Thread by @CPAPlanner

1/🤷‍♂️

#Breaking: Treasury has released Interim Regulations for the #PaycheckProtectionProgram

I'm about to review and break them down, but before doing so, I just want to quickly mention how incredible it is that @USTreasury got these out before tomorrow "Opening Day".

So👏

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Note these Regs provide an IMMEDIATE INTERIM RULE, which means they are effective right away, despite not having undergone a (normally-required) comment period.

As a result, these are Regs which CAN be immediately relied on, but comments ARE requested for a 30-day period...

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Money IS desperately needed by businesses now, so it makes sense that the Congress and the SBA are streamlining the application and underwriting process.

But it's also kind of amazing we're about to give about $349 BILLION out based on what is essentially the "honor system"

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Not much new in 2a. Everything we already knew.

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Section 2b is helpful. Makes a few things crystal clear, like:

- Household employers (e.g. you pay your nanny) aren't eligible (No profit motive, so it's not a business!)

- No businesses illegal under Fed, State OR local law, so marijuana dispensaries are not eligible...

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Section 2e provides clarity on employees making more than $100k in compensation/year.

Notably their comp IS included in loan calc, up to $100k. I thought this was clear from #CARESAct, but received feedback from several saying they were flat out ignored in calc. They're NOT!

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Reinforcing the point from above, 2g makes clear, again, that it's the COMPENSATION of the employee in EXCESS of $100k that's excluded, NOT the entire employee!

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Despite initial statement (+ info sheet) from @USTreasury saying interest rate would be 0.5%, Interim Regs confirm Mnuchin statement earlier today... rate is 1%.

This is a HUGE win for lenders. Half a point on $349 billion/year is a lot of money! That's on top of orig fees!

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"Ample inducement"?

Not gonna lie... this part reeks of a bunch of bankers going to some old friends and saying "C'mon, you can do better than that for me, can't you?"

Significant origination fees + 0.5% interest rate would have still had plenty of lenders in the mix🤷‍♂️

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Good planning point here from Treasury.

You only get one crack at the PPP 'apple', so you should probably think about getting as much as you can while you can.

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Alternative title for Section 2m...

GET YOUR ASS IN GEAR!

(But seriously... if you want to get a piece of the action, you'd better act quickly. Real quickly. Businesses are going to be lining up for the 'free money'.

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OK... here's first significant news of the Regs...

Treasury confirms that a MAXIMUM of 25% of loan proceeds can be used for non-payroll expenses.

Sorta runs counter to plain language of CARES Act, but they're gonna interpret liberally here to preserve program $ for payroll

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And only 25% of the amount of the loan that is forgiven can be attributable to non-payroll costs.

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A reminder via 2t that while this is basically an honor system loan, you DO have to certify that the economic uncertainty makes the loan NECESSARY.

Economic uncertainty = highly likely right now.

Necessity? Definitely more of a judgment call.

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If it can be easily shown that your loan was not necessary, and you clearly lied on your application in an effort to get some 'free' cash, the penalties can be... errrr... severe🤕

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REALLY important point here for CPAs, attorneys, and other persons assisting borrowers with their #PPP loan apps.

🚨YOU CANNOT CHARGE THE BORROWER DIRECTLY!🚨

Your fee will be paid by the lender, and cannot exceed certain amounts.

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Def still going to be many Qs about the #PaycheckProtectionProgram for which we don't have answers, but overall, this was good.

Several previously open Qs have been definitively answered, which is helpful b/c, you know... applications beginto be accepted TOMORROW!

End👊