F100: PPP Forgiveness Overview — Welcome to Forgiveness U. (ACAP SME, LLC & The Loan Source Inc., Armanino LLP)
Summary
A slide deck titled "F100: PPP Forgiveness Overview", headed "Welcome to Forgiveness U." and branded ACAP SME, LLC & The Loan Source Inc. and Armanino, with presenters John Schweisberger and Jenn McCabe. The slides state that borrowers choose an 8-week or 24-week Covered Period, and list five key forgiveness changes, including a new EZ form, a payroll threshold lowered from 75% to 60%, and a maximum compensation cap per person of $46,154 for a 24-week Covered Period or $15,385 for 8 weeks. They work through an ABC Co. example with a $200,000 PPP loan and a final forgiveness amount of 122,738, and list Armanino support fees that rise from $1,500 to $10,500 with loan size.
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“F100: PPP Forgiveness Overview — Welcome to Forgiveness U. (ACAP SME, LLC & The Loan Source Inc., Armanino LLP).”
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WELCOME TO FORGIVENESS U.
F100:
PPP Forgiveness
Overview
1 ACAP SME, LLC & The Loan Source Inc. | ArmaninoLLP
Today’s Presenters
John Schweisberger Jenn McCabe
Business Outsourcing Business Outsourcing
Services, Partner Services, Partner
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Armanino Overview
SNAPSHOT LOCATIONS
Audit Consulting
Tax Outsourcing
• 1200+ Employees
• Team Members in 22 States
• Top 25 Largest U.S.
CPA/Consulting Firms
• Clients from <$10M to >$2B
RECOGNITION & AWARDS
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ACAP and Armanino Partnership: Forgiveness U.
F100 Webinar – Overview Guide to the Basics
Knowledge Center on ACAP’s website
“Forgiveness Google” – Searchable FAQ Library
Guide to the Basics
Definitions and Topics Quick Start Guide
Recording of F100 Webinar
Distance Learning Program
3 monthly webinars on key topics
In-webinar exams to test knowledge
4 ACAP SME, LLC & The Loan Source Inc. | ArmaninoLLP
Complexities of the PPP Forgiveness Program
Constantly changing rules
Allowable vs. non-allowable uses of funds
Borrower options – Alternative Covered Period,
FTE calcs, even which Application Form to use
Multiple reduction factors and safe harbors
Multiple look-back periods
Multiple thresholds
Insufficient guidance and interpretations
Result: more questions than answers
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ACAP Forgiveness FAQ Library
Updated 7/14
lease payments
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ACAP Forgiveness FAQ Library – Search Function
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PPP Loan Forgiveness Overview
Maximum forgivable amount is equal to the amount spent
on qualifying payroll costs and specific operating
expenses
Borrowers’ choice of either an 8-week or 24-week
Covered Period (but nothing in between)
Forgiveness may be reduced if wages are cut beyond the
75% reduction threshold
Forgiveness will be reduced if # of FTEs is lower than the
chosen baseline period
There are safe harbors available for both reduction
factors, but they are complicated
Any unforgiven amount must be repaid over 2 years at a
1% interest rate, with deferred payments until the date
SBA reimburses the loan servicer; 5-year terms available
after 6/5/20
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Five Key Forgiveness Changes
1. New EZ form available for:
Self-employed, sole proprietors or independent contractors with no
employees at time of applying and in basis of loan application
Businesses with no salary reductions AND no FTE reductions from 1/1/20
through end of Covered Period
Businesses with no salary reductions AND an inability to return to pre-
2/15/20 activity throughout the Covered Period due to governmental
restrictions using HHS, CDC or OSHA guidance
2. Able to file application when PPP money runs out
3. Payroll threshold lowered from 75% to 60%, with limitations
on non-payroll costs to enforce the ratio when necessary
4. Maximum compensation cap per person moves to $46,154 if
choosing 24-week Covered Period (or $15,385 if 8 weeks)
5. New FTE/Wage Reduction safe harbor dates and exclusions
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Forgiveness Math: A Refresher
Payroll
Costs
Gross
Mortgage Salary/Wage FTE Reduction
Forgiveness
Interest Reduction ($) Quotient (%)
Amount
LOAN AMOUNT
SPENT
Rent/Lease
Payments
Modified Forgiveness Total
Utility
Payments
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Forgiveness Math: A Refresher
