As we have outlined in prior Client Alerts, there were certain tax credits/deferrals offered under the CARES Act that were not available if you received a PPP loan and/or got the PPP loan forgiven. The Employee Retention Credit offered by the CARES Act was not available to anyone who received a PPP loan and the deferral of social security payroll taxes was not available to anyone who got all or a portion of their PPP loan forgiven. Since the SBA/Treasury Department announced the guidelines for reviewing eligibility for a PPP loan and provided borrowers with a safe harbor period where they could pay their PPP loan back without penalty, we have received questions from various clients as to whether they would be eligible for the Employee Retention Credit offered under the CARES Act if they paid back the PPP loan by the May 14 deadline.
The Treasury Department issued a new Q&A yesterday that answered this question, and the answer is “yes”. Any employer that repays their PPP loan by the safe harbor deadline (May 14, 2020) will be treated as though the employer had not received a PPP loan for purposes of the Employee Retention Credit. As such, if an employer repays its PPP loan by May 14, 2020 as it is otherwise eligible for the Employee Retention Credit pursuant to the terms of the CARES Act, it will be able to take advantage of that credit notwithstanding the fact that it originally obtained a PPP loan. The full text of the Q&A is below for reference:
45. Question: Is an employer that repays its PPP loan by the safe harbor deadline (May 14, 2020) eligible for the Employee Retention Credit?
Answer: Yes. An employer that applied for a PPP loan, received payment, and repays the loan by the safe harbor deadline (May 14, 2020) will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit. Therefore, the employer will be eligible for the credit if the employer is otherwise an eligible employer for purposes of the credit.
Contact Your HH&K Attorney For Legal Guidance
This Client Alert provides general information regarding the PPP program and does not outline all of the important considerations related thereto. We anticipate that the terms of the PPP program will continue to evolve as the SBA releases additional guidance. This Client Alert is not a substitute for legal guidance regarding program details and how those may be applicable to your business. As always, if we can be of assistance during this difficult time, please do not hesitate to contact your HH&K attorney.
| Erica L. Lawson Partner 80 Exchange Street Binghamton, NY 13901 Phone: (607) 231-6907 Email: elawson@hhk.com |
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