SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief (R46397, Version 4, Updated September 3, 2020)
Summary
This Congressional Research Service report, R46397, Version 4, was updated September 3, 2020. It says the first $349 billion for 7(a) loans, including PPP loans, had a 100% SBA loan guarantee, no borrower fees, a 1% interest rate and a two-year term, with payments deferred for six months, and that Congress added $310 billion on April 24, 2020, for $659 billion in total. When the SBA stopped accepting new applications on August 8, 2020, it had approved over 5.2 million PPP loans totaling more than $525 billion. Loan amounts were capped at the lesser of 2.5 times average monthly payroll costs plus any refinanced Economic Injury Disaster Loan balance or $10 million. The report covers the forgiveness process, payroll and nonpayroll costs, reductions in forgiveness and pending legislation of interest.
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SBA Paycheck Protection Program (PPP) Loan
Forgiveness: In Brief
Updated September 3, 2020
Congressional Research Service
https://crsreports.congress.gov
R46397
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
Contents
Introduction ................................................................................................................... 1
PPP Forgiveness Provisions and Process ............................................................................. 4
Forgiveness Application Process .................................................................................. 4
Payroll Costs ............................................................................................................ 5
Nonpayroll Costs....................................................................................................... 5
Reductions in Forgiveness .......................................................................................... 6
Calculating Full-Time Equivalent Employees ........................................................... 6
Calculating Salaries and Wages .............................................................................. 7
Pending Legislation of Interest .................................................................................... 7
Contacts
Author Information ......................................................................................................... 8
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
Introduction
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) created the
Small Business Administration (SBA) Paycheck Protection Program (PPP) to provide short-term,
low-interest “covered loans” that could be forgiven in whole or in part under specified conditions
to small businesses eligible to participate in the SBA’s 7(a) loan guarantee program and any
business, 501(c)(3) nonprofit organization, 501(c)(19) veteran’s organization, or tribal business
not currently eligible that has not more than 500 employees or, if applicable, the SBA’s size
standard in number of employees for the industry in which they operate. Sole proprietors,
independent contractors, and eligible self-employed individuals are also eligible to receive a
covered loan. 1 For more information on Coronavirus Disease 2019-related (COVID-19-related)
assistance to small businesses, including a summary of enacted legislation and select bills, see
CRS Report R46284, COVID-19 Relief Assistance to Small Businesses: Issues and Policy
Options, by Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry.
Congress initially authorized $349 billion for SBA 7(a) loans—including PPP loans—which were
available through June 30, 2020, had a 100% SBA loan guarantee, no borrower fees, a 1% interest
rate, and a two-year term. Loan payments were deferred for six months. Loan amounts were
capped at the lesser of (1) 2.5 times the average total monthly payments by the applicant for
payroll costs incurred during the one-year period before the date on which the loan is made, plus
the outstanding balance of any Economic Injury Disaster Loan (EIDL) made on or after January
31, 2020, that is refinanced as part of a covered loan or (2) $10 million. Lending began on April
3, 2020, and the initial authorization was exhausted by April 16.
On April 24, 2020, Congress authorized another $310 billion ($659 billion total) for 7(a) loans—
including PPP loans—in the Paycheck Protection Program and Health Care Enhancement Act
(P.L. 116-139). Lending resumed on April 27, 2020, and stopped, once again, on June 30, 2020,
as required by the CARES Act.
Lending resumed on July 6, 2020, following enactment of An Act to Extend the Authority for
Commitments for the Paycheck Protection Program (P.L. 116-147). The act extended the
authorization for issuing new PPP loans from June 30, 2020, to August 8, 2020; and it authorized
$659 billion for PPP loan commitments and $30 billion for 7(a) loan commitments . As required
by the act, the SBA stopped accepting new PPP loan applications on August 8, 2020. As of that
date, the SBA had approved over 5.2 million PPP loans, totaling more than $525 billion.
