COVID-19 Updates

May 6, 2020: New PPP Guidance Extends Safe Harbor Repayment Date, Caps Loans to a Corporate Group, Expands Eligibility for Loan Forgiveness, and Includes Non-US Resident Employees of Foreign Affiliates When Evaluating Business Size

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The Treasury Department continues to issue new guidance related to the Paycheck Protection Program (“PPP”).  The latest developments include:  the PPP safe harbor loan repayment deadline has been extended to May 14; loans are capped at $20 million per corporate group; and certain laid-off employees who refuse offers to be rehired do not reduce their employers’ headcounts for loan forgiveness purposes.

The Treasury Department previously clarified that PPP borrowers must certify, in good faith, that “‘[c]urrent economic uncertainty makes this loan request necessary to support the[ir] ongoing operations”, considering their access to other sources of liquidity.  Borrowers who applied for a PPP loan before April 24 and fully repaid their loans by May 7, 2020, would be deemed to have made that certification in good faith.  On May 5, the Treasury Department extended that safe harbor repayment date to May 14, 2020.  (See question #43 here.)

A new interim rule released on April 30 also limits each corporate group to no more than $20 million in PPP loans, regardless of the loan amounts for which individual businesses in the corporate group otherwise qualify.  For this rule, all businesses that have the same direct or indirect majority owner are in a common corporate group, even if those businesses are not treated as affiliated businesses for purposes of counting employees on their PPP loan applications.  The $20 million cap went into effect on April 30, and applies to all PPP loan applications pending or submitted on or after that date, as well as to loans that were only partially disbursed as of April 30.

Applicants must notify their lenders if they applied for or received a PPP loan that does or could push the total received by their corporate group to over $20 million.  Those loan applications must be cancelled or withdrawn or the loans repaid.  (The interim rule did not provide the option of amending a loan application to reduce the total PPP loan requested by a corporate group to $20 million.)  Retaining a loan that violates the corporate group limit counts as an unauthorized use of PPP loan funds, making the loan ineligible for any forgiveness.

Although the corporate group rule could reduce loan forgiveness for some borrowers, FAQ #40 could increase loan forgiveness for others.  Section 1106(d)(2) of the CARES Act reduces the amount of PPP loan forgiveness borrowers are eligible for if the average number of full-time employees they have or the total salaries and wages they pay eight weeks after the loan is disbursed dip below the numbers from their base period.  However, the new guidance says that if a laid-off employee refuses an offer of rehire by its employer, as long as that offer was for the same salary/wages and hours the employee had before, the employee headcount is not treated as lower for purposes of reducing that employer’s loan forgiveness amount.

FAQ #44 makes a significant change to the SBA Interim Final Rule for any applicant business that has a foreign-based affiliate or affiliates. The SBA Interim Final Rule released April 2 and the early FAQs released by the U.S. Treasury (FAQ #3) made clear that a business “is eligible for a PPP loan if it has 500 or fewer employees whose principal place of residence is in the United States.”  This led many to conclude that employees of foreign affiliates who are resident outside the United States are not counted for the purposes of PPP eligibility. FAQ #44 sweeps those employees back into the count by requiring that for the purposes of the 500-or-fewer employees size standard, an applicant must count not only the employees of its U.S.-based affiliates, but also the employees of affiliates based overseas.

Any qualified business, nonprofit, sole proprietor, or veteran or tribal organization seeking a PPP loan should apply as soon as possible to ensure that funds are still available.  These financial institutions can accept PPP applications.

New PPP guidance is issued regularly, so please check our COVID-19 news page or ask your attorney for updates.

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For more information about the Paycheck Protection Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (