SBA clarifies PPP eligibility of payroll costs

Federal Issues SBA Covid-19 CARES Act Small Business Lending

On June 13, the SBA added question #72 to its Paycheck Protection Program (PPP) Frequently Asked Questions clarifying whether “the amounts paid by a borrower to a third-party payer for the third-party payer’s employees to operate the borrower considered eligible payroll expenses for the purpose of calculating the maximum loan amount.” Previous guidance released in 2020 (FAQ #10) relayed that “payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation.” However, because FAQ #10 was issued three days after the PPP began accepting applications and there have been conflicting interpretations of the guidance, the SBA administrator determined additional clarification was necessary.

After reviewing a September 2022 decision issued by the SBA Office of Hearings and Appeals, the administrator published FAQ #72, stating “payroll costs paid by a borrower to a third-party payer for the third-party’s employees to operate the borrower are eligible payroll costs for the purpose of calculating the borrower’s maximum loan amount, as long as the employees were not otherwise counted towards payroll costs on a PPP loan received by the third-party payer.” The administrator further explained that “payroll cost documentation which shows that a borrower paid a third-party payer for the employees of the third-party to operate the borrower will be permitted to support eligible payroll costs for the purpose of calculating the maximum loan amount as long as the employees were not otherwise counted towards payroll costs on another PPP loan, and all other PPP requirements are met, including the submission of payroll documentation that indicates the amount of wages and payroll taxes reported to the IRS by the third-party payer.”