incurred)
3) Importance of Maintaining FTEs
4) FTE Definitions
5) Covered Period Definitions
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Introduction to Audited Financial Statements
How do we reach FMA with additional questions and support on PPP after today?
Please reach out [email protected]
One of our experts will assist you with your questions as soon as possible
Forgiveness Estimator Available on the Toolbox
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Forgiveness Application Simulator Available Too
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What should we expect from the Application and the process?
Introduction to Audited Financial Statements
What are the steps for getting forgiveness?
Sample Process You Might See After Your Forgiveness Period Ends
Submit Forgiveness
Application & Documents to Your Lender
Gather Documents &
Complete Application
(May Be Online Portal)
Lender Sends to
SBA and SBA Reviews
Lender Notifies You
of Result within 60
Days
Lender Verifies Info & May Have Questions
Where Are We Awaiting More Guidance?
Will Congress extend the 8-week forgiveness period to 16 or 24 weeks, thus extending how much time you’ll have to spend down the funds and therefore when you’d be applying?
How long will you have to submit your forgiveness application once your forgiveness period is over?
What will online application forms and documentation requirements from lenders look like?
What kinds of reports will payroll companies create to make this easier for you?
How will the EIDL advance and/or loan be taken into account on PPP forgiveness?
How will organizations who want to request a forgiveness amount lower than their initial calculations lead to make sure they can do so? Examples:
You’re being reimbursed from restricted funding sources that covered the same exact expenses as PPP and you don’t want to double dip
You want to exclude the payroll and non-payroll expenses attributed to an affiliated (c)(4), (c)(6), or other nonprofit prohibited from applying for PPP
Let’s Dig Into the Application
https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf
Take a breath. You’ve probably filled out more cumbersome grant applications. Or your own taxes. We’re here to break it all down.
The Application Itself
11 Pages with Lots of Great Instructions But You’ll Only Submit 3 Pages to Your Lender + Some Back Up Documents
Page 3: PPP Loan Forgiveness Calc. Form
Page 4: Certifications & Signature
Page 6: PPP Schedule A
The Application ItselfHere’s Our Suggested Order for Filling Out:
Page 9: Top of PPP Schedule A Worksheet
Page 9: Finish Schedule A Worksheet
Page 6: PPP Schedule A
1 3
4Page 3: PPP Loan
Forgiveness Calc. Form5
2 Pages 7/8: If You Reduced Salary Levels or Hourly Rates
Page 4: Certifications & Signature6
What do we need to Collect, Calculate, and Complete for each
section of the application?
Ultimately Here’s What You Need to Calculate
Maximum Amount Eligible for
Forgiveness
Less Penalties
Forgiveness Amount
75% on Payroll Check
What Core Documents Do You Need to Collect First?
Payroll reports overlapping with your covered period (paid and incurred) listed by each employee showing cash compensation and employer paid state/local taxes. These reports, or others, will also need to show employee start date and last four of their social security number.
Reports or statements showing employer paid benefits showing health insurance as well as retirement (both excluding employee contributions)
Three reports listed by employee showing number of hours worked per week (i) during your covered period; (ii) between 2/15/19 – 6/30/19; (iii) between 1/1/20 –2/29/20. If you already know if (ii) or (iii) will show lower FTEs, just grab the lower one. For exempt employees, you will need to understand the standard number of hours they are paid for (e.g., 40, 32)
List of rent, lease payments for real or personal property and mortgage interest payments from arrangements in place before 2/15/20 that were paid or incurred during the covered period
List of utility payments paid and payments incurred during the covered period (electricity, gas, water, transportation, telephone, and internet access in service before 2/15/20)
What Other Documents Might You Need to Get Started?
Did you reduce salary level or hourly rates
in 2020? Gather the changes in
those rates between 1/1/20 – 6/30/20
Did you experience a staff reduction from 2/15/20 – 4/26/20 and then fully recover your
FTE count by 6/30/20?
Gather payroll or time tracking reports to understand the FTE count/# of hours worked per employee for
2/15/20 – 4/26/20 As of 2/15/20 As of 6/30/20
Will it be clear from other reports gathered who made
≤$100k annualized for all pay periods in 2019?
