When applying for “forgiveness” you must submit the following:
Nonprofit PPP Loan forgiveness – How Does it Work? – May 4, 2020
May 3, 2020
Nonprofit Boards – The Way We’re Working Isn’t Working
May 8, 2020Nonprofit PPP Loan Forgiveness UPDATE – May 14, 2020
Nonprofit PPP Loan Forgiveness UPDATE reveals new facts regarding the forthcoming PPP Loan forgiveness process. Unfortunately, the probability of actually receiving a PPP Loan has come to an end. The SBA announced today that as a result of an unprecedented crush of applications (and the rapid depletion of CARES Act funding allocated by Congress) that they have CLOSED their application portal and are drastically limiting the amounts of the remaining loans they have left to offer to nonprofits and small businesses. If your nonprofit is among those fortunate enough to have received a loan or loan advance your next major hurdle will be to ensure the amount you receive is actually forgiven.
Here’s what we can confirm so far:
- The CARES Act requires that you APPLY TO YOUR LENDER FOR LOAN FORGIVENESS at the end of the eight-week period following receipt of your loan. Your lender MUST make a decision on your application for forgiveness within 60 days.
- The IRS has ruled that any forgiven part of a PPP loan is exempt from being taxed as a “discharged debt.” This means you DO NOT have to declare the forgiven part of your loan as income when you file taxes for 2020.
- Your EIDL loan advance WILL be deducted from the forgivable part of any subsequent PPP loan you receive.
- To receive full forgiveness, you must retain (or rehire by June 30, 2020) all full-time equivalent employees (FTEEs) according to the baseline used to establish your loan, except for any fully documented instances in which an employee refuses the rehire offer.
- The amount forgiven will also be reduced in proportion to any reduction in employee salary or wages during the eight week forgiveness period greater than 25% of the average amount that employee made during the base period.
Here’s the single most important task you have to do TODAY:
Secure a bookkeeper that understands all the details of The CARES Act, EIDL and PPP Loan programs. Here at INSIDE CHARITY the company we use re-calibrated our Quick Books to account for all our EIDL and PPP Loan revenues and are allocating, in real-time, the dollars we spend that can be forgiven. You don’t have till next years tax season to straighten this out. YOU ONLY HAVE EIGHT WEEKS. You thought getting the loan was tough. Well, you may be already behind if you’re counting on forgiveness. As the poet so aptly said, “Once more unto the breach, dear friends, once more!”
- The total amount requested to be forgiven
- Verification of the number of FTEEs (full-time employee equivalents) on payroll and their pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings
- Verification of your payments on covered mortgage interest, rent/lease obligations, and utilities
- Certification from an authorized representative of your company that the supplied documentation is true and that the amount that is being forgiven complies with PPP guidelines
Nonprofit PPP Loan Forgiveness UPDATE
Your PPP loan may be forgiven if you use the money for:
- Salary/wages/commissions, tips (up to $100K per employee)
- Benefits including vacation, parental family medical or sick leave
- State and local taxes on compensation
- Utilities
- Rent/mortgage interest
- Interest on debt in place as of Feb. 15, 2020
You may NOT use your PPP loan for:
- Salaries over $100K
- Payroll outside the US
- Employer federal, FICA tax credits
- Employer FFCRA credits
- 1099s
- Mortgage or debt principal
You want to avoid IMMEDIATE PAYBACK. Any part of your PPP loan that is not forgiven must be paid back, either immediately, in the case of non-permitted use, or in the form of a two-year loan at 1% with a six-month deferment in the case of permitted but not forgivable amounts. An example of a permitted but not forgivable use would be utility costs that push your non-payroll expenses over 25% of the amount forgiven. Another example would be interest on non-mortgage debt in place on Feb. 15, 2020.
You must also adhere to some additional requirements:
- Payroll costs must make up 75% or more of the amount forgiven. This includes the first three categories listed under permitted uses above
- Non-payroll costs can make up no more than 25% of the amount forgiven and are defined as the last three categories under permitted uses.
- To receive full forgiveness, you must retain (or rehire by June 30, 2020) all full-time equivalent employees (FTEEs) according to the baseline used to establish your loan, except for any fully documented instances in which an employee refuses the rehire offer (see “Tip,” above).
- The amount forgiven will also be reduced in proportion to any reduction in employee salary or wages during the eight week forgiveness period greater than 25% of the average amount that employee made during the base period.
Unanswered questions requiring further guidance:
As much as is known about the Paycheck Protection Program, there is just as much that is not known. As guidance becomes available and to the extent it answers any of these questions, information will be added to this article.
- Are health benefits you pay for furloughed employees forgivable
- Similarly, is vacation pay for terminated or resigned employees forgivable?
- Can you claim transportation expenses under utilities?
- What about reimbursement of home office expenses for remote workers?
- Will forgiveness trigger an IRS audit?
- Can you prorate allowable expenses if they started before the eight-week period, i.e. rent paid Apr. 1 for an eight-week period that starts Apr. 15?
Here’s the single most important task you have to do TODAY:
Find a bookkeeper or CPA that understands The CARES Act, EIDL and PPP Loan programs and nonprofit finances. Here at INSIDE CHARITY the company we use re-calibrated our Quick Books to account for all our EIDL and PPP Loan revenues and are allocating, in real-time, the dollars we spend that can be forgiven. You don’t have till next years tax season to straighten this out. You thought getting the loan was tough. Well, you don’t have a moment to catch your breath if you actually want forgiveness. As the poet so aptly said, “Once more unto the breach, dear friends, once more!”
Nonprofit PPP Loan Forgiveness UPDATE was first posted at INSIDE CHARITY
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Nonprofit PPP Loan Forgiveness UPDATE and other INSIDE CHARITY content and comments are for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. All content on this site is information of a general nature and does not address the circumstances of any particular individual or entity. Nothing on this site constitutes professional and/or financial advice, nor does any information on the site constitute a comprehensive or complete statement of the matters discussed or the law relating thereto.
Jimmy LaRose
Jimmy LaRose’s passion for “people who give” has inspired philanthropists around the world to change the way they invest in nonprofits. His belief that donors are uniquely positioned to give charities what they truly need – leadership rather than money – is the basis for his work with individuals, governments, corporations and foundations, in the U.S., Europe, Asia & Middle East. Jimmy, in his role as author, speaker, corporate CEO & nonprofit CEO champions all of civil society’s vital causes by facilitating acts of benevolence that bring healing to humanity and advance our common good. He and his beautiful wife Kristi are citizens of the Palmetto State where they make their home in Lexington, South Carolina.
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I am president/CEO of Appalachian Affordable Housing, we build homes for very low and low-income and homeless families. We also educate/tutor if needed, computer classes, Home Ownership, Financial, and other. and we also work with 4 different Banks to work with our potential homeowner credit. We finance these homes with no interest, and 30.5 % to 38.5% of their income for home payment.
Our mission is to build safe affordable homes, better lives, stronger families and safer communities through partnerships with people an organizations throughout our city and county bringing individuals together to build affordable homes with those in need. We are Christian ministry that calls on all people regardless of religious preferences or cultural background to make safe and simple, affordable housing a madder of conscience and a action in Cocke County, TN.
Thank you: Ronnie