On Friday, June 5, the President signed the Paycheck Protection Program (PPP) Flexibility Act, which made significant changes in the PPP as it had been initially enacted on March 27, 2020. These FAQs, divided into 5 separate subject matter areas, represent our answers, based upon the current state of the law, to questions we have been asked by clients and by over 2000 participants in webinars we have given on the Paycheck Protection Program in the past 2 months. We expect that the SBA will (and should) change its PPP loan regulations to address issues raised by the amendment that became law on June 5, so stay tuned.
The 5 different subject matter areas covered by these FAQs are:
 

1. Administrative and bureaucratic matters
2. Payroll cost forgiveness
3. Non-payroll cost forgiveness
4. Full-time equivalent employee reductions causing reductions in forgiveness
5. Salary reductions causing reductions in forgiveness 

I prepared these FAQs after the Small Business Administration (SBA) issued its regulations on the requirements to obtain forgiveness of the obligation to repay a Paycheck Protection Program (PPP) loan. Congress then amended the PPP loan program to provide significant changes, including changes affecting forgiveness. These questions and answers have been revised to take into account the recent amendment.

Q. A1. Can you give me an executive summary of forgiveness?

A. A1. A borrower who obtains a PPP loan is entitled to have some, or all, of the loan forgiven if the borrower incurs certain types of expenses and pays them during the 24 weeks after the loan is made, but in no event later than December 31, 2020. In some cases, the borrower can elect an 8 week period to measure forgivable expenses, instead of 24 weeks. The maximum forgiveness is the entire loan amount, with interest. Forgiveness is available for amounts paid for payroll costs, business rent, business mortgage interest and business utilities. At least 60% of the total loan amount must be used for payroll costs to qualify for any forgiveness. Total forgiveness will be reduced by a reduction in salaries or a reduction in the average total number of employees, except for certain exempt reductions.
 
Q. A2. Businesses without PPP loans. What happens if I don’t already have a PPP loan? Are they still available?

A. A2. Yes. If you want to get a PPP loan, you should talk to your bank, or any other lender that is offering PPP loans. The authorization to make PPP loans expires on December 31, 2020, which is an extension of the previous June 30 deadline. As of June 4, 2020, there remains approximately $148 billion of unused SBA guaranty authorization, and that amount has declined relatively slowly in recent weeks. However, we anticipate that the new amendment will cause an acceleration of new applications.
 
Q. A3. The Amendment. Can you give me a summary of the changes made by the amendment as recently adopted?

A. A3. Here are highlights of the principal changes.

• PPP loans will be available until December 31, 2020, unless the SBA’s authorization to guaranty up to $659 billion of loans is used up before then.
• Instead of an eight week measurement period during which the borrower must spend the loan proceeds in order to obtain forgiveness, businesses with existing loans may choose 24 weeks instead of 8 weeks. All new loans will have a 24 week measurement period. However, the measurement period will not extend beyond December 31, 2020, so if the loan is made after July 16 (24 weeks before the end of the year), expenditures for forgiveness must be paid by December 31, 2020.
• Businesses must spend 60% of the entire loan amount on payroll costs to get any forgiveness. A number of members of Congress and Senators have suggested that this is a drafting error and that an “all or nothing” result was not intended. They have suggested that Congress intended to allow partial forgiveness applications so long as at least 60% of the requested forgiveness, rather than 60% of the entire loan amount, was spent on payroll costs. We do not know whether this change will be implemented by another amendment, and SBA regulation, or not at all.
• New loans must have a minimum term to maturity of five years, instead of the two-year term to maturity under the existing SBA regulations. This change may cause the SBA to increase the interest rate for five-year loans.
• Under the existing law, payments were deferred for six months. Payments will now be deferred for a much longer period.
• If you reduced your employee headcount, you still risk a pro rata reduction of forgiveness, but if you reduced the headcount between February 15 and April 26, 2020, you have until December 31, 2020, to rehire employees and avoid a forgiveness haircut due to a reduction in full-time equivalent employees (known as FTEEs).
• If you reduced any employee’s salary by more than 25%, you still risk a dollar for dollar reduction of forgiveness, but if you reduced salaries between February 15 and April 26, 2020, you have until December 31, 2020, to eliminate the salary reductions and avoid a forgiveness haircut.
• You are not penalized if you are unable to restore your level of FTEEs because you are unable to rehire former employees and you are unable to hire similarly qualified replacements.
• You are not penalized if you are unable to return to the same level of business activity due to Federal Government requirements or guidance that the Health and Human Services Department (HHS), the Center for Disease Control (CDC) or the Occupational Safety and Health Administration (OSHA) have adopted or may adopt in the future.