Gather a list of salaries as of 1/1/2019
Let’s Start With Page 9: Schedule A Worksheet
Table 1: List employees who: • Received compensation from the Borrower at an annualized rate of less than or equal to $100,000 for all pay periods in 2019 or were not employed by the Borrower at any point in 2019.
Look at the payroll reports listing all of your employees who were(1) employed at any point during your covered period and (2) whose
principal place of residence is in the US, and divide them up into two lists:
Table 2: List employees who: • Received compensation from the Borrower at an annualized rate of more than $100,000 for any pay period in 2019.
Name Last 4 SSN Cash Compensation Average FTE Salary/Hourly
Rate Reduction
Name Last 4 SSN Cash Compensation Average FTE
Top of Page 9 Tables 1 + 2: How do I calculate?
Cash Compensation
Sum of gross salary/wages paid or incurred during your covered period per employee including:• Salaries, wages, tips, commissions, bonuses, hazard pay,
furlough pay• Paid leave (vacation, family, medical or sick excluding leave
covered by FFCRA credits)• Allowances for dismissal or separation• Prorate the last payroll that overlaps with your Covered
Period if the paid date falls after your Covered PeriodKeep in mind, you must cap the sum at $15,385 per employee
To Calculate…. How to Calculate
Average FTE
Number of hours paid per employee for each of the weeks during the Covered Period – and take the Average
Mathematical Method: Total Hours Paid During 8 Weeks/40/8or
Simple Method: 1 FTE if paid for 40+ hours each week; ,5 FTE if paid for fewer than .5 FTE each week
Top of Page 9 Table 1: How do I complete?
Did you reduce that employee’s salary level or hourly rate in 2020?
Write 0
NO YES
See the Appendix to Determine How to Calculate or on Page 7 + 8 of SBA
Application
Salary/Hourly Rate Reduction Per Employee
Top of Page 9 Table 1: How do I complete?
Write 0
NO YES
Write Additional # of FTEs These Employees Would Have Represented
During the Covered Period
FTE Reduction Exceptions
Did any of the following happen and the relevant role was not filled by a new employee?
• Did you make a good-faith written offer to rehire an employee during the Covered Period and it was rejected?
• Was an employee fired for cause during the Covered Period? • Did someone voluntarily resign or request and receive a reduction of their hours
during the Covered Period?
Top of Page 9: Schedule A Worksheet
Sample of What Table 1 Might Looks LikeFeel free to Use our Estimator or Your own Excel
Bottom of Page 9: FTE Reduction Safe Harbor
Did you reduce the number of employees or average paid hours of your employees between Jan 1, 2020 and the End Of Your Covered Period?
Skip
NO YES
See the Appendix to Determine How to Calculate or
on Bottom of Page 9 of SBA Application
Moving On to Page 6: Schedule A
By completing the Page 9 Schedule A Worksheet, you’ll have most of what you need to complete the math on Schedule A, with just 3 new fields to fill in.
Time to bring those payroll and benefits reports and statements back out thatoverlap with your covered period (paid and incurred)
Line 6. Employer Contributions for Employee Health
Insurance
Line 7. Employer Contributions to
Employee Retirement Plans
Line 8. Employer State + Local
Taxes Assessed on Employee
Compensation
Employer Paid Medical + Dental + Vision Insurance Paid + Prorating the amount Incurred but not Paid
Employer Contributions Transferred to Employee Accounts + Prorating the amount Incurred but not Transferred
State and Local Payroll Taxes (e.g., SUTA) Paid + Prorating the amount Incurred but not Paid
Ignore and Type 0 in Line 9 – Not Applicable to Nonprofits
Learn More:
Almost Done → Page 3: Forgiveness Calculation Form
Fields GuidanceBusiness Legal Name Enter the same info. as on your original PPP Application Form.
DBA or Trade Name Enter the same info. as on your original PPP Application Form.
Business Address Enter the same info. as on your original Application Form, unless there has been a change in address
Business TIN (EIN, SSN) Enter the same info. as on your original PPP Application Form.
Business Phone Enter the same info. as on your original PPP Application Form.
