1. WHAT’S NEXT FOR PPP?
A U T O W E B I N A R S E R I E S
November 11, 2020
PRESENTED BY:
Will Fernandez
Partner, Co-Practice Leader
Joe Bueti
Director
WWW.CITRINCOOPERMAN.COM

2. When Do I Need to Apply for Forgiveness?
• 10 months after the end of
your covered period
o5/1/2020 loan date would
result in a 8/15/2021 due date
• The lender then has 60
days to issue a decision to
the SBA
• The SBA then has 90 days
to conclude on forgiveness

3. WHICH APPLICATION DO I FILL OUT?
• 3508S – File this application if,
‒ The total PPP loan amount you received from your Lender
was $50,000 or less, and
‒ The total PPP loans received, together with affiliates,
amounted to less than $2 mil
o Requires fewer calculations and less documentation for
eligible borrowers
‒ Exempt from reductions in loan forgiveness amounts based
on reductions in full-time equivalent (FTE) employees or in
salaries or wages.
‒ Does not require borrowers to show the calculations used to
determine their loan forgiveness amount
‒ SBA may request information and documents to review those
calculations as part of its loan review process.
• 3508EZ – File this application if,
o You are a sole proprietor or independent contractor
‒ No employees at time of PPP application
Or;
o No wage or FTE reductions to account for
‒ No salary or wage reduction in excess of 25 percent, and
▪ No reduction in FTEs, or
▪ Borrower meets FTE safe harbor based on inability to operate at
same level of business
• 3508 - File this application if
o Not eligible for 3508S or 3508EZ

4. WALKING THROUGH THE 3508
• General information
oPPP Loan info from loan issuance
oEmployee count (note FTEs) at
time of loan application
oEmployee count (note FTEs) at
time of forgiveness application
oEIDL Loan advance
oPayroll periods, covered period,
and alternate covered period
‒ Covered period is 24 week (168-day)
period beginning on the PPP Loan
Disbursement date, or
‒ Alternate covered payroll period is
168-day period that begins on the
first day of their first pay period
following the PPP Loan
Disbursement Date.

5. Recent Developments
• Recent Developments
o On October 26, 2020, the SBA published a notice related to information filing forms, form 3509, documenting the
necessity certification issued under FAQ #31. The forms (that are not officially published) require various forms of
financial information to be disclosed for those whose PPP loans (including affiliates) totaled $2,000,000 or more. As
indicated in the draft forms, the purpose is intended to facilitate the collection of supplemental information (including
certifications and disclosure of quarterly revenues, distributions, compensation levels to owners and employees, and
more), that will be used by SBA loan reviewers to evaluate the good-faith certification that was made on the PPP borrower
application that economic uncertainty made the loan request necessary. The form will be issued by the lender servicing
the loan and the completed form is due within ten business days of receipt from the lender.
• Does this recent filing requirement apply to auto dealers? Any individual dealership that obtained a PPP loan
of $2M must complete form 3509.
• But does the additional disclosure required by form 3509, apply to an auto dealer with affiliated dealerships,
that obtained loans of less than $2M but in the aggregate exceeded $2M. The draft instructions for form 3509,
reference 85 FR 20817 issued on April 15, 2020 regarding the application of SBA’s affiliation rules. Under
these rules, the affiliation rules for the PPP, do not apply to any business operating as a franchise that is
assigned a franchise identifier code (FIC) by SBA. Dealers operating new car franchises fall under the waiver
and do not need to aggregate individual PPP loans to determine if the completion of form 3509 is required.

6. • Final forgiveness amount is
lower of
oModified total (adding up all qualified
costs and adjusting for FTE and wage
reductions)
oPPP Loan Amount
oPayroll / 60%
oNote that any reductions are
calculated on the total qualified costs.
For example if a company had a PPP
loan amount of 750k, and spent 1.5M
with a 30% FTE reduction resulting in
a modified total of ($1.050m), you’d
still have full forgiveness because the
modified total would be more than the
PPP loan amount.
WALKING THROUGH THE 3508

7. Payroll costs-Schedule A
• Payroll costs include all forms of cash compensation paid to employees,
including tips, commissions, bonuses, and hazard pay. Note that forgivable
cash compensation per employee is limited to $46,154 for non-owners
during the covered period.
• Other payroll costs
o Employer expenses for group health care benefits that are paid or incurred by
the borrower during the Covered Period or the Alternative Payroll Covered
Period are included in Payroll costs. Amounts contributed by employees are not
included. Forgiveness is not provided for expenses for group health benefits
accelerated from periods outside of the covered period.
o Employer contributions for employee retirement benefits that are paid or
incurred by the borrower during the Covered Period or Alternative Payroll
Covered Period qualify as “payroll costs” eligible for loan forgiveness. Amounts
contributed by employees are not included. Forgiveness is not provided for
expenses for retirement benefits accelerated from periods outside of the
covered period.
o Employer payments for state and local taxes assessed on employee
compensation (e.g., state unemployment insurance tax)
• Owner compensation for owner-employees, self-employed individuals or
general partners is the lesser of $20,833 (2.5/12 x 100,000) or 2.5/12 x
2019 compensation
o Benefits for owner-employees depends on business tax structure
‒ S corporations: employer health insurance is not allowed for owners and family
members of 2% shareholders.
‒ LLC members/Partners: employer health insurance, retirement contributions and state
& local taxes are not allowed.

