Join Withum and CFMA South Jersey Chapter for the latest update on PPP loan forgiveness for the construction industry. As the SBA continues to release guidance, many questions remain surrounding PPP Loan forgiveness. Presented by Withum’s Daniel Mayo, National Lead, Federal Tax Policy, Frank Boutillette, CPA, CGMA, Ron Martino, CPA, CCIFP, Joe O’Drain , CPA and Kim Hullfish, CCIFP, MBA, CRIS, Controller at C. Abbonizio Contractors Inc. and CFMA South Jersey Chapter Board Member. This webinar will provide guidance on PPP Loan Forgiveness and how you can prepare your construction organization for maximum forgiveness. Attendees will be able to: -Interpret the updated PPP Loan Forgiveness Application Forms by the SBA (Standard and EZ applications) - Assess corporate tax provisions of the CARES act - Identify Accounting/GAAP treatment of PPP loan forgiveness on year-end financial statements

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PPP LOAN FORGIVENESS
&
TAX CONSIDERATIONS FOR THE
CONSTRUCTION INDUSTRY
August 26, 2020

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Presenters
Daniel Mayo , JD, LLM,
Principal, National Lead, Federal Tax
Policy
Frank Boutillette, CPA, CGMA,
Partner, Market Leader, SBA
Financial Assistance Services and
Lead
Ron Martino , CPA, CCIFP®,
Partner, Team Leader, South
Jersey/Greater Philadelphia
Construction
Joe O’Drain, CPA,
Senior Manager, Team Member,
Construction Services
Kim Hullfish , CCIFP®, MBA, CRIS,
Controller, C. Abbonizio Contractors,
Inc., CFMA SJ Board Member
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Disclaimer
 This content is for general informational purposes only and should not be
used as a substitute for individualized tax advice with a qualified tax
advisor. This content represents the views of the authors only and does
not necessarily represent the views or professional advice of WithumSmith
+ Brown, PC.
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Agenda
 Loan Forgiveness
 Payroll costs
 Nonpayroll costs
 FTE and wage reductions
 Application process
 Taxation of PPP Loans
 Receipt of PPP loan
 Loan forgiveness
• Expense disallowance and Notice 2020-32
 Estimated taxes, amended and superseding
tax returns
 Special tax treatment of SEIs and GPs
 Accounting Treatment of PPP Loan
Forgiveness
 Debt option
 Government Grant option
 Emergency paid sick leave and expanded
family & medical leave
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PPP LOAN FORGIVENESS
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PPP Generally
 Enacted March 27, 2020 – CARES Act appropriated ~ $350B for PPP
 Application process opened April 3, 2020
 ~ April 16, 2020 – PPP ran out of funding – ~ 1.6 million loans issued
 April 24, 2020 – PPP and Health Care Enhancement Act added ~ $310B of additional funding
 June 5, 2020 – PPP Flexibility Act brought in 24-week covered period, 60/40 rule, new FTE safe
harbors, and other borrower-favorable rules
 July 4, 2020 – PPP Extension Act extended loan application deadline to August 8, 2020
 Application process now closed
 About 5.2 million PPP loans were issued (SBA report through 8/8/2020)
 ~ 87% of PPP loans are under $150,000
 ~ 95% of PPP loans are under $350,000
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PPP Flexibility Act of 2020 (June 5, 2020)
 Covered period (CP) – for loans issued before June 5th, the default CP is 24 weeks, and
borrowers can elect an 8-week CP
• For loans issued on or after June 5th, there is no 8-week option
 Rehire rule – for 8-week and 24-week CPs, the FTE and wage reductions can be cured on
or before December 31, 2020 (i.e., June 30th date no longer applies)
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PPP Flexibility Act (cont’d)
 Maturity date – for loans issued on or after June 5th, they will have a 5-year
minimum maturity date
• For loans issued before June 5th, borrowers and lenders are permitted, but not required, to
extend the term from 2 years to 5 years
• Not necessary if full loan forgiveness is expected
 Payment deferral (principal & interest) – extends deferral period to the date
the SBA remits the loan forgiveness amount to the lender
• If no forgiveness is sought, then payments will begin 10 months after the end of the covered
period
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PPP Flexibility Act (cont’d)
 New FTE reduction safe harbors (in addition to 4 pre-existing exceptions), as modified in IFR
• Employee Availability – borrower can document in good faith an inability during the CP to rehire
individuals who were employees on February 15, 2020 and an inability to hire similarly-qualified
employees for unfilled positions on or before December 31, 2020
• Must notify state unemployment insurance office within 30 days of a rejected offer
• Business Activity – borrower can document in good faith an inability during the CP to return to the
same level of business before February 15, 2020 due to compliance with requirements or guidance
issued by the CDC, OSHA or HHS, during period from March 1st – December 31st, and relating to
