Welcome everyone. My name is Chris Nichols. We're going to kick off this webinar shortly. We hit capacity. So those of you that are on, welcome. Those of you who are listening to this on a recording, my sincere apologies. We did try to increase the numbers apparently we had problems and we didn't release it enough. So apologies on that one. We'll go ahead and get started now. I want to welcome all our customers at CenterState and our new partner, South State Bank. This webinar topic is How To Optimize Your Forgiveness. The objective today is to kind of give you an overview of some of the trickier aspects program and to take as many questions we have. We're going to run probably about 30-45 minutes for presentation and then take questions after that, we'll go for the full hour. Before we take the next step, I do want to offer a disclaimer that you see on your screen right now. We'll try to go into as much detail as we can, but every business we point out as a particular situation that we really don't know what's going on. And so we're not the ones to give you a definitive answer, you should definitely check with your tax professional for that. Further, this is still an evolving program. We are waiting for the SBA and the Treasury to give us the final guidance. And so this is continues to evolve and there's still many many questions where we don't know and we're just going to take our best guess and we'll try to point those out. It took... just to put this in context, this is going to be a live webinar, today, we're going to record it. So in case someone missed this will have this on the website will be doing this every Thursday at this time. You all will get invites out for the next several and the thought is, at this time, we'll do a network will delve into specific topics. Next week's topic is going to be on owner employees and we'll, again, take questions and cover of the topics we cover today just to enforce those lessons. We also, starting today, we'll have a series of quick 10 minutes or less videos on our site the two are How To Manage The EZ Form, The 3508 EZ Form, and see if you qualify for that and then the difference between 8-week and the 24-week Covered Period, we'll cover some of that today, but do check out both of those videos once they're available today, on the site we'll be adding I think four more next week. Well with that, let's get in, oh, also we're sending out emails each time every week. So if you're not on that shoot me an email and we'll get you on that distribution list. And then we continue to continue to update our website two times per week. So do check that out for updated information. With that let's get into the meat today. We have lucky enough to have two experts you see on your webcam there. I want to introduce John Carpenter, Principal at the CPA firm of Cherry Bekaert. In our industry, John is one of the foremost experts on both PPP origination and PPP forgiveness. He is one of the most outspoken educators in our industry and as well as a partner at CenterState Bank, and so his firm helping us both our customer education and with forgiveness processing. Also with us is our very own Josh Harris. Josh is a senior credit administrator with us at CenterState Bank, and he is in charge of the credit aspect of approvals. So he's... him and his team are the ones behind looking at every application and approving each application. So he is the foremost expert we have here at the Bank and can hopefully answer some questions that we'll be presenting today. With that, the agenda in front of you, we're gonna kind of talk forgiveness, talk about the calculations, talk about some of the limitations. We're going to just touch on the documentation required. Josh will do an in-depth video recording on that for next week, but we'll talk about how to start to prepare those documents, what's needed, and then we'll take Q&A. Many of you have seen the changes already that have been released by the SBA that has been in process. We saw the advent of the standard form a couple months ago and then just a couple weeks ago with the PPP Flexibility Act, the SBA came out with the 3508 EZ Form, making a shorter version of the standard form. And so that we have fuel on that how to qualify. There are three criteria, which we get into in the video that Josh or John may touch on today and then we have the 8 to 24 week question, again, we talk in the video on that. When that move the level of payroll qualifications from 75% down to 60% making it easier to qualify. So between the 60% and the 24-week period, we expect a higher percentage of forgiveness across the board. Finally, we have more restrictions on owner-occupant... owner employees we'll talk about some of that today and go more in-depth a week from today on a live webinar. We will also quickly add that we still are waiting for final guidance. It's probably about three weeks delayed by the SBA and in their defense, they're really waiting on Congress to quote-unquote put down their pen. There's still some changes that are rumored to take in place. As far as when you can file for forgiveness, we look to open up that shortly probably August 10th is what we're currently targeting but we're going to still need to see those final requirements to help us finalize the technology. I've talked enough, with that, let me turn it over to John and Josh. John... John, you want to take it away? I will, thank you Chris. So let's... let's first just highlight for everybody because we've been getting a lot of questions on this, you know understand that the numerical components that go into forgiveness are definitely different than what everyone experienced when they went through the application phase. Just as a, as a refresher remember than in the application phase, you were qualifying for your PPP loan based really on two and a half times average monthly payroll costs and we've got a summary here what comprised the bulk of those average monthly payroll costs. The, the math behind forgiveness is quite different in the components are some of the same items but there's some additional items in there. So just keep in mind in forgiveness, you know, now you're talking about it was originally eight weeks then it got expanded to 24 weeks, but now you're talking about up to 24 weeks of the same type of payroll costs, salaries, wages, commissions, tips