On Monday, August 24, 2020, the U.S. Small Business Administration (SBA) and Treasury issued additional guidance on Payment Protection Program (PPP) loan forgiveness relating to owner-employee compensation and the eligibility of non-payroll costs. It says:
- Owner-employees owning less than a 5% interest in a C or S corporation are exempt from the owner compensation limit of up to $15,385 for an eight week covered period or up to $20,833 for a 24 week covered period.
- Rent paid to a related party is eligible for loan forgiveness to the extent of the related party’s mortgage interest for the space rented by the business.
- Rent paid is reduced by a sub-tenants rental payments for loan forgiveness.
- Mortgage interest is eligible for loan forgiveness for the portion of the building occupied by the owner. Mortgage interest related to space rented to other businesses is not eligible for loan forgiveness.
- Mortgage interest paid to a related party is not eligible for forgiveness.
- Mortgage interest and utilities in connection with a home office are eligible for loan forgiveness to the extent these expenses were deductible on your 2019 tax return.
What Should You Do?
At this time, there is nothing to do, as there is no clear guidance on how to handle these retro-active changes. The Rhode Island Society of CPAs is writing a letter to the SBA to ask for guidance on how to handle these and other changes. If you have questions, please contact us at 401-831-0200.