PPP Loan Safe Harbors

As we do more of these forgiveness forms, we get more questions about the safe harbors that were written into the various laws affecting forgiveness. They are confusing, so let’s spend some time sorting these out.
What is a Safe Harbor?
It’s a provision that can be included into the rules to ensure that people do not accidentally violate the rules based upon a situation that is outside of their control. When the updated application was released, information about these safe harbors was included.
Good Faith Certification
This is related to the requirement that borrowers certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”
This safe harbor states that if you borrowed less that $2 Million, you are automatically deemed to have made the required certification in good faith.
Full Time Employee Safe Harbors
Forgiveness on this loan can be reduced if you did not maintain the same number of Full Time Employees (FTE’s) by comparing a chosen reference period to the Covered Period. The reference periods that you can choose from are
1) February 15, 2019 – June 30, 2019
2) January 1, 2020 – February 29, 2020
3) Any consecutive twelve week period from May 1, 2019 through September 15, 2019 for seasonal employers only
Please remember that a FTE is defined as a person working 40 hours in a given 7 day period of time. Given the definition a person cannot work more than 40 hours to be counted as more than one FTE.
An example would be a manager that work 50 hours in a week would only count as one FTE. On the other hand, if you had 40 people only working one hour during a week, then all of them would only count as one FTE.
Safe Harbor #1
This applies if your business was required to be fully or partially shut, given the compliance guidelines issued by the HHS, the CDC, or OSHA between March 1 and December 31, 2020.
If you fulfill this requirement, then you do not have a FTE Requirement. To apply this safe harbor, you check a box on the application.
Safe Harbor #2
This would apply if you reduced your FTE’s and are trying to restore them. There are two criterion that need to be met.
1) You reduced your FTE’s between February 15, 2020 and April 26, 2020, and
2) You then must restore he number of FTE’s by December 31, 2020 to its former level.
If you bring your FTE count back up to where it was before the end of the year, then you should not have a forgiveness reduction.
FTE Reduction Exemption
This is not a safe harbor, but rather a situation where you would be exempted from the safe harbor rule. These situations include,
1) You made a good faith offer in writing to rehire a person that was laid off before February 15, 2020, and were unable to find a qualified hire before December 31, 2020
2) You made a good faith offer in writing to restore a persons hours during the covered period, and they rejected the offer
3) If, during the covered period, you fired an employee for cause, they quit, or they requested a reduction in hours.
You are required to maintain proof of these situations. I hope that I haven’t confused you too much. If you have questions, please call.
Let me leave you with this one thought…
I had dinner downtown last night across from the Federal Building, and it was a ghost town. You could have played golf on Jackson last night at 6:00 pm, and not hit anyone.
It was surreal.
Coming downtown, I took Michigan Avenue and saw tons of designer stores that were still boarded up from the looters.
We keep hearing about the large employers in the Loop, who are defaulting on their leases, given the fact that all of their employees are working from home.
They just shut down Navy Pier, the number one tourist attraction in the city.
Condo owners downtown are putting their properties on the market in unprecedented numbers.
I don’t know how many of you were here back in the seventies, but our downtown was then a ghost town as well. Years of white flight to the suburbs and the difficulties with crime and made it that way.
But all of that changed in the late eighties and early nineties. Downtown again became a hot spot where people wanted to live, party, and work. The economic boom to Chicago that this created is immeasurable.
Are we on our way back to the seventies? Will the current administration actually do something about crime, rather than just talk about it? Will downtown condo owners ever again feel safe enough to walk their dogs at night?
I certainly hope so. Don’t kid yourselves. As downtown Chicago goes, so does the rest of Chicagoland.
The last mayoral election was primarily about developing the poorer neighborhoods on the south and west sides of town. My, how things have changed, since that election in April of 2019.
Accounting Solutions Ltd stands ready to complete our mission and purpose of protecting you, your family, and your business. If you need anything, whether you are a current client or not, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
Accounting Solutions Ltd.
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