Expense Item Included Excluded
Gross salary, wage, commission, tips, or similar compensation (capped
at $100K annualized, or $1,923/week)
Employer portion of Group health care benefits including HSA
Employer portion of Retirement benefits, including DBP and DCP
Payroll Employer portion of State or local tax assessed
Costs Bonus payments (not to exceed maximum allowable compensation)
Severance and PTO payouts for terminated employees
Sick leave (unless covered by FFCRA)
(8 weeks: smaller of 8/52 of 2019 Schedule C or $15,385)
Self-employed income
(24 weeks: smaller of 2.5 months of 2019 Schedule C or $20,833)
LOAN AMOUNT 2019 Profit Sharing contributions
SPENT
Self-employed health insurance costs
Disability, Long Term Care and Workers’ Compensation insurance
Union dues (beyond health insurance costs)
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Forgiveness Math: A Refresher
Applies to any real or personal property with a secured loan
Only interest is forgivable; principal may not be included
Evidence of the amortization schedule needs to be submitted
Mortgage with your application
Interest
Expense Item Included Excluded
Mortgage loan on a building
Payments on a note to purchase a fixed asset
LOAN AMOUNT Loans used to buy a fleet of vehicles
SPENT
Buy-out payments to a former partner
Interest on a Line of Credit
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Forgiveness Math: A Refresher
Applies to any real or personal property with a lease
The entire payment is forgivable
Evidence of the lease payment schedule needs to be
Rent/Lease submitted with your application
Payments
Expense Item Included Excluded
Office or storage facility rent
Leased fleet vehicles
LOAN AMOUNT Leases on copiers
SPENT
Property taxes, insurance and CAM on office space
Newly leased property since 2/15/20
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Forgiveness Math: A Refresher
Includes:
Electricity, Gas, Water
Internet Access Service, Telephone
Transportation
The entire payment is forgivable
Utility
Payments Monthly statements or other evidence of payments need to be
submitted with your application
Expense Item Included Excluded
Electric bill received 2 days after funding, covering prior service period
LOAN AMOUNT
SPENT
Fuel for business vehicles
Maintenance on business vehicles
Software license costs, managed services for enterprise servers
Internet access from home for employees as a result of COVID
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Incurred vs. Paid Rules for Forgiveness
Because Payroll 1 was
ALLOWABLE EXPENSES FOR FORGIVENESS The part of Payroll 5
paid during the that was incurred
Covered Period, the during the Covered
entire incurred amount Period is forgivable,
is forgivable even though it was paid
in the next pay cycle
Payroll 1 Payroll 2 Payroll 3 Payroll 4 Payroll 5
incurred incurred incurred incurred incurred
COVERED PERIOD: APRIL 14 – JUNE 8
April 1 April 15 May 1 May 15 June 1 June 15 July 1
Payroll 1 Payroll 2 Payroll 3 Payroll 4 Payroll 5
paid paid paid paid paid
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Forgiveness Math: A Refresher
Payroll
Costs
Mortgage Gross
Interest Salary/Wage
Forgiveness
Reduction ($)
Amount
LOAN AMOUNT
SPENT
Rent/Lease
Step 1: Determine who should be included in the Reduction Factor calculation
Payments
• Include only employees under $100K annualized in every pay period in 2019
Step 2: Determine if any employee’s average Salary/Wages were reduced by more
than 25% during the Covered Period as compared to Q1 2020
Utility
Payments Step 3: Reduce forgiveness only by the amount beyond the 25% reduction
This is a dollar for dollar reduction calculated at the individual employee level
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Forgiveness Math: A Refresher
Gross
Salary/Wage FTE Reduction
Forgiveness
Reduction ($) Quotient (%)
Amount
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Forgiveness Math: A Refresher
• If average number of FTE were lower during the Covered
Period compared to one of two base periods:
• 2/15/19 – 6/30/19
FTE Reduction Quotient (%) • 1/1/20 – 2/29/20
• Seasonal Employer option: 5/1/19 – 9/15/19
• This is a percentage reduction calculated on the Gross
Forgiveness Amount less the Salary/Wage reduction
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Salary/Hourly Wage Reduction Factor Safe Harbor
Safe Harbor is calculated for EACH employee whose average pay was <75% of Q1 2020:
?
