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What Costs Are Eligible for Loan Forgiveness Through the Payroll Protection Program (PPP)?

Borrowers can be eligible for loan forgiveness for eligible payroll costs and eligible nonpayroll costs through the Payroll Protection Program (PPP).

Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight week (56-day) covered period.  Payroll costs are considered paid on the day that paychecks are distributed, or the borrower originates an ACH credit transaction.  Payroll costs are considered incurred on the day that the employee’s pay is earned.

Payroll costs incurred but not paid during the borrower’s last pay period of the covered period are eligible for forgiveness if paid on or before the next regular payroll date.  Otherwise, payroll costs must be paid during the covered period.  For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period. You should count payroll costs that were both paid and incurred only once.

An eligible nonpayroll cost must be paid during the covered period or incurred during the covered period.  It also must paid on or before the next regular billing date.  This holds true even if the billing date is after the covered period.  Eligible nonpayroll costs cannot exceed 25% of the total forgiveness amount.  You should count nonpayroll costs that were both incurred and paid only once.

Nonpayroll costs eligible for forgiveness consist of:

  • What are the covered mortgage obligations?  These are payments of interest that do not include any prepayment or payment of principal. They are on any business mortgage obligation on real or personal property incurred before February 15, 2020.
  • What are the Covered rent obligations?  These are business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020.
  • What are covered utility payments?  These are business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.

For additional articles on payroll costs, please visit our COVID-19 Resources Center here.

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