Initially, PPP loans used for payroll expenses and for specified nonpayroll operating costs paid or
incurred during an eight-week “covered period” following the loan’s origination date could be
fully forgiven if the borrower met certain payroll and employment retention criteria. Initially,
borrowers were required by SBA regulations to use at least 75% of the loan forgiveness amount
on payroll costs and the remainder on eligible mortgage interest, rent, and utility payments in
order to receive full loan forgiveness. 2
1 For purposes of determining not more than 500 employees, the term employee includes individuals employed on a
full-time, part-time, or other basis. Also, special eligibility considerations are provided for certain businesses and
organizations. For example, businesses operating in NAICS Sector 72 ( Accommodation and Food Services industry)
that employ not more than 500 employees per physical location are also eligible for a covere d loan. Affiliation rules are
also waived for (1) NAICS Sector 72 businesses, (2) franchises, and (3) SBIC-owned businesses. In other words, these
businesses would not be denied a covered loan solely because they employ more than 500 employees across multi ple
businesses under common ownership.
2 Small Business Administration (SBA) and Department of the Treasury (T reasury), “Interim Final Rule - Business
Congressional Research Service 1
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
On May 18, 2020, the SBA released the first version of the borrower’s application for PPP loan
forgiveness. 3 On May 22, 2020, the SBA issued an Interim Final Rule (IFR) on PPP forgiveness.4
In an effort to make it easier for borrowers to receive full loan forgiveness, especially those with
relatively high mortgage interest, rent, or utility costs, the at least 75% payroll requirement
imposed by the SBA through regulations was statutorily reduced to at least 60% by the Paycheck
Protection Program Flexibility Act (P.L. 116-142). The act also
extended the PPP loan forgiveness covered period from eight weeks after the
loan’s origination date to the earlier of 24 weeks after the loan’s origination date
or December 31, 2020;
provides borrowers that received a PPP loan prior to the date of enactment (June
5, 2020) the option to use the CARES Act’s loan forgiveness covered period of
eight weeks after the loan’s origination date;
provides borrowers a “safe harbor” from the loan forgiveness rehiring
requirement if the borrower is unable to rehire an individual who was an
employee of the recipient on or before February 15, 2020, or if the borrower can
demonstrate an inability to hire similarly qualified employees on or before
December 31, 2020;
provides borrowers another “safe harbor” from the loan forgiveness rehiring
requirement if the business can document that it was 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 U.S. Department of Health and Human Services
(HHS), the Centers for Disease Control and Prevention (CDC), or the
Occupational Safety and Health Administration (OSHA), related to the
maintenance of standards for sanitation, social distancing, or any other worker or
customer safety requirement related to COVID-19 (the SBA indicates that this
safe harbor includes state and local government directives based on these
requirements or guidance);5
establishes a minimum PPP loan maturity of five years for loans made on or after
the date of enactment;
extends the PPP loan deferral period from 6 months (under SBA regulations) to
the date that the SBA remits the borrower’s loan forgiveness amount to the
lender or, if the borrower does not apply for loan forgiveness, 10 months after the
end of the borrower’s loan forgiveness covered period; and
Loan Program T emporary,” 85 Federal Register 20811, April 15, 2020, at https://home.treasury.gov/system/files/136/
PPP—IFRN%20FINAL.pdf.
3 SBA, “Paycheck Protection Program – Loan Forgiveness Application,” at https://home.treasury.gov/system/files/136/
3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf.
4
SBA and T reasury, “Interim Final Rule - Business Loan Program T emporary,” 85 Federal Register 33004, June 1,
2020.
5 SBA and T reasury, “Business Loan Program T emporary Changes; Paycheck Protection Program – Revisions to Loan
Forgiveness and Loan Review Procedures Interim Final Rules,” 85 Federal Register 38309, June 26, 2020.
Congressional Research Service 2
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
eliminates the exception in the CARES Act preventing taxpayers who receive
PPP loan forgiveness from delaying the payment of employer payroll taxes. 6
The act also specified that, as long as the borrower submits an application for loan forgiveness
within 10 months of the covered period (typically eight or 24 weeks), the borrower is not required
to make any PPP loan payments until the forgiveness amount is remitted to the lender by the
SBA. SBA guidance indicates that
If the loan is fully forgiven, the borrower is not responsible for any payments. If only a
portion of the loan is forgiven, or if the forgiveness application is denied, any remaining
balance due on the loan must be repaid by the borrower on or before the maturity date of
the loan. Interest accrues during the time between the disbursement of the loan and SBA
remittance of the forgiveness amount. The borrower is responsible for paying the accrued
interest on any amount of the loan that is not forgiven. The lender is responsible for
notifying the borrower of remittance by SBA of the loan forgiveness amount (or that SBA
determined that no amount of the loan is eligible for forgiveness) and the date on which
the borrower’s first payment is due, if applicable.7
On June 16, 2020, the SBA
1. released a revised version of the borrower’s application for PPP loan forgiveness
to account for changes made by the Paycheck Protection Program Flexibility
Act;8
2. released an EZ loan forgiveness application requiring fewer calculations and less
documentation than the standard loan forgiveness application form for borrowers
that meet specified criteria;9 and
6 Section 2302 of the CARES Act allows employers and self-employed individuals to defer, or postpone, the employer
share of the Social Security payroll tax through the end of 2020. Deferred tax liability can be paid in two installments:
one due by December 31, 2021, and the second by December 31, 2022. T he Social Security trust funds are not affected.
