SBA Updates Guidance to Conform with PPP Flexibility Act

On June 3, 2020, the President signed into law the Payroll Protection Program Flexibility Act (the “Flexibility Act”). You can read more about the Flexibility Act here. Since that time, both the Small Business Administration (“SBA”) and Department of the Treasury have worked to update their original guidance to reflect the changes imposed by the Flexibility Act.

This article summarizes the Interim Final Rules (“IFR”) that have been published since our last IFR article. You can read about other guidance published by the SBA by consulting the Baird Holm LLP COVID-19 Hub.

• Sixteenth Interim Final Rule (Eligibility of Certain Telephone Cooperatives). While the CARES Act expanded eligilbility to nonprofit organizations, but only if they were exempt from Federal income tax under Section 501(c)(3) or Section 501(c)(19) of the Internal Revenue Code. Last week, the 16th IFR expanded elibility to telephone cooperatives that are exempt under Section 501(c)(12) of the Internal Revenue Code.
• Seventeenth Interim Final Rule (IFR on Revisions to the First IFR). On June 11, the SBA published its 17^th IFR, which updated previous guidance to conform with the Flexibility Act. This IFR specifies that loan made prior to June 5 will continue to have a maturity of two years, but loans made after that time will have a maturity of 5 years. It also states that a violation of the 60% rule will result in a proportional decrease in eligible forgiveness, rather than a dollar reduction.
• Eighteen Interim Final Rule (IFR on Additional Revisions to the First IFR). On June 12, the SBA published its 18^th IFR, which relaxes the eligibility rules that had previously restricted applicants that had committed felonies within the most recent five years.
• Nineteenth Interim Final Rule (Revisions to the Third and Sixth Interim Final Rules). On June 16, the SBA published a 19^th IFR to update the 3^rd IFR, which addressed eligibility, and the 6^th IFR, which addressed disbursements. The 19^th IFR noted that the per person maximum for borrowers that use a 24-week covered period will be $46,154, which same figure is the ownership compensation maximum. It also makes clear that “payroll costs” do not include amounts for which an FFCRA credit was claimed (previous language excluded amounts for which an FFCRA credit was allowable). 

When analyzing eligibility, compliance, or other issues related to the PPP loans, both lenders and borrowers should ensure they have consulted the proper sources. If you have any questions regarding the SBA PPP loans, or other aspects of the CARES Act, please contact a Baird Holm LLP attorney.