 
Q. A4. Measuring the 24 weeks. My pay periods don’t start with the exact date the loan is funded. What can I do?

A. A4. The existing SBA regulations provide that if you have biweekly or more frequent pay periods, you can elect to calculate payroll costs over the period starting with the first day of the first payroll period after the first disbursement of the loan. If you only pay monthly, you cannot use this option. If you do not yet have a loan that has already been funded, and you have monthly payroll periods, I have found nothing that prohibits you from switching to biweekly payroll periods immediately and using those to measure your applicable period. This becomes less important when the measurement period is 24 weeks, and it is possible that the SBA will decide that 24 weeks is a long enough period to allow a simpler rule and delete the second alternative altogether.
 
Q. A5. Choosing which period. May I pick and choose between the 2 different ways to measure payroll costs for each separate payroll cost?

A. A5. No. You must elect the same measurement period for all of your payroll costs. However, no matter what period you choose for payroll costs, you must start with the day the loan is funded for non-payroll forgivable costs.
 
Q. A6. Disallowing expenses. Why would any expenses ever be disallowed?

A. A6. Your expenses might be disallowed because of inadequate documentation, because of a misunderstanding about your explanation of the expenses, or because of a disagreement as to whether certain expenses are legally permitted for forgiveness. Depending on how your lender operates, you may be able to avoid wasting time going back and forth if you list all of your forgivable expenses, totaling more than the maximum loan amount, and only a few minor ones are disallowed. The SBA will have to revise its Form 3508 forgiveness application form under the new statute, or issue an entirely new form, which may address this issue.
 
Q. A7. SBA audits. Am I going to be audited by the SBA?

A. A7. An audit seems unlikely for loans of less than $2 million. The SBA has announced that it will audit all loans of $2 million or more when forgiveness applications are submitted. The SBA has also issued regulations on the review procedure in general and the SBA has repeatedly stated in those regulations that it “may” review any loan. There are already more than 4,500,000 PPP loans, with more than $140 billion of loans still available. It appears that the SBA focus is on larger loans, so smaller loans seem less likely to be audited. However, that is not an excuse to lie on your forgiveness application, which would be a federal crime.
 
Q. A8. Information going to the IRS. Is the SBA going to give a copy of my forgiveness application to the IRS?

A. A8. The SBA has a right to do so, but we have no evidence that they intend to do so.
 
Q. A9. Approval of forgiveness applications. Who decides how much forgiveness I get? Is it the lender or the SBA?

A. A9. You must submit your forgiveness application to the lender. The lender then analyzes the application and determines whether you are entitled to forgiveness. The lender has 60 days to make a decision, after which the lender must submit your application to the SBA and the SBA has 90 days to reimburse the lender for the amount forgiven. The SBA can review an application for years after it has reimbursed the lender, and may decide that a loan should not have been made or should not have been forgiven in whole or in part, which would cause you to have to repay any amount not forgiven. Since there are more than 4,500,000 PPP loans, we anticipate that the SBA will review, at most, a small fraction of the loans with balances of less than $2 million.
 
Q. A10. Deadline for submitting forgiveness application. How long do I have after the end of the 24/8 week measurement week period to submit my forgiveness application?

A. A10. The amendment provides a dramatic change on this issue. You must submit your forgiveness application no later than a date that depends upon the facts and is difficult to determine in a vacuum. The earliest date that we believe an application must be filed is March 29, 2021, for those who elect to retain an eight week measurement period, or no earlier than July 14, 2021, for those who have a 24 week measurement period. Regardless of the specifics of your loan, you will never have beyond October 31, 2021 to submit your application, and in many cases the deadline will be earlier.
 
Q. A11. Documentation. What documentation must I provide to support my forgiveness application?

A. A11. There are detailed documentation requirements listed on page 10 of the application form, SBA Form 3508. We do not anticipate major changes based upon the new statute. You should follow the documentation requirements very carefully because failing to submit required documentation will result in a denial of forgiveness for the undocumented items. Even if your lender lets a documentation weakness slide and authorizes forgiveness, this is one issue where the SBA may be able to create an automated audit program and review all loan forgiveness applications for proper documentation without human intervention.
 