with a, with still of max of $100,000 annualized per person, employer portion of health, employer portion of retirement, mortgage interest or rent on company facilities and utilities, and now in the Forgiveness phase and we will touch on this today, but probably need to do a whole separate webinar on the reductions then Borrowers have to take into account as related to wages and salaries that may have been reduced during the Forgiveness period or FTE reductions. So just realize the math behind forgiveness is, is based on some very different components that what went, what went into the application phase. Let's talk about payroll cost, first, as we said in order to get full forgiveness, payroll costs have to be at least 60% of the loan forgiveness amount. Many people have asked, "Well, what if I don't hit 60%, what if I only hit 55% does that mean I get no forgiveness?" Not at all. It just means, I have stated the other way, that your non payroll costs can can only make up 40% of your total loan forgiveness amount. But if you hit 58% of a forgiveness amount based on payroll cost then then you still get most of, in fact, the very large majority of your forgiveness, it may just be reduced by a few percentage points and and and and a change that occurred in early June with passage of the Flexibility Act was the option that rather than going the initial 56 days or eight weeks, borrowers could go to a 168 days or 24 weeks for their forgivable expenses. Remember that these are wages paid only to employees whose primary residence is in the U.S. That has nothing to do with citizenship, that has nothing to do with tax home, has everything to do with just there where their primary residence is. The Forgiveness period for most people is going to start on the day that the PPP loan was funded. If you are a company that has either a weekly or bi-weekly, not sure anyone has something more frequent than that payroll cycle, then you do have the option to go with what's called an Alternative Covered Period which can start the first day of the first pay period after your loan funding. But for probably most borrowers the Forgiveness period is going to start on the day the loan was funded. And what kind of wages can be included? Well, it's the wages that you either pay or incur during that forgiveness period if you have a payroll... if let's say you got your PPP loan funded on April 20th, and you had a payroll that happened five days later, that may cover a pay period that started before your PPP loan was funded, can that payroll be included in forgiveness? Yes, it can because it was incurred after your loan was funded. The regulations also say that you may include payroll expenses up to the end of your forgiveness period and as long as they are paid in a pay cycle at the next pay cycle after that forgiveness period ends, those may also be included. So for the accountants in the audience something you really do get a mix of cash and accrual accounting you're getting credit for payroll pay during the Forgiveness period and on the back end you're getting a credit for payroll incurred, but paid in the next cycle after the Forgiveness period ends. We note here, What is... What is considered the effective date of payroll? Well as we say in this blue box here, it's either the date that you originated your ACH credits for direct deposit or the day you distribute paychecks. Now those may not necessarily be the same day. and we would probably say you should use the earlier of the two which would be the date that you originated ACH is for direct deposit and there are maximums per employee. So you may not count in forgiveness any more than $15,385 per person if you're using an eight-week period or 46,154 if you're using a 24 week period, these are for non-owner employees. We talk about owners here in a few slides. What if you choose a forgiveness period that's between 8 and 24 weeks? SBA has not really issued guidance on this but the presumption I think by most professionals who study this is that you do need to prorate it. So if you're using a 12-week forgiveness period, then your max per employee would be roughly 23,000, not, not the full 46,000. Other, other items to keep in mind as I said, it's 8 or 24 weeks, severance pay can be included. Payrolls paid right after the funding day are included. How about bonuses? Bonuses can be included. As a CPA firm, our, our guidance to, to a lot of clients has been keep it reasonable. Well, what's a reasonable bonus? Well, probably if you were to say "I want to pay a bonus of 40% of an employee's base salary, is that reasonable?" That is probably a little more than reasonable, but 5 to 10% bonuses for anyone is probably fine. And then we'll talk a little bit more in a couple of slides about owners, but owners are, have special rules. Owners are capped at either $15,385 if they're using an 8-week period or $20,833 during a 24-week period and it's the lesser of $20,833 or the two and a half month equivalent of whatever their 2019 compensation was including health and retirement. What else falls under payroll cost? I think most people think of payroll as wages, but there are some other categories in here as well. And that is mainly employer portion of health and employer portion of retirement. And I do emphasize this is the employer portion. We have we do not get to include the withholdings that come out of pay from the employees to fund their share of either health or retirement. So it would be the employer portion of health which includes premiums and this is and, and what, what falls in in health? Well, it's, it's dental, vision, HRAs, FSAs, not HSAs, long-term and short-term disability is not included, but your typical medical, dental, vision are included. Health care premiums if you have a self-insured plan, can be included. There, there may need to be, you may need some support from your administrator to justify what's a reasonable contribution to that self-insured plan. And we make a note here about prepaid premiums and contributions. SBA has not issued any definitive guidance on whether prepaid contributions for health insurance, and we're going to see this on retirement as well, we've not really specifically said whether prepayments into a health plan on behalf of the employees is allowed, we're hoping there's some guidance that will