maintenance of standards for sanitation, social distancing or worker/customer safety relating to
COVID-19
• Inability must be directly or indirectly related to federal rules (recognizing that state orders are based on federal
rules)
• Documentation must include copies of COVID-19 requirements or guidance for each business location and relevant
borrower financial records
• Example in IFR issued June 23, 2020 indicates that state shut-down order must reference the federal guidance
• This safe harbor will allow many borrowers to use the EZ loan forgiveness application
 60% / 40% rule – requires at least 60% of loan forgiveness amount to be spent on payroll costs
(effectively eliminates SBA’s 75% / 25% rule)
• New application indicates this as a proportional requirement as opposed to a cliff
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POLLING QUESTION #1
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PPP Extension Act
 Enacted July 3, 2020
 Extended the loan application deadline 5 weeks
 Deadline extended from June 30, 2020 to August 8, 2020
 Reason – about $130 billion remained in the program
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Loan Forgiveness – Covered Period
 CP defaults to 24 weeks beginning on the day of the first loan disbursement
• Paid or incurred rule still applies to payroll and nonpayroll costs
 Borrowers who received loan before June 5th can elect an 8-week CP
 Alternative Payroll Covered Period (APCP)
• For administrative convenience, borrowers with bi-weekly (or more frequent)
payroll may elect to calculate eligible payroll costs using 8-week or 24-week CP that
begins on the 1st day of their first pay period following the loan disbursement date
• Example:
• Loan received Monday, April 20 –> 1st day of pay period is Sunday, April 26
• 8-week APCP would begin Sunday, April 26 and end Saturday, June 20
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Loan Forgiveness – Payroll Costs
Payroll costs
 Non-owner employees – (for C and S corps, this means owner-EEs that own < 5%)
• Cash compensation (including wages, tips, commissions, bonuses and hazard pay) –
 8-week CP – subject to cap of $15,385 ($100k x 8/52)
 24-week CP – subject to cap of $46,154 ($100k x 24/52)
• Non-cash compensation includes employer-paid group health care benefits (which includes vision and dental),
retirement benefits, and state/local employment taxes.
 These are in addition to cash compensation
 Employee group health care costs are includible to the extent paid by the employer during the CP for coverage during the CP, but
not for coverage outside the CP (different from cash compensation “paid” rule)
 Cannot accelerate retirement benefits from outside the CP – this too represents a narrowing of the “paid” rule
 Owner-employees/self-employed/general partners – (for C and S corps, owner-EEs that own ≥ 5%)
• 8-week CP – cash compensation limited to lesser of 8 weeks of 2019 compensation or $15,385 ($100k x 8/52), in total
across all businesses
• 24-week CP – cash compensation limited to lesser of 2.5 months of 2019 compensation or $20,833 ($100k x 2.5/12), in
total across all businesses
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Loan Forgiveness – Payroll Costs
Payroll costs
 C corporation owner-employees that own ≥ 5% – capped at 2019 cash compensation, plus employer
state/local employment taxes, health care contributions, and employer retirement contributions capped
at 2.5 months of the 2019 retirement contribution amount
 S corporation owner-employees that own ≥ 5% – capped at 2019 cash compensation, plus employer
state/local employment taxes and employer retirement contributions capped at 2.5 months of the 2019
retirement contribution amount, and health care contributions for < 2% owners and family members of
such owners
• Cannot include health insurance contributions of 2%+ owners or family members of 2%+ owners
 Schedule C filers – capped at owner compensation replacement amount, calculated based on 2019 net
profit on Schedule C, line 31
• Cannot include state/local employment taxes, retirement or health care contributions
 General partners – capped at 2019 net earnings from self-employment on Sch. K-1, box 14a (reduced by
box 12 §179 expense deduction, unreimbursed partnership expenses on Form 1040, Sch. SE, and
depletion from oil and gas properties), multiplied by 0.9235
• Amount must be paid during the covered period to be eligible for forgiveness
• Cannot include state/local employment taxes, retirement or health care contributions
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Loan Forgiveness – Nonpayroll Costs
 Nonpayroll (i.e., overhead) costs
• Interest on mortgage obligations on real or personal property incurred before 2/15/2020
• Property must be secured by a mortgage or security interest (e.g., UCC-1)
• Interest payment must relate to borrower’s use of the underlying property
 For example, if a borrower pays interest on a covered mortgage on a building and it uses only 75% of the property, leasing out the remaining 25%, then it
can include only 75% of the interest on its loan forgiveness application