Primary Contact Enter the same info. as on your original Application Form, unless there has been a change in contact
Email Address Enter the same info. as on your original Application Form, unless there has been a change in contact
SBA PPP Loan Number Enter the loan number assigned by SBA at time of approval. Request from your Lender if necessary.
Lender PPP Loan Number Enter the loan number assigned to the PPP loan by your Lender.
PPP Loan Amount Enter the disbursed principal amount of the PPP loan
PPP Loan Disbursement Date Enter the date the PPP loan funds hit your bank account
Almost Done → Page 3: Forgiveness Calculation Form
Fields Guidance
Employees at Time of Loan Application
Headcount (not FTEs) on the day you submitted your original loan application to your lender
Employees at Time of Forgiveness Application
Headcount (not FTEs) of all employees on the day you’re submitting your PPP application to your lender.
EIDL Advance Amount If you received an EIDL Advance, Enter the total amount of the EIDL advance (e.g., $10,000)
Payroll Schedule Select one or more frequencies of payroll you used during the loan period
Covered PeriodThe 8-week (56 day) period starting the day PPP loan funds hit your bank account.(Ex. Funds received April 20, 2020 + 55 days = June 14, 2020)
Alternative Payroll Covered Period, if applicable
Only fill in if not using the standard Covered Period. The 8-week (56 day) period starting the first day of the bi-weekly or weekly payroll that began after your loan was disbursed.
If Borrower Received PPP Loans in Excess of $2M
Based on your total approved principal amount. The SBA has indicated they will audit loans above $2M, including for the certification of need from the original application
Almost Done → Page 3: Forgiveness Calculation Form
By completing Page 6 Schedule A, you’ll have most of what you need to complete the Forgiveness Calculation Form, with just 3 new fields to fill in.
Grab your list of non-payroll expenses thatoverlap with your covered period (paid and incurred)
Line 2. Business Mortgage Interest
Payments
Line 3. Business Rent or Lease
Payments
Line 4. Business Utility Payments
Mortgage Interest Paid on Real or Personal Property on Obligations In Place by 2/15/20
+ Prorating the amount Incurred but not Paid
Rent or Lease Payments Paid on Real or Personal Property from Arrangements In Force by 2/15/20
+ Prorating the amount Incurred but not Paid
Electricity + Gas + Water + Transportation + Telephone + Internet Paid from Services that Began by 2/15/20
+ Prorating the amount Incurred but not Paid
Almost Done → Page 3: Forgiveness Calculation Form
Time to Bring All Of Our Hard Work Together. Last Calculations:
Pg. 6
No Separate Sheet – Just Add Here
No Separate Sheet – Just Add Here
No Separate Sheet – Just Add Here
From Pg. 6
Pg. 6
Finish Line→ Page 4: Certifications + Signature
Some highlights of what you will need to certify:
Your organization used it for allowable purposes
You factored in any workforce or wage reduction penalties
You were careful about your forgiveness calculations and submitted all proper backup. (This burden is primarily with you more than your lender)
If you knowingly use the funds for other purposes or mispresent the forgiveness amounts, this could lead to needing to returning the loan, fines up to $1M and/or fraud charges
Any other nuances to understand?
• If you’re being reimbursed from restricted funding sources that covered the same exact expenses as PPP and you don’t want to double dip, you’ll need to reduce your Line 11. Forgiveness Amount from Page 3 for the amount being reimbursed by other sources. Incorporating this adjustment before that calculation may cause very difficult calculations and may also reduce your forgiveness amount further than necessary.
• If you share employees and/or allowable operations expenses with another nonprofit that isn’t a (c)(3) or (c)(19), you’ll need to reduce your Line 11. Forgiveness Amount from Page 3 for the amount of expenses associated with those other entities.
• If you received sick and family leave credits covered by the Families First Coronavirus Response Act (FFCRA), you cannot include those leave credits in allowable Payroll Costs throughout the Application.
• If you are a seasonal employer, you can adjust the Average FTE comparison period used on the Schedule A, line 11 to be based on the average number of FTEs/month between any consecutive 12-week period between 5/1/2019 – 9/15/2019.
