Update on 4/18/20: I’m posting the same update here as on our other post related to this matter containing our debt forgiveness forecasting tool. The issue surrounding whether loan forgiveness will be based on Gross or Net payroll still looms. I had not been able to find anyone calling attention to this or talking about it besides myself until I came across this article by Forbes contributor Tony Nitti. See point #6. There is a snippet in the SBA FAQ that Nitti interprets to mean they are going to base loan forgiveness on gross pay. This seems like someone in DC is finally succumbing to common sense. But I agree with Nitti. It would have made a lot more sense to put this in the guidance rather than burying it in a footnote to an FAQ.
Earlier this week we put together a tool to help businesses, CPA’s and bankers calculate the maximum amount for new Payroll Protection Program loans under the CARES Act. It has evolved with our understanding of the Act and guidance released by SBA. We expect that to continue. You can download the tool at the bottom of this post and sign up to receive updates.
As businesses started to get help from industry groups and payroll companies the provision to exclude certain taxes is causing a lot of confusion. It reads…
taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period;
I don’t think this has as much to do with calculating the maximum loan amount as it does with determining how much of your loan is eligible to be forgiven. And the way I read it the employer and employee portions of FICA and the income tax withholding on an employee’s paycheck will not be eligible.
This means a business could use 100% of the funds for payroll costs and not have their loan forgiven.
I explain my take more fully in the video and go over some adjustments in the tool.
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To download the spreadsheet visit axiomstrategic.com/blog/ppldebt