Q. A12. Excess forgiveness expenses. What happens if I have forgivable expenses for more than the loan amount? Can I avoid the reduction in forgiveness due to salary cuts or employee terminations because of the excess forgivable expenses?

A. A12. The statute says no.
 
Q. A13. Timing of forgiveness decision. How long after I submit my forgiveness application will I find out how much of the debt is forgiven?

A. A13. You should get an initial determination from your lender within 60 days after you submit a complete application. We anticipate that the lender will reserve the right to change that decision if the SBA balks, but that is unlikely to affect you because your repayment obligation generally starts after the SBA reimburses the lender for the forgiveness.
 
Q. A14. PPP forgiveness reducing EIDL. I have both a PPP loan and an Economic Injury Disaster Loan, known as an EIDL. Someone told me that the amount of my EIDL will be deducted from my forgiveness. That sounds unfair. Is that correct?

A. A14. First, if you received an EIDL grant that you are not required to repay, that reduces your PPP loan forgiveness because you can’t get free money twice. Second, if you included your EIDL loan in calculating your PPP loan amount, then the proceeds of a portion of your PPP loan should have already been sent by your lender to the SBA to reduce your EIDL loan.
 
Q. A15. Repayment of amount not forgiven. If a portion of the PPP loan is not forgiven, when do I have to pay it back?

A. A15. If the forgiveness application is not filed by the deadline discussed above, then repayment of the loan must begin no later than, at the earliest, approximately May 25, 2022, and in most cases much later. Since all currently-existing loans have a two-year maturity, they are scheduled to mature prior to the date that repayment is required to commence for those businesses that do not timely file a forgiveness application. There is thus a clash between the earlier maturity date in the promissory note and the later statutory date on which the first payment must be made. The resolution of this clash will have to wait SBA regulations. If you file the forgiveness application on time, then repayment will not commence until a date that is somewhere between 61 and 150 days after you file your forgiveness application, depending on when the SBA reimburses the lender.
 
Q. A16. Deferring payroll taxes. Under the original statute, the price of taking a PPP loan was a loss of the ability to defer payroll taxes. Is that still the rule?

A. A16. No. Under the amendment, the prohibition on PPP loan borrowers from taking advantage of statutory payroll tax deferral opportunities has been deleted. As a result, employers may delay the payment of employment taxes for 2020 and pay 50% by the end of 2021 and the remainder by the end of 2022.
 
Q. B1. Defining payroll costs? What gets included in payroll costs for the purpose of the forgiveness calculation?

A. B1. Payroll costs for forgiveness are the same as the payroll costs when you calculated your maximum loan amount. The principal categories are salaries, commissions and other similar cash compensation, tips paid to employees, health benefits, pension plan contributions and the employer’s share of certain state and municipal salary-based taxes like state unemployment insurance, state worker’s compensation insurance and the Metropolitan Commuter Tax. Please do not forget the $100,000 annual salary limit. The maximum amount of salary, wages and commissions that you can include for any person is limited to $100,000, prorated for what now appears to be 24 weeks. That means $46,153.84 under the amended statute, which is a huge jump from the $15,384.61 you were allowed to include as salary, wages and commissions for any person. The SBA may try to avoid this result because, in many cases, it will allow highly compensated owners to increase their share of the PPP loan proceeds. For certain owners and self-employed individuals, the guidance provides that this amount excludes pension contributions and health insurance payments, because those expenses are otherwise considered part of self-employment income subject to the $100,000 annual cap.
 
Q. B2. Payroll payment dates. At what point am I deemed to have paid my payroll for the purposes of forgiveness?

A. B2. As a general rule, you pay your payroll when you distribute payroll checks or authorize your bank to make a direct deposit into your employee’s account. Although the forgiveness application does not specifically address what happens if you use a payroll service, it appears that it is not until the payroll service distributes the check or authorizes the direct deposit that you can include the amount as forgiveness.
 
Q. B3. Payroll payments after the end of the measurement period. What happens if I pay payroll 5 business days after the end of each payroll period. Do I lose the benefit of my last payroll payment?

A. B3. Unless the SBA changes the rule as a result of the new amendment, so long as you pay your payroll on or before the next regular payroll date after the end of the measurement period, you can include costs that you incurred during the measurement period. However, remember that if the payroll period spans the end of the measurement period, you can only use the pro rata portion of the payroll that covers the days before the measurement period expires.
 
