Though forgiveness applications are available now, and some banks are providing borrowers with these forms to complete, most professionals in the field are encouraging people to wait until the next legislative round to see if the deductibility issue on PPP proceeds can be resolved. According to Pat Tabor:
“Anyone who files now will have the forgivable portion of the loan considered income by the IRS, which effectively makes the forgiveness proceeds taxable. That could be a real ding for folks who don’t have cash, but may wind up with taxable income. The computation/determination of any curtailment of the qualifying payroll numbers will essentially be an auto calculation based on the tools the banks and SBA have developed for calculation of forgiveness. Because of the 24-week 60/40 revision virtually no one should get caught in a reportable payroll trap.”
In addition, there are two Safe Harbors identified in SBA Loan Forgiveness Form 3508:
FTE Reduction Safe Harbor 1: If you were unable to operate between February 15, 2020, and the end of the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19, you are insulated from any reduction in the payroll portion of your forgiveness amount.
FTE Reduction Safe Harbor 2: If your average FTE between February 15, 2020 and April 26, 2020 summed across all employees is less than the total FTE in your pay period that includes February 15, 2020, you qualify for the SBA Reduction Safe Harbor 2, and will not need to calculate a reduction to your forgiveness amount.
America Outdoors anticipates that most operators should qualify for Safe Harbor 1, and winter operators, or operators who had to shut down most operations over the loan period, should qualify for Safe Harbor 2. Let us know if this is not the case for you. AO wants to ensure that as many members as possible can take advantage of the full forgiveness potential.