• Interest paid to a related party is not eligible for forgiveness (related party includes any common ownership)
• Rent under a lease on real or personal property in force before 2/15/2020, or a renewal of such lease
• Does not include amounts paid that are attributable to a sub-tenant
 For example, borrower pays rent of $10K, but receives $3K from a sub-tenant. Only $7K can be included on its loan forgiveness application
• Does not include household expenses in the case of a home-based business; includes only those expenses that are deductible on borrower’s tax return
• Rent paid to a related party is eligible for forgiveness if (i) the amount of rent does not exceed the amount of mortgage interest owed on the property during the
covered period that is attributable to the space being rented and (ii) the lease and mortgage were both in effect prior to February 15, 2020
 What if there is no mortgage on the property? SBA did not address this
 Related party includes any common ownership
• Utilities for which service began before 2/15/2020 (e.g., electric, gas, water, transportation (e.g., gas and transportation utility fees
assessed by state/local governments), telephone, and internet)
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POLLING QUESTION #2
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Loan Forgiveness Amount – Paid or Incurred
 Includes costs paid or incurred during the CP
• This includes costs –
• incurred BEFORE the CP and paid DURING the CP and
• incurred DURING the CP and paid AFTER the CP but ON OR BEFORE the next regular pay date
• Employee group health care costs are includible to the extent paid by the employer during the CP for coverage during
the CP, but not for coverage outside the CP (different from cash compensation “paid” rule)
• Cannot accelerate retirement benefits from outside the CP
• Can include more than 8 or 24 weeks of costs –
• for non-owner employees
• for owner-employees/self-employed/general partners, subject to the appropriate cap (i.e., 2019 comp or
specific dollar amount)
• For overhead costs, subject to the 40% limit on loan forgiveness amount
 Cannot exceed the principal amount of the loan plus accrued interest
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Eliminating FTE reductions
 3 Ways to eliminate an FTE reduction:
1. Rehire rule – FTE reduction from 2/15/20 – 4/26/20 and FTE restored by 12/31/20
2. 2 FTE safe harbors
• Employee Availability – borrower can document in good faith an inability during the CP to rehire
individuals who were employees on February 15, 2020 and an inability to hire similarly-qualified
employees for unfilled positions on or before December 31, 2020
 Must notify state unemployment insurance office within 30 days of a rejected offer
• Business Activity – borrower can document in good faith an inability during the CP to return to
the same level of business before February 15, 2020 due to compliance with requirements or
guidance issued by the CDC, OSHA or HHS, during period from March 1st – December 31st, and
relating to maintenance of standards for sanitation, social distancing or worker/customer safety
relating to COVID-19
3. 4 FTE exceptions
• EE hours were reduced and EE refused an offer at same salary/wage to restore the reduction in hours
• EE fired for cause during the CP
• EE voluntarily resigned during the CP
• EE voluntarily requested and received reduced hours during the CP
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Additional Considerations
 Key points in the FTE reduction calculation:
• FTE calculation for the reference period is static – there are no adjustments to these amounts regardless of the
status of those employees after the reference period
• FTE reduction exceptions are added back to the amount of FTEs during the CP
• There are 4 FTE reduction exceptions – note what must occur during the CP
• For example – borrower utilizes a reference period of 1/1/20 – 2/29/20 and its CP is 4/15/20 – 6/9/20. On 3/31/20, an
employee voluntarily resigns. Borrower would NOT be able to eliminate this reduction because the voluntary
resignation did not occur during the CP (but the rehire rule would apply)
 Gross spending is the starting point in the loan forgiveness calculation, which is why most borrowers will
obtain 100% loan forgiveness with a 24-week CP
• Who will not get 100% loan forgiveness? Generally, borrowers with drastic reductions in headcount or wages
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Additional Considerations (cont’d)
 Borrowers can submit loan forgiveness applications at any time, even before the end of the CP, if the
borrower has used all the loan proceeds for which forgiveness is sought, but must account for any wage
reductions in excess of 25% through the end of its CP – but no requirement to account for subsequent FTE
reductions
 SBA/Treasury released information about borrowers whose loans equal or exceed $150k
• Names, addresses, NAICS codes, zip codes, business type, demographic data, non-profit information, jobs
supported, and loan amounts in the following ranges: $150k – 350k; $350k – 1 million; $1 million – 2 million;
