Taxpayers with fewer than 500 employees were eligible for “paycheck protection loans” administered via the Small Business Administration (
see Q
) in 2020 and 2021. The loans were forgivable (and amounts excluded from income for tax purposes) if used to cover payroll costs. PPP loan forgiveness was determined based on how the small business client spent the loan proceeds. Under the PPPFA, at least 60 percent of the loan had to be used for payroll costs (this 60 percent threshold was reduced from 75 percent under the CARES Act).
Under the CARES Act and subsequent administrative guidance, payroll costs were defined to include the sum of:
1. payments of any compensation with respect to employees that is:
a. salary, wage, commission, or similar compensation;
b. payment of cash tips or equivalents;