come out sometime here fairly soon to clarify that. And then retirement plan contributions much like health, remember, this is just the employer share of what goes into retirement. So for a lot of companies, this is going to be the 401K match or this will be an employer contribution into a simple IRA. Not many companies have, have traditional pension plans anymore. But if you did then contributions into a traditional Pension Plan of course would be qualified and if... now that we're into July, I doubt there's very many employers out there who have not already funded their 2019 contributions. But if by chance you have not funded your 2019 contributions, or if they were funded during your forgiveness period, those can be included. And then 2020 contributions, or employer match, profit sharing, and any other allowable defined benefit plan if it's funded during the Forgiveness period than that can be included in forgiveness. Here again, we note prepayments or prepaid contributions may be allowed. We're hoping for some better guidance from SBA to clarify that. You do need, you know, we make the note here at the bottom, be careful, be sure to check if you're, if you're unsure whether the contributions you're making not only will qualify for PPP, but be in compliance with your plan document probably a good idea good idea to check with your plan administrator to make sure that the contributions you're thinking about making are, are within compliance with the plan and are not exceeding any maximum contribution limits that you built into your plan document. So let's talk for a second about owner employees. Well, first of all who is an owner employee? Well, this is very, the SBA's made clear that they're basically including, it's a very broad definition, so, sole proprietors, any member of an LLC, any partner in a partnership, any shareholder of a C-corp or escort and this is regardless of ownership percentage. So if you have even some 1% shareholders, they are considered own, owner employees. If you have some employees who hold Phantom stock or options or none stock compensation, they would not be included. These are, these are actual shareholders who've already had their stock issued to them. This is probably everyone if you're an S corp or an LLC, this is everyone who's getting a K1 but it's not going to be anyone who's not getting a K1. And so Congress rightly or wrongly put some some limitations around how much compensation for owner employees can be included in forgiveness and it's been capped at either 15,385, if you're using an eight-week period, or if you're going longer than an eight-week period, it's the lesser of $20,833 or the two and a half month equivalent of your 2019 compensation including health and retirement contributions. So for owner employees, they will need to provide documentation to the Bank that, that documents, what was their 2019 compensation? It's going to be if you've got a W-2 that's, that gets included. And if you're either reporting on a schedule C, schedule F or the SE income off your K1, that has to be reported. But this, you know, where this is going to potentially create some, some consternation as I mean, you do have to look at not only the compensation has been paid to the owners during the Forgiveness period, but you got to compare it to, to what they what their compensation look like in 2019. Undoubtedly, there will unfortunately probably be some borrowers out there who, who perhaps in 2019 had very low taxable income, either on those schedule C's or on the partnership returns or the S Corp returns and if that, if that income was very low and wages were low, than those owners are going to be limited to a percentage of that which may very well be less than what was incurred during the Forgiveness period. And then for building, properties rents and mortgage interest on real or personal property, keep in mind, this is not just buildings, but this is personal property owned by the Business that those expenses are eligible for forgiveness. The rent or mortgage obligations have to have been in place back on February 15th, and the Bank will require, Bank will require, just like a SBA will require, that you provide upload copies of either the leases or the promissory notes or the amortization schedules that evidence that those obligations were in place. Past-due amounts, here, are forgivable. That can be included. Prepaid mortgage interest is one of the few categories that SBA has categorically said cannot be included. Prepaid rent, we think may be permitted. We're waiting to get some better guidance. from SBA on that. And then really the last category of forgivable expense is utilities. And some of these are I think intuitively pretty easy to understand. Your basic electricity service, natural gas, water, telephone is included, including cell phones, company cell phones can be included, internet access is included. There is a category that's been outlined by SBA called transportation. They've provided not very good detail on what's included in transportation, what little anyone's been able to determine is that if you're purchasing gas for company vehicles, that appears to be an okay expense to include in utilities. But, but other things in transportation are probably not allowed. It is clear paying any past due amounts or prepaying a utility that were the bill is due in the month after your forgiveness period ends. That's okay, prepaying farther than a month in advance, probably not okay. And you will need to provide evidence of utility bills, evidence of the payments, and utility bills going back to February 15th to document that this is a utility service that was set up prior to February 15th and not later. And we know they're at the bottom, we've seen over the last few weeks, you know, a number of examples of, you know, what else might be included in, in utilities? Well, we have we have a short list here of things we think that are not included like trash and recycling, outdoor maintenance, email service, VPN service, other IT Support, what little we can get from the SBA is that those are considered, those are not really considered utilities by SBA, those are considered more IT services. And with that, I'm going to turn it over to Josh to talk about some documentation items. All right. Thanks John. So we have maybe three or four slides here