How the Latest PPP Interim Final Rule May Impact You

Please note: This blog is current to the date of its publication, Wednesday, Aug. 26. For additional updates or assistance navigating these uncertain times, please contact us or visit our SST COVID-19 resource page.


On Aug. 24, the Small Business Administration (SBA) issued an interim final rule which provides additional guidance on the Paycheck Protection Program (PPP) loan forgiveness process. The update clarifies the ownership percentage that triggers the applicability of the owner compensation rule for forgiveness purposes and forgiveness eligibility of certain non-payroll costs.

In summary, the interim final rule clarifies:

  • Owner-employees with less than five percent ownership stake in a C- or S-Corporation are not subject to the owner-employee compensation rule, which caps the amount of loan forgiveness for payroll compensation attributable to an owner-employee.
  • The amount of loan forgiveness requested for non-payroll costs may not include any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower.
  • For home-based businesses, only the share of covered non-payroll expenses that were deductible on the borrower’s 2019 tax filings (or expected on 2020 tax filings for new businesses) are eligible for loan forgiveness.
  • Rent payments to related parties are eligible for loan forgiveness as long as:
    • 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.
    • The lease and the mortgage were entered into prior to Feb. 15, 2020.
  • While rent or lease payments to a related party may be eligible for forgiveness, mortgage interest payments to a related party are not eligible for forgiveness.

This interim final rule, as well as anticipated additional guidance, will be helpful as organizations prepare to apply for PPP loan forgiveness. SST is committed to delivering the most up-to-date and accurate information regarding COVID-19 financial assistance programs and encourage you to explore our dedicated resource page or contact us today for more.

Thanks to SST Partner Emily Cook for providing the content for this post. Click here to learn more about Emily.