While the SBA stopped issuing new PPP loans on August 8th, it continues to clarify its rules. Last week the SBS provided further clarification of its PPP Loan Forgiveness Rules. In particular it clarified the owner/ employee rule. Our friends at the DC law firm of Pillsubry Winthrop Shaw Pittman LLP noted the following:
“The SBA’s new Interim Final Rule dated August 24, 2020, clarifies the important issue of the percentage of equity ownership of a borrower that triggers the PPP’s limitations on “owner-employee” compensation. As we explained in a recent client alert, the SBA set strict limits on the amount of compensation paid to an “owner-employee” that would be eligible for forgiveness—but the SBA failed to define “owner-employee.” The new Interim Final Rule clarifies that “owner-employees with less than a 5 percent ownership stake in a C- or S-Corporation are not subject to the owner-employee compensation rule.” It should be noted that the new Interim Final Rule applies this exception only to C-Corp and S-Corp entities and does not provide an exception for partnerships or limited liability companies.”
There are additional clarifications in the new rules regarding 1) loan deferrals; 2) loan forgiveness for a reduction in salaries or employees; 3) the appeals process and finally 4) mergers and acquisitions.
To see the complete memo from the law firm of Pillsbury Winthrop Shaw Pittman LLP click HERE.
To see good article summarizing the clarifications in Forbes click HERE.
To see the SBS’s Interim Final Rule click HERE.
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