SBA Issues Interim Final Rule Revising PPP’s Owner-Employee Compensation Rule and Clarifying Loan Forgiveness for Certain Non-Payroll Costs

On August 24, the SBA issued an interim final rule revising the PPP’s owner-employee compensation rule and clarifying loan forgiveness for certain non-payroll costs. Specifically, the interim final rule exempted owner-employees with less than a 5% ownership stake in a C- or S-Corporation from the owner-employee compensation rule’s limitations on the amount of loan forgiveness for payroll compensation attributable to an owner-employee. In revising the rule, the SBA determined that owner-employees at this threshold cannot meaningfully influence decisions about the use of PPP loan proceeds.

The interim final rule also clarified that the amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, for home-based businesses, household expenses. Rent payments to a related third-party are eligible for forgiveness as long as (1) the amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the covered period that is attributable to the space being rented by the business, and (2) the lease or the mortgage were entered into prior to February 15, 2020.