$2 million – 5 million; and $5 million – 10 million
• These categories account for nearly 75% of loan dollars approved
• For loans under $150k, only aggregated loan data was released
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POLLING QUESTION #3
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Loan Repayment
 For loans not reviewed by the SBA –
• Lender has 60 days from receipt of completed application to issue a decision to SBA
• SBA then has 90 days to render a decision to the lender
 Decision can be either –
• Approval in whole or in part
• Denial
• (If directed by the SBA) – denial without prejudice pending SBA review of the loan
• Borrower can request lender reconsideration unless SBA determined borrower is ineligible for PPP loan
 SBA delayed opening its loan forgiveness application portal until August 10th
 No payments of principal, interest and fees are due until the date the SBA issues decision
to lender and remits the loan forgiveness amount
• If borrower does not apply for loan forgiveness, then the deferral period ends 10 months after the
end of its CP
• If forgiveness is denied by the SBA, then the deferral period ends to the extent repayment is due
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Documentation Requirements
 Payroll costs (cash payments and non-cash benefit payments)
• Bank account statements or third-party payroll service provider reports to show cash payments
• Tax forms (or equivalent third-party payroll service provider reports)
• Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941), and
• State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or
that will be reported, to the relevant state
• Payment receipts, cancelled checks, or account statements documenting the amount of any employer
contributions to employee health insurance and retirement plans that were included in the forgiveness amount
 FTE (average # of FTEs/month during borrower’s the reference period)
• Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941), and
• State quarterly business and individual employee wage reporting and unemployment insurance tax filings
reported, or that will be reported, to the relevant state
• May cover a time period longer than the specific time period
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Documentation Requirements (cont’d)
 Nonpayroll costs (cash payments and non-cash benefit payments)
• Business mortgage interest payments
• Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the
CP, or
• Lender account statements from February 2020 and the months of the CP through one month after the
end of the CP verifying interest amounts and eligible payments
• Business rent or lease payments
• Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the CP,
or
• Lessor account statements from February 2020 and from the CP through one month after the end of the
CP verifying eligible payments
• Business utility payments
• Copy of invoices from February 2020 and those paid during the CP, and
• Receipts, cancelled checks, or account statements verifying those eligible payments
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Documentation Requirements (cont’d)
 Documents each borrower must maintain but is not required to submit to its lender
• PPP Schedule A Worksheet
• Documentation supporting the information in the Worksheet, including salary/wage data of included and excluded employees
and FTE levels
• Documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations, and written requests
by any employee for reductions in work schedule
 All records relating to the loan, including –
• Documentation submitted with the loan application
• Documentation supporting the borrower’s certifications as to the necessity of the loan request and its eligibility for a loan
• Documentation necessary to support the borrower’s loan forgiveness application, and
• Documentation demonstrating the borrower’s material compliance with PPP requirements
 Borrower must retain all documentation in its files for 6 years after the date the loan is forgiven or repaid in
full
 Borrower must permit authorized representatives of SBA, including representatives of its Office of
Inspector General, to access such files upon request
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PPP Loan Forgiveness Application(s)
 There are four parts to the PPP Loan Forgiveness Application form:
i. PPP Loan Forgiveness Calculation Form
ii. PPP Schedule A
iii. PPP Schedule A Worksheet
iv. Optional PPP Borrower Demographic Information Form
Only parts (i) and (ii) are required to be submitted to the lender
 There are two parts to the PPP Loan Forgiveness Application 3508 EZ form:
i. PPP Loan Forgiveness Calculation
ii. Optional PPP Borrower Demographic Information Form
This application can be used by self-employed individuals, independent contractors and sole proprietors that have no
employees
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The Future of Loan Forgiveness
 More changes to PPP
 Even simpler application for small PPP loans (< $150k)?
 Automatic forgiveness on loans under $150,000? $350,000?
 Latest Senate proposal for New PPP
 Eligibility limited to borrowers with 300 or fewer EEs (vs. 500 in first PPP)
 At least $25B earmarked for businesses with 10 or fewer employees
 Borrowers must have suffered 35% reduction in gross revenue in Q1 or Q2 of 2020 vs. same quarter of 2019
 Eligible borrowers would be expanded to include section 501(c)(6) groups and tourism bureaus that employ 150 or
fewer people
 Loan size of 250% of average monthly payroll costs up to $2M (vs. $10M in first PPP)
 Expanded list of eligible nonpayroll costs (subject to 40% cap)
• Would include nonpayroll costs such as PPE, expenses related to adapting work environments for social distancing guidelines,
software/cloud computing services that facilitate important business functions, costs related to vandalism, looting or damage due to
2020 protests (to extent not covered by insurance)
 Additional ineligible businesses would include finance/insurance businesses, lobbying companies, think tanks and
businesses that are partially owned by Chinese businesses or have a Chinese resident serving in a Board capacity
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TAX PROVISIONS
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Taxation of Receipt of PPP Loan
 Generally, no tax consequences on issuance of a note and receipt of loan
proceeds
 There is no accession to wealth because of the obligation to repay the loan
 This general rule applies to the receipt of a PPP loan – no tax consequences
until repayment or forgiveness
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Taxation of Loan Forgiveness
 Generally, cancellation of debt (COD) income gives rise to taxable income for
borrowers
 This is because the elimination of the repayment obligation creates an
accession to wealth
 Section 1106(i) of the CARES Act provides that any amount that would be
includible on the forgiveness of a PPP loan “shall be excluded from gross
income”
 Applies regardless of whether the income is characterized as COD income includible
under §61(a)(11) or as income otherwise includible under §61
 The CARES Act did not address the expense side of the equation
 The IRS addressed expenses in Notice 2020-32
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Taxation of Loan Forgiveness (cont’d)
Notice 2020-32
 Payroll costs, rent and utilities are deductible under §162, and interest on covered mortgages is deductible
under §163(a)
 The allowance of these deductions is subject to exceptions, including §265
 Under §265 and Reg. §1.265-1, no deduction is allowed for any amount otherwise deductible if it is allocable
to one or more classes of income (other than interest) that is wholly exempt from tax (whether or not any
amount of income of that class or classes is received or accrued)
 The purpose of §265 is to prevent a double tax benefit
 §265 also applies tax-exempt income that is earmarked for a specific purpose and the deductions are incurred
in carrying out that purpose
 Because the loan forgiveness amount is a “class of exempt income,” borrower should eliminate the deductions
relating to that class of income
 In addition, the expenses are subject to disallowance under case law and published rulings that deny
deductions for otherwise deductible payments for which the taxpayer receives reimbursement
Many legislators have stated that expense disallowance was not intended, and legislation has been
proposed to restore the deductions (S. 3612, the Small Business Expense Protection Act of 2020)
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Taxation of Loan Forgiveness (cont’d)
 Example: B has gross income of $500 and expenses of $300. B received a PPP loan for
$100, and expects 100% loan forgiveness
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Timing and Estimated Taxes
 What is the timing of expense disallowance?
 §265 states that no deduction is allowed for deductions allocable to a class of tax-exempt income
“whether or not any amount of income of that class or classes is received or accrued”
 This suggests expenses should be disallowed on a borrower’s 2020 tax return if loan forgiveness is
expected even though a decision may not be received until 2021
 Expense disallowance increases taxable income, so borrowers may need to increase their
estimated tax payments during the year to account for the increased tax liability that will be due
for 2020
 The effect of expense disallowance is that the loan forgiveness amount is taxable
 Increasing estimated taxes also helps to avoid underpayment penalties if the borrower is relying on
the current year’s estimated tax payment safe harbor
 Recall that quarterly estimated tax payments can be based on 90% of 2020 tax due, or 100% of full-year
2019 tax due
 Payments due April 15, June 15, September 15, and December 15
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Amended v. Superseded Returns
What does a borrower do if it disallowed 2020 expenses based on 100% loan
forgiveness but only receives 80% loan forgiveness in 2021?
