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Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Rules and Regulations for a First Draw PPP Loan and that report more than $150,000 in gross income on the Schedule C that was used to calculate the borrowers loan amount will not automatically be deemed to have made the required certification concerning the necessity of the loan request in good faith. SBA may review their certification that Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant. If SBA determines that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA may determine that the borrower was not eligible for the loan, for the loan amount, or for loan forgiveness.
d. Subsection f7 of the interim final rule for Second Draw PPP Loans 86 FR
3712, 3720 is revised to read as follows:
7 The maximum amount of a Second Draw PPP Loan to a borrower that has income from self-employment and files an IRS Form 1040, Schedule C, is calculated as follows, depending on whether the borrower has employees:
i For a borrower that has income from self-employment and does not have any employees, the maximum loan amount is the lesser of:
A The product obtained by multiplying:
1 The net profit or gross income of the borrower in 2019 or 2020, as reported on IRS Form 1040, Schedule C, that is not more than $100,000, divided by 12; and 2 2.5 or, only for a borrower assigned a NAICS code beginning with 72 as defined in subsection f10 at the time of disbursement, 3.5. This amount cannot exceed $29,167 for NAICS code 72 borrowers and $20,833 for all other borrowers.
ii For a borrower that has income from self-employment and has employees, the maximum loan amount is the lesser of:
A The product obtained by multiplying:
1 The sum of i one of the two following options, up to $100,000; if this amount is less than zero, set this amount at zero if you are using 2020
and have not yet filed a 2020 return, fill it out and compute the value:
The borrowers net profit reported on IRS Form 1040, Schedule C for 2019
or 2020, divided by 12; or line 7 from the borrowers 2019 or 2020 IRS Form 1040, Schedule C, minus lines 14, 19, and 26, divided by 12; and ii the average total monthly payment for employee payroll costs incurred or paid by the borrower during the same year elected by the borrower; by
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2 2.5 or, only for a borrower assigned a NAICS code beginning with 72 at the time of disbursement as defined in subsection f10, 3.5; or B $2,000,000.
e. Subsection IV.1.b.ii of the interim final rule on loan forgiveness requirements and loan review procedures 86 FR 8283, 8287 is revised to read as follows:
ii. Owner compensation replacement, calculated based on 2019 or 2020 19 net profit or proprietor expenses, if applicable,20 as described in subsection 3.c. below; forgiveness of such amounts is limited to either a the prorated portion of 2019 or 2020 net profit or gross income, if applicable, for a covered period up to 2.5 months, or b 2.5 months worth 2.5/12 of 2019 or 2020 net profit or gross income, if applicable, up to $20,833 for a covered period greater than 2.5 months,21
excluding any qualified sick leave equivalent amount for which a credit is claimed under section 7002 of the Families First Coronavirus Response Act FFCRA Pub. L. 116127 or qualified family leave equivalent amount for which a credit is claimed under section 7004 of FFCRA;
f. Subsection IV.3.c of the interim final rule on loan forgiveness requirements and loan review procedures 86 FR 8283, 8289 is revised to read as follows:
c. Are there caps on the amount of loan forgiveness available for owneremployees and self-employed individuals own payroll compensation? 37
19 For First Draw PPP loans made in 2020, borrowers use 2019. For First Draw PPP loans made in 2021 and Second Draw PPP Loans, borrowers use the year 2019 or 2020 that was used to calculate the borrowers loan amount.
20 For self-employed borrowers with no employees that file IRS Form 1040, Schedule C, who used gross income to calculate the loan amount, proprietor expenses equal gross income.
For self-employed borrowers with employees that file IRS Form 1040, Schedule C, who used gross income to calculate the loan amount, proprietor expenses equal the difference between gross income and employee payroll costs. See subsections B.4.b and B.11.b of the consolidated interim final rule implementing updates to the PPP as amended by this interim final rule. For self-employed borrowers that file IRS Form 1040, Schedule F and have no employees, gross income may be used instead of net profit throughout this calculation. For selfemployed borrowers that file IRS Form 1040, Schedule F and have employees, the difference between gross income and employee payroll costs may be used instead of net profit throughout this calculation. See section 313 of the Economic Aid Act. This calculation for Schedule F filers is equivalent to proprietor expenses for Schedule C
filers.
21 Section 306 of the Economic Aid Act allows the borrower to select a covered period between 8
weeks and 24 weeks.
37 This subsection was originally published at 85
FR 33004, subsection III.3.c. June 1, 2020 and
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Yes. Forgiveness is capped at 2.5
months worth 2.5/12 of an owneremployee or self-employed individuals 2019 or 2020 38 compensation up to a maximum $20,833 per individual in total across all businesses. The individuals total compensation may not exceed $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred. For example, for borrowers that elect to use an eight-week covered period, the amount of loan forgiveness requested for owner-employees and self-employed individuals payroll compensation is capped at eight weeks worth 8/52 of 2019 or 2020 compensation i.e., approximately 15.38 percent of 2019 or 2020 compensation or $15,385 per individual, whichever is less, in total across all businesses. For borrowers that elect to use a ten-week covered period, the cap is ten weeks worth 10/52 of 2019 or 2020 compensation approximately 19.23 percent or $19,231 per individual, whichever is less, in total across all businesses. For a covered period longer than 2.5
months, the amount of loan forgiveness requested for owner-employees and selfemployed individuals payroll compensation is capped at 2.5 months worth 2.5/12 of 2019 or 2020
compensation up to $20,833 in total across all businesses.
In particular, C-corporation owneremployees are capped by the prorated amount of their 2019 or 2020 39
employee cash compensation and employer retirement and health, life, disability, vision and dental insurance contributions made on their behalf. Scorporation owner-employees are capped by the prorated amount of their 2019 or 2020 40 employee cash compensation and employer retirement contributions made on their behalf.
However, employer health, life, disability, vision and dental insurance contributions made on their behalf cannot be separately added; those payments are already included in their employee cash compensation. Schedule C or F filers are capped by the prorated amount of their owner compensation replacement calculated based on 2019
amended by 85 FR 38304, subsection III.1.d June 26, 2020 and has been modified to conform to sections 308 and 344 of the Economic Aid Act and for readability.
38 For First Draw PPP loans made in 2020, borrowers use 2019. For First Draw PPP loans made in 2021 and Second Draw PPP loans, borrowers use the year 2019 or 2020 that was used to calculate the borrowers loan amount.
39 Use whichever year was used to calculate the borrowers loan amount.
40 Use whichever year was used to calculate the borrowers loan amount.

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