8. Payroll costs-Schedule A
• Timing of Payroll Cost
o Payroll costs incurred but not paid during the last pay period of the
selected period are eligible for forgiveness if paid on or before the
next regular payroll date.
• Reductions to PPP Loan Forgiveness
o If your average amount of full-time equivalent employees is less
than the reference periods (i. 2/15/19 - 6/30/19; ii. 1/1/20 - 2/29/20;
the percentage decrease would result in an “FTE Reduction
Quotient”
‒ For example, if you had 100 FTEs in the measurement period, and 70
FTEs during your covered period, you’d have a 70% FTE Reduction
Quotient.
o If an employee’s salary or hourly rate was reduced by more than
25% when compared to the measurement period (Q1 2020), a
reduction to forgiveness is applied by calculating the difference in
rate between the covered period and the measurement period X .75,
and applying that difference to the hours worked during the covered
period
‒ For example, if someone was earning $20/hr during the measurement
period and $14/hr during the covered period. the wage reduction is
based on $1/hr ($20 X .75) – $14). If the employee worked 500 hours
during the covered period, the wage reduction is $500, which is simply
subtracted from your total qualified costs.

9. Non-payroll Cost
• Mortgage interest
o Interest on business mortgages on real or personal property
are eligible for loan forgiveness.
• Rent
o Payments of rent obligated under a leasing agreement in force
before February 15, 2020
• If the lease is renewed after 2/15/2020, it’s still qualified
o Rent to related parties is limited to the amount of the mortgage
interest owed on the property during the covered period. There
is no guidance addressing whether owner attribution rules
apply.
• Utilities
o Electricity, gas, water, transportation, telephone or internet
access for service which began prior to February 15, 2020
• Timing of non-payroll costs –
o Eligible business mortgage interest costs, eligible business
rent or lease costs, and eligible business utility costs incurred
prior to the Covered Period and paid during the Covered
Period are eligible for loan forgiveness.
o For amounts paid by the next scheduled payment date after
the end of the covered period, the borrower must prorate the
total amount for only the days that fall in the covered period.
The rule states specifically that advance payments of
mortgage interest and all payments of principal are not eligible
for forgiveness.

10. Safe Harbors
• Certain safe harbors are provided for businesses that
are unable to maintain their FTEs and rates of pay
during the covered period. Forgiveness will not be
reduced under the following circumstances
o The most relevant safe harbor reads as follows, “If you
were unable to operate between February 15, 2020, and
the end of the Covered Period at the same level of
business activity as before February 15, 2020 due to
compliance with requirements established or guidance
issued between March 1, 2020 and December 31, 2020,
by the Secretary of Health and Human Services, the
Director of the Centers for Disease Control and
Prevention, or the Occupational Safety and Health
Administration related to the maintenance of standards for
sanitation, social distancing, or any other worker or
customer safety requirement related to COVID-19”, you
will not need to apply an FTE Reduction Quotient to your
qualified costs.

11. Safe Harbors
• Additionally, there are exceptions to the FTE reduction if the borrower
o makes a good-faith, written offer to rehire or restore the reduced hours of an
employee during the covered period or the alternative payroll covered period,
the offer was rejected and the borrower has documentation of the offer and
rejection, and notified the State’s Unemployment Division
o Employee was fired for cause
o Employee voluntarily resigned
o Employee requested and received a reduction of their hours
o Borrower in good faith can document the inability to rehire individuals who
were employees on February 15, 2020 and hire similarly qualified employees
for unfilled positions on or before December 31, 2020 or the date of the
application for forgiveness
• Borrower reduced FTE employee levels between Feb. 15 and Apr. 26,
2020; and then restored its FTE employee levels by not later than Dec.
31, 2020 or the date of the forgiveness application to FTE levels in the
pay period that included Feb.15.
• There is also a safe harbor for the Salary/Hourly Wage Reduction. If the
employees’ rate of pay is brought up to the rate during the pay period
that includes 2/15/2020 as of the earlier of 12/31/2020 and the date the
application is submitted, the safe harbor is met and no reduction is
applied to the forgiveness amount.