Q. B4. Spending more than 60% on payroll costs. May I spend more than 60% on payroll costs?

A. B4. Yes.
 
Q. B5. Paying yourself a salary when self-employed. I am self-employed. The loan proceeds were deposited into my business bank account. Do I have to write myself a check in order to prove that I had payroll costs?

A. B5. Not clear from the current rules and guidance.
 
Q. B6. Health benefits payable semiannually. I normally pay my health insurance premiums on March 1 and September 1. May I include some of that expense even if it is outside the measurement period?

A. B6. There is no direct guidance on this issue, but I believe that you can include an appropriate pro rata share of health insurance costs. The SBA’s forgiveness regulations specifically state that non-payroll costs are eligible for forgiveness if they were, “incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the [measurement period].” We believe it is reasonable to take the position that health insurance costs are incurred pro rata during each week. However, in light of the documentation requirements, if health insurance is paid in arrears, like a mortgage loan, you may have to wait to file your forgiveness application until you pay and can provide documentation of the payment. If those expenses are paid in advance, as is normally the case with a lease, you should have no problem.
 
Q. B7. Large lump-sum pension contributions. May I make a large lump-sum pension plan contribution or IRA deposit 3 days before the measurement period expires and get credit for it?

A. B7. It depends upon whether you are an owner. The SBA guidance appears to indicate that you cannot do so if you are an owner whose pension plan contribution is part of earned income, but you can do so with respect to pension plan contributions made for non-owner employees. We do not know if this rule will remain unchanged. It is potentially a large loophole because 24/52nds is a lot more than 8/52nds.
 
Q. B8. Includability of other insurance as a payroll costs. It is my professional liability insurance or fidelity insurance or fidelity bond considered part of payroll costs?

A. B8. No. These are not health benefit costs. They are ordinary business expenses.
 
Q. B9. Reduced self-employment income. I am a self-employed individual whose earnings are based on the work that I do and I haven’t been doing a lot of work recently, so my earnings are down. How do I get forgiveness for money I can’t pay myself?

A. B9. Don’t forget that you can “pay” yourself out of the PPP loan proceeds.
 
Q. C1. Non-payroll costs in general. What non-payroll costs can be a basis for forgiveness?

A. C1. You are entitled to include non-payroll costs for mortgage interest, commercial rent and business utilities as part of your forgiveness application. However, the aggregate of these items cannot exceed 40% of the total loan amount. Furthermore, you can request forgiveness only if the mortgage loan was created before February 15, the lease agreement was entered into before February 15, or the utility service commenced before February 15. If you never had an Internet connection and on April 1 you signed up for the gold standard in Internet service to use while working from home, you cannot include that.
 
Q. C2. Reporting excess items. What if I pay payroll costs equal to the entire loan amount? Do I have to report other forgivable payments on my application?

A. C2. No, but I recommend that you include as much as you conveniently can and explain it when you submit your application. It doesn’t hurt to be double covered if some of your expenses are disallowed.
 
Q. C3. Interest on a non-mortgage loan. I borrowed money to buy a computer. Can I include interest on that loan?

A. C3. I believe that the current answer is, unfortunately, that you cannot. There are valid arguments on both sides of this issue. Congress proposed to allow all loan interest to be includable for forgiveness purposes, but that was not in the final amendment. However, look at your financing documents carefully. If you entered into a capitalized lease financing rather than an ordinary loan, the expense appears to be includable unless the SBA decides to restructure the form and get to the substance. See Q C10 below.
 
Q. C4. Defining utilities. What constitute utilities that can be included as forgivable expenses?

A. C4. Utilities include ONLY business payments for electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020. That does not mean payments you made for services rendered before February 15. It means that you must have started receiving the service before February 15. If you never had Internet access until you signed a fancy contract on March 1, you are out of luck.
 
Q. C5. Business use of a personal cell phone. I am self-employed and I have a personal cell phone that is only partially used for business. Does my cell phone bill qualify as a forgivable item?

A. C5. The SBA has not issued any guidance on this issue. We suggest that you should be allowed to include as a forgivable expense that portion of your cell phone bill that is tax-deductible as a business expense.
 
Q. C6. Data services as utilities. Is a computer information service, like Bloomberg or Lexis, a utility that I can include when calculating forgiveness?

A. C6. No. Utilities are limited only to the items listed above.
 
Q. C7. Transportation as a utility. The list of utilities includes “transportation.” What does that mean?

A. C7. I’ve been able to find no guidance on the subject. I can only guess. One lawyer suggested that gasoline that his client used to power his delivery trucks was thus a utility available for forgiveness. I have my doubts.
 