 If it receives the decision from its lender before its filing deadline (including extensions), then it
can file a superseding tax return
• A superseding return is a return filed subsequent to the originally-filed return and filed within the filing
period (including extensions)
 If it receives the decision after its filing deadline, then it can file an amended tax return
• An amended return is a return filed subsequent to the originally-filed or superseding return and filed after
the expiration of the filing period (including extensions)
Revenue Procedure 2020-23 allows BBA partnerships with tax years beginning in 2018
or 2019 to file an amended partnership tax returns, instead of an administrative
adjustment request (AAR), and furnish K-1s before September 30, 2020
 This allow the partnerships and their partners to benefit from the provisions of the CARES Act
sooner than if they had to wait until 2021 to file an AAR
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Self-Employed Individuals & General Partners
 Self-employed individuals (SEIs) and general partners (GPs) in partnerships receive better
tax treatment than employees of corporations
 In the case of a corporation, the entity effectively pays tax on the loan forgiveness
amount and its employees recognize ordinary compensation income
 SEIs and GPs receive tax-free loan forgiveness but do not suffer expense disallowance
with regard to their owner compensation replacement amounts
 This is because such amounts are not otherwise deductible for them – unlike the third-
party model, there are no deductions to disallow
 SEIs file Schedule C and realize tax-free income of up to $15,385 on an 8-week covered period, and
up to $20,833 on a 24-week covered period
 Applies to GPs that receive their owner compensation replacement amount as a distributive share of
profit (i.e., a draw, as opposed to a guaranteed payment for services)
 The favorable tax treatment applies only to the owner compensation replacement amount – it does
not apply to payroll costs of employees
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ACCOUNTING
TREATMENT OF PPP
LOAN FORGIVENESS
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Accounting for PPP Loans
How does my Company account for the PPP loan received?
 Currently, there is no GAAP guidance specifically addressing how to account
for forgivable loans guaranteed by a governmental agency. However, the
AICPA has issued the AICPA Technical Q&A Section 3200 providing the
following advice:
 Record the loan as a financial liability in accordance with FASB ASC 470 and accrue
interest in accordance with the interest method under FASB ASC 835-30
 Companies with material PPP loans would need to adequately disclose their
accounting policy for such loans and the related impact to the financial statements.
Other disclosure considerations may include those on restricted cash until spent,
subsequent events, and potential impacts on going concerns
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Two Approach Model
While the PPP loan may always be accounted for as a debt facility, a company
that expects loan forgiveness may account for a PPP loan as a government grant
instead of debt. Therefore, there are two practical reporting models to discuss:
• Approach A: Account for PPP Loan as Debt
• Approach B: Account for PPP Loan as a Government Grant
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Approach A: Debt Model (Likely More Common)
The loan can be recorded as a debt financing liability with accrued interest, irrespective to whether the
company expects to repay the PPP loan or feels it will obtain forgiveness (i.e., a grant)
Should the company be entitled to forgiveness, the AICPA Q&A highlighted FASB ASC 470-50-15-4 which refers
to guidance at FASB ASC 405-20 regarding the derecognition of the PPP loan liability:
• The proceeds from the loan would remain recorded as a liability until either –
a) The loan is, in part or wholly, forgiven and the debtor has been “legally released,” OR
b) The debtor pays off the loan to the creditor
• Once, the loan is, in part or wholly, forgiven and legal release is received, the Company would reduce the liability by the
amount forgiven and record a gain on extinguishment
-A more conservative method-
NOTE: SBA lenders are provided 60 days to review forgiveness submissions and then the SBA has an additional
90 days to approve forgiveness, therefore it could it take up to five months from the date forgiveness
calculations are submitted to lender to receive legal release from the debt
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Approach B: Government Grant Model
Companies may account for their PPP loans as Government Grants if:
a) Their PPP eligibility is expected,
b) They are reasonably assured (it is probable) that all conditions required for forgiveness are met, and
c) They can conclude they will receive forgiveness of a specific portion or the full loan amount
In essence, the AICPA’s Q&A provides that accounting for a grant that is expected to be
forgiven may analogize to accounting under either the IAS 20 or FASB ASC 958-605 for the
liability
Under the IAS 20 model, the earnings impact is initially reported as a deferred income liability with an
income pickup taken in over a systematic basis covering the periods where the company incurs the
related expenses funded by the PPP loan
Under 958, the company would treat the amount received as a conditional contribution and gain
contingency with the initial recording of funds as a refundable advance liability, which gets subsequently
reduced and recognized as contribution revenue as qualifying PPP expenses are incurred assuming all the
contingencies of debt release have been substantially met or explicitly waived and gain is realized or
realizable
- Less conservative methods-
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Accounting for Related Items
Those other items include:
 Origination Costs – issuance costs, if any, should be a direct reduction from
the carrying amount of the loan, deferred and amortized into interest
expense over the term of the loan
 Interest Expense – since the loans provide a deferral of interest and principal
payments until the date forgiveness is determined, the interest method
should be applied
 It is not necessary to impute additional interest at a market rate (even though the stated interest
rate may be below market)
NOTE: The SBA and the US Department of the Treasury are continually updating their Q&A and therefore we
recommend that a close eye is kept on evolving guidance as it is released
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POLLING QUESTION #4
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WHY CAN’T I FILE FOR
FORGIVENESS YET?
