The SBA released additional regulations on April 14th that primarily deal with self-employed individuals; however, these regulations provided a few interesting tidbits of information.
1. Confirmation of State Unemployment Taxes (SUTA) as an allowable payroll cost.
The regulations explicitly stated that state and local taxes assessed on employee compensation includes taxes “primarily under state laws commonly referred to as State Unemployment Tax Act or SUTA.” We have been including these in our calculations, but they are now confirmed as a payroll cost.
2. Confirmation of the maximum forgivable payroll cost per employee.
Under the forgiveness section of the updated regulations, the SBA confirms that for the 8-week period the maximum forgivable salary for an employee is $15,285, which is $100,000/52 ($1,923.07) x 8. Any confusion regarding employees whose compensation exceeds $100,000 should be eliminated.
3. Expanded definitions of Rents and Mortgages.
The original reading of the CARES Act and most interpretations had a narrow reading on the nature of Rents and Mortgages. However, the April 14th guidance indicates that rents can include things besides office space, such as business automobiles and that mortgages can include interest on personal property, such as a business auto loan for a vehicle used in a business. This expanded definition should help many borrowers.
4. Potential increase in documentation requests.
To date, many of the loans have only requested payroll tax forms (such as Forms 941) and income tax returns. The guidance provided also says lenders should ask for evidence of any retirement or health insurance contributions as well. Borrowers should be prepared in the event this becomes a lender quest.
5. Terms of Economic Injury Disaster Loan Grants have changed.
Many businesses and organizations applied for Economic Injury Disaster Grants (EIDL) after the passage of the CARES Act, which allowed for a $10,000 grant per law. However, given the high interest, the SBA and Treasury have changed this to now be limited to a $1,000 per employee, up to $10,000.
Edward McWilliams, CPA
Ed is a Partner in the firm’s tax and business advisory practice focusing on providing services to middle market private companies across different industries as well as to early stage startups. Ed has over a decade of experience providing tax and business consulting services to these companies of different sizes and across different industries, bringing a broad and diverse knowledge base and strategic solutions to the many complex issues that businesses face.