See CRS Report R46279, The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief for
Individuals and Businesses, coordinated by Molly F. Sherlock. Section 2302 prohibit ed taxpayers who obtain PPP loan
forgiveness from also benefiting from deferral. Internal Revenue Service (IRS) guidance had indicated that employers
who obtain a PPP loan are able to defer their payroll taxes. However, “Once an employer receives a decision from its
lender that its PPP loan is forgiven, the employer is no longer eligible to defer deposit and payment of the employer ’s
share of Social Security tax due after that date.” See IRS, “ Deferral of employment tax deposits and payments through
December 31, 2020,” at https://www.irs.gov/newsroom/deferral-of-employment -tax-deposits-and-payments-through-
december-31-2020.
7 SBA, “Paycheck Protection Program Frequently Asked Questions (FAQs) on PPP Loan Forgiveness, as of August 11,
2020,” at https://www.sba.gov/document/support-frequently-asked-questions-ppp-loan-forgiveness (hereinafter SBA,
“Paycheck Protection Program Frequently Asked Questions (FAQs) on PPP Loan Forgiveness, as of August 11,
2020”).
8
SBA, “Paycheck Protection Program – Loan Forgiveness Application Form (revised 6/16/2020),” at
https://www.sba.gov/document/sba-form-paycheck-protection-program-loan-forgiveness-application.
9
SBA, “Paycheck Protection Program, PPP Loan Forgiveness Application Form 3508EZ,” at https://www.sba.gov/
document/sba-form-paycheck-protection-program-ez-loan-forgiveness-application.
Borrowers can use the EZ loan forgiveness application if they meet any one of the following three criteria: (1) the
borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of
the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in
the Borrower Application Form; (2) the borrower did not reduce annual salary or hourly wages of any employee by
more than 25% during the covered period or the alternative payroll covered period (as defined below) compared to the
period between January 1, 2020 and March 31, 2020 , and did not reduce the number of employees or the average paid
hours of employees between January 1, 2020 and the end of the covered period; or (3) the borrower did not reduce
annual salary or hourly wages of any employee by more than 25 % during the covered period or the alternative payroll
covered period compared to the period between January 1, 2020 and March 31, 2020 , and was unable to operate during
the covered period at the same level of business activity as before February 15, 2020, due to compliance with
Congressional Research Service 3
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
3. issued an Interim Final Rule summarizing revisions to the first Interim Final Rule
resulting from the enactment of the Paycheck Protection Program Flexibility
Act. 10
On June 26, 2020, the SBA and Treasury jointly issued an Interim Final Rule detailing revisions
to the initial Interim Final Rule on PPP loan forgiveness. 11
This In Brief report discusses statutes, regulations, and agency guidance relevant to the PPP loan
forgiveness process and determination. A summary of the Paycheck Protection Program
Flexibility Act is also provided.