As always, check with your lender with questions on nuances to see how they’d like you to proceed
What documents do I submit to my lender?
See the Appendix (or SBA Application Page 10) for more details, but here are the highlights:
Bank account statements showing cash compensation paid or third-party payroll service provider reports
Payroll tax filings (Form 941) – not required for those using PEOs State quarterly (if appliable) and individual employee wage reporting and
unemployment insurance tax filings to each relevant state Payment receipts, cancelled checks, or account statements documenting the amount
of contributions to health insurance and retirement plans Proof of FTEs from comparison period Payment receipts, cancelled checks, or account statements documenting the amount
of expenses for mortgage interest, rent and utilities For mortgage interest: lender amortization schedule or lender account statements
from February 2020 and covered period For rent: copy of lease or lessor account statements from February 2020 and covered
period For utilities, copy of invoices from February 2020
What documents do I keep but don’t need to submit?
Keep all documents for 6 years, including:
Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 1, including the “Salary/Hourly Wage Reduction” calculation, if necessary (e.g., the work from page 7).
Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 2; specifically, that each listed employee received during any single pay period in 2019 compensation at an annualized rate of more than $100,000.
If applicable, documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations, and written requests by any employee for reductions in work schedule.
If applicable, documentation supporting the FTE Reduction Safe Harbor from the Schedule A Worksheet
What do we need to do post-forgiveness?
What happens after we submit our paperwork?
• Lender will have 60 days to return the result of how much is being forgiven. Details on appeal process coming.
• Amy amount that is not forgiven continues as a loan at 1% APR to be paid back 6 months after the loan disbursement date. Principal and interest must be paid back within 2 years from the start of the day of loan disbursement.
• You can pay the balance back immediately without penalty (except for any interest that accrued)
• We believe it continues to be a conditional loan, but are awaiting more guidance. We do not know if the 75% on payroll requirement stays in place, but good to plan on that being the case.
• Loans above $2M will be subject to an audit from the SBA, but the SBA may review any loan, regardless of size, to review eligibility of the borrower, loan amount, and loan forgiveness amount.
What else do we need to do after forgiveness?
• Book revenue in your general ledger as Loan Forgiveness Revenue and reduce liability for the principal and interest forgiven
• Include in your internal and external financials, audit and 990
• Maintain documents for 6 years
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Appendix
When is the 8 Week Period for Forgiveness?
The primary purpose of the loan is to use it on allowable expenses during the 8 weeks following when you received it. The allowable spending you
have during this 8 weeks is what will count for forgiveness.
How To Define 8 Weeks aka 56 Days
The Covered Period is 8 weeks (56 days) starting with the loan disbursement date.
However, for administrative convenience, organizations can calculate eligible payroll costs using an Alternative Payroll Covered Period if they are on a bi-
weekly or more frequent schedule, delaying the start of their 8-week period to the first day of their first payroll following when the loan was disbursed. This is
not an option for semi-monthly or monthly payrolls.
Understanding The 8-Week Covered Period
Starting date: The day the lender makes the PPP loan disbursement.
Forgiveness “covered period:” 8 weeks
May be used for payroll; must be used for non-payroll expenses
8
weeks
Do we include the expenses paid during or incurred in the 8 weeks in our calculations?
The Application allows for both methodologies to be used.
*Bills fully incurred before the 8-week period that are paid in the ordinary course during the 8-week period areallowed. Pre-paid mortgage interest for after the 8-week period is not allowed. We are awaiting guidance on
how other pre-payments will be treated, but organizations should plan on them not being allowed.
Paid During* All of it Counts
Paid During & Incurred All of it Counts
Fully Incurred, Not Paid During But Is At Next Regular Due Date All of it Counts
Partially Incurred, Not Paid During But Is At Next Regular Due Date
Part of it Counts (Prorated)
NOTE: Payroll is PAID the day that paychecks are distributed or the ACH credit transaction is originated. Payroll is INCURRED on the day the employee’s pay is earned.
What Counts During the 8 Weeks Towards Forgiveness?
Example Covered Period: April 20, 2020 – June 14, 2020 For Payroll Costs
April 20 – June 14
SBA may provide further guidance as there are some
alternative ways to read their application
KEYAll of It Counts
Part of It Counts (Prorated)
Payroll for April 12 –April 25 paid on May 1
Payroll for April 26 –
May 9 paid on May 15
Payroll for May 10 –May 23 paid on May 29
Payroll for May 24 –
June 6 paid on June 12
Payroll for June 7 –June 20 paid on June 26
Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date.
Assumes Bi-Weekly Payroll and using standard Covered Period
Paid & Partially Incurred
Paid & Incurred
Paid & Incurred
Partially Incurred
Reminder: Cannot include more than $15,385 in cash compensation per
employee in your forgiveness amount
Paid & Incurred
What Counts During the 8 Weeks Towards Forgiveness?
Example Period: April 20, 2020 – June 14, 2020 Non-Payroll: Rent
April 20 – June 14
Rent for June paid on June 1
SBA may provide further guidance as there are some
alternative ways to read their application
Rent for April paid on April 1 Rent for May paid on May 1
KEYAll of It Counts
Part of It Counts (Prorated)
An eligible nonpayroll cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date
is after the Covered Period.
Paid & Incurred
Partially Incurred
Paid & Partially Incurred
Reminder: Total non-payroll costs cannot exceed more than 25% of your forgiveness amount without incurring
a reduction penalty
What Counts During the 8 Weeks Towards Forgiveness?
Example Period: April 20, 2020 – June 14, 2020 Non-Payroll: Utilities
April 20 – June 14
SBA may provide further guidance as there are some
alternative ways to read their application
KEYAll of It Counts
Part of It Counts (Prorated)
Utilities for March 1 –
March 31 paid on April 22
Utilities for April 1 –
April 30 paid on May 15
Utilities for May 1 –
May 30 paid on June 12
Utilities for June 1 –
June 30 paid on July 17
An eligible nonpayroll cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date
is after the Covered Period.
Paid & Partially Incurred
Paid & Incurred
Paid Partially Incurred
Reminder: Total non-payroll costs cannot exceed more than 25% of your forgiveness amount without incurring
a reduction penalty
What Expenses Are Allowable for Forgiveness?
Payroll Costs Paid or IncurredDuring 8 Weeks
Non-Payroll Costs Paid or IncurredDuring 8 Weeks
Cash Compensation1
Employer Paid
Health2 & Retirement
Benefits
Employer Paid State
& Local Payroll Taxes
AllowableRent &
Mortgage Interest
Utilities (Water, Gas, Electricity,
Transp. Internet, Phone)
+
1Cash compensation includes salaries, wages and commissions (including to furloughed employees), tips, bonuses, hazard pay, paid leave, severance, and housing allowances. Cash compensation eligible for forgiveness is limited to $15,385 per employee.
2Group health benefits includes medical, dental, and vision.
Average FTEs: What’s an FTE in this context?
Defining Full-Time Equivalent Employees (FTEs/FTEEs)
FTEs ≠ headcount or number of employees
If you have 5 part-time employees, who each work 1 day per week…
Headcount FTEs5 1.0
Average FTE: What’s an FTE in this context?
