Our last email referenced interest expenses on loans under the PPP program. While both mortgage interest and other interest are listed as ALLOWABLE expenses under the PPP, we cannot confidently advise that both allowable mortgage interest and other interest will both be forgivable. It is clear that mortgage interest will qualify for loan forgiveness, forgiveness for other interest is still debatable.
For the majority of clients, the mortgage interest forgiveness on real estate will not apply as likely they lease their office space either from a third party or from themselves. In this case, the rent paid to those entities will be forgiven, not the interest then paid to the bank. For those who own their building the rent they charge the practice will in effect cover the interest on the mortgage.
With regard to other interest, for those that continue to pay their practices notes during this eight week period, we will need to wait to see if the expense is includable in the forgiveness applications to the lender, we have not seen these details yet.
What If My Employees Don’t Want to Come Back?
The SBA is continually updating their list of FAQ that provide guidance on the provisions of the PPP loan on the following link.
The SBA added an important update to their list of FAQ. See question #40 below. This will be important to document if an employee declines your offer of employment. The employer is required to make a written offer of rehire, should the employee decline then ideally you should have them provide something in writing as to their decision to decline your offer. If you are unable to obtain a written reply from the employee carefully document that employees verbal decline or lack of response and physical presence thereof which would imply a decline.
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.