Simplified PPP Forgiveness Process

Simplified PPP Forgiveness Process

SBA releases simplified PPP Forgiveness Process and Form for Loans of $50k or less

But before you go cheering into the streets because your clients are receiving the much-anticipated automatic forgiveness of their PPP loans, you might want to read on…

In an October 2, 2020 release, the SBA indicated they would begin to accept PPP loan forgiveness applications.  On Friday October 9, SBA released guidance (and a new form) for a simplified loan forgiveness process using Form 3508S. The form consists of only 7 statements, most of which center around certifications that the person or company has completed the form honestly and under penalty of law has complied with all SBA requirements for the proper use of PPP loan proceeds.

Before getting too excited about this new form and what appears to be a simplified process with no documentation required, I wish to draw your attention to the fourth statement on the new Form 3508S:

I have submitted to the Lender the required documentation verifying payroll costs, the existence of obligations and service (as applicable) prior to February 15, 2020, and eligible business mortgage interest payments, business rent or lease payments, and business utility payments.

The requirement of statement #4 to document the proper use of PPP loan proceeds to your lender’s satisfaction, in my opinion, removes any notion of “automatic” forgiveness. Remember that your client’s lending institution provided the money to your client. The SBA (a.k.a. the American taxpayers) will reimburse the bank upon receipt by SBA of the properly completed form.  I expect that lenders are eager to recoup their funds.

So much for our expectation of automatic forgiveness coming from the government. I guess for now, we’ll celebrate the elimination of the calculations the original forgiveness forms required (and still require for loans in excess of $50k) for our client/borrowers with $50k or less PPP borrowing.

For the SBA guidance provided in the Interim Final Rule, click here.

Instructions for the proper completion of Form 3508S are also available.

Unfortunately, my friends, many unanswered questions remain. Foremost in your mind may be whether PPP funds used for qualified expenses may also be used as ordinary deductible expenses on the recipient’s tax return. While contrary to the way we and the IRS think, there has been bi-partisan support for just such a rule to become law. As of today, however, no action has been taken in this area.

One thing is for certain…for the next several weeks (and hopefully not months), uncertainty will reign supreme…gee, I wonder if this has anything to do with November 3…?

by Tom O’Saben, EA