Mathematical Method1 FTE = 40 hours/week
Example: Someone who is paid for 10 hours/week = .25 FTE
Simple MethodAnyone who is paid for 40
hours/week or more = 1 FTE
Anyone who has fewer hours = .5 FTE
Choose a Calculation Method
OR
Based on the initial reading of the Application:
Calculate: FTE Reduction Exceptions
Employees w/ change in FTE
ReferencePeriod FTE
CoveredPeriod
FTEWhat Happened? Impact
Jackson 1.0 0 Laid off Feb 19, 2020 Qualifies for Safe Harbor: no reduction if 1.0 FTE is
restored by 6/30/20Dianne 0.5 0 Left voluntarily during
Covered PeriodNo reduction in FTE
Rami 0.75 0.25 Requested a reduction in hours
during Covered Period
No reduction in FTE
Benjamin 0.5 1.0 Increased hours before Covered Period
Increase average FTE
Michelle 1.0 0 Fired for cause before Covered Period
Reduction in FTE
Rhonda N/A 0.75 New hire during Covered Period
Increase average FTE
FTE Reduction Penalty
Goal: Compare your FTEs during your 8-week forgiveness period to a prior reference period to see if a penalty
needs to be assessed if you do nothing
While you will look at specific employees to determine your FTE count in the time periods, you do not need to
retain the exact same people
FTE Reduction Penalty
Choose a Comparison Period
Choose the period with the lower FTE count
Feb 15, 2019–June 30, 2019
January 1, 2020 –Feb 29, 2020
Seasonal can also choose to use any consecutive 12-week period
between 5/1/19 – 9/15/19
OR
Based on the initial reading of the Application:
Calculate: Average FTE (Mathematical)
Employee Average Hours Paid Per Week During Reference Period
FTEAverage Hours Paid
Per Week During Covered Period
FTE
Joanne 30 0.75 30 0.75
Jackson 40 1.0 0 0
Robert 40 1.0 40 1.0
Dianne 20 0.5 0 0
Rami 30 0.75 10 0.25Benjamin 20 0.5 40 1.0
Michelle 40 1.0 0 0
Rhonda N/A N/A 30 0.75
Average FTEs Per Week During the Reference Period:
5.5Schedule A,
Line 11
Average FTEs Per Week During the 8-Week Forgiveness
Period:
3.75Schedule A, Line 12
Calculate: FTE Reduction Quotient
Average FTEs Per Week During the 8-week Forgiveness
Period
Average FTEs Per Week During the Reference Period
Schedule A, Line 124.25
Schedule A, Line 11
5
÷ ÷ ÷
FTE Reduction Quotient
0.85 Schedule A, Line 13
Example: Application:
Salary Reduction Penalty
Of (a) new employees who started in 2020 or (b) the employees with avg. annualized salaries of $100k or less
during all pay periods in 2019who were working during the 8
weeks, did you reduce any of their salaries/hourly rates after Jan 1,
2020?
No Reduction
NO!
YESStep 1: Was their avg. rate
reduced by more than 25% when comparing the 8-week period to
1/1/20– 3/31/20?
NO!Step 2: Did the reduction happen
between 2/15/20– 4/26/20?
YES
YES!
Step 3: Was the rate the employee had on 2/15/20
restored by 6/30/20?
YES!
Reduce by Compensation Lost During 8-Weeks As a Result of
Salary/Wage Cut
NO
NOUse FMA Estimator for
Specific Calculations
Calculate: Salary Reduction Penalty
Step 1 Determine if pay was reduced more than 25% for any individual employee (earning less than or equal to $100,000 for all pay periods in 2019)
Average annual salary or hourly wage
during Covered Period (or Alternate)
÷Average annual
salary or hourly wage between 1/1/20 and
3/31/20
=≥0.75
No Reduction over 25%
≤0.75Reduction over
25%
Skip Steps 2 -3
Proceed to Step 2
Calculate: Salary Reduction Penalty
Step 2
Average annual salary or hourly wage as of
Feb. 15, 2020
Determine if Salary/Hourly Wage Reduction Safe Harbor is met
Average annual salary or hourly wage between
2/15/20 and 4/26/20
Safe Harbor has not been metIf (b) ≥ (a)
Safe Harbor applies
Calculate:
Proceed to Step 3
(a) (b)
If (a) ≤ (b) Proceed to Step 2.5
Calculate: Salary Reduction Penalty
Step 2.5
(a) Average annual salary or hourly wage as
of Feb. 15, 2020
Determine if Salary/Hourly Wage Reduction Safe Harbor is met
(b) Average annual salary or hourly wage
between 2/15/20 and 4/26/20
(b) ≥ (a)Safe Harbor does
not apply
If:(a) < (b)
Average annual salary or hourly wage as of June
30, 2020
Calculate:
Proceed to Step 3
If:
(c) ≥ (1)Safe Harbor has
been met (no reductions)
(c) < (1)Safe Harbor has not been
met
Proceed to Step 3
Skip Step 3
vs.
