SBA PPP Loans – More New Guidance!

Newest FAQ Document Clarifies Key Questions

April 7, 2020

Mike Batts, CPA


More new guidance has been issued by the Treasury Department on the Paycheck Protection Program loans available under the CARES Act.  The newest guidance, dated April 6, is available on the Treasury Department’s website.  (It is the document labeled “Frequently Asked Questions.”)

Here are the key elements of clarification most important to nonprofit organizations:

  • Lenders are not required to verify borrowers’ calculation of their payroll costs. Lenders are expected to perform a good faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning average monthly payroll cost.  Minimal review of calculations based on a payroll report by a recognized third-party payroll processor, for example, would be reasonable.  If lenders identify errors in the borrower’s calculation or material lack of substantiation in the borrower’s supporting documents, the lender should work with the borrower to remedy the error.

  • Lenders are not required to make an independent determination regarding applicability of the affiliation rules for organizations that have affiliates. It is the responsibility of the borrower to determine which entities (if any) are its affiliates and to determine the employee headcount of the borrower and its affiliates.  Lenders are permitted to rely on the borrower’s certifications.  (Note BMWL’s previous update related to exemption from the affiliation rules for religious organizations.)

  • The limit of $100,000 in annual compensation per employee for payroll costs applies only to cash compensation. It does not apply to noncash benefits.  Employer-paid benefits for retirement plans and group healthcare plans may be included in payroll costs for such employees in addition to their maximum cash compensation of $100,000.

  • For employers that use a Professional Employer Organization (PEO), payroll costs for employees paid by the PEO may be included in payroll costs and may be documented with payroll records provided by the PEO.

  • The time period for measuring annual payroll costs for purposes of determining average monthly payroll costs can be either the 12-month period preceding the date of the loan or calendar year 2019.

  • To determine their number of employees for determining eligibility to obtain a PPP loan, borrowers may use either the 12-month period preceding the date of the loan or calendar year 2019…and may use “their average employment” over that time period. Alternatively, borrowers may use the SBA’s “usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application.”

  • We understand the FAQ document to state that federal income taxes, Social Security taxes, and Medicare taxes withheld from employees’ pay (i.e., the employee portion) can be disregarded in all calculations of payroll costs for all purposes for all periods. (I.e., the borrower does not reduce payroll costs for these amounts for any period.)

  • Borrowers may rely on the law and guidance available at the time of their application. A borrower may revise its application after it is submitted based on new guidance.


Our firm’s summary of the CARES Act provisions relevant for nonprofit organizations has been updated to reflect this new guidance.


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