PPP Loan Forgiveness Update per 6/17/20 SBA Press Release

On June 17, 2020, the SBA published a new Form 3508EZ version of the PPP loan forgiveness application that applies to qualifying borrowers. There are three possible ways for borrowers to qualify if they:

  • Are self-employed and have no employees; OR
  • Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
  • Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

See the SBA press release below for more details.

SBA and Treasury Announce New EZ and Revised Full Forgiveness Applications for the Paycheck Protection Program

Release Date:
Wednesday, June 17, 2020

Release Number:

Press_Office@sba.gov, (202) 205-7036

WASHINGTON—Today, the U.S. Small Business Administration, in consultation with the Department of the Treasury, posted a revised, borrower-friendly Paycheck Protection Program (PPP) loan forgiveness application implementing the PPP Flexibility Act of 2020, signed into law by President Trump on June 5, 2020.

The EZ application requires fewer calculations and less documentation for eligible borrowers.  Details regarding the applicability of these provisions are available in the instructions to the new EZ application form.

Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period.  These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.

Click here to view the EZ Forgiveness Application.
Click here to view the Full Forgiveness Application.

Price CPAs will continue to post significant updates from the SBA and the Treasury as they are available.  In the meantime, please contact us if you would like assistance with the completion of your Loan Forgiveness Application or a review of your completed application based upon the most recent guidance available.

PPP Loan Forgiveness — Tax Issues

As we are approaching the date for borrowers to begin submitting their applications for PPP loan forgiveness, understanding the tax treatment of the forgiven loan proceeds and related expenses is obviously of significant importance.

Section 1106(i) of the CARES Act excludes from gross income any amount forgiven under the PPP. But, the CARES Act did not expressly address the tax treatment of expenses paid with the forgiven funds.

The IRS has issued Notice 2020-32, which says that taxpayers receiving loans through the PPP are not permitted to deduct normally deductible expenses to the extent the expenses were reimbursed by a PPP loan that was then forgiven.

The IRS notice reasoned that IRC Section 265 prohibits an otherwise allowable deduction under any provision of the Code for the amount of any payment of an eligible Section 1106 expense to the extent of the resulting covered loan forgiveness (up to the aggregate amount forgiven) because that payment is allocable to tax-exempt income.  In other words, expenses incurred related to income exempt from tax aren’t deductible.

Certain members of Congress have stated that the IRS position is contrary to the goal of the PPP and would like to see a legislative fix to allow the deductions.  In addition, the American Institute of CPAs is on record supporting legislation to allow deductions paid for with forgiven PPP loan proceeds.

Additionally, for fiscal year entities filing their tax returns prior to receiving approval of their loan forgiveness application, there is separate IRS guidance, including options available regarding the reporting period for the disallowed PPP related expenses.Please let us know if you have any questions in this regard. You can reach us at our office by calling 615-385-0686, or by email at info@pricecpas.com.