May 7, 2020

PPP Loan Forgiveness: What We Know, and What is Still Unknown

Written By: Nate Williams

As a team, we have spent hundreds of hours researching, studying, and learning about the Paycheck Protection Program (PPP). Collectively, we know more than most when it comes to this loan and how it works. Nevertheless, at this point in time the SBA and Treasury have left several questions unanswered. Each day we scour our resources for new information and will continue to do so. In the meantime, here is a summary of everything we know about PPP forgiveness, as well as questions that are still unanswered.


What we know


Forgiveness Period and Usage

The amount of the PPP loan that can be forgiven is equal to the total qualified costs used in the 8-week period starting on the date you receive the funds. Qualified costs include:

  • Payroll Costs
  • Mortgage Interest
  • Rent
  • Utilities

Of the amount that will be forgivable, at least 75% must be used for payroll costs. If you do not use the full amount of the PPP loan in the 8-week period, the excess funds will be due back as a 1% interest loan over 24 months, beginning 6 months from the date of the loan agreement.


What is included in “payroll costs”?

Payroll costs include:

  • Wages
  • State unemployment premiums
  • Group health benefits
  • Paid leave
  • The employer portion of retirement contributions

Payroll costs do not include compensation to any employee in excess of $100,000 per year, prorated for the covered period.  However, this only applies to wages; additional employee benefits, including health care and retirement contributions, are eligible for forgiveness.

If you do not use all of the PPP funds in the first 8 weeks or if you use more than 25% for non-payroll costs, the rest of the PPP proceeds will be due back as a 1% interest loan.


What is included in “mortgage interest”?

The text of the law indicates that the term “mortgage interest” includes interest on any business debt with collateral. This would include practice purchase and equipment loans. However, many banks have interpreted “mortgage” to only include real estate debts. We believe all business debts should be eligible; however, the forgivable interest may ultimately be limited to mortgages on business real estate.


Staffing Requirements

In order to qualify for full forgiveness, you must maintain or re-hire the same number of employees on payroll as you did prior to the pandemic. In addition, you must pay each employee at least 75% of their pre-pandemic wages.

If an employee rejects your re-employment offer, this will not impact your loan forgiveness, as long as you meet the following criteria:

  • You made a written offer to re-hire in good faith
  • You offered the employee the same salary/wage and hours as before they were laid off
  • You have documentation of the employee’s rejection of the offer


EIDL Grant

If your PPP loan amount was not reduced by the amount you received in EIDL Grant, then your PPP loan forgiveness will be reduced by the amount received in EIDL grant.


Tax Deductibility of Forgiveness Amount

The IRS has released guidance indicating that payments made with forgiven funds will not be tax deductible. The AICPA is currently challenging this ruling, but as it stands now you will not be able to “double dip” and receive both loan forgiveness and a tax deduction for the same expenses.


What is still unknown


How will owner retirement benefits be treated?

Based on the guidance from the SBA relating to Schedule C businesses, covered benefits for owners including health care and retirement contributions are not eligible for forgiveness. However, each of our clients are owners of S-Corporations and Partnerships and do not file a Schedule C for their practices. It is still unclear how benefits for S-Corp and Partnership owners will be treated.


Will the 8-week covered period be modified or extended?

The AICPA is urging the Treasury and SBA to modify the 8-week period to align with the lifting of stay-at-home restrictions and with the beginning of the businesses pay period. However, the SBA and the Treasury have not made any changes. As the rules stand, the 8-week covered period will begin when the loan is funded.


Will self-rental payments be eligible for forgiveness?

While there is no clear guidance on this question, the likely answer is no, unless you have a formal rent or lease agreement in effect prior to Feb 15, 2020.


How will the SBA define a full-time equivalent employee?

The SBA has not provided clear guidance on this question. Our assumption is that a full-time equivalent employee will be based on hours worked, with those working a minimum of 30 hours/week considered full-time.


What does “costs incurred, and payments made” mean? Does the cost have to be incurred and paid during the covered period?

The SBA has indicated that the expenses eligible for forgiveness will be limited to “costs incurred, and payments made.” Further guidance is outstanding on the exact application of this phrase. Payments made is more clear – you have to actually pay the money. But what about “costs incurred?” We expect that this means the cost must pertain to the 8-week period (you can’t prepay a year’s worth of rent, or salary). But again, further guidance on this point is expected.


How will forgiveness be treated for business that restore employment/wages during the covered period?

While we know that you must restore your staffing and pay to pre-pandemic levels by the end of the 8-week period, it is unclear how forgiveness will be affected if you have changes to your staffing during the period. For example, if you start the period with low levels of pay but increase throughout the 8 weeks.


What will the forgiveness application process look like?

At this point we have little information about how you will apply for loan forgiveness. However, we do know that there will be an application process through the bank, and we expect that you will be required to submit payroll reports, receipts, invoices, etc.



As we have stated repeatedly, we think you should operate your business as normal. Pay your employees for hours worked. Get yourself back on payroll, including your family. Pay for normal business expenses. Don’t pay for anything extra, and don’t not pay for anything you would normally pay for. And finally, focus your attention on running your practice; this is as hard of a time as we have ever seen to be a dentist. We have tremendous respect for the work you’re doing, and now with a stronger headwind than ever before!

And remember, when it comes time to apply for loan forgiveness, we will be there to help.

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