May 26, 2020 - Douglas Myser

Coalition wants change for PPP loans. With all the talk that large companies were getting the bulk of the Paycheck Protection Program loans, other criticisms have been forthcoming also. One has been that the way the pay calculation is made is not an accurate determination for what a company really needs. An AICPA led small business coalition, in conjunction witht he National Payroll Reporting Consortium, issued a statement supporting the use of gross payroll based on 2019 data in calculations for Paycheck Protection Program pandemic relief loan applications. Applications which are ongoing for the loans, funded by the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES) Act, P.L. 116-136. PPP is offering $349 billion in forgivable loans that small businesses impacted by the coronavirus pandemic can use to cover costs including payroll and rent. Coalition wants change for PPP loans.

For the calculation of the average monthly payroll cost, the AICPA led coalition recommended in a statement released that payroll providers and CPAs use gross payroll based on 2019 data versus net payroll. Neither the CARES Act nor the SBA guidance instructs the PPP applicant to exclude federal withholding and employee FICA for the 2019 period. The average monthly payroll cost includes gross payroll and the other defined PPP payroll costs elements such as health care. The AICPA also said that its discussions with IRS, Treasury, SBA, and banks and payroll processors to address these and other issues are ongoing and that it will keep its members, coalition partners, and small businesses updated on the small business funding efforts.

Mark Koziel, CPA, CGMA, and AICPAs executive vice president of firm services, said, "Based upon statements from members of Congress, it appears that the intent of the PPP was to base the salary calculation on gross wages with no adjustment for federal taxes. "This ensures that payroll tax expenses are not passed on to the small business in need. In a program of this magnitude, it's expected that guidance will evolve and terms will be clarified."

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