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Tax & Assurance Guidance

PPP Forgiveness & Full Time Equivalents

Posted on May 5, 2020 by

Tim Hilligoss

Tim Hilligoss

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Another day, another number. The number 40, to be specific. FAQ # 40 addresses one of the many PPP loan forgiveness questions: what happens if a laid-off employee declines to come back to work? Will this affect your forgiven amount? The answer: no.

At first glance, this is the answer you would hope. However, there is not much fine print at this point. Question 40 addresses “an” employee – i.e. one. But, what if you have more than one? The answer indicates the SBA and Treasury intend to exclude employees (more than one) that you offered to rehire but declined to come back to work, from the loan forgiveness reduction calculation. This, provided they were offered the same salary/wages/hours as the measurement period. So, how many employees can refuse to return to work without you losing your qualification for full forgiveness? And does this exception exceed the de minimis powers given the Treasury? So many questions!

So, what is next? For the SBA and Treasury, it’s to put the details in writing in their Interim Final Rules. For you, it’s all about documentation. To qualify for this exception, you must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented. This is definitely a step in the right direction, especially considering the June 30 rehire provision in the CARES Act. See the PPP Q&A for yourself.

The above represents our best understanding and interpretation of the material covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change. This information is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.

Tim Hilligoss

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As a trusted advisor, Tim guides clients through business transactions, tax issues and international expansion.

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