that are going to kind of just discuss the documentation requirements around the PPP forgiveness process. And then we're going to as we kind of wrap up these couple slides. There's also kind of a "how to prepare" or "things to remember" slide. So just so you kind of know where I'm going to go with my piece of the presentation. There's actually some tips I want to hand off. And I'm probably going to kick off with its kind of my introductory comments to the next couple of slides. We'll then go through these couple of slides and then as we wrap up, we'll have a couple of reminders and before we open it up for Q&A. So before I dive into the content that you're looking at on page 16 having gone through a couple reviews now at this point myself just to kind of get my hands dirty and get into a couple of these and see what are we looking at? It became readily apparent that there were some tips that we could pass along that I think will help everybody and then, so let me pass those along. So the first thing I think is to be your real friend in this entire process is organization. Bottom line, one of the easiest things for you to do to expedite the process for yourself and for the Bank and in the future of the SBA with the take a deep look at this, is to make sure that your electronic files are very well organized and one of the simplest ways to do that is to elect, to name your electronic files by the line number that relates to the application, then by the document type and then by the date. So for example, if it's a payroll report, you might say line one payroll report 5120. So that is an approach. That's really going to help you. Another thing. I would just pass along is that it's very important to understand that the 3508 and the 3508 EZ have their own set of instructions. And so I can't emphasize enough how important it is, just as you prepare these to actually read those instructions, because a lot of information that we are passing along to you and this webinar can actually be found readily available on the instructions to the forms. And so that can be a real friend to you as you're going through this, I would just highlight that for everybody to understand that if you have questions about what documents are required we're going to highlight it here, but you should also see the exact same type of information on the instructions to the to the applications. Understand, too, that when you look at those instructions, you're going to see two types of information that need to be required: One, one type of information must actually be provided to the Bank. In fact, if you do not provide it to the Bank, you will not be eligible to receive forgiveness. And so I think it's important for you to understand that you're starting to pull together your documentation packages to understand what the SBA clearly makes, clearly states will be required to be submitted to the Bank and then what will be required for you to just maintain in your files and your, in your personal records, and your corporate records. Another helpful tip is for you, as you're putting together your application, to kind of put yourself temporarily in the shoes of a, of an auditor. You're going to, I guess, I'd encourage you to kind of pretend that you're being an auditor for the day or two that you're pulling this together and understand that what, in order to expedite and in order to maximize the amount of forgiveness that you accomplish, you really are going to have to put together a nice clean package that has essentially two or three documents for every single item that you claim. So you're going to need to provide proof that the item is the legitimate item, and you're going to need to provide proof that you actually paid it. And then I think the third piece of information, you know, would typically just be any notes that you need to supply so that if you were, again, kind of creating a paper trail or an audit trail that somebody could look at the source document, look at the proof of payment and then see any relevant notes for why you adjusted the source document and so that the person reviewing your file can kind of track through and say "hey I see number, you know this number, and I see how it came from this document after adjustments." Lastly, before I jump into the slides, I think another really key way for you to be efficient in this process, and again, to kind of maximize or optimize your result is to prioritize where you're devoting your energy. So as most of us probably understand payroll has been a major emphasis of this entire program from start to finish whether was origination or whether it's forgiveness. And so one of the most common or most, the most obvious place for you to place your attention would be on payroll. I would start there and, and that's going to get you the most lift as quickly as possible because in all likelihood for most businesses that's going to be the line item that will comprise the vast majority of your forgiveness. So, so start there now oddly enough, I would say after you kind of nailed down that number, the next way to prioritize your process is by what's the easiest to verify what numbers will be the easiest to prove and I think in that regard, two of the easiest things that will, that you can prove after payroll would be your rent interest and utility payments. So only at the end if you're still trying to figure out "hey, I, you know, I had a forgiveness amount of X, but I'm only at 80% and I need to try to get to my full 100%." At that point, you could then maybe start focusing your energies on the two last expense items which would be health insurance and retirement. And the reason I say maybe leave those to the end. If you don't need to ever touch those then you're saving yourself a lot of time and energy. However, if in order to get to maximum forgiveness, you need to get into the health insurance and retirement side. That's an area that's going to have a lot of nuance and a lot of adjustments and so hopefully that helped everybody in terms of just understanding, "hey, as I'm digging into this is, I'm prioritizing my approach. How can I get the most bang for my buck?" I would say first focus on the biggest dollar amount, which is your payroll, second focus on those the lowest hanging fruit, that is easiest to prove which would be your utilities, rent, interest, expense. And