Annual Salary or Hourly Yes Must Restore Salary or
Average Annual Salary
Wage in 2/15/20 Pay Wage to 2/15/20 Level
or Hourly Wage
Period by time of application or
2/15/20 – 4/26/20
x 75% 12/31/20
No No
No Safe Harbor
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FTE Reduction Factor Safe Harbor
Safe Harbor is calculated for the aggregate FTE count of the business:
?
Yes Must Restore FTEs to
Average FTEs FTEs in 2/15/20 Pay
2/15/20 Level by time of
2/15/20 – 4/26/20 Period
application or 12/31/20
No No
No Safe Harbor
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Forgiveness Math: A Refresher
0.60
Payroll Alternative Forgiveness Total
Costs
Gross
Mortgage Salary/Wage FTE Reduction
Forgiveness
Interest Reduction ($) Quotient (%)
Amount
LOAN AMOUNT Which is Lower?
SPENT
Rent/Lease
Payments
Modified Forgiveness Total
Utility
Payments
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2
ABC Co. Example
ABC Co.
PPP Loan Funded CP Ends
200,000 4/14/2020 6/8/2020
Pd 6/30/19 2019 2020 Q1
2019 Salary Bonus Per Mo Ave Per PP Per PP
Owner 240,000 20,000 10,000 10,000
Exec 1 132,000 18,000 12,500 5,500 5,500
Mgr 1 90,000 6,000 8,000 3,750 3,750
Mgr 2 90,000 6,000 8,000 3,750 3,750
EE 1 60,000 5,000 2,500 2,500
EE 2 54,000 6,000 5,000 2,250 2,250
EE 3 54,000 4,500 2,250 2,250
EE 4 48,000 4,000 2,000 2,000
EE 5 48,000 4,000 2,000 2,000
EE 6 42,000 3,500 1,750 1,750
EE 7 36,000 3,000 1,500 1,500
EE 8 30,000 2,500 1,250 1,250
80,000 38,500 38,500
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ABC Co. Example
ABC Co.
PPP Loan Funded CP Ends
200,000 4/14/2020 6/8/2020
Pd 6/30/19 2019 2020 Q1 Layoff + Pay cut at 4/1 Partial Reinstate at 6/1
2019 Salary Bonus Per Mo Ave Per PP Per PP 4/1/2020 4/15/2020 4/30/2020 5/15/2020 5/31/2020 6/1/2020 6/15/2020 6/30/2020
Owner 240,000 20,000 10,000 10,000 50% cut 5,000 5,000 5,000 5,000 No change 5,000 5,000
Exec 1 132,000 18,000 12,500 5,500 5,500 50% cut 2,750 2,750 2,750 2,750 No change 2,750 2,750
Mgr 1 90,000 6,000 8,000 3,750 3,750 20% cut 3,000 3,000 3,000 3,000 No change 3,000 3,000
Mgr 2 90,000 6,000 8,000 3,750 3,750 Furlough Rehire @ 80% 3,000 3,000
EE 1 60,000 5,000 2,500 2,500 Layoff No change
EE 2 54,000 6,000 5,000 2,250 2,250 20% cut 1,800 1,800 1,800 1,800 No change 1,800 1,800
EE 3 54,000 4,500 2,250 2,250 20% cut 1,800 1,800 1,800 1,800 No change 1,800 1,800
EE 4 48,000 4,000 2,000 2,000 Layoff Refused
EE 5 48,000 4,000 2,000 2,000 30% cut 1,400 1,400 1,400 1,400 10% hike 1,600 1,600
EE 6 42,000 3,500 1,750 1,750 30% cut 1,225 1,225 1,225 1,225 10% hike 1,400 1,400
EE 7 36,000 3,000 1,500 1,500 30% cut 1,050 1,050 1,050 1,050 10% hike 1,200 1,200
EE 8 30,000 2,500 1,250 1,250 30% cut 875 875 875 875 10% hike 1,000 1,000
80,000 38,500 38,500 18,900 18,900 18,900 18,900 22,550 22,550
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ABC Co. Example
ABC Co.
