The just-released Paycheck Protection Program Forgiveness Application answers a number of important questions, but leaves many more unanswered, according to the American Institute of CPAs.
More importantly, the document and related instructions, issued by the Treasury Department and the Small Business Administration, “still do not provide enough flexibility for those who receive funds,” the institute stated. “The forgiveness application form does help address some administrative items such as providing additional clarity around ‘costs incurred but not paid’ during the covered period, which is aligned with a recommendation by the AICPA. However, major issues remain. In particular, small businesses need flexibility on when the eight-week period should start or need to have the covered period extended to more than eight weeks.”
“It’s clear the application form and instructions provided [on May 15, 2020] are not enough,” said Erik Asgeirsson, president and CEO of CPA.com, the AICPA’s business and technology arm. “Some of the most pressing issues are not addressed and in other areas it appears new questions have arisen.”
Roger Harris, president of Padgett Business Services, agreed. “They need to provide additional clarity,” he said. “For example, the portion regarding self-employed individuals refers back to other guidance. Not everyone has that. They need to give an example of how to calculate payroll costs for Schedule C filers and partnerships, because the instructions in the form are confusing.”
“The AICPA loan forgiveness calculator provided more support and details than the SBA loan forgiveness application, and we will continue to encourage Treasury and SBA to leverage our recommendations,” said Mark Koziel, the AICPA’s executive vice president of firm services. “We will now reconcile our calculator with this form and publish an updated version with additional recommendations and direction for our 44,000 CPA firms.”
Dennis Brager, of Los Angeles-based Brager Tax Law Group, suggests that borrowers check frequently for changes to the PPP forgiveness guidelines, since they are likely to shift frequently.
He noted that the language of the statute provides for forgiveness of amounts paid and accrued. “Some borrowers had concerns about whether costs needed to be both paid and accrued during the covered period. The instructions seem to go with ‘or.’ The instructions state, ‘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 payroll date.’ Not surprisingly, the instructions caution that costs can be taken into account only once: either when paid or accrued.”
The instructions adopt a similar rule for non-payroll costs, Brager observed. “They state, ‘An eligible non-payroll 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.’”
The forgiveness application constitutes encouraging news for borrowers and their advisors, according to Robbin Carusuo, partner and co-chair of the National Tax Controversy Practice at Top 100 Firm Prager Metis.
“This constitutes an 11-page document with the necessary application forms and instructions, which address many of the previously unanswered issues on the handling of the PPP loan forgiveness,” she said, noting that the instructions provide explanations of the following:
- How to calculate full-time equivalents] for PPP loan forgiveness purposes;
- An alternative covered period for addressing payroll costs;
- How to handle expenses that are not both incurred and paid in the eight-week covered period; and,
- What support documents will be required.
