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Great News in New Paycheck Protection Program (PPP) Guidance

The latest PPP loan forgiveness guidance brings some good news for minority shareholders, Schedule C borrowers with home office expenses, and self-renters:

  • Owner-employees with less than a 5% ownership interest in a C or S corporation: These owner-employees are not subject to the owner-employee compensation rule (which generally limits the amount of compensation eligible for loan forgiveness to 2.5 months of compensation reported on the 2019 return).
  • Home-office expenses: Deductible home-office expenses are qualified expenses, but only to the extent they were deductible on 2019 tax filings (or if a new business, the borrower’s expected 2020 tax filings).
  • Self-renters: Rent or lease payments to related parties (defined as any ownership in common between the business and property owner) are eligible for forgiveness if:
    • The amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the covered period that is attributable to the space being rented by the party; and
    • The lease and the mortgage were entered into prior to February 15, 2020.
  • Borrowers with tenants or subtenants: Amounts attributable to a tenant or subtenant of the PPP borrower are ineligible for loan forgiveness (e.g., a tenant with a monthly rent of $10,000 who subleases a portion of the space for $2,500 will only be eligible for $7,500 of forgiveness).

The interim rule can be found at:
https://home.treasury.gov/system/files/136/PPP–IFR–Treatment-Owners-Forgiveness-Certain-Nonpayroll-Costs.pdf

For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).

This article is reproduced with permission from Spidell Publishing, Inc.

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