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#19: SBA Issued New Interim Final Rule (IFR) for Borrowers

On Monday, June 22, the SBA issued a new Interim Final Rule (IFR) implementing regulation changes made to the loan forgiveness process by the PPP Flexibility Act.  The links to the IFR and the revised loan forgiveness applications are below, but we have included some of the key information on how the changes will be applied.

  • It confirms that Borrowers may submit forgiveness applications on or before the maturity date of the loan, including before the end of the covered period, provided they have used all the loan funds for which they are requesting forgiveness.

A new Forgiveness Application Form EZ is available to use if you meet at least one of three following safe harbors:

  • You are self-employed and do not have any employees; or
  • You did not reduce annual salary or hourly wages of any employee by more than 25%, and you did not reduce the number of employees or the average paid hours between January 1, 2020 and the end of your covered period; or
  • You did not reduce annual salary or hourly wages of any employee by more than 25%, and you were unable to operate at the same level of business during the covered period due to public health directives

The safe harbors for both the salary/hourly wage reduction and FTE reduction to be measured as of June 30, 2020 have been extended to the earlier of December 31, 2020, or the date the forgiveness application is submitted.

  • Clarification was provided regarding how the limit of eligible costs incurred during the 8-week covered period would apply to the extended 24-week covered period:
  • Individual employee compensation is capped at $15,385 for the 8-weeks or $46,154 for the 24-week, and owner compensation is based on 2019 compensation, and is capped at $15,385 for the 8-week period or $20,833 for the 24-week.
  • The employer-paid portion of health insurance premiums paid for self-employed individuals, general partners, and owner-employees of S-corporations are excluded.
  • The employer-paid portion of retirement contributions for self-employed individuals and general partners are excluded. Contributions for owner-employees of S-corporations are includable but are capped at two and a half months of the 2019 contribution amount.

Citizens Bank continues to diligently monitor changes in program rules and will continue to bring you information as it becomes available.

The PPP has been a challenge for all of us and we expect the forgiveness process to present similar challenges.  Citizens Bank is willing to accept applications for loan forgiveness although the portal to submit the forgiveness applications to the SBA is not available. Therefore, we continue to recommend to our Borrowers that they delay submitting their forgiveness application.  As a reminder, forgiveness will be granted on a principal and interest basis on the forgiven amount so additional interest expense will not be incurred by waiting. Whatever you decide about your forgiveness application, rest assured that Citizens Bank will approach the PPP forgiveness process in an efficient and meticulous manner.

Citizens Bank recommends that you consult your outside advisors and experts in all matters relating to the PPP and loan forgiveness. We will work to provide you timely and accurate information, but the burden for obtaining forgiveness rests on the borrower. All information provided in this format or any other communication regarding the program is believed to be accurate, but no guarantee is or can be made by any Citizens Bank representative.

Please submit your questions to pppquestions@citizens-banking.com.  Include the name of your business in your e-mail.  We will endeavor to answer in a timely way with the best information currently available.

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