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PPP Loan Forgiveness - Updated Guidance for Rehires

Posted by Carlin Culbertson on May 4, 2020 4:24:06 PM

Loan forgiveness

Treasury and the SBA updated their FAQ on May 3, 2020 with Q&A item 40.  This indicates that if you make an attempt to rehire an employee and they refuse to come back to work, you will not be penalized in your forgiveness calculation for them.  You do need to follow certain documentation guidelines as described below.  This thankfully offers some clarity on this situation as it has been a common occurrence with some employees for a variety of reason. 

Make sure you follow this guidance when documenting the offer to rehire and the refusal and you consider discussing the best approach to documentation further with your attorneys.  When the interim final rule is posted, we will provide an update with any other forgiveness related guidance included in it.

40. Question: Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?

Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

If you would like to discuss further, please contact us.  We will continue to generate updates as more information becomes available. 

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Topics: Tax Planning & Strategies, Small Business, Accounting & Auditing, Accounting and Tax Resource, COVID-19, Featured

Carlin Culbertson

Carlin Culbertson

With over 15 years in public accounting, Carlin has extensive auditing experience serving a wide variety of clients in various industries, including construction, manufacturing, mining, biotechnology and distribution.

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