May 15, 2020 - The rules regarding the Paycheck Protection Program (PPP) loans are continuously being clarified, sometimes changing what was previously thought to be correct.  On Wednesday May 13, 2020, The U.S. Small Business Administration (SBA) issued a new interim final rule further clarifying rules relating to the amount of loan proceeds that a partnership can receive under the PPP.

Previously, on April 14, 2020 the SBA issued an interim final rule that, among other things, provided guidance for individuals with self-employment income.  The interim final rule stated, “if you are a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual. Instead, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.”

Some partnerships who filed for their PPP loans before the April 14, 2020 interim final rule was issued may not have received the maximum amount of PPP loan proceeds that they could have received.  The new interim final rule issued on May 13, 2020 authorizes all PPP lenders to increase existing PPP loans to partnerships or seasonal employers to include appropriate amounts to cover partner compensation in accordance with the interim final rule posted on April 14, 2020, or to permit the seasonal employer to calculate its maximum loan amount using the alternative criterion posted on April 28, 2020.

This interim final rule authorizes the lender to make an additional disbursement of the increased loan proceeds prior to submission of the initial SBA Form 1502 that includes that loan. SBA Form 1502 is required to be submitted within 20 calendar days after a PPP loan is approved or, for loans approved before availability of the updated SBA Form 1502 reporting process, by May 22, 2020.  Prior to this interim final rule, a previous interim final rule posted on April 28, 2020 required that all PPP loans to be distributed in a single disbursement.  Therefore, even if loan proceeds have been disbursed a partnership can still receive the additional proceeds if Form 1502 has not yet been filed with the SBA.

If a partnership did not receive PPP loan proceeds that included the self-employment income of the partners, then they should contact the lender to see if the additional loan proceeds can be applied for.

Please feel free to contact your Dermody, Burke & Brown tax advisor to further discuss any questions you may have.

The information reflected in this article was current at the time of publication.  This article will not be modified or updated for any subsequent tax law changes, if any.