Q. C8. Home mortgage expense for a home office. I have a home office and no other office. Can I include a portion of my home mortgage interest? How about if I have been working from home and I am not allowed back into my office? May I include a portion of my home mortgage interest?

A. C8. Thus far, the SBA has not issued any guidance on this issue. We hope to get guidance on this question to the SBA, but the increase of the measurement period to 24 weeks makes less significant.
 
Q. C9. Oral lease arrangement. I rent commercial space for my business but there is no written lease. I pay every month and have been doing so for 2 years. May I include those payments in my forgiveness application?

A. C9. I have found no guidance on this issue, but the forgiveness application only requires that the rent be pursuant to a lease agreement that was in force before February 15, 2020. It does not require that the lease be in writing. If you can establish that you paid the rent every month last year, so your tax return last year shows rent as a deductible expense and your landlord’s tax return shows that rent as taxable income, I think you have a reasonable argument that the rent is includable. However, you can’t all of a sudden decide to pay rent on space that was provided for free and claim it on your forgiveness application.
 
Q. C10. Rent on personal property. How about rent on personal property, like my photocopier and the van we use to deliver pizzas?

A. C10. Much to the surprise of a lot of people, the SBA Form Forgiveness Application specifies that you can include business lease payments for personal property, so it appears that those payments can be included as part of the up to 40% permitted proceeds usage over and above payroll costs.
 
Q. C11. Payment of pre-loan expenses. I didn’t pay my March and April rent payments or utility payments until I got my loan on April 15. I made those payments on April 16. May I include them in my forgiveness application? How about my utility payment that starts during but is not due until after the measurement period is over?

A. C11. The SBA’s most recent guidance allows you to deduct your March and April payments, because the payments were made during the measurement period for which forgiveness is calculated. You may also deduct a portion of your “last” payment that is allocated to the days at the end of your measurement period. Although this is actually more than the permitted number of weeks’ worth of expense, the SBA originally said that it was comfortable that the 75%/25% rule would serve to avoid any abuse. We do not know whether the SBA will continue to take this position since the maximum non-payroll percentage increased to 40%.
 
Q. C12. Payments after covered period expires. If I pay an expense in arrears and I incur it during the measurement period, but I don’t pay it until after the measurement period is over, such as mortgage interest, may I get credit for it?

A. C12. According to the SBA, if you incur any expense during the measurement period and pay it on or before the next regular billing date, you may include the expense even if the billing date is after the end of the measurement period. We do not expect that the SBA will modify this rule when it issues regulations regarding the amendment, but it is not inconceivable that the SBA will rescind this flexibility.
 
Q. C13. Prepaying mortgage interest. May I prepay 3 months of mortgage interest at the end of the measurement period in order to maximize forgiveness?

A. C13. No. Prepayments of mortgage interest may not be included in your forgiveness application.
 
Q. D1. Reduced FTEEs in general. Do I lose forgiveness if I terminate employees?

A. D1. As a general rule, you do, although there are exceptions. You lose forgiveness pro rata equal to your percentage reduction in average FTEEs between your pre-COVID-19 average headcount and average FTEEs during the same measurement period that you use to calculate payroll costs. Please remember that these are based upon averages, so electing a 24 week rather than an eight week measurement period could force you to maintain a higher than desirable average for a longer period of time.
 
Q. D2. Pre- versus post- COVID-19 measurement periods. How do I calculate full-time equivalent employees for the purpose of determining whether I have reduced my headcount too much?

A. D2. First, you must select a starting period to determine your average full-time equivalent employees. You can choose either the period from February 15 to June 30, 2019 or the period from January 1 to February 29, 2020. Then you have to calculate average FTEEs during the period that you use for determining forgivable payroll costs. We do not know, but do not expect, that the “before” base period calculation will change because of the amendment, but the “after” calculation seems likely to be the full 24 weeks, hence the need to maintain a higher average employment level for a longer period of time under the 24-week calculation methodology. Remember also that the haircut for FTEE reductions, as is also the case with the haircut for salary reductions, is deducted after you calculate your permitted forgiveness based upon expenses. An increase to 24 weeks may make it easier for you to get to the maximum, but it might also increase how much you must spend to avoid the haircut.
 
