PPP rules for partnerships reversed on April 14

[Michael Plaks]

Today, 4/14/2020, the SBA issued their 3rd "Interim Final Rule" (what a name!) in 2 weeks, reversing the method of applying for PPP loans/grants for partnership.

https://home.treasury.gov/system/files/136/Interim-Final-Rule-Additional-Eligibility-Criteria-and-Requirements-for-Certain-Pledges-of-Loans.pdf

"...However, 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."

Too bad for those partnerships that already filed for PPP without including their active partners' compensation. We all thought it was the right procedure - until today. Oh well...

By the way, this same rule confirmed that PPP applications for self-employed investors must be based on their net income from 2019 Sch C. That part we sorta figured out before the official rule, but not the partnership rule.

[Greg O'Brien]

@Kevin Lefeuvre check out the latest Interim Final Rule.  It provides great examples.  We did a dozen or so for our clients last week. 

In general, you take your net earnings from SE from Schedule C, divide by 12 * 2.5.  A lot of caveats and other items, but that is the basic premise.  This is also capped at $100k  So if your net earnings on 2019 Schedule C were $120k, you'd only include the first $100k.  If you pay employees by W2, this can be added as well (with normal payroll costs define within). 

https://home.treasury.gov/system/files/136/Interim-Final-Rule-Additional-Eligibility-Criteria-and-Requirements-for-Certain-Pledges-of-Loans.pdf?fbclid=IwAR35Rl3xCA7M43VREb9JKgeq4_UHYTgt79kjC6_5pF_c9vUrEOFi6Eb_Chk

The forgiveness rules are quite complex for SE and it appears that not 100% would be foriven since they use an "8/52" factor to determine forgiveness.

If you already applied, I'd wait until your banker review the app.  They will most likely ask you to revise.