Second Draw Paycheck Protection Program (PPP) Loans: How to

As of March 12, 2021

Second Draw Paycheck Protection Program (PPP) Loans:

How to Calculate Revenue Reduction and Maximum Loan Amounts Including What

Documentation to Provide

The Small Business Administration (SBA), in consultation with the Department of the Treasury,

is providing this guidance to assist businesses in calculating their revenue reduction and payroll

costs (and the relevant documentation that is required to support each set of calculations) for

purposes of determining their eligibility for and amount of a Second Draw PPP Loan.

Borrowers and lenders may rely on the guidance provided in this document as SBA’s

interpretation of the CARES Act, the Economic Aid Act, and the Paycheck Protection Program

Interim Final Rules. The U.S. government will not challenge lender PPP actions that conform to

this guidance

and to the PPP Interim Final Rules and any subsequent rulemaking in effect at the

time the action is taken.

Revenue Reduction

1. Question: What are “gross receipts” for the purpose of determining eligibility for a

Second Draw PPP Loan?

Answer: For a for-profit business, gross receipts generally are all revenue in whatever

form received or accrued (in accordance with the entity’s accounting method, i.e., accrual

or cash) from whatever source, including from the sales of products or services, interest,

dividends, rents, royalties, fees, or commissions, reduced by returns and allowances but

excluding net capital gains and losses. These terms carry the definitions used and

reported on IRS tax return forms.

Gross receipts do not include the following:

• taxes collected for and remitted to a taxing authority if included in gross or total

income, such as sales or other taxes collected from customers (this does not

include taxes levied on the concern or its employees);

• proceeds from transactions between a concern and its domestic or foreign

affiliates; and

• amounts collected for another by a travel agent, real estate agent, advertising

agent, conference management service provider, freight forwarder or customs

broker.

All other items, such as subcontractor costs, reimbursements for purchases a contractor

makes at a customer’s request, investment income, and employee-based costs such as

payroll taxes, may not be excluded from gross receipts.

For a nonprofit 501(c)(3) organization, a 501(c)(19) veterans organization, an eligible

nonprofit news organization, an eligible 501(c)(6) organization, or an eligible

destination marketing organization, gross receipts means gross receipts within the

This document does not carry the force and effect of law independent of the statutes and regulations on which it is

based.

As of March 12, 2021

meaning of section 6033 of the Internal Revenue Code of 1986, which is the gross

amount received by the organization during its annual accounting period from all sources

without reduction for any costs or expenses including, for example, cost of goods or

assets sold, cost of operations, or expenses of earning, raising, or collecting such

amounts. Thus “gross receipts” includes, but is not limited to:

(i) the gross amount received as contributions, gifts, grants, and similar amounts

without reduction for the expenses of raising and collecting such amounts,

(ii) the gross amount received as dues or assessments from members or affiliated

organizations without reduction for expenses attributable to the receipt of such

amounts,

(iii) gross sales or receipts from business activities (including business activities

unrelated to the purpose for which the organization qualifies for exemption, the net

income or loss from which may be required to be reported on Form 990-T),

(iv) the gross amount received from the sale of assets without reduction for cost or

other basis and expenses of sale, and

(v) the gross amount received as investment income, such as interest, dividends, rents,

and royalties.

Gross receipts of a borrower’s affiliates (unless a waiver of affiliation applies

) are

calculated by adding the gross receipts of the business concern with the gross receipts of

each affiliate.

For more information on what constitutes gross receipts by entity type, see FAQ 5 below.

2. Question: For all entity types (e.g., for-profit businesses and nonprofit organizations),

do “gross receipts” include PPP Loan proceeds that are forgiven (or EIDL advances)?

Answer: No. The amount of any forgiven First Draw PPP Loan or any EIDL advance,

which are not subject to federal income tax, is not included in the calculation of “gross

receipts”.

3. Question: What reference periods can be used to determine whether the Applicant can

demonstrate at least a 25 percent gross receipts reduction in order to qualify for a Second

Draw PPP loan?