PPP Forgiveness Provisions and Process
The PPP loan forgiveness process is summarized and key terms are defined below, followed by an
explanation of situations in which loan forgiveness amounts may be reduced.12
Forgiveness Application Process
Borrowers must complete the SBA loan forgiveness application (SBA Form 3508 or SBA Form
3508EZ) or a lender equivalent for PPP loan forgiveness and submit it to their lender, who is to
then make a decision on the application within 60 days after submission. 13 If the lender
determines that the borrower is entitled to some or all of the applied forgiveness amount, then the
lender must request payment from the SBA. SBA is to review all loans in excess of $2 million
following the lender’s submission of the borrower’s loan forgiveness application. 14 Less than 1%
of all PPP loans are larger than $2 million (28,982 of 5.2 million), representing slightly more than
20% of loan amounts ($105.3 billion of $525 billion). 15
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 of sanitation, social distancing, or any other work or
customer safety requirement related to COVID-19. T he covered period is either: (1) the 24-week (168-day) period
beginning on the PPP loan disbursement date, or (2) if the borrower received its PPP loan before June 5, 2020, the
borrower may elect to use an eight -week (56-day) covered period. T he alternative payroll covered period is available
for borrowers with a biweekly (or more frequent) payroll schedule. T hey may elect to calculate eligible payroll costs
using the 24-week (168-day) period or for loans received before June 5, 2020 at the election of the borrower, the eight -
week (56-day) period that begins on the first day of their first pay period following their PPP loan disbursement date.
10 SBA, “Business Loan Program T emporary Changes; Paycheck Protection Program – Revisions to First Interim Final
Rule,” 85 Federal Register 36308-36312, June 16, 2020.
11 SBA and T reasury, “Business Loan Program T emporary Changes; Paycheck Protection Program – Revisions to Loan
Forgiveness and Loan Review Procedures Interim Final Rules,” 85 Federal Register 38304-38312, June 26, 2020.
12
T he CARES Act gives private lenders “delegated authority” to issue PPP loans. T hese lenders (e.g., banks, credit
unions, communit y financial institutions) have enrolled with SBA to issue PPP loans (or SBA loans, generally). SBA is
not issuing the loans directly to borrowers.
13
Borrowers must retain documentation for six years after the loan is forgiven or paid in full and make it av ailable to
the SBA or its Office of Inspector General upon request.
14
SBA may also review other smaller loans as it deems appropriate, following the lender’s submission for loan
forgiveness. During a review process, SBA could choose to review the initial PPP loan application, forgiveness
application, or both. (In addition, borrowers may request that SBA review the lender’s forgiveness decision.) See FAQ
#39 in SBA, “Paycheck Protection Program Frequently Asked Questions,” at https://home.treasury.gov/system/files/
136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf.
15 SBA, “ Paycheck Protection Program (PPP) Report (Approvals through 8/8/2020),” at https://home.treasury.gov/
system/files/136/SBA-Paycheck-Protection-Program-Loan-Report-Round2.pdf.
Congressional Research Service 4
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
SBA is then to remit the appropriate forgiveness amount to the lender, plus any interest accrued
through the payment date, no later than 90 days after the lender issues its decision to SBA. The
borrower must repay any amount not forgiven within the PPP loan’s two-year or, if the
application received an SBA loan number on or after June 5, 2020, five-year maturity period.
Payroll Costs
Generally, only payroll costs paid or incurred during the 8-week (56 consecutive days) or 24-
week (168-day) “covered period” are eligible for forgiveness. Borrowers can consistently apply
one of two start dates: (1) the date that their lender disbursed their PPP loan or (2) the first day of
their first payroll cycle in the covered period (termed the “alternative payroll covered period”). 16
There is an exception for payroll costs incurred during the borrower’s last pay period of the
covered period, which are eligible for forgiveness only if paid on or before the next regular
payroll date. This is intended for the borrower’s administrative convenience. Also, any payroll
costs that were incurred before the covered period but paid during the covered period are eligible
for loan forgiveness.
Compensation to furloughed employees, even if they are not performing their day-to-day
functions, is considered a “payroll cost” eligible for forgiveness.
No more than $15,385 in cash compensation per individual during the 8-week covered period and
$20,833 in cash compensation per individual during the 24-week covered period is eligible for
forgiveness. 17 Noncash compensation for employee health insurance, employer contributions to
employee retirement plans, and payment of state and local taxes assessed on employee
compensation are not subject to this limitation.
Self-employed individuals (e.g., sole proprietors, independent contractors) are limited to
forgiveness based on their positive net profit or earnings amounts from their 2019 federal income
tax filings. 18 The SBA has labeled this as “owner compensation replacement.”
Nonpayroll Costs
Nonpayroll costs eligible for forgiveness include payments for the following expenses:
1. interest on any business mortgage obligation on real or personal property,
2. business rent obligations on real or personal property under a lease agreement,
and
3. business utility payments for the distribution of electricity, gas, water,
transportation, telephone, or internet access.19
Eligible expenses must have been incurred, in force, or in service as of February 15, 2020. No
more than 40% of the loan forgiveness amount can be attributed to nonpayroll costs.
