Time to Apply for PPP Forgiveness; Forms 3509/3510 Updates

July 29, 2021 | Article

The Paycheck Protection Program (PPP) has wrapped up (or will soon wrap up) for many borrowers. Still, there are several important updates some PPP borrowers should take note of. 

New Paycheck Protection Program Streamlining Guidance for Loans of up $150,000

In recently released guidance (found here), the government is making two changes to the PPP forgiveness process for PPP loans of $150,000 and under.

First, second draw PPP borrowers with loans of $150,000 or less can use an optional method (called the “COVID Revenue Reduction Score”) to demonstrate the requisite 25% revenue reduction. This score is developed by a third-party governmental contractor “based on a variety of inputs including industry, geography, and business size.” Second, lenders can choose to use a direct borrower forgiveness process for all PPP loans up to $150,000 instead of lenders processing the applications themselves. The government states it will be issuing further detailed procedural guidance for both the COVID Revenue Reduction Score and the direct borrower forgiveness process.

This new guidance also provides “that a timely appeal by a PPP borrower of a final SBA loan review decision extends the deferment period of the PPP loan” until the government’s decision becomes final.

10-month Date for Applying for Paycheck Protection Forgiveness

Previous guidance (found here) states a PPP borrower has up to “10 months after the end of the borrower’s loan forgiveness period” to apply for forgiveness while deferring interest and principal payments. Of course, a borrower can still apply for forgiveness after this 10-month window has expired, but the borrower would begin making principal and interest payments. 

Early PPP borrowers originating their loans in April and May of 2020 had a 24-week covered period ending sometime in late September or October of 2020. Ten months from that end date could be around late July or August of 2021. This means early borrowers who have not already applied for forgiveness may consider doing so in the next month (depending on their specific facts) to avoid having to make principal and interest payments.

As long as a borrower has submitted their forgiveness application, they are not required to make principal or interest payments until the government makes a final determination (meaning no payment is due unless the government denies full forgiveness). 

Forms 3509 and 3510 and the Paycheck Protection Program

The government applies extra scrutiny to PPP loansin excess of $2 million by requiring for-profit borrowers to answer certain questions (and provide documentation) on a Form 3509. Nonprofit borrowers submit a Form 3510. The Forms 3509/3510 questions were not posed when borrowers originally applied for their PPP loan, and many commentators questioned these actions as a form of retroactive rule making. 

The Associated General Contractors of America (AGC) sued the government on account of these forms, and informally, the AGC has indicated the government settled the suit by agreeing to withdraw the forms (see here and here). While the government has not officially announced anything, anecdotal reports indicate that borrowers with loans in excess of $2 million are receiving full forgiveness notifications, albeit in a delayed fashion, with no further follow up questions related to their Forms 3509/3510. This may be indicative of a governmental decision to cease consideration of the Forms 3509/3510. Unstated is what the government will do with the collected Forms 3509 and 3510 and the information contained therein.

What to Do Next When It Comes to the Paycheck Protection Program

Hopefully most PPP borrowers have submitted, or are planning to submit, their loan forgiveness application. And with the government’s apparent withdrawal from reviewing loans in excess of $2 million, most eligible PPP borrowers may have their PPP loans officially forgiven in the next few months. This may allow taxpayers to turn their attention towards other programs, like the Employee Retention Credit.

PPP loan forgiveness is coming to an end. But that doesn’t mean there aren’t still outstanding questions for many organizations.

This article is provided for general informational purposes only. It is not legal, accounting or other professional advice, as it does not address any individual facts, circumstances or concerns. Before making personal or business related decisions, please consult with appropriate legal, accounting or other qualified professionals.

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