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PPP Recipients Get Guidance on Expenses Eligible for Forgiveness

Aug. 24, 2020, 11:20 PM

The Small Business Administration has issued details on how small businesses should handle certain business expenses when they apply for forgiveness on Paycheck Protection Program loans.

The PPP, authorized in the CARES Act (Public Law 116-136), facilitated hundreds of billions of dollars in government-backed loans intended to keep small businesses afloat during the coronavirus pandemic.

  • The SBA, in an interim final rule posted online Monday, said expenses attributable to the business operation of a loan recipient’s tenant or subtenant may not be forgiven. That means a loan recipient who pays $10,000 a month in rent and subleases part of the space for $2,500 a month would only be allowed to seek forgiveness for $7,500 a month in rent.
  • Rent payments to a related party are eligible for loan forgiveness if certain conditions are met, the SBA said.
  • Guidance also clarifies that a cap on forgiveness for the compensation of owner-employees doesn’t apply to owner-employees with less than a 5% ownership stake in a C corporation or S corporation.

To contact the reporter on this story: Patrick Ambrosio in Washington at pambrosio@bloombergtax.com

To contact the editors responsible for this story: Rachael Daigle at rdaigle@bloombergindustry.com; Yuri Nagano at ynagano@bloombergtax.com