Q. D3. Percentage Loss. How much do I lose for reducing my employee headcount?

A. D3. You lose a percentage of your forgiveness equal to the percentage of your average FTEE reduction between the two calculation periods. If you averaged 10 FTEEs in the pre-COVID period but averaged only 8 FTEEs during the 24 week (or 8 week) measurement period, you lose 20% of your forgiveness, unless you can take advantage of the exceptions or special rules.
 
Q. D4. Calculating FTEEs. How do I calculate FTEEs?

A. D4. Anyone who is paid for 40 or more hours a week is treated as one FTEE. You have two choices for employees who work part-time. You can either do an actual hours calculation for each employee separately, based upon what percentage of a 40 hour week each person is paid for, or you can treat each part-time employee as one half of a full-time employee. You cannot pick and choose between the pro rata rule and the one-half of full-time employee rule on an employee by employee basis for your part-time employees.
 
Q. D5. Double penalty for terminated employees. If I reduce my FTEEs, am I double penalized because that also means I reduce their salary to zero?

A. D5. No. You do not include individuals who are no longer in your FTEE complement in calculating the percentage reduction in salary.
 
Q. D6. Exemptions. What are some of the exemptions that are available in calculating a reduction in my number of employees?

A. D6. If the reduction is the result of former employees who were terminated for cause or voluntarily resigned, you do not have to count that reduction. You are not penalized if you are unable to rehire former employees and cannot hire similarly qualified new employees. You are also not penalized if you are unable to return to the same level of business as a result of restrictions or guidelines of HHS, CDC or OSHA. This last exception is one reason that businesses should consider whether opting for 8 weeks rather than 24 is preferable.
 
Q. D7. Furloughs. I had to furlough half of my employees. Is there anything I can do about it to not lose forgiveness?

A. D7. If you eliminate any reductions in FTEEs that occurred between February 15, 2020 and April 26, 2020 by hiring new employees by December 31, 2020, you are exempt from any reduction in forgiveness that would otherwise be required due to reductions in FTEEs. This exemption is often misunderstood or described incorrectly. It ONLY applies to the extent that you terminated employees between February 15 and April 26. There are worksheets in the forgiveness application to help you calculate the reduction and we recommend that all PPP loan borrowers make their best estimates now and use those worksheets to determine whether they risk a reduction in forgiveness. If you risk a loss of forgiveness, you can evaluate whether to rehire employees if it is in your best interests to do so.
 
Q. D8. Rehiring the same people. Do I have to hire back the same people that I terminated in order to avoid losing forgiveness due to a reduction in headcount?

A. D8. No. This is another common misunderstanding. You measure full-time equivalent employees versus full-time equivalent employees on an aggregate basis, without regard to the exact identity of the individual employees. The exact identity of the employee is relevant if you offer reemployment and your offer is refused; if you terminate for cause; if an employee voluntarily resigns; or if an employee voluntarily requests a reduction in hours. In any of these cases, you get a free pass and hiring a replacement just increases average FTEEs. You simply count the former employee as the same percentage of full-time equivalent employee as he or she was just before the employment terminated. However, due to a language clarification in the recent amendment, the SBA may revise this rule.
 
Q. D9. Employees refusing to return. I reduced my headcount, and need to rehire, but my former employee refuses to come back to work. Am I out of luck?

A. D9. Unfortunately, the amendment creates a conflict between the statute and the pre-existing regulations. We believe that regardless of how Congress or the SBA resolves this, you will not be penalized for employees who refused to return. The unanswered question is whether you will have to seek a similarly qualified replacement and certify that you were unable to find one. Under the current rules, if you make a written offer to rehire the same employee at the same salary for the same number of hours and he or she refuses to come back, that reduction in employment doesn’t count against you so long as you satisfy certain conditions. One of those conditions is that you must notify the state unemployment office within 30 days that the individual refused to return to work, so the employee may lose unemployment benefits. The regulations do not require that you try to hire a new individual, but that may change
 
Q. D10. Adding brand-new employees. In January, I created a new division that includes 5 new employees. I gave them job offers in February but they didn’t start working for us until March 15. Can I include them as new hires in determining whether my headcount has declined?

A. D10. Yes, and you exclude them from the calculation of salary reductions.
 
Q. D11. Rehire and refire. May I rehire an employee on December 31, 2020 and then fire him or her a week later?

A. D11. I have been asked that question many times. Although I have not found any specific guidance on the issue, I strongly advise against it. Remember that the SBA has the right to audit forgiveness applications for years. It is easy to see the SBA deciding to make an example of just such an employer, especially after an employee who is terminated twice files a complaint.