“Subsection (f) of the IFR uses “calendar year 2020” to refer to “the twelve-month period prior to when the loan is made.” Calculating payroll costs based on calendar year 2020 rather than the twelve months preceding the date the loan is made will simplify the calculations and documentation requirements for borrowers because payroll records are more commonly created and retained on a calendar-year basis.The Interim Final Rules explain the above as follows: This can now be any consecutive 365 day period and can start as soon as Jan 1, 2019, but can be, for example, Mato March 11, 2020. The Act itself was interpreted to mean that a borrower’s average monthly payroll costs had to be calculated based upon 12 consecutive calendar months. The Interim Final Rules provide that the borrower is permitted to use the precise 1-year period before the date on which the loan is made to calculate payroll costs if they choose not to use 2019 or 2020 to calculate payroll costs. The Act also provided that the time period that is used for calculating a borrower’s average payroll costs for a Second Draw PPP Loan is either “the 1-year period before the date on which the loan is made” or “calendar year 2019." In general, the Economic Aid Act provides that the maximum loan amount a borrower may receive for a Second Draw PPP Loan is the lesser of two and half months of the borrower’s average monthly payroll costs or $2 million. The Interim Final Rules state that excluding the forgiveness amount from a borrower’s gross receipts is “consistent with section 7A(i) of the Small Business Act, which expressly excludes PPP forgiveness amounts from being taxed as income.”Īdditionally, the Interim Final Rules provide that this clarification “ensures the effectiveness of the second draw loan program by ensuring that a borrower is not disqualified from receiving a Second Draw PPP Loan because it received forgiveness on a First Draw PPP Loan.”īorrowers May Use any 365 Day Period Beginning on Januto Calculate Their Average Monthly Payroll Costs: “Any Forgiveness Amount” of a First Draw PPP Loan is Excluded from a Borrower’s Gross Receiptsīorrowers of First Draw PPP Loans that are looking to receive a Second Draw PPP Loan will be relieved to know that the Interim Final Rules clarify that “any forgiveness amount of a First Draw PPP Loan that a borrower received in calendar year 2020 is excluded from a borrower’s gross receipts.” 121.104 of SBA’s size regulations because this definition appropriately captures the type of income that is typically included in a small business’s gross receipts.” The SBA notes that the definition for gross receipts in the Interim Final Rules is “consistent with the definition of receipts in 13 C.F.R. Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.”Īdditionally, the Interim Final Rules also state that “all other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts.”.Proceeds from transactions between a concern and its domestic or foreign affiliates and.“Taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees).The Interim Final Rules provide that gross receipts do not include the following:
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