16 Payroll costs are considered paid on the day that paychecks are distributed or the borrower originates an automated
clearing house (ACH) credit transaction.
17 SBA, “Paycheck Protection Program Frequently Asked Questions (FAQs) on PPP Loan Forgiveness, as of August
11, 2020,” p. 4.
18 CRS Insight IN11341, SBA’s Paycheck Protection Program (PPP) Loans and Self-Employed Individuals, by Sean
Lowry.
19 Advance interest payments (prepayment) on a covered mortgage or loan principal payments are not eligible for
forgiveness.
Congressional Research Service 5
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
Nonpayroll costs are eligible for forgiveness if they were paid during the covered period (even if
they were incurred prior to the covered period) or incurred during the covered period and paid on
the next regular billing date. If a billing cycle covers a period within and outside of the covered
period, only the portion of the payment attributed to costs incurred during the covered period is
eligible for forgiveness.
Reductions in Forgiveness
Under Section 1106 of the CARES Act, forgiveness for borrowers’ PPP-eligible expenses during
the covered period is to be reduced according to specified formulas (discussed below) if a
borrower (1) reduces its full-time equivalent (FTE) employees (including employees who made
more than $100,000), as compared to a reference period selected by the borrower, or (2) reduces
the amount of salaries or wages paid to certain FTE employees by more than 25% below levels in
a reference period selected by the borrower. 20 Reducing loan forgiveness means borrowers would
have to repay some or all of their original PPP loan amount.
The CARES Act specified that these reductions would not take place if the borrower eliminated
the reductions in FTEs or salaries and wages by no later than June 30, 2020. As mentioned
previously, in recognition of the difficulties some small businesses were experiencing in rehiring
employees, the Paycheck Protection Program Flexibility Act of 2020 (P.L. 116-142) allows
borrowers to exclude any reduction in FTE employees if they are able to document in good faith
(1) an inability to rehire individuals who were employees of the borrower on February 15, 2020,
and (2) an inability to hire similarly qualified individuals for unfilled positions on or before
December 31, 2020. This is commonly referred to as the “rehiring provision.”
The act also allows borrowers to exclude any reduction in FTE employees if they c an document
an inability to return to the same level of business activity the business was operating at before
February 15, 2020, due to compliance with requirements established or guidance issued by the
Secretary of HHS, the Director of the CDC, or OSHA, related to the maintenance of standards for
sanitation, social distancing, or any other worker or customer safety requirement related to
COVID-19.
Calculating Full-Time Equivalent Employees
If the average number of FTE employees during the covered period is less than during the
reference period selected by the borrower, then the forgiveness amount is reduced
proportionately. For example, if an employer had an average of 100 FTE employees in its
reference period and 80 FTE employees during the covered period, then it would be eligible for
loan forgiveness on up to 80% (8/10) of its total eligible expenses (payroll and nonpayroll) during
the covered period.
20 Borrowers have the following options for their reference period: (1) February 15, 2019, through June 30, 2019; (2)
January 1, 2020, through February 29, 2020; or (3) in the case of a seasonal employer, either of the two preceding
methods or a consecutive 12-week period between May 1, 2019, and September 15, 2019. A “covered employee” is an
individual who (1) was employed by the borrower at any point during the covered period or alternative payroll covered
period and whose principal place of residence is in the United States and (2) received compensation from the borrower
at an annualized rate less t han or equal to $100,000 for all pay periods in 2019 or was not employed by the borrower at
any point in 2019. See SBA, “Paycheck Protection Program Frequently Asked Questions (FAQs) on PPP Loan
Forgiveness, as of August 11, 2020,” pp. 8, 9.
Congressional Research Service 6
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
An FTE is defined as an employee who works 40 hours per week.21 FTE employee counts are
determined on an aggregate basis, based on the hours of all employees on the borrower’s payroll
divided by the number of employees. An employee working more than 40 hours per week is
capped as counting as one FTE employee. For example, an employee who was paid 48 hours per
week during the covered period would be considered to be 1.0 FTE employee. As an
administrative convenience, employees who were paid for less than 40 hours per week may be
counted in one of two ways: (1) based on the average hours worked per week, or (2) counting
each part-time employee as 0.5 FTE employees. Borrowers must consistently apply their
calculation methods across all employees.