Answer: The appropriate reference periods depend on how long the Applicant has been

in business:

See subsection (d) of the interim final rule titled “Business Loan Program Temporary Changes; Paycheck

Protection Program Second Draw Loans” posted on SBA’s website January 6, 2021 (86 FR 3712).

If a borrower has acquired an affiliate or been acquired as an affiliate during 2020, gross receipts includes the

receipts of the acquired or acquiring concern. This aggregation applies for the entire period of measurement, not just

the period after the affiliation arose. However, if a concern acquired a segregable division of another business

concern during 2020, gross receipts do not include the receipts of the acquired division prior to the acquisition.

Similarly, the gross receipts of a former affiliate are not included. This exclusion of gross receipts of such former

affiliate applies during the entire period of measurement, rather than only for the period after which affiliation

ceased. However, if a borrower sold a segregable division during 2020, the gross receipts will continue to include

the receipts of the division that was sold. All terms in this paragraph have the meaning attributed to them by the IRS.

As of March 12, 2021

• For all Applicants, except those satisfying the conditions set forth below, the

Applicant must demonstrate that gross receipts in any calendar quarter of 2020

were at least 25 percent lower than the same quarter of 2019. Alternatively,

Applicants may compare annual gross receipts in 2020 with annual gross receipts

in 2019 if they were in business in 2019.

• For entities not in business during the first and second quarters of 2019 but in

operation during the third and fourth quarters of 2019, Applicants must

demonstrate that gross receipts in any quarter of 2020 were at least 25 percent

lower than during either the third or fourth quarters of 2019.

• For entities not in business during the first, second, and third quarters of 2019 but

in operation during the fourth quarter of 2019, Applicants must demonstrate that

gross receipts in any quarter of 2020 were at least 25 percent lower than the fourth

quarter of 2019.

• For entities not in business during 2019 but in operation on February 15, 2020,

Applicants must demonstrate that gross receipts in the second, third, or fourth

quarter of 2020 were at least 25 percent lower than the first quarter of 2020.

4. Question: What documentation do I need to provide to corroborate that my entity

sustained at least a 25 percent reduction in gross receipts?

Answer: The following are the primary sets of documentation Applicants can provide to

substantiate their certification of a 25 percent gross receipts reduction (only one set is

required):

• Quarterly financial statements for the entity. If the financial statements are not

audited, the Applicant must sign and date the first page of the financial statement

and initial all other pages, attesting to their accuracy. If the financial statements

do not specifically identify the line item(s) that constitute gross receipts, the

Applicant must annotate which line item(s) constitute gross receipts.

• Quarterly or monthly bank statements for the entity showing deposits from the

relevant quarters. The Applicant must annotate, if it is not clear, which deposits

listed on the bank statement constitute gross receipts (e.g., payments for purchases

of goods and services) and which do not (e.g., capital infusions).

• Annual IRS income tax filings of the entity (required if using an annual reference

period). If the entity has not yet filed a tax return for 2020, the Applicant must fill

out the return forms, compute the relevant gross receipts value (see Question 5),

and sign and date the return, attesting that the values that enter into the gross

receipts computation are the same values that will be filed on the entity’s tax

return.

As of March 12, 2021

5. Question: If I use my entity’s annual income tax returns to demonstrate a gross receipts

reduction of at least 25 percent, what amounts do I use to calculate gross receipts?

Answer: The amounts required to compute gross receipts varies by the entity tax return

type:

• For self-employed individuals other than farmers and ranchers (IRS Form 1040

Schedule C): sum of line 4 and line 7

• For self-employed farmers and ranchers (IRS Form 1040 Schedule F): sum of

lines 1b and 9

• For partnerships (IRS Form 1065): sum of lines 2 and 8, minus line 6

• For S-Corporations (IRS Form 1120-S): sum of lines 2 and 6, minus line 4

• For C-Corporations (IRS Form 1120): sum of lines 2 and 11, minus the sum of

lines 8 and 9

• For nonprofit organizations (IRS Form 990): the sum of lines 6b(i), 6b(ii), 7b(i),

7b(ii), 8b, 9b, 10b, and 12 (column (A)) of Part VIII

• For nonprofit organizations (IRS Form 990-EZ): sum of lines 5b, 6c, 7b, and 9 of

Part I.