PPP Loan Funded CP Ends
200,000 4/14/2020 6/8/2020
Pd 6/30/19 2019 2020 Q1 Layoff + Pay cut at 4/1 Partial Reinstate at 6/1 Table 1 Definition Salary/Wage Reduction
2019 Salary Bonus Per Mo Ave Per PP Per PP 4/1/2020 4/15/2020 4/30/2020 5/15/2020 5/31/2020 6/1/2020 6/15/2020 6/30/2020 Max PP Include? Q1 Ave Sal CP Ave Sal Reduc. % Calculate? $ Reduction Safe Harbor?
Owner 240,000 20,000 10,000 10,000 50% cut 5,000 5,000 5,000 5,000 No change 5,000 5,000 240,000 No
Exec 1 132,000 18,000 12,500 5,500 5,500 50% cut 2,750 2,750 2,750 2,750 No change 2,750 2,750 564,000 No
Mgr 1 90,000 6,000 8,000 3,750 3,750 20% cut 3,000 3,000 3,000 3,000 No change 3,000 3,000 234,000 No
Mgr 2 90,000 6,000 8,000 3,750 3,750 Furlough Rehire @ 80% 3,000 3,000 234,000 No
EE 1 60,000 5,000 2,500 2,500 Layoff No change 60,000 Yes
EE 2 54,000 6,000 5,000 2,250 2,250 20% cut 1,800 1,800 1,800 1,800 No change 1,800 1,800 198,000 No
EE 3 54,000 4,500 2,250 2,250 20% cut 1,800 1,800 1,800 1,800 No change 1,800 1,800 54,000 Yes 54,000 43,414 80% No
EE 4 48,000 4,000 2,000 2,000 Layoff Refused 48,000 Yes
EE 5 48,000 4,000 2,000 2,000 30% cut 1,400 1,400 1,400 1,400 10% hike 1,600 1,600 48,000 Yes 48,000 34,345 72% Yes (255) No
EE 6 42,000 3,500 1,750 1,750 30% cut 1,225 1,225 1,225 1,225 10% hike 1,400 1,400 42,000 Yes 42,000 30,052 72% Yes (223) No
EE 7 36,000 3,000 1,500 1,500 30% cut 1,050 1,050 1,050 1,050 10% hike 1,200 1,200 36,000 Yes 36,000 25,759 72% Yes (191) No
EE 8 30,000 2,500 1,250 1,250 30% cut 875 875 875 875 10% hike 1,000 1,000 30,000 Yes 30,000 21,466 72% Yes (159) No
80,000 38,500 38,500 18,900 18,900 18,900 18,900 22,550 22,550 (827)
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ABC Co. Example
Pd 6/30/19 2019 2020 Q1 Partial Reinstate at 6/1
2019 Salary Bonus Per Mo Ave Per PP Per PP 4/15/2020 4/30/2020 5/15/2020 5/31/2020 6/1/2020 6/15/2020 6/30/2020
80,000 38,500 38,500 18,900 18,900 18,900 18,900 22,550 22,550
FTEs 12 12 9 9 9 9 10 10
Includable in forgiveness? Yes Yes Yes Yes Part-6/11 No
Gross Forgiveness Amount Calculation
Calculated allowable Payroll amount - Owner amount is limited 17,746 17,746 17,746 17,746 11,671 -
Health Insurance Payments 11,000 11,000
401(k) Match Payments 5,000 5,000 2,727
Rent Payments - paid in advance 12,000 12,000 12,000
Utilities Payments 1,000 2,000 1,000 2,000 1,000 2,000
23,746 42,746 23,746 42,746 15,398 -
Final Forgiveness Amount Calculation
Total Forgivable Spend 148,382
Salary/Wage Reduction (827)
Intermediate Forgiveness Amount 147,554
FTE Reduction Quotient 83%
Average FTEs in Baseline 12.0
FTE Exclusions from Baseline (1.0)
Average FTEs in Cov Per 9.2
Final Forgiveness Amount 122,738
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Armanino Can Help You
with Forgiveness
What you need to do:
Gather your reports
Send them to us
We’ll do the rest
• Loans to $100K: $ 1,500
• Loans from $100K-$350K: $ 3,500
• Loans from $350K-$2M: $ 7,500
• Loans over $2M: $10,500
Visit learn.armaninollp.com/ppp-
forgiveness-support-program
