Take-Away: More guidance was published by the federal government on April 8 in the form of additional questions and answers with regard to the Payroll Protection Program (PPP.)A few of the 20 proposed answers to questions tend to help clarify some earlier confusion in the implementation of the PPP.

Source: https://tinyurl.com/yxxn5g6b

Background: Under the PPP excluded from the definition of a borrower’s payroll costs, upon which the amount of the borrower’s available SBA loan is based, is any employee compensation in excess of an annual salary of $100,000. This has led to several important questions in how to calculate a borrower’s payroll costs. 

Q&A 7:  The exclusion of employee compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits, including: (i) employer contributions to defined benefit and defined contribution qualified retirement plans; (ii) the payment for the provision of group health plans, including the payment insurance premiums; and (iii) the payment of state and local taxes assessed on the compensation of employees.

Q&A 10: The SBA will recognize that the eligible borrower may use a third-party payroll provider or Professional Employer Organization (PEOs)to process payroll and report payroll taxes, even though in some states the PEO’s own employer identification number must be used with regard to the employer-borrower’s payroll costs obligation.

Q&A 15: Payments made by the employer to an independent contractor or sole proprietor will not be included in the employer-borrower’s payroll costs.

Q&A 16: Payroll costs are not reduced by taxes imposed on an employee and required to be withheld by the employer. However, payroll costs do not include the employer’s share of those payroll costs.

Conclusion: Other topics were also covered in these Q&A’s, like how are affiliates of an employer-borrower are determined and included (or not) in the employer’s payroll costs.

Expect even more Q&A’s will be published in the weeks ahead, once the loan program actually starts to become operative.