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CARES Act Paycheck Protection Program (PPP)Getting Ready To File Your Forgiveness Application
July 30, 2020
SPEAKERS
Chris Nichols, Director of Capital MarketsCenterState [email protected]
Josh Harris, SVP Credit AdministrationCenterState [email protected]
John Carpenter, PrincipalCherry Bekaert, [email protected]
Disclaimer
PPP Forgiveness is an evolving process, subject to change as further guidance comes out from the SBA and US Treasury.
This presentation is for general information purposes only and should not be relied upon as a substitute for obtaining independent advice or undertaking independent research before starting the process to apply for PPP forgiveness. This presentation does not take into account any particular borrower’s situation or needs.
All PPP Borrowers should obtain professional advice based on their unique situation before proceeding with the forgiving process. In addition, any implied projections or views of the hosts are their own personal opinions and are not the official position of CenterState Bank, N.A., Cherry Bekaert LLP or their respective directors or successors or assigns, and may not prove to be accurate. While the information contained herein is believed to be accurate as of the date of production, the information is subject to change and revision.
Speakers
Host
Chris NicholsCenterState Bank
Subject Matter Experts
Josh Harris, CPASenior Credit Administrator
CenterState Bank
John CarpenterPrincipal
Cherry Bekaert, LLP
Getting Ready To File
Agenda
• Update of Forgiveness Program
• Timing and start• Overview Recap
• Choosing the Covered Period• Payroll• Other Expenses
• Documentation• Audience Q&A
Getting Ready
• Subject to the SBA and Congress - We will send you a link via email to our portal. We will have a “rolling” invite starting on August 10th and lasting 7 days.
• If you have used the SmartBiz secure portal for origination, then you will simply log in using your existing credentials (or you can reset in case you forgot).
• If you are new, then you will register.
Getting Ready
1. Utilize a Chrome browser
2. Have your documents in electronic form (see acceptable file formats)
3. Have your information ready
4. Signer must be authorized and should be the same for the PPP application.
5. Wait for a secure email from us with borrower information and link.
PPP Customer Support - Website
PPP Customer Support - Videos
• All recorded webinar• Quick video focused
topics
If You Need Help
1. Email: [email protected]
2. Phone: Toll Free Number – Coming Soon
3. Chat: (on website) – Coming Soon
11
Forgiveness Wizard: Enter Data and Upload Documents
13
All expense sections follow similar layout:
1)Enter data2)Provide documentation3)Explain calculation
Pop-out boxes provide in-app detail
Easy drag & drop upload
boxes
Progress bar provides
transparency
2
Starting The Online Application
FTE Documentation
• 3508 (Standard) Only
• Documentation showing (at the Borrower’s election):• the average number of FTE employees on payroll per week employed
by the Borrower between February 15, 2019 andJune 30, 2019;
• the average number of FTE employees on payroll per week employed by the Borrower between January 1, 2020 andFebruary 29, 2020; or
• in the case of a seasonal employer, the average number of FTE employees on payroll per week employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive 12-week period between May 1, 2019 and September 15, 2019.
Once You File
8 to 24 Weeks
Covered Period
10 Months
Submit Forgiveness App
60 Days
Bank Review
90 Days
SBA Review
Approximate 20 month maximum deferral period
Payroll Costs Incurred or Paid
• Must be at least 60% of loan forgiveness amount
• Option of 56 days OR 168 days of wages paid and incurred for employees whose primary residence is in the US, beginning either:
On the PPP loan funding date, or for borrowers with bi-
weekly or more frequent payroll, day
of first pay period after loan funding
Wages incurred in forgiveness period
and paid after forgiveness period ends are included
Payrolls are effective as of date of
distribution of paychecks or effective
date that ACH deposits are originated
For employees other than owner-
employees, no more than $15,385 per
person (8 weeks) OR $46,154 (24 week
option)
Payroll Costs Incurred or Paid
• 8 weeks OR 24 weeks of wages beginning when the loan is funded for employees whose principal residence is in the US• Severance pay for terminated employees included
• Earned payrolls paid in first payroll after loan funding included
• By starting period on day of loan funding, may include more than 56 days (or 168 days) of wages
• Payrolls paid on first payroll date following covered period may be also be included where applicable to payroll periods occurring during covered period
Payroll Costs Incurred or Paid
• Reasonable bonus payments can be paid provided that no single employee receives more than $15,385 during the 8 week period OR $46,154 during the 24 week period
• For owner-employees no more than $15,385 during the 8 week period OR $20,833 during the 24 week period, capped at the 2.5 month equivalent of their 2019 compensation (including health benefits and retirement plan contributions)
• Mandated paid leave wages cannot be included
Other Payroll Costs Incurred or Paid
• Qualified health care costs for employees only• Employer share of costs paid during the 8 (or 24) week period
• Pre-tax amounts included in gross wages • Includes health care premiums and costs of a self-insured plan • Includes dental, vision, HDHPs, HRAs, FSAs and other usual
health coverages (but not HSAs or QSEHRAs)• Self-insured health benefits paid from the employer’s general
assets or a special health plan bank account will be included• Prepaid premiums and contributions to health plans may be
allowed• Can create funded trust to receive prepayments of self-
insured benefits if necessary
Other Payroll Costs Incurred or Paid
• Retirement plan contributions for employees only• Employer share of costs paid during the 8-week (or 24-week) period
• Pre-tax amounts included in gross wages
• 2019 contributions not previously paid if funded in the 8-week (or 24 week) period
• 2020 contributions for employer match, discretionary profit sharing contributions and maximum allowable defined benefit plan contributions if funded in the 8-week (or 24-week) period
• Contributions may perhaps be prepaid and allocated to employee accounts as required later in 2020
• Need to be sure you comply with plan provisions regarding maximum contribution
Restrictions for Owner-Employee Forgiveness Amounts
• Owner-employees includes any shareholder of a C corporation or S corporation, any member of an LLC, any partner of a partnership and all sole proprietors
• Amount forgiven is limited to lesser of $15,385 during the 8 week period or $20,833 during the 24 week period, capped at the 2.5 month equivalent of their 2019 compensation (including health benefits and retirement plan contributions)• Amounts included in gross wages, SE income or Schedule C or F
amounts
• Group health plan benefits and retirement contribution not included in gross wages added to compensation before limitation (with the effect of reducing the maximum salary amount attributable to Owner-employees).
