PPP Loan Forgiveness Safe Harbor Timeline

For those dealers that applied for and received a Paycheck Protection Program loan in 2020, you have 10 months from the end of the covered period to apply for forgiveness, otherwise your loan will not be forgiven and you will have to repay the loan principal plus interest according to the terms of the note. 

The Loan Forgiveness application process can be complicated, especially if your loan was for more than $150,000.  The forgiveness process for loans of less than $150,000 has been streamlined, requiring no documentation for forgiveness.  Larger loans ($150,000+) require documentation to be submitted with the forgiveness application.

Whether the entire amount of your loan will be forgiven depends on many factors, including whether your dealership has returned to staffing levels in-place as of February 15, 2020.  If your dealership has reduced staff during the loan period, as compared to pre-pandemic levels, the amount of your loan that will be forgiven may be reduced unless you qualify for the Safe Harbor 1 discussed below.  

FTE Reduction Safe Harbor 1 Exemption
If your dealership reduced staff during the “covered period” (the date of your loan plus 24 weeks) you may be eligible to use the FTE Reduction Safe Harbor 1 exemption (Form 3508 “PPP Loan Forgiveness Calculation Form”).  You must establish that your dealership was unable to return to the same level of “business activity” between February 15, 2020 and the end of your covered period due to compliance with government guidance/requirements issued between March 1, 2020 and December 31, 2020  – which includes NYS Executive Orders based on COVID-19 guidance issued by CDC. 
 
The FTE Reduction Safe Harbor 1 allows borrowers to not have to reduce any potential loan forgiveness as a result of FTE Reductions – dealers would enter 1.0 for the FTE Reduction Quotient.  

Issuance of these orders undoubtedly impacted your dealerships ability to conduct business.  In order to successfully support your assertion of the FTE Reduction Safe Harbor 1 exemption, you will need to demonstrate that these orders prevented you from returning to the same level of Business Activity as before February 15, 2020. For Instance, the requirement for remote/electronic sales reduced the number of vehicles sold, and/or social distancing/capacity limitations lowered the number of walk-in customers.
      
To assist dealers considering taking advantage of the FTE Reduction Safe Harbor 1 exemption, GNYADA has compiled a timeline of relevant Executive Orders issued by Governor Cuomo along with guidance provided by New York State agencies. The timeline is available here.  

GNYADA strongly recommends that dealers consult their dealership accountant or attorney for both preparation of their PPP loan forgiveness application and the application of this safe harbor to their individual dealership’s unique facts and circumstances. 
 

GNYADA thanks Edward McWilliams, CPA Partner at Cerini & Associates, LLP for his contributions to this article.

The information contained within this article is provided merely to alert dealers to the complexities of the PPP Loan Forgiveness application process and to provide easy access to relevant government orders/guidance which can be used in support of a dealer’s loan forgiveness application. It is not intended as legal advice, tax preparation guidance or to suggest that dealers should use the FTE Reduction Safe Harbor 1 exemption.