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On May 5, 2020, the U.S. Small Business Administration (SBA) issued guidance on forgiveness for Payroll Protection Program (PPP) loans for employers that laid off an employee, offered to rehire that same employee, but the employee declined the offer to return.
Treasury FAQ #40 states that the SBA and Treasury intend to issue an interim final rule, which will state that laid-off employees whom employers offered to rehire will be excluded from the CARES Act’s loan forgiveness reduction calculation. Presumably, this means employees meeting certain requirements may be excluded from the full-time equivalent (FTE) calculation for both the 8-week forgiveness period as well as the elected comparison period, thereby eliminating any reduction in the PPP loan forgiveness amount.
For an employee to qualify for elimination from the FTE calculation, the offer of re-employment must be for the same salary/wages and the same number of hours. Additionally, the employer must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the employer. And lastly, employees who reject re-employment offers may not be eligible for continued unemployment compensation.
If you need assistance on how maximizing PPP loan forgiveness, documenting your PPP loan needs or managing your PPP loan funds, our team is available to help. To learn more, visit the COVID-19 Business Services section of our website or contact us. Also, be sure to subscribe here to get our news and alerts as they are released as we are committed to keeping you updated on how to navigate financial challenges associated with the COVID-19 pandemic.
Bert Mills, CPA, is the Managing Partner at Moore Colson. In his role, Bert sets the vision and mission of the Firm and works closely with the Firm’s leadership to drive and implement strategies.