then lastly, if you're still trying to drum up the last couple of dollars to get your maximum forgiveness, then go to those harder to items such as health insurance and retirement benefits. So, anyways, I apologize for kind of going out of order a little bit, but the jumping to the slides, slide 16, the bank will approve forgiveness and forward to the SBA for further approval. But in order to do that, we have to obtain a mount of information literally mandated by the SBA. So that would include things such as your payroll report tax forms, which really is going to for the most part be your form 941 your quarterly payroll report. That overlap the Forgiveness period again canceled checks or proof of ACH payments, transcripts of account, or other documents that just verify the payment of wages will also be looking for in anything that you know identifies the interest that you paid lease obligations and utility payments. So the other thing that you're going to need to at least have proof of in your own personal record is all the FTE, the full time equivalent information that's going to go into substantiating whether you maintain the baseline from the start of your program that from the start of your covered period so if you were to ever get audited you want to make sure that you have proof that "hey, day one of my covered period I've started with, you know, 12 employees and by the end of my covered period, that ended with 11 or 12 employees," that does not necessarily have to be provided to the Bank. You can provide it if you'd like, however, you absolutely must make sure to maintain that in your own corporate records. And let's see, I think that covers slide 16 we can go to slide 17. John Carpenter: Hey Josh, I will jump in and just, just clarify the applications do require release, the 3508 does require, that borrowers provide support for their FTEs during that reference period either January-February of 2020 or February through June of 2019. Josh Harris: Got it. Thank you, John. Chris Nichols: Josh - John. We got a lot of questions on companies that don't have the IRS 941 form. What do you all suggest for backup support then? John Carpenter: Well, you, you, you kind of have, if you're paying payroll, you have to file a 941. Now if you're in a PEO, professional employer organization, and your PEO is filing that for you, than the PEO can probably generate reports that will serve as a substitute for a 941, but everyone, this and, and Chris, it kind of touches on a couple things. If you have payroll then, then you have to be filing a 941. Now one thing that was made clear on the application is that SBA is requiring copies of 941s for those periods that overlap the covered period. 941s get filed at the end of each quarter: March, June, September, and December. If your whole forgiveness period ended before June 30, then you only need that 941 for the second quarter. If your forgiveness period goes anything past June 30, even a day into July, then then you will need to include not only the second quarter 941, but a third quarter 941, you can't do that. Third can't prepare that third quarter 941 until the third quarters over and that's at the end of September. So that's maybe a little detail to keep in mind is that if your forgiveness period is going into July or August, even then, then you can gather up all this information. You really can't apply for forgiveness and have a complete application until you've got a third quarter 941 prepared. Chris Nichols: Okay, another question on those businesses that needed to rent additional space. We have one that had the store tables and chairs. Can they include that under the mortgages and leases? John Carpenter: Only if the rent, only if the, the lease was, was put in place prior to February 15. So we've seen where if you had to rent additional space in the middle of COVID say in April and that was a new lease than that that's not included because it had to have been in place at February 15. Chris Nichols: And Josh questions for you, if employees have expenses on their credit card, so maybe they're paying for many vehicles for transportation, etc, credit card receipts, Amex receipts, for example, are okay? Josh Harris: I guess it just depends upon, I mean, if it's for an eligible expense, I think we can take it from any, any source as long as it's deemed an eligible expense. Chris Nichols: Yep, that was going to do... Josh Harris: I think the, I think the question would be I question... I guess I would just wonder how many employees would be paying these types of expenses on their corporate card? So I wouldn't expect if utilities paid on a corporate card and I wouldn't expect to see interest so that would narrow it down to transportation so maybe there's some fuel expense or something or as John pointed out, the transportation category is a bit, is it bit undefined at this point but as long as it's for an eligible expense and that, that’s the up for debate a little bit we're not going to care where it was paid from as long as you have proof of payment. Chris Nichols: And ultimately you'd like to see both the liability of the charge and the actual charge itself. So like an invoice and a credit card receipt or a bank statement showing it coming out something like that. Correct? Josh Harris: Correct. Chris Nichols: Okay, keep going. . Josh Harris: So I think we can okay. So looking at slide 17. I don't think there's too much new here. So other required loan documents that you should maintain in your files would be support for the certification of necessity. So one of the basic criteria of this entire program was that we had as borrowers, you know, we had to certify that there was an actual legitimate need for the funds. So that would be proof that you should retain in your files. You would should support the eligibility for the loan. So if there is any everybody should should provide or maintain this but especially if you had questions at the beginning or outset of the origination phase and if you had to go through kind of a Q&A with your bank or directly with the SBA to say "hey, am I eligible?" You definitely want to maintain your eligibility records in your corporate files? I'll and then the last note here is that this information need to be maintained for at least six years after forgiveness or repayment? So plan on