SBA Clarifies New Rules under PPP Flexibility Act

The SBA issued an Interim Final Rule (IFR) yesterday evening to clarify several areas of the Paycheck Protection Program (PPP), which was recently amended by the passing of the PPP Flexibility Act.

The IFR made conforming, technical changes to prior interim final rules and provided the following new guidance:

  • Confirmed that the $100,000 cap on cash compensation under the new 24-week covered period shall be applied as 24/52. This results in a cap of $46,154 for each employee. For borrowers who opt to use the 8-week period, the cap remains at $15,385 (8/52) per employee.
  • Capped the cash compensation for sole proprietors, independent contractors and self-employed individuals at the lesser of 2.5 months of 2019 net profit (2.5/12) or $20,833 , under the 24-week covered period. For sole proprietor, independent contractor or self-employed borrowers using the 8-week covered period, this cap remains at the lesser of 8/52 of 2019 net profit or $15,385.

New PPP Loan Forgiveness Applications

The SBA also published two new loan forgiveness applications yesterday: a revised standard form application and a form EZ.

The revised loan forgiveness application reflects the new PPP Flexibility Act provisions, primarily the 24-week covered period. The revised application also provides guidance on documenting safe harbors for FTE reductions. The documentation must include copies of applicable requirements for each borrower location and relevant borrower financial records.

This documentation must be retained by the borrower but is not required to be submitted with the application. The lender will rely on the borrower’s certification within the application regarding the safe harbor.

The new EZ loan forgiveness application (3508EZ) is a simplified form for those borrowers who meet at least one of the following criteria:

  • Self-employed individual, independent contractor or sole proprietor with no employees;
  • Any employer who did not reduce pay rates more than 25% and did not reduce FTEs; or
  • Any employer who did not reduce pay rates by more than 25% and can utilize safe harbors for FTE reductions.

If you have questions about this new guidance or need assistance applying for the PPP or planning your loan forgiveness, please contact your Grassi Advisor or our Crisis Response & Recovery hotline at or 212.223.6216.

Lou Pizzileo An accounting and advisory Partner at Grassi, Lou Pizzileo plays a key role serving the firm’s clients in the manufacturing and distribution, technology and specialty finance practices. Entrepreneurial minded, Lou recently led the firm’s efforts in assisting companies with capturing available stimulus provided by the CARES Act, including the Paycheck Protection Program. He also recently created and leads the firm’s IT accounting practice. Lou... Read full bio