Rent and Mortgage Interest
• Rents under leases and interest on mortgages for real or personal property used in the business
• Only covers rents and mortgage interest for obligations that were in place as of 2/15/20
• Evidence of leases or promissory notes must be provided• Past due amounts can be included• Prepaid mortgage interest cannot be included; prepaid rent may
be permitted
Utilities In Place As of 2/15/20
• Payment for a service to include:
Electricity
Gas (natural gas service)
Water
Telephone (including cell phones),
Internet access
Transportation (gas for business vehicles)
• Prepayments of next month and past due amounts can be included
• Evidence of utility obligations must be provided
• Payments for trash pickup, recycling pickup, outdoor maintenance, VPN service, email service, and other IT support cannot be included
Documentation: Setting Expectations
• The PPP Forgiveness Phase requires more documentation than origination.
• Organization will be critical (for your own sanity as well as your banker’s)
• Imagine you’re creating an audit work paper file (if you claim an amount in your forgiveness requests, you need to show everyone where that amount came from)
Reference: Application Instructions
The content of this presentation is taken directly from P6 of the 3508 instructions and P4 of the 3508EZ instructions which can be found at:
www.treasury.gov/policy-issues/cares/assistance-for-small-businesses
While we haven’t quoted the instructions word-for-word, we tried to stay as close to the instruction language as possible.
High-Level Observations
• Basic Categories:• Documents that Each Borrower Must Submit with its PPP Forgiveness
Application
• Documents that Each Borrower Must Maintain but is Not Required to Submit
3508 (Standard)
• PPP Loan Forgiveness Calculation Form 3508
• PPP Schedule A
• Payroll Documentation
• FTE Documentation
• Non-payroll Documentation
3508EZ
• PPP Loan Forgiveness Calculation Form 3508EZ
• Payroll Documentation
• Non-payroll Documentation
***No Schedule A, No FTE Docs***
Docs That Must Be Submitted26
Payroll Documentation ∙ 3508
• Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:
a) Bank account statements OR third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
b) Tax forms (OR equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
i. Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
ii. State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
c) Payment receipts, cancelled checks, OR account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount (PPP Schedule A, lines (6) and (7).
Payroll Documentation ∙ 3508EZ
• The same as required for the standard 3508 plus• If you checked only the second box on the checklist on page 1
of the instructions, the average number of FTEs on payroll employed on January 1, 2020 and at the end of your Covered Period.
FTE Documentation
• The selected time period must be the same time period selected for purposes of completing PPP Schedule A, line 11.
• Documents may include payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
• Documents submitted may cover periods longer than the specific time period.
Non-Payroll Documentation
• Applies to 3508 and 3508EZ
• Documentation verifying existence of the obligations/services prior to February 15, 2020 AND eligible payments from the Covered Period.
• Business mortgage interest payments: Copy of lender amortization schedule AND receipts ORcancelled checks verifying eligible payments from the Covered Period; OR lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
• Business rent or lease payments: Copy of current lease agreement AND receipts OR cancelled checks verifying eligible payments from the Covered Period; OR lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
• Business utility payments: Copy of invoices from February 2020 AND those paid during the Covered Period AND receipts, cancelled checks, OR account statements verifying those eligible payments.
The SBA requires Borrowers to retain all (submitted and supporting) records relating to their PPP loan for six (6) years after the date the loan is forgiven or repaid in full.
Document Retention Requirements
Chris Nichols, Director of Capital MarketsCenterState [email protected]
Josh Harris, SVP Credit AdministrationCenterState [email protected]
John Carpenter, PrincipalCherry Bekaert, [email protected]
What Questions Do You Have?