• LLCs should follow the instructions that apply to their tax filing status in the

reference periods.

6. Question: I am applying for a Second Draw PPP Loan amount greater than $150,000.

When do I need to provide the documentation to substantiate the reduction in gross

receipts?

Answer: For a Second Draw PPP Loan amount greater than $150,000, the applicant

must provide documentation substantiating the reduction in gross receipts with its Second

Draw Borrower Application Form (SBA Form 2483-SD or lender’s equivalent form).

The documentation must support the amounts provided in the application.

7. Question: I am an applicant for a Second Draw PPP Loan amount of $150,000 or less.

When do I need to provide the documentation to substantiate the reduction in gross

receipts?

Answer: For a Second Draw PPP Loan amount of $150,000 or less, the borrower must

provide documentation substantiating the reduction in gross receipts before or at the time

the borrower seeks loan forgiveness (or upon SBA request). The documentation must

clearly identify both of the reference quarters (if not using annual comparison), must

Any of the following included in the specific tax form lines must be excluded from the computation and annotated

on the return: taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales

or other taxes collected from customers and excluding taxes levied on the concern or its employees); proceeds from

transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel

agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs

broker. In particular, for tax returns that include sales tax as income and then as a deduction, annotate next to the

“taxes and license” line of the return the amount of such taxes that were included in income.

If you file multiple Schedule C forms on the same Form 1040, you must include and sum across all of them.

If nonzero, you must also include Form 1065 Schedule K lines 3a, 5, 6a, 7, and 11 and Form 8825 line 2.

If nonzero, you must also include Form 1120-S Schedule K lines 3a, 4, 5a, 6, and 10 and Form 8825 line 2.

As of March 12, 2021

contain the gross receipts amounts for both quarters, and support the amounts provided.

(Payroll documentation to substantiate the amount of the loan requested must still be

provided with the Second Draw PPP Loan application, see the next set of FAQs in this

document for more information.)

8. Question: Can I document my reduction in gross receipts with income tax returns if my

entity files taxes on the basis of a fiscal year that differs from the calendar year?

Answer: Entities that use a fiscal year to file taxes may document a reduction in gross

receipts with income tax returns only if their fiscal year contains all of the second, third,

and fourth quarters of the calendar year (i.e., have a fiscal year start date of February 1,

March 1, or April 1).

9. Question: I am a self-employed individual who is eligible to use gross income from both

Schedule C and Schedule F to calculate loan amount, how do I calculate the percentage

reduction in gross receipts for a Second Draw PPP Loan?

Answer: Add the gross receipts for your Schedule C business with the gross receipts for

your Schedule F business together and compare this sum against the sum of your gross

receipts for your Schedule C and Schedule F business gross receipts for the reference

period you choose (either quarterly or annually).

As of March 12, 2021

Maximum Second Draw PPP Loan Amounts

This guidance describes payroll costs using calendar year 2019 as the reference period for

determining payroll costs used to calculate loan amounts. However, borrowers are permitted to

use payroll costs from either calendar year 2019 or calendar year 2020 for their Second Draw

PPP Loan amount calculation.

Documentation, including IRS forms, must be supplied for the

selected reference period. If a borrower is using the same lender and same payroll timeframe as

it used for its First Draw PPP Loan and already submitted the required payroll documentation to

the lender, no additional payroll documentation is required to be submitted with its Second Draw

PPP Loan application.

Question: I am self-employed and have no employees. How do I calculate my

maximum Second Draw PPP Loan amount if I use net profit? (Note that PPP loan

forgiveness amounts will depend, in part, on the total amount spent during the covered

period following disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount

that can be borrowed if you are self-employed and have no employees, and your

principal place of residence is in the United States, including if you are an independent

contractor or operate a sole proprietorship, and you use net profit (but not if you are a

partner in a partnership):

• Step 1: Find your 2019 IRS Form 1040 Schedule C line 31 net profit amount.

this amount is over $100,000, reduce it to $100,000. If this amount is zero or less,

you are not eligible for a PPP loan.

