8/25/20 – Owner-Employees Defined

Last night, the SBA issued an interim rule relating to “owners” and the PPP. Below are the three main takeaways from the new guidance:

  1. A definition for “owner-employee” was finally provided. For PPP purposes only, an “owner-employee” is anyone who owns more than 5% of an S- or C-corporation.
  2.  The amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the operation of a tenant or sub-tenant of the PPP borrower.
    1. For example, If a borrower rents an office building for $10,000 per month and subleases a portion of the space to another business for $2,500 per month, then only $7,500 of the monthly rent expense is eligible for loan forgiveness.
  3. Rent payments to a related party are only eligible for forgiveness if they satisfy the following two criteria:
    1. the rent payment is less than the amount of mortgage interest owed on the property during the Covered Period and
    2. The lease and the mortgage were entered into prior to February 15, 2020.