Sec. 1105. Loan forgiveness
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In this section— the term covered 7(a) loan means a loan guaranteed under section 7(a) of the Small Business Act ( 15 U.S.C. 636(a) ) that is made during the covered period; the term covered period means the period beginning on March 1, 2020 and ending on June 30, 2020; the term eligible recipient means the recipient of a covered 7(a) loan; and the term payroll costs shall not include— the compensation of an individual employee in excess of $33,333 during the covered period; qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act; or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act.
An eligible recipient shall be eligible for forgiveness of indebtedness on a covered 7(a) loan in an amount equal to the cost of maintaining payroll continuity during the covered period. Amounts which have been forgiven under this section shall be considered canceled indebtedness by lenders authorized under section 7(a) of the Small Business Act ( 15 U.S.C. 636(a) ). For purposes of the redemption of a guarantee by the lender for a covered 7(a) loan, amounts which are forgiven under this section shall be treated as a default, in accordance with the procedures that are otherwise applicable to a default on a loan guaranteed under section 7(a) of the Small Business Act ( 15 U.S.C. 636(a) ).
The amount of loan forgiveness under this section for an eligible recipient shall not exceed the sum of— the total payroll costs incurred by the eligible recipient during the covered period; and the amount of payments made during the covered period on debt obligations that were incurred before the covered period. The amount of loan forgiveness under this section shall be reduced by the percentage equal to the difference obtained by subtracting— the quotient obtained by dividing— the average number of full-time equivalent employees per month employed by the eligible recipient during the covered period; by the average number of full time equivalent employees per month employed by the eligible recipient during the period beginning on March 1, 2019 and ending on June 30, 2019; or in the case of an eligible recipient that is seasonal employer, as determined by the Administrator, the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on March 1, 2019 and ending on June 30, 2019; from 1.
The average number of full-time equivalent employees shall be determined by calculating the average number of employees for each pay period falling within a month. The amount of loan forgiveness under this section shall also be reduced by the amount of any reduction in excess of 25 percent of compensation in the most recent full quarter in which the employee was paid in compensation during the covered period of any employee who was compensated— in an amount less than $33,333 during the period beginning on March 1, 2019 and ending on June 30, 2019; or not more than $100,000 on annualized basis during 2019.
An eligible recipient with tipped employees described in section 3(m)(2)(A) of the Fair Labor Standards Act of 1938 ( 29 U.S.C. 203(m)(2)(A) ) may receive forgiveness for additional wages paid to those employees. An eligible recipient seeking loan forgiveness under this section shall submit to the lender that originated the covered 7(a) loan an application, which shall include documentation verifying the number of full-time equivalent employees on payroll and pay rates for the periods described in subsection (d), including— payroll tax filings reported to the Internal Revenue Service;
State income, payroll, and unemployment insurance filings; financial statements verifying payment on debt obligations incurred before the covered period; and any other documentation the Administrator determines necessary. An eligible recipient receiving loan forgiveness under this section shall make a good faith certification that the uncertainty of current economic conditions justifies the loan request to support the ongoing operations of the borrower, and acknowledges that funds will be used to retain workers and maintain payroll.
No eligible recipient shall receive forgiveness under this section without submitting to the lender that originated the covered 7(a) loan the documentation required under subsection (e). Not later than 15 days after the date on which a lender receives an application for loan forgiveness under this section from an eligible recipient, the lender shall issue a decision on the an application. Canceled indebtedness under this section shall be excluded from gross income for purposes of the Internal Revenue Code of 1986.
The cancellation of indebtedness on a covered 7(a) loan under this section shall not otherwise modify the terms and conditions of the covered 7(a) loan. Not later than 30 days after the date of enactment of this Act, the Administrator shall issue guidance and regulations implementing this section.
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