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CARES Act: Additional Guidance on Interplay Between PPP Loans and Employee Retention Tax Credit

Under the CARES Act, employers who receive a Paycheck Protection Program (“PPP”) loan are ineligible to claim the employee retention tax credit. On May 6, 2020, the Small Business Administration (“SBA”) updated its FAQs on PPP loans to address situations when an employer received a PPP loan but now decides to repay it by the safe harbor deadline of May 14, 2020. Specifically, new Q/A-45 states that if such an employer repays its PPP loan by May 14, 2020, the employer will be eligible to claim the employee retention tax credit, provided the employer meets the other requirements to claim that credit. The SBA FAQs are available here.

UPDATE: Calculation of Payroll Costs for Purposes of the Paycheck Protection Program (“PPP”)

The Small Business Administration (“SBA”) continues to update its FAQs on PPP loans to provide additional guidance regarding what costs constitute payroll costs. Borrowers should use care in determining what amounts constitute payroll costs since borrowers are responsible for providing an accurate calculation of payroll costs and must attest to the accuracy of those calculations on their Borrower Application Form. Under the new guidance the SBA clarified: The $100,000 annualized per employee cap only applies to cash compensation and does not include any non-cash benefits, such as employer contributions to defined benefit or defined contribution retirement plans, payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and payment of state and local taxes assessed on employees’ compensation. PPP loans can be used to cover costs for employee paid vacation, parental, family, medical and sick leave (other than qualified sick and family wages for… Continue Reading

May 2020
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