On Thursday, April 2nd, the SBA released thirty-one pages of an interim final rule concerning the PPP. Many of the provisions address lender-related details, and several additional regulations are still forthcoming. The following is a summary of the document.
1 – Independent contractors do not count as employees for purposes of a borrower’s PPP loan calculations. This is somewhat of a departure from the statutory language, which included “the sum of payments of any compensation to or income of a . . . independent contractor . . .” as payroll costs. However, independent contractors retain the ability to apply for a PPP loan of their own. The interest rate on a PPP loan is one percent, and the term is two years. The loans are available on a first-come, first-served basis. Payments do not need to be made for six months following the date of the loan’s disbursement, though interest will continue to accrue.
2 – No more than twenty-five percent of the loan forgiveness may be attributable to non-payroll costs. The SBA will issue additional rules concerning loan forgiveness.
3 – Independent contractors do not count as employees for purposes of loan forgiveness.
4 – Consistent with the information and discussion on our webinar, federal employment taxes and income taxes required to be withheld from employees are not payroll costs, but only those taxes imposed or withheld between February 15, 2020 and June 30, 2020 are confirmed as not being such costs. It is unclear if the inference to be drawn is that those imposed or withheld in earlier periods are payroll costs, though perhaps not, since they are not otherwise included as payroll costs in the statute or in the interim final rule.
5 – The measurement period for payroll costs is broadly referred to as “the last twelve months.”
6 – If PPP funds are misused, they will need to be repaid. If funds are misused knowingly, additional liability may attach for fraud.
As more information about PPP becomes available, we will continue to share.