On April 14, 2020, the Small Business Administration (SBA) posted an additional Interim Final Rule for the Paycheck Protection Program (PPP). This new Interim Final Rule functions as a supplement to the first PPP Interim Final Rule posted on April 2, 2020. The April 14, 2020, Interim Final Rule is effective immediately and gives guidance regarding Additional Paycheck Protection Program Eligibility Criteria and Requirements for Certain Pledges of Loans.
In addition to detailed information about eligibility and application requirements for independent contractors and sole proprietors, the new Interim Final Rule states that partners in a partnership may not submit a PPP loan application as a self-employed individual. The self-employment income of partners may only be reported through the partnership’s PPP loan application as a payroll cost, subject to the $100,000 annualized cap on compensation. This requirement also applies to LLCs taxed as partnerships.
This new Interim Final Rule provides needed guidance for PPP eligible partnerships and LLCs. However, since the application process for PPP loans commenced on April 3, 2020, we expect that many partnerships, LLCs and individuals may have already submitted PPP loan applications which may not comply with this new guidance. Additional guidance from the SBA is needed to determine how previously filed applications will be treated in light of this new SBA Interim Final Rule.
If you have any questions about the SBA’s Final Interim Rules, the PPP or any related issues, please do not hesitate to contact Aron Beezley, Frederic Smith or Elizabeth Boone.