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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations
f. How should borrowers seeking loan forgiveness account for the reduction based on a reduction in the number of employees section 7Ad2 relative to the reduction relating to salary and wages section 7Ad3?
g. If a borrower restores reductions made to employee salaries and wages or FTE
employees, can the borrower avoid a reduction in its loan forgiveness amount?
h. Will a borrowers loan forgiveness amount be reduced if an employee is fired for cause, voluntarily resigns, or voluntarily requests a schedule reduction?
i. Is a borrower with a loan of $50,000 or less exempt from any reductions to the loan forgiveness amount?
6. Documentation Requirements a. What must borrowers submit for forgiveness of their PPP loans?
b. What documentation must borrowers who are individuals with selfemployment income who file a Form 1040, Schedule C or F, submit to their lender with their request for loan forgiveness?
c. What additional documentation must a borrower submit when the President of the United States, Vice President of the United States, the head of an Executive department, or a Member of Congress, or the spouse of any of the preceding, directly or indirectly holds a controlling interest in the borrower?
7. Lender Hold Harmless V. Paycheck Protection Program SBA Loan Review Procedures and Related Borrower and Lender Responsibilities 1. SBA Reviews of Individual PPP Loans a. Will SBA review individual PPP loans?
b. What borrower representations and statements will SBA review?
c. When will SBA undertake a loan review?
d. Will I have the opportunity to respond to SBAs questions in a review?
e. If SBA determines that a borrower is ineligible for a PPP loan, can the loan be forgiven?
f. May a borrower appeal SBAs determination that the borrower is ineligible for a PPP loan or ineligible for the loan amount or the loan forgiveness amount claimed by the borrower?
2. The Loan Forgiveness Process for Lenders a. What should a lender review?
b. What is the timeline for the lenders decision on a loan forgiveness application?
c. What should a lender do if it receives notice that SBA is reviewing a loan?
d. What should a lender do if a borrower submits documentation of eligible costs that exceed a borrowers PPP Loan Amount?
3. Lender Fees
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IV. Paycheck Protection Program Loan Forgiveness Requirements 1. General a. What amounts are eligible for forgiveness? 8
Section 7Ab of the Small Business Act provides that, subject to several important limitations, borrowers shall be eligible for forgiveness of their PPP
loan in an amount equal to the sum of the following costs incurred and payments made during the covered period as described in section IV.3.
below.
1 Payroll costs.9 Payroll costs consist of compensation to employees whose principal place of residence is the United States in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips;
payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from selfemployment, or similar compensation.
Payroll costs that are qualified wages taken into account in determining the Employer Retention Credit are not eligible for loan forgiveness.10
2 Interest payments on any business mortgage obligation on real or personal property that was incurred before February 15, 2020 but not any prepayment or payment of principal.
3 Payments on business rent obligations on real or personal property under a lease agreement in force before February 15, 2020.
8 This subsection was originally published at 85
FR 33004, section III.1. June 1, 2020 and has been modified to conform to section 304 of the Economic Aid Act.
9 Payroll costs has the same meaning as in subsections III.B.4.g. and h. of the consolidated interim final rule implementing updates to the Paycheck Protection Program. 86 FR 3692, 3702
Jan. 14, 2021.
10 Section 7a37Jiii of the Small Business Act provides these amounts are not eligible for forgiveness for Second Draw PPP Loans. This provision similarly provides that these amounts are not eligible for forgiveness for First Draw PPP Loans in order to provide consistent treatment and to prevent a borrower from receiving forgiveness for amounts for which the borrower will also receive a tax credit.

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4 Business utility payments for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.
5 Covered operations expenditures.
A covered operations expenditure is a payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.11
6 Covered property damage costs. A
covered property damage cost is a cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020
that was not covered by insurance or other compensation.12
7 Covered supplier costs. A covered supplier cost means an expenditure made by a borrower to a supplier of goods for the supply of goods thatA
are essential to the operations of the borrower at the time at which the expenditure is made; and B is made pursuant to a contract, order, or purchase orderi in effect at any time before the covered period with respect to the applicable covered loan; or ii with respect to perishable goods, in effect before or at any time during the covered period with respect to the applicable covered loan.13
8 Covered worker protection expenditures. A covered worker protection expenditure:
A Means an operating or a capital expenditure to facilitate the adaptation of the business activities of an entity to comply with requirements established or guidance issued by the Department of Health and Human Services, the Centers for Disease Control, or the Occupational Safety and Health Administration, or any equivalent requirements established or guidance issued by a State or local government related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID19, during the period beginning on March 1, 2020 and ending the date on which the national emergency declared by the President under the National Emergencies Act 50 U.S.C.
1601 et seq. with respect to the Coronavirus Disease 2019 COVID19
expires;
B may include 11 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act.
12 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act.
13 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act.

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