28 ACAP SME, LLC & The Loan Source Inc. | ArmaninoLLP
Top 5 Things You Need To Do Now
Decide on the length of your Covered Period
Gather necessary supporting documentation
If you’re going to try this at home…Begin entering data as you can –
remember, there is no rush
If you want us to do it for you…Just send us your documentation
Check the FAQ Library regularly for updates
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Frequently Asked
Questions
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20 Questions
Use of funds questions: Use of funds questions:
1. Our loan funded April 29. Can we can include the 5. Can I use PPP funds to pay bonuses?
entire April 30 payroll toward our forgiveness
because it was paid after disbursement, even 6. Can I use PPP funds to make 2019 profit
though it covers time worked prior to disbursement? sharing contributions?
2. Are payments to temp agencies considered payroll 7. Are owner health premiums an eligible use of
costs? PPP funds?
3. Do I treat employees paid via a PEO the same as if 8. My business pays rent every month to a related
they were paid by a temp agency? entity. Can I include that in my rent costs?
4. Can I include in my benefits costs the auto 9. Can I use PPP funds to pre-pay obligations?
allowance that I pay to my salespeople?
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FAQs, Cont.
Reduction Factor questions: Forgiveness Calculation questions:
10. I had an employee go out on disability and another 15. If I apply after 12 weeks, what is the maximum
one take maternity leave. Does that count against me compensation per employee I can get credit for?
as an FTE reduction?
16. Can I include the payroll cost in the forgiveness
11. I furloughed employees but did not lay them off. Does calculation for people I did not include in the loan
that count against my FTE reduction factor? application (e.g. equity partners)?
12. I cut people's pay by 30%. Do I have to take the 17. Will severance or PTO payouts (not accruals) count
entire 30% as my salary reduction calculation? in compensation for forgiveness?
13. If we fired an employee during the loan period, but 18. What is the definition of an FTE?
replaced them, do we have to take a salary reduction
penalty for the employees we let go, even though our 19. Which employees do I put on Table 1 and which do I
employee count remained constant? put on Table 2 of the Schedule A Worksheet?
14. If I spent more than my PPP loan amount during my 20. My business had to close for all of April by order of
Covered Period, can I apply the reduction factors the Health Department. Do I qualify to use the EZ
against this higher forgiveness amount, thereby still form?
staying above 100% forgiveness?
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Still Have Questions?
Email support@theloansource.com
Visit learn.armaninollp.com/ppp-forgiveness-support-program
33 ACAP SME, LLC & The Loan Source Inc. | ArmaninoLLP
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