having that file tucked away in your corporate records for a good, a good amount of time. They can go to slot the next slide. So as we already said we need to maintain this information for six years and I think one final thing we need to remember there aren't many of these. In fact our bank, you know, probably only had several dozen. That are over 2 million, but if you have a loan over 2 million dollars, there's no safe harbor from audits for the for those folks with a loan amount of more than two million dollars. So I think it should say I think the bullet should say there's no safe harbor from audits for borrowers with loans over 2 million. Is that, is that correct? John? Are we trying to say? "Hey everybody needs to be ready." John Carpenter: Well, it's really everyone needs to be ready. I mean SBA has as being treasury have that they plan to audit every loan over 2 million now whether they actually follow through on that promise, who knows but they are promising to audit every oan over 2 million, but part of the point is that, that does not exempt everyone who's under 2 million from a potential audit because it's been made pretty clear that they will conduct audits of loans under 2 million. I think logically we can assume it's going to be a smaller number or smaller percentage and but there have been no details released on how they plan to go about that audit process. Josh Harris: Yeah, that so you bring up a good point. Yeah, you bring a good point, John, then so obviously those folks who have loans above 2 million need to be on heightened alert, those who are under 2 million cannot sit back and think that there's no risk and I think the reason that that matters is when we went through the origination process. It was not uncommon to receive an application that was 25% complete or 50% complete and it looked like there was very little effort to kind of compile a real package. So I guess the point that we need to highlight with folks is hey when it comes to forgiveness, there's much, there's very little latitude in terms of what you provide and what you don't provide if it's required. It's required and the Bank is not asking for it for fun. We're literally checking the boxes that are required by the SBA. So hopefully it keeps us all on the same page. I think we can go on. Let's see. So, how can we prepare? I gave you some of those tips at the very beginning of my presentation and this kind of summarizes some of them again. So you've already been tracking. Hopefully you're eligible forgiveness payment from the time that your PPP loan was dispersed. We're going to need to see copies of lease agreements and mortgage documents and evidence of utility services that were in place as of, or prior to 2/15/20, start saving all these files whether it's in paper format, electronic format. And like I said, naming them in a way that's consistent and easy to follow and easy to organize, you know, basically we're putting together that, that audit package so we want to just be paying really close attention to your FTE’s and your salary and wage levels. So if you have your eye on the ball on this in this regard, you're organized. You're putting together a complete package. You, you were, you're monitoring your FTE count your salary wage level. You're really doing everything. You can to have, you know, the maximum success with this forgiveness process. So John, do you have any other comments that you'd like to add on this line? John Caprenter: I think you fit it all and again, I think as you touched on earlier, Josh, the whole arena of FTE counts and whether companies are subject to a reduction that's going to need some study and people need to allocate some time to reviewing those requirements and keeping those records because at least we're certainly finding alreadythat it's not it's pretty easy to get tripped up with the heh reductions Josh Harris: So one thing we know is very important is to try to help folks understand just the timing of how this whole process is going to unfold. So the first bullet here talked about just the timing of when the Forgiveness application needs to be submitted and it happens to kind of coincide with what's called the Payment Deferral Period. This is one more of those items that kind of shifted from the beginning of the, you know, the origination phase when we started to now with all the new IFRs and the new, the new guidance that’s been published, but the bottom line is that borrowers should be submitting their applications for forgiveness by the time their deferral period expires and right now their the deferral period is 10 months from the last day of their covered period so, so that's how much time you have now. Probably not prudent to wait till the last minute. So we expect a lot of folks to apply before then. In fact, we have some pretty good indication that a lot of our a lot of our clients are going to apply early in the process. So once you have submitted your application to us, we must, by the SBA regs. we must respond within 60 days. That being the case, our target is to take no more than 30 days and that we're looking at that obviously is kind of outside window that if you submit a complete package to us and again, I think I should emphasize complete, because the that 60-day window does not start ticking until we have a complete file in hand. So just to make that bold and highlighted you get us a complete package. We have 60 days to turn around response. However, internally our goal is to respond within no less are no more than 30 ideally. It won't take even close to that. But that's we're trying to set expectations. So that being said once we have made our decision once we've reviewed all the documents once we have become comfortable that the Forgiveness amount is acceptable and that it's supported by the documents. We then will submit it to the full disclosure. I don't think we exactly know the mechanics yet of how that's going to be submitted to the SBA but that will be a step that’sgonna be necessary. So once we've approved it we’ll submit to the SBA and the SBA at that point has 90 days to make a determination based upon the package that has been put together and based upon the Bank's decision. So that's the general timeline that we're working with last bullet point out that amounts not forgiving our due at the scheduled maturity, not