PPP Loan Update for the Nonprofit Community Bridget Hartnett, CPA, - - PowerPoint PPT Presentation

PPP Loan Update for the Nonprofit Community

Bridget Hartnett, CPA, PSA Michael LaForge, CPA, PSA, CGMA

Guidance Issued From the SBA and Treasury

Details for computing the debt forgiveness Clarification of many critical issues

These Questions are Clarified

“Incurred” and “paid” as referenced in the CARES Act is further defined to allow (with certain limitations) expenses both paid and incurred in the eight week period The calculation of both full-time equivalent (FTE) and wage/salary reduction provisions will be done in a way that helps mitigate reduction

• f amount of debt forgiven

The definition of rent obligations will include leases on both real and personal property The Organizations will be able to align the 56 day period with their own payroll period through the introduction of the new Alternative Payroll Covered Period

The Core Parameters of the PPP Loan are as Follows:

• Loan amount equal to 2.5 times the employer’s average monthly payroll
• Loan amounts up to $10,000,000
• Loan forgiveness amount equal to eight weeks salaries, plus several other

costs incurred during that period.

Review the Application

The application consists of four main areas:

The PPP Loan Forgiveness Application The PPP Schedule A The PPP Schedule A Worksheet The PPP Borrower Demographic Information Form (optional)

PPP Loan Forgiveness Application

Step 1 Step 2 Step 3 Step 4

Eligible Payroll Costs Include:

• Payment for vacation, parental, family, medical, or sick leave. Allowance

for dismissal or separation.

• Payment required for the provisions of group health care benefits,

including insurance premiums.

• Payment of any retirement benefit.
• Payment of state or local tax assessed on the compensation of employees.

What Costs Are Not Eligible For Calculating Payroll?

• Compensation in excess of $100,000.
• Compensation covered by other funding sources (Federal or State).
• Taxes imposed or withheld under chapters 21 (FICA), 22(Railroad

Retirement Tax), and 24(Income Tax Withholding) of the IRS code.

• Compensation of employees whose principal place of residence is outside
• f the U.S.
• Qualified sick and family leave for which a credit is allowed under sections

7001 and 7003 of the Families First Coronavirus Response Act.

Computing Eligible Payroll Costs and Other Expenses for Forgiveness

Covered Period - 8 Week Period – 56 days – Beginning on the PPP Loan Disbursement Date Alternate Payroll Covered Period – The Organizations may elect to calculate eligible payroll costs using the 8 weeks - 56 days - Beginning from the first day of the first pay period following their PPP Distribution

Understanding Eligible Costs (Non-Payroll)

• Covered mortgage obligations such as payments of interest (not

including any prepayment or payment of principal) on any mortgage obligation on real or personal property incurred before February 15, 2020.

• Covered rent obligations such as rent or lease payments pursuant

to lease agreements for real or personal property in force before February 15, 2020.

• Covered utility payments such as payments for a service for the

distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.

Application - Step 1

Fill ll in the Bla lanks:

• Line One – Enter total eligible payroll costs incurred or paid during the

Covered Period or the Alternative Payroll Covered Period.

• Line Two – Enter the amount of mortgage interest payments during the

Covered Period for any mortgage obligation on real or personal property incurred before February 15, 2020. Do not include prepayments.

• Line Three – Enter the amount of rent or lease payments for real or

personal property during the Covered Period, pursuant to lease agreements in force before February 15, 2020.

Application - Step 1

Fill i ll in t the B Bla lanks:

• Line Four - Enter the amount of utility payments during the

Covered Period, for business utilities for which service began before February 15, 2020.

• Note: you are not required to report payments that you do

not want to include in the forgiveness amount. This would include both compensation and other costs reimbursed by

• ther sources.

Application - Step 2

Fill i ll in t the B Bla lanks:

• Lines Five thru Seven include the details on how to compute any

reduction in the loan due to a reduction in full-time equivalents (FTEs) or salary/wage reductions, with supporting calculations on PPP “Schedule A.” Salary and Wage Reduction:

• Must be done by employee by salary or hourly wage.
• Compare 1st Quarter 2020 (1/1/20-3/31/20) vs. Covered Period
• r Alternative Payroll Covered Period.

Application - Step 2

2020 Quarter 1 $ 20,000 $80,000 Covered (8 weeks at reduced pay) $ 6,153 $ 40,000 75% (8 weeks at $60K) $ 9,231 $ 60,000 Reduction $ 3,078

Application - Step 2

Do I Need To Calculate a Reduction?

Did I reduce salaries or wages for any employee who was working during the covered period?

Yes

Was the average salary reduced by more than 25%?

Yes

Did I restore reduced salaries before June 30th?

No Go to Schedule A Worksheet to Determine Reduction NO REDUCTION NECESSARY! No No Yes

Application - Step 3

Fill ll in t the B Bla lanks:

• Lines Five thru Seven include the details on how to compute any reduction in

the loan due to a reduction in full-time equivalents (FTEs) or salary/wage reductions, with supporting calculations on PPP “Schedule A.” Full Time Equivalent (FTE):

• For each employee, enter the average number of hours paid per week, divide

by 40, and round to the nearest tenth. The maximum of each employee regardless of hours is 1.0.

• Alternative method assigns 1.0 for any employees who work 40 hours or

more per week and .5 for employees who work fewer hours. *The Organization can choose which method to use*

Application - Step 3

Average FTE Example Alternative 1 2 Moses Average 45 Hours During Period 1 1 Larry 40 1 1 Jerome 28 .7 .5 Samuel 20 .5 .5 Joe 20 .5 .5 3.7 3.5

Application - Step 3

Fill ll in the Bla lanks:

Full Time Equivalent – Period Elected by The Organization:

• The average number of full-time equivalent employees per month employed

during the period February 15, 2019 – June 30, 2019; OR

• The average number of full-time equivalent employees per month employed

during the period January 1, 2020 – February 29, 2020.

FTE Reduction Average FTE’s During Covered Period FTE’S Per Period Elected by The Organization

Application - Step 3

Fill ll in the Bla lanks:

Full Time Equivalent – Safe Harbor: The Organization is exempt from the reduction in loan forgiveness based

• n a reduction in FTE’s if the following is met:
• The Organization restored its FTE levels by JUNE 30, 2020 when

compared to the levels in the Organization’s February 15, 2020 payroll.

Application - Step 4

Fill ll in the Bla lanks:

• Lines Eight thru Ten compute the potential forgiveness amounts with the

actual forgiveness amount being the smallest of lines 8-10, which is entered on line 11.

• Line 8 – Modified Total – Multiply the total payroll after salary/wage

reduction by FTE reduction quotient

• Line 9 – PPP Loan Amount
• Line 10 – Payroll cost 75% (divide line 1 by .75)

The Smallest Will Be The Forgiveness Amount.

Certifications

Used for eligible purposes, doesn’t exceed 100K cap or $15,385, 25% or less non-payroll, reductions all included Other representations of accuracy and acknowledgement that additional information may be required

Let’s Hear From You!

Contact Information

Visit our website for additional information: SobelCoLLC.com

Michael LaForge, CPA, PSA, CGMA

Member of the Firm, SobelCo Michael.LaForge@SobelCoLLC.com

Bridget Hartnett, CPA, PSA

Member of the Firm, SobelCo Bridget.Hartnett@SobelCoLLC.com