(c)Average annual salary or hourly wage as of June
30, 2020
Calculate: Salary Reduction Penalty
Hourly EmployeesStep 3 Determine Salary/Wage Reduction
Average # of hours worked
per week between
1/1/20 and 3/31/20
Average annual hourly wage during
Covered Period (or Alternate)
XAverage annual
hourly wage between
1/1/20 and 3/31/20
-0.75 X
X 8Hourly
Reduction for Table 1=
Calculate: Salary Reduction Penalty
Salaried EmployeesStep 3 Determine Salary/Wage Reduction
Average annual salary
during Covered
Period (or Alternate)
XAverage annual
salary wage between
1/1/20 and 3/31/20
-0.75 X
÷ 52Salary
Reduction for Table 1
8
=
Potential Forgiveness Amounts
Your forgiveness amount is the smallest of these three options:
1 Potential Forgivable Amount Less the Penalties (“Modified Total” Application pg. 3, Line 9)
2 Total Loan Amount(“PPP Loan Amount” Application pg. 3, Line 9)
3 Amount Spent on Payroll in the 8 Weeks ÷ .75(“Payroll Cost 75% Requirement” Application pg. 3, Line 10)
PPP & Restricted Funding Sources
• Organizations receiving federal funds cannot "double dip," meaning you cannot claim to the federal government you spent different federal funds on the same expenses. It is likely PPP funds will be treated as federal funds for this purpose. Double dipping only occurs if you get reimbursed for the same expense twice.
• Nonprofits will need to keep good records to show which employees are being paid from what source so that the government isn't paying more than 100% of a salary. This is a good approach for all of your restricted funding sources.
• You should consider comparing your allowable expenses for PPP vs. your restricted grants and contracts.
• There may be other allowable expenses your other restricted funding sources can cover, including during the 8-week period.
• Some may choose to reduce their forgiveness request because they want to be able use a drawn down from their restricted funding sources.
What documents do I submit to my lender?
Each borrower must submit documentation verifying eligible cash compensation and non-cash benefit payments consisting of each of the following:
Cash Compensation: Bank account statements or third-party payroll service provider reports Tax forms (or equivalent third-party payroll service provider reports) for
the periods that overlap with the Covered Period or the Alternative Payroll Covered Period: Payroll tax filings (Form 941) State quarterly (if appliable) and individual employee wage reporting
and unemployment insurance tax filings to each relevant stateBenefits:
Payment receipts, cancelled checks, or account statements documenting the amount of employer contributions to health insurance and retirement plans
What documents do I submit to my lender?
Each borrower must submit documentation verifying eligible cash compensation and non-cash benefit payments consisting of each of the following:
Cash Compensation: Bank account statements or third-party payroll service provider reports Tax forms (or equivalent third-party payroll service provider reports) for
the periods that overlap with the Covered Period or the Alternative Payroll Covered Period: Payroll tax filings (Form 941) State quarterly (if appliable) and individual employee wage reporting
and unemployment insurance tax filings to each relevant stateBenefits:
Payment receipts, cancelled checks, or account statements documenting the amount of employer contributions to health insurance and retirement plans
What documents do I submit to my lender?
FTEs: Each borrower must submit documentation for one of the following periods
showing the average number of FTE employees on payroll per month:1. Between February 15, 2019 and June 30, 2019 or2. Between January 1, 2020 and February 20, 2020
*Seasonal employers may use (1), (2), or any consecutive 12-week period between May 1, 2019 and September 15, 2019
Documents may include:• Payroll tax filings to the IRS (Form 941)• State quarterly business and individual employee wage reporting and
unemployment insurance tax filings
Documents submitted may cover periods longer than the specific time period.
What documents do I submit to my lender?
Non-payroll:Each borrower must submit documentation verifying the existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period:
Business mortgage interest payments & rent or lease payments: Copy of Lender amortization schedule for mortgage interest Current lease agreement for rent or lease
Receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from Feb 2020 and the months of Covered Period through one month after the end of the Covered Period
Business Utility payments: Copy of invoices from Feb 2020 and those paid during the Covered Period; Receipts, cancelled checks, or account statements verifying eligible
payments you’re seeking forgiveness for