FROM THE CONTRACTOR
PERSPECTIVE
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Delay in filing your loan forgiveness application
• JP Morgan Chase (29.2 Billion in Loans) delaying loan forgiveness
applications until at least September 10th
• Many of our Local Banks are following suit. M&T Bank – starting a test group
shortly with anticipation of opening up its portal to everyone on or about
September 10th
• Hoping Congress will pass automatic forgiveness for at minimum loans under
$150,000 and a streamlined process for loans up to $2,000,000
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EMERGENCY PAID SICK
LEAVE AND EXPANDED
FAMILY & MEDICAL LEAVE
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“What NJ Workers Need to Know About the Families
First Coronavirus Response Act”
• While the focus is NJ, the Families First emergency leave applies to all states
• NJ has its own paid family leave and paid disability. The PDF outlines how
these two leaves of absence coordinates with the Federal Emergency Leave
• https://www.dwt.com/blogs/employment-labor-and-
benefits/2020/04/new-jersey-covid-19-family-medical-leave-act
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Background
• Families First Coronavirus Response Act took effect April 1, 2020
• The law requires employers to provide two types of leave: Emergency Paid
Sick Leave and Emergency Childcare Leave
 Emergency Paid Sick Leave: 80 hours (up to two weeks) of paid leave for employees to
care for themselves or a loved one for coronavirus quarantine (ordered by a public
health official or recommended by a healthcare provider), illness, or symptoms (seeking
a medical diagnoses); or, the school/child care closure of the employee’s son or
daughter
 Emergency Childcare Leave: 12 weeks of job-protected leave for employees (the first
two weeks unpaid; the remaining 10 weeks paid), under the Family & Medical Leave Act
(FMLA), to care for their children if their school or childcare is closed, or their childcare
provider is unavailable, due to coronavirus
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Snapshot of federal paid leave due to covid-19
/ pandemic
For additional details and FAQs please see
https://www.dol.gov/agencies/whd/pandemic
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• The Federal Emergency Leave and Expanded Family & Medical
Leave allows for leave to be taken intermittently IF your
employer agrees
• May be daily (8 hours), ½ day (4 hours) or other hours as
agreed upon with employer
From the NJ Outline:
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• How do you navigate through all the choices NJ has to offer?
• Childcare and / School are closed:
 80 Hours Federal Emergency Paid Sick Leave (Capped)
 Up to One Week of NJ Earned Sick Leave
 10 additional weeks of Federal Emergency Expanded Family & Medical Leave
 NJ Unemployment
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• How do you navigate through all the choices NJ has to offer?
• Caring for a Loved One Who is Ill with COVID-19
 80 Hours Federal Emergency Paid Sick Leave (Capped)
 Up to One Week of NJ Earned Sick Leave
 Up to 39 weeks of Unemployment Insurance (NJ)
 Up to 6 Weeks of NJ Family Leave Insurance (Can be taken instead of 39 weeks of
unemployment or after exhausting unemployment)
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QUESTIONS?
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Contact Your Presenters
Daniel Mayo, JD, LLM,
Principal, National Lead, Federal Tax
Policy
dmayo@withum.com
Frank Boutillette, CPA, CGMA,
Partner, Market Leader, SBA
Financial Assistance Services and
Lead
fboutillette@withum.com
Ron Martino , CPA, CCIFP®,
Partner, Team Leader, South
Jersey/Greater Philadelphia
Construction
rmartino@withum.com
Joe O’Drain, CPA,
Senior Manager, Team Member,
Construction Services
jodrain@withum.com
Kim Hullfish , CCIFP®, MBA, CRIS,
Controller, C. Abbonizio Contractors,
Inc., CFMA SJ Board Member
khullfish@cabbonizio.com
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