Ohio Valley ABC Ask the Experts: CARES Act, PPP Forgiveness for Contractors




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Ohio Valley ABC Ask the Experts: CARES Act, PPP Forgiveness for Contractors

Published on June 05, 2024 by Cheryl Ganim, CPA
Remodeling and Home Design

In May, Ohio Valley Associated Builders and Contractors (ABC) and Barnes Dennig partnered on an Ask the Experts panel discussion on PPP loans and other aspects of the CARES Act and the FFCRA. This summary outlines the questions and answers from that session. The on-demand recording is also available for download from both ABC and Barnes Dennig. During the session, the experts discussed:

  • PPP Loan Forgiveness – Strategies for maximizing loan forgiveness, restore FTE headcount, what’s forgivable, interplay with other incentives, taxation of, etc.
  • Impact of Covid-19 on Builders and Contractors –  Revising forecasts, supply chain issues, best practices learned from Stay at Home and Global Pandemic
  • Possible other tax changes in CARES Act – NOL c/b, AMT credit, expansion of Business interest limitation, correction to leasehold improvement depreciation

Throughout the conversation, a number of questions were raised by members of the audience. We’ve summarized those questions and provided the answers below:

PPP Loan Qualifications & Forgiveness

Is there a timeline for when the SBA reviews might occur?

The banks have 60 days to review PPP loan forgiveness applications, and the SBA has an additional 90 days to review the application and reimburse the bank. The SBA also has six years to review any PPP loan.

We have a credit line, which we didn’t use, and we got a PPP loan. Is that considered a bad thing?

There has been a lot of debate on the question of having access to other funds and liquidity, with respect to needing the PPP loan. We do not have definitive guidelines, but many practitioners believe that having a line of credit does not equate to having liquidity. There is some uncertainty until the SBA issues additional guidance on their review process.

Can we use the funds to provide bonuses to employees for their work during this time?

Bonus and hazard pay are qualifying expenses for the PPP loan.

Does the loan covered period begin on the date you receive the funds?

There is also an alternative covered period that begins with the first day of your next natural pay cycle after the PPP funds are deposited.

How should needs and substantiation for taking the loan that be documented in board minutes?

This will vary with each company’s circumstances.

How does business forgiveness calculation work?

There are various thresholds that have to be met for loan forgiveness with respect to qualifying expenses, owners’ pay, caps on pay, covered period, reductions to payroll and employee headcount, and restoration of employee head count. This is a complex calculation with many variables beyond the scope of this Q&A.

Can 1099 payments be used for forgiveness?

No, 1099 payments may not be used for loan forgiveness.

Can you use the funds to pay for owners’ wages and benefits when the owners are set up as employees?

Yes, if the employee/owner is less than a 20% shareholder and not a general partner.

Our Friday payroll is always for the prior week’s work. Our loan was funded on a Monday. 4 days later we paid payroll for the prior week. Can we include that payroll payment in our forgiveness calculation, or is it excluded because the cost was actually incurred the week prior to funding?

You may include the payroll that was paid during your covered period.

We know the maximum pay calculation is based on weeks ($100,000/52 weeks = $15,384), but we pay ourselves monthly. Are we able to calculate our maximum pay in the following way? ($100,000/12 months = $16,666.66)?

The maximum is $15,385.

Is the 75% requirement also the maximum amount of the loan needed in order to achieve forgiveness? In other words, if 90% of the loan was actually used for payroll and 10% was applied toward other expenses, will the 90% be forgivable?

No, the 75% threshold is one requirement to avoid loan forgiveness reduction. If the other requirements are met, and other expenses paid are qualifying expenses, the loan can be forgiven.

I understood that we used the one-year prior / 12 x 2.5 to calculate loan amount, but then we pay our employees and come up short. Only a portion of it is forgivable. Then we choose to continue to keep the funds that were not forgiven and pay the loan for the two years – isn’t this how it works?

The forgivable payroll is based on gross payroll, but not the employer portion of taxes.

Full-time Equivalents (FTEs)

How are FTE calculated? Is “full-time” 32 hours/week?

FTE is 40 hours; part-time is 0.5 hours.

We struggle to have employees work 40 hours, as they call off work for a day. Will that hurt our FTE calculation?

Yes, if you do not pay them for that day. If they are paid, the hours count whether worked or not.

Regarding how loan forgiveness relates to employee FTEs – if your Numerator (June 30th) and Denominator (from Jan/Feb) do not match, is loan forgiveness adjusted on a pro-rated basis down to 75% or is simply a cliff (forgiven if above/not forgiven if below)?

It is adjusted; it is not a cliff.

8-Week Payroll Spending Period

Is the payroll based on the pay period or payroll date?

It is based on the date the loan proceeds were deposited into the account, and payroll paid and incurred during the 8-week period.

Have they considered extending the “8-week” time period on payroll spending to obtain the loan forgiveness?

The House has voted and the Senate has introduced a bill to extend the 8 weeks.

If an employee voluntarily quit after February 12, or if an employee were to pass away, do these events cause us to lose loan forgivability since they will not receive any pay during our 8-week period?

There is an exception for these events.

Can you prepay benefits or other bills during the 8-week covered period?


Do you think workman’s compensation will be allowed under your payroll expenses during the 8-week period?

There is no guidance as of this date.

Is it possible to prepay rent or other expenses that may not be due until after the 8-week period in order to maximize the forgiveness?


If you bring back an employee by June 30, would you be able to consider the employee’s payroll cost during your 8-week covered period even though they were not paid during this time?

You would incur half a month of group health insurance, but it is only paid monthly.

Let’s say your 8-week period ends on a Thursday, but payroll runs on a Friday. Should we pay them on Thursday that week?

you can include expenses incurred during the 8 weeks but paid just after your 8-week covered period.

Costs & Contributions

What utilities are included?

Gas and electric, water, internet, and phone costs are included.

Are cell phone bills considered a utility cost?


Do we know what is meant by “transportation costs” under utilities?

There is no guidance on this yet.

Do you think vehicle allowances paid to employees are forgivable?

There is no guidance on this yet.

Can you increase your profit-sharing contribution or increase your 401k match to use some of the money?


Are K-1 owner payments included?

Yes, if the owner is less than a 20% shareholder and not a general partner.

Is there any more word on the tax implications?

As of today, the loan proceeds are not taxable, but the expenses paid with this money are not deductible.

What about union and pension benefits paid to unions?

These are forgivable if they are retirement benefits, or wages.

Additional Resources

If you have additional questions or need assistance calculating your potential loan forgiveness, contact the experts at Barnes Dennig for services and expertise customized to your unique needs.

You can also access the full discussion recording on our website here.