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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations wages, or commissions during the covered period, those payments are eligible for forgiveness as long as they do not exceed an annual salary of $100,000, as prorated for the period during which the payments are made or the obligation to make the payments is incurred. The Administrator, in consultation with the Secretary, has also determined that, if an employees total compensation does 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, the employees hazard pay and bonuses are eligible for loan forgiveness because they constitute a supplement to salary or wages, and are thus a similar form of compensation.

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c. Are there caps on the amount of loan forgiveness available for owneremployees and self-employed individuals own payroll compensation? 37
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
37 This subsection was originally published at 85
FR 33004, subsection III.3.c. June 1, 2020 and 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.

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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
or 2020 net profit.41 General partners are capped by the prorated amount of their 2019 or 2020 net earnings from selfemployment reduced by claimed section 179 expense deduction, unreimbursed partnership expenses, and depletion from oil and gas properties multiplied by 0.9235. For self-employed individuals, including Schedule C or F filers and general partners, retirement and health, life, disability, vision or dental insurance contributions are included in their net self-employment income and therefore cannot be separately added to their payroll calculation. LLC members are subject to the rules based on their LLCs tax filing status in the reference year used to determine their loan amount.
d. Are any individuals with an ownership stake in a PPP borrower exempt from application of the PPP
owner-employee compensation rule when determining the amount of their compensation that is eligible for loan forgiveness? 42
Yes, owner-employees with less than a 5 percent ownership stake in a Cor S-corporation are not subject to the owner-employee compensation rule in subsection IV.3.c. above.
39 Use whichever year was used to calculate the borrowers loan amount.
40 Use whichever year was used to calculate the borrowers loan amount.
41 For self-employed borrowers that file Form 1040, Schedule F and have no employees, gross income may be used instead of net profit. For selfemployed borrowers that file Schedule F and have employees, the difference between gross income and employee payroll costs may be used instead of net profit. See section 313 of the Economic Aid Act.
42 This subsection was originally published at 85
FR 52881, section III.1. Aug. 27, 2020 and has been modified for readability.

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e. May a fishing boat owner include as payroll costs in its application for loan forgiveness any compensation paid to a crewmember who received his or her own PPP loan and is seeking forgiveness for amounts of compensation the crewmember received for performing services described in Section 3121b20 of the Internal Revenue Code with respect to that owners fishing boat? 43
No. If a fishing boat crewmember obtains his or her own PPP loan during the fishing boat owners covered period and seeks forgiveness of that loan based in part on compensation from a particular fishing boat owner, the fishing boat owner cannot also obtain PPP loan forgiveness based on compensation paid to that same crewmember. This restriction applies only if the crewmember is performing services described in section 3121b20
of the Internal Revenue Code for the particular fishing boat owner. The fishing boat owner is responsible for determining whether any of its crewmembers received their own PPP
loans during the fishing boat owners loan forgiveness covered period.
4. Nonpayroll Costs Eligible for Loan Forgiveness a. When must nonpayroll costs be incurred and/or paid to be eligible for forgiveness? 44
A nonpayroll cost is eligible for forgiveness if it was:
i. Paid during the covered period; or ii. incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.
Example: A borrower that received a loan before June 5, 2020 uses a 24-week covered period that begins on June 1
and ends on November 15. The borrower pays its electricity bills for June through October during the covered period and pays its November electricity bill on December 10, which is the next regular billing date. The borrower may seek loan forgiveness for its June through October electricity bills, because they were paid during the covered period. In addition, the borrower may seek loan forgiveness for the portion of its November electricity bill through November 15 the end of the covered period, because it was 43 This subsection was originally published at 85
FR 39066, subsection III.2. June 30, 2020 and has been modified for consistency with the Economic Aid Act.
44 This subsection was originally published at 85
FR 33004, subsection III.4.a. June 1, 2020 and amended by 85 FR 38304, subsection III.1.e June 26, 2020 and has been modified for readability.

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