immediately. So if for some reason you don't get forgiveness the loan will default to you know, if you got $100,000 Forgiveness Loan and only $75,000 is Forgiven the remaining 25,000 will be repaid over the 18 months or 24 months that are left in your original loan term. So I believe that covers that slide. So, Chris, we're kind of right on time with that 45 minute time slot. It looks like we have some time for some Q&A. Chris Nichols: Perfect we have yards of questions. Let me knock out a couple right now, if the business picks up a hundred percent of the benefits expense that can all be included. Is that correct John? John Carpenter: That's correct. It's employer portion whether that's one percent or a 100% Chris Nichols: Excellent. Talk, John, talk a little bit about subcontractors and independent contractors and how those are included or not Included. John Carpenter: They are, they are not included. So, if we're talking about 1099ers here, just like at the application phase when you applied for your PPP loan, it was, I think made pretty clear, that in calculating that payroll expense, that was the payroll of your employees, your W-2 to employees, it did not include 1099ers and forgiveness is consistent with that. These wages can be included in forgiveness or the wages of your W-2 employees. It's not the wages of your 1099ers, if you know kind of a separate note. How did, how do those 1099 people would get the benefit of any PPP money? Well, they can apply on their own or they should have applied on their own so independent contractors who receive all their compensation through 1099s. They would apply individually probably as a sole proprietor and and would get their PPP money base probably on their schedule C. Josh Harris: And, John, if I could piggy back on that real quick, I just want to, I want to make that statement even stronger because that's something I've dealt with multiple times during the origination phase. There's a lot of confusion around independent contractors. And so I think what everybody on the call needs to understand is that if you are paid by 1099 by definition, you are an independent contractor, so I want to make that very clear because people think oh no, it's a 1099... a 1099 employee. There's no such thing. So I just want to make that super, super, super abundantly clear that if you paid somebody by 1099, by definition, they're an independent contractor. Therefore, you cannot claim them in your PPP loan or in the Forgiveness piece. They would instead apply on their own and I to take it one step further. And again, hope I don't offend anybody by being too rough, but I do want to be just really clear here, this idea is across all industries. It doesn't matter what industry you're in. It doesn't matter what laws are in your industry. If you paid somebody by 1099, they cannot be included. So I just state that just because there's a lot I had that conversation multiple times and I think it'll save every time if they can kind of understand that piece so it's a really good question one that everybody needs to be very clear on. Chris Nichols: Let me knock out a couple, people are asking, I want to remind everyone, while these forms, both the 3508 Standard and the EZ form, are available for you to look through, They are on our website. I want to caution everyone that you don't need to fill those out. You will fill those out online and will step you through a series of questions of what we call a wizard that will direct you and will validate which form you're too funny. So that's all taken care. of, but if you want to get a jump on it, be sure to check out those forms and as John and Josh said particularly the instructions as they'll make your time on the site go much faster question we got was when will we hear back? I'll let Josh jump in but for the most part what we're targeting after you file, we have 60 days of the Bank to respond to you, we're going to try to do that in 30. That's our goal. Maybe a little longer part will probably, probably be a little shorter once we get up and running and then we, electronically, we're one of the few entities there's probably only 30 plus entities, many banks, that will file electronically with the SBA. We're going to have those capabilities. So as soon as we're done with your application will go ahead and file it with the SBA. They have 90 days to get back to us again. They're going hoping to do sooner than that, but they'll have 90 days to get back. We will update you on your status as we go along, but we're not quite sure what status reports we're going to get. But to the extent that we do have status reports will try to keep you updated that will be on the site and then you'll have a decision should you not get full forgiveness and maybe partial forgiveness will then direct you on how to go from there. Other than that, we will finalize how to finish off and complete the Forgiveness process. John, for owners does the $20,833 dollar maximum include the employer contribution to simple IRA? John Carpernter: It does that $20,833 includes any contributions made on behalf of those owner employees for either health or any any kind of retirement be it a simple IRA and employer match into a 401k. It's all included in that $20,833 And I'll add unfortunately I'd say, unfortunately, for the business owners, there's, that's a hard cap. And, there's probably someprovisions of tax law that we could argue that make it somewhat unfair for the business owners, but this was really a political decision on the part of Congress and Treasury. Chris Nichols: Okay, we have a nonprofit that rents out or provides homes for the homeless. So they have rent on those homes. Can those be included under the mortgages? I would say yes, as long as the long as the rent obligations were in place on February 15th. It's, pretty clear that that as long as the rent obligation is in I guess we'll say that as long as the lease is in the name of the nonprofit and the obligations in place prior to February 15th, then that's okay. You know SBA is contemplated that many businesses do have multiple locations and multiple offices. They have some extra side warehouses and things like that. That's that's all okay, as long as the obligation was In place earlier than 2/15/2020. Chris Nichols: Okay for companies that have already met their forgiveness