Apr 14, 2020

Important Notice Regarding Legal Implications for Clients Who Have Applied for Loans from the PPP

The accounting, tax and general business implications of COVID-19 is a rapidly evolving situation. BMSS will provide an update and/or revised information as it becomes known to us and we have had time to process the information.

Some information that we provide–for example, updates on the progress, passage and contents of federal and state legislation–may raise legal implications in addition to tax and accounting issues. Our mention of any such matters is for general information purposes and not intended to be legal advice. We encourage you to consult with your legal counsel on legal matters and with your BMSS adviser regarding the tax and accounting implications for your particular set of circumstances.

As we move into the loan forgiveness phase of the Paycheck Protection Program, there are certain items you may wish to consider:

  1. Set up a separate bank account for the entirety of the funds received from the PPP. As your company incurs appropriate expenditures, treat this account as if it were an expense reimbursement account. Only move monies from this account as you have accumulated the appropriate backup for the expenditures incurred. This way, you will have backup documentation in place when these items are submitted in order to calculate loan forgiveness.
  2. As you are set to receive funding, consider the timing of funding as it relates to the funding of approved expenditures. Consider scheduling out approved payments during the eight week forgiveness calculation period in order to achieve the maximum allowed forgiveness.
  3. Ensure you appropriately follow the 75/25 rules in the Act. No more than 25% of the funds may go toward rent, utilities, and interest on mortgage indebtedness.
  4. Calculate the effects of salary reductions allowed (no greater than 25%) before penalizing loan forgiveness and the effects of any lay-offs, furloughs, or terminations.
  5. Contact your bank to ascertain its policy for funding. Will the bank automatically deposit the monies into your account or will they contact you for a funding date?

As we have seen since the implementation of this program, there can be rapid changes in definitions and interpretations. BMSS will be holding a webinar on the loan forgiveness calculation on April 30th at 9:00 a.m. Guidance from the SBA has been promised no later than April 26th, so we should have the most up-to-date information for our seminar.

Prior to this date, if new developments occur, we will send this information out through our e-newsletters and will post it on our COVID-19 webpage. If you have individual questions, please do not hesitate to reach out to your BMSS professional.