The CARES Act AND the Economic Aid to Hard-Hit Small Business, Nonprofits, and Venues Act (signed into law on 12/27/20) lists the items that can be used to calculate Payroll Costs for a new loan request and “Eligible payroll costs” and “Eligible nonpayroll costs” for a forgiveness request. This means that a PPP loan is forgivable to the extent the proceeds of the loan are spent on these two categories, headcount and salaries of employees are maintained at the same pre-Covid-19 level. Another important requirement is that these expenses are paid during the “covered period” or “alternative covered period”. At least 60% of the PPP Loan must be spent on “Eligible payroll costs” and up to 40% can be spent on “Eligible nonpayroll costs”.
Eligible Payroll Costs – For New Loan and Forgiveness Request
- Compensation to employees including salary, wages, commissions or similar compensation
- Cash tips or the equivalent
- Vacation, parental, family, medical, or sick leave (except those paid leave amounts for which a credit is allowed under FFCRA Sections 7001 and 7003)
- Allowance for separation or dismissal
- Employer contributions for employee group healthcare coverage, group life, vision, or dental (including insurance premiums paid by employer)
- Employer contributions to employee retirement plans
- Employer state and local taxes assessed on employee compensation
- For Independent Contractors and Sole Proprietorships - wage, commissions, income, or net earnings from self-employment of similar compensation
Eligible Nonpayroll Costs – Appropriate Use of Loan Funds to Support Forgiveness Request
- Interest on covered mortgages
- Expenses for rent or lease payments
- Utility expenses
- Covered operations expenditures
- Covered property damage costs
- Covered suppliers costs
- Covered worker protection expenditures
Covered Period: The Covered Period begins on the date the loan was originally disbursed. It ends on a date selected by the Borrower that is at least 8 weeks (56 days) following the date of loan disbursement and not more than 24 weeks (168 days) after the date of loan disbursement. For example, if the Borrower received their PPP loan proceeds on Monday, April 20, 2020, the first day of the Covered Period is Monday, April 20, 2020 and the final day of the Covered Period is any date selected by the Borrower between Sunday, June 14, 2020 and Sunday, October 4, 2020.