maximum. They can do it all through payroll. So no surprise there that they can achieve a hundred percent of their forgiveness just through payroll. So we had too many questions on that as soon as I think John got you one of you said that as soon as they finish off even if they've opted for the twenty four week period they'll be able to file prior to the end of their twenty four week period is that correct, right? Josh Harris: Yes. Correct. Chris Nichols: And John at that point in time if they have to let an employee go they can do so without penalties is that correct. John Carpetner: Yeah. What SBA has said is that once that that you were your FTE measurements are done through December 31 2020 or the date of your forgiveness application. Whichever is earlier. I think you know right now. Like literally as we sit here today the fact that the applications are not really open to be filed yet. I think the safe advice is that you really can't furlough people quite yet. You need to apply for forgiveness first. So knowing the the target date for that application being still a few weeks away. Then businesses probably need to hold off on those furloughs until they've actually hit submit and filed that application with the bank. Chris Nichols: Okay, payroll costs that they pay John would you say that is not considered part of the utilities is not forgivable and in the calculation? John Carpenterwhat was the category Chris Nichols: payroll costs to a payroll company John Carpenter: Like the actual charges of the Payroll company? Chris Nichols: Yeah, like for services. John Carpenter: The fee you paid ADP or paychecks or Paylocity or know that's not consider utility and not an eligible expense. It's really it's an administrative expense. Chris Nichols: Got it. For the EZ form when they talk about 25% that you can't reduce your hours or employees 25% discuss. Maybe just a touch more of what that means and how to how to calculate that, is that an average excetera. John Carpenter: Well and remember there's as part of the EZ form. There's there's really two different tests. You have to be the one test says thatyou're certifying that you have not reduced the annual wages. For the hourly wage rate of any of your people who are making compensation of a hundred thousand a year or less. If you've not reduced that by more than 25% that does not speak to hours and only speaks tobase salary. It also does not speak to bonuses, commission's anything like that. We're just talking base salary and base wage rates. So as long as those have not been reduced more than 25% then you meet the first test and then the second test is that that you've not reduced either the number of employees or the average paid hours between from January 1 through the end of the Forgiveness period which could be a pretty long time, right if your forgiveness period goes into who knows September October November than you're measuring. That over a 9 a 10 or an 11-month period and everyone just needs to look at the application because there are some exceptions if you furloughed people early in the Forgiveness period but brought them back that doesn't count against you if you have people resign voluntarily that doesn't count against you if you if you had to furlough some people but you are unable to hire back people with similar qualifications. That doesn't count. Against you so it that is I mean it is one of the areas that gets somewhat tricky and employers do have to literally look at employee by employee count to see how that's doing and to look at those average paid hours. Chris Nichols: Unemployment pay tax to employees that are unemployed. How does that count in the calculation? John Carpenter: State unemployment tax is an eligible wage cost federal unemployment is not but State unemployment is an eligible wage cost and can be included payroll cost. It's you know to going back to one. Of Josh's points about you know, where should Borrowers Focus their attention. Well, I can tell you we've looked at this point almost hundreds of forgiveness applications their state unemployment taxes. That's really small dollars. It's never very much money. So it is included but in almost every case, it's a really small dollar amount. Chris Nichols: Fuel for off road construction equipment included in transportation fuel costs. You think John Carpenter: I'd say. Yes. It's a company owned vehicle. Chris Nichols: Yep. All right for a sole proprietor with the transcript of the the account showing funds transfer from a business to personal account. Is that sufficient back up to show wages Joshua take that? that one So if I just show something on my bank? Josh Harris: Yeah, I believe a transcription transfers or if they cut themselves checks. I mean, we just need to see clear evidence that the money's gone from a corporate type of business account into the into the individuals name. So that is one of those areas that you know, there's not probably a ton of clarity, but I think that would suffice. I'm not sure if John if you have any additional opinion, But… John Carpenter: Yeah, I would do that. It's really a proof of the actual cash payment and then And then remember that that's also got to be matched against the 2019 owner compensation which in the case of a sole proprietor is going to be there Schedule C. And so the the bank's going to have to look at not only what was paid in the Forgiveness period but compare it to a proportionate amount of Schedule C from 2019 and it's the bottom line number of Schedule C. Josh Harris: Yeah. Chris Nichols: All right. Well with that we're out of time. We thank everyone for joining sorry for any issues and some of you had for not be able to see some of the slides or audio issues or unfortunately not be able to get on we will do an after-action report on this and try to fix all those problems for next one. We got through the bulk of the question. We still have probably about 20 more to go not bad, but we'll be using these questions for follow-up webinars and for follow-up video recordings John, Josh. Thank you for your time you guys have been great. Thank you. Everyone, the borrower's,our customers. of CenterStateBank for joining in. We look forward to speaking with you soon. And if you have anything else in the meantime, do hit us up and we'll get more information out to you shortly. Thank you very much.