Calculating Salaries and Wages
The amount of loan forgiveness is reduced by the amount of any reduction over 25% of an
employee’s total salary or wages during the covered period compared with the employee’s total
salary or wages during the most recent full quarter prior to the covered period. Employees who
earned more than $100,000 in 2019 are not taken into account for the compensation reduction
part of the reduction formula. In other words, such employees may have their pay reduced by
more than 25% without affecting the borrower’s forgiveness amounts.
The salary and wages reduction formula only applies to the decline in total salary or wages that is
not attributed to FTE employee reductions. This is to prevent borrowers from being “doubly
penalized” for FTE employee reductions. For example, an employee worked 40 hours per week
during the reference period and was reduced to 20 hours per week during the covered period with
no hourly wage reduction. Although the employee earned half the compensation during the
covered period, the employer’s forgiveness amount will only be reduced with respect to a
reduction in FTE employees (from 1.0 to 0.5 FTE employees).
Three other groups of employees do not affect a borrower’s forgiveness:
1. employees who were laid off or forced to reduce their hours, but then declined
their employer’s subsequent offer to return to work or restore their previous
schedules;22
2. employees who were fired for cause; and
3. employees who requested a schedule reduction.
The borrower must make a good faith certification attesting to the above conditions and maintain
various documentation (e.g., employee-employer communications).
Pending Legislation of Interest
The Continuing Small Business Recovery and Paycheck Protection Program Act (S. 4321) would,
among other provisions,
extend the PPP loan covered period from August 8, 2020, to December 31, 2020,
and reduce the maximum PPP loan amount for new loans from $10 million to $2
million;
21
Note that this is different than the 30 hour-per-week FT E employee definition and determination under the
Affordable Care Act’s Employer Shared Responsibility Provision. See CRS Report R45455, The Affordable Care Act’s
(ACA’s) Employer Shared Responsibility Provisions (ESRP), by Ryan J. Rosso.
22 T he offer must be for the same salary or wages and same number of hours as earned by such employee in the last pay
period prior to the separation or reduction in hours. For example, an employer cannot offer an employee compensation
at half the employee’s previous pay rate or hours and qualify for the safe harbor.
Congressional Research Service 7
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
expand PPP forgivable expenses to include covered operations expenditures (e.g.,
software, cloud computing, and other human resources and accounting needs),
property damages due to public disturbances that occurred during 2020 (not
covered by insurance or other compensation), covered supplier costs essential to
the recipient’s current operations, and covered worker protection expenditures to
comply with federal health and safety guidelines related to COVID-19;
create simplified loan forgiveness application processes for loans under $150,000
and for loans between $150,000 and $2 million. The SBA would retain the right
to review and audit these loans for fraud. Reporting of demographic information
would be optional;
expand eligibility to include certain 501(c)(6) organizations, including Chambers
of Commerce and Destination Marketing Organizations, that have 300 or fewer
employees, do not receive more than 10% of their receipts from lobbying, and
whose lobbying activities do not comprise more than 10% of their total activities.
Recipients cannot use any loan proceeds for lobbying activities;
allow second PPP “draw” loans through December 31, 2020, for PPP borrowers
that meet the SBA’s revenue standard, if applicable, have not more than 300
employees, and can demonstrate at least a 50% reduction in gross receipts in the
first or second quarter of 2020 relative to the same 2019 quarter. Several types of
PPP eligible entities, such as publicly traded companies, would be ineligible for a
second loan. The maximum loan size would equal 2.5 times average monthly
payroll costs, up to $2 million (not more than $10 million in the aggregate). Full
loan forgiveness would be based on a 60/40 cost allocation between payroll and
eligible nonpayroll costs; and
increase the PPP authorization amount from $659 billion to $749 billion, rescind
$100 billion from the SBA’s business loan program account, and appropriate an
additional $190 billion for the cost of PPP and PPP second draw loans. $25
billion of this funding would be set aside for entities employing 10 or fewer
employees, and $10 billion would be set aside for community lenders.
Author Information
Robert Jay Dilger Sean Lowry
Senior Specialist in American National Government Analyst in Public Finance
Congressional Research Service 8
SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief
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