• Step 2: Calculate the average monthly net profit amount (divide the amount from

Step 1 by 12).

• Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5.

Your 2019 IRS Form 1040 Schedule C must be provided to substantiate the applied-for

Second Draw PPP Loan amount. You must also provide a 2019 IRS Form 1099-MISC

detailing nonemployee compensation received (box 7), IRS Form 1099-K, invoice, bank

statement, or book of record establishing you were self-employed in 2019 and a 2020

invoice, bank statement, or book of record establishing you were in operation on

February 15, 2020.

Question: I am self-employed and have employees. How do I calculate my maximum

Second Draw PPP Loan amount (up to $2 million) if I use net profit? (Note that PPP

loan forgiveness amounts will depend, in part, on the total amount spent during the

covered period following disbursement of the PPP loan.)

All components of payroll costs must be from the same calendar year. Payroll costs, including for covered benefits,

can only be included for employees whose principal place of residence is in the United States.

If you are using 2020 amounts and you have not yet completed a 2020 return, fill it out and compute the value.

Multiply by 3.5 if your business is in the Accommodation and Food Services sector (NAICS Code 72) and the

business activity code reported on your most recent IRS Form 1040 Schedule C line B begins with 72.

As of March 12, 2021

Answer: The following methodology should be used to calculate the maximum amount

that can be borrowed if you are self-employed with employees, including if you are an

independent contractor or operate a sole proprietorship, and you use net profit (but not if

you are a partner in a partnership):

• Step 1: Compute your 2019 payroll costs by adding the following:

2019 IRS Form 1040 Schedule C line 31 net profit amount;

• if this amount is over $100,000, reduce it to $100,000;

• if this amount is less than zero, set this amount at zero;

2019 gross wages and tips paid to your employees whose principal place of

residence is in the United States, up to $100,000 per employee, which can be

computed using:

• 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-

column 1) from each quarter,

• Plus any pre-tax employee contributions for health insurance or

other fringe benefits excluded from Taxable Medicare wages &

tips,

• Minus (i) any amounts paid to any individual employee in excess

of $100,000, and (ii) any amounts paid to any employee whose

principal place of residence is outside the United States;

2019 employer contributions for employee group health, life, disability,

vision, and dental insurance (the portion of IRS Form 1040 Schedule C line

14 attributable to those contributions);

2019 employer contributions to employee retirement plans (IRS Form 1040

Schedule C line 19); and

2019 employer state and local taxes assessed on employee compensation,

primarily state unemployment insurance tax (from state quarterly wage

reporting forms).

• Step 2: Calculate the average monthly payroll costs amount (divide the amount

from Step 1 by 12).

• Step 3: Multiply the average monthly payroll costs amount from Step 2 by 2.5.

Your 2019 IRS Form 1040 Schedule C, IRS Form 941 and state quarterly wage

unemployment insurance tax reporting form from each quarter (or equivalent payroll

processor records or IRS Wage and Tax Statements), along with documentation of any

retirement or group health, life, disability, vision, and dental insurance contributions,

If you are using 2020 payroll costs and have not yet completed a 2020 return, fill it out and compute the value.

Multiply by 3.5 if your business is in the Accommodation and Food Services sector and the business activity code

reported on your most recent IRS Form 1040 Schedule C line B begins with 72.

As of March 12, 2021

must be provided to substantiate the applied-for Second Draw PPP Loan amount. A

payroll statement or similar documentation from the pay period that covered February

15, 2020 must be provided to establish you were in operation and had employees on that

date.

Question: I am a self-employed farmer or rancher who reports my income on IRS

Form 1040 Schedule F. What documentation must I provide in place of Schedule C and

how should my maximum Second Draw PPP Loan amount be calculated (up to $2

million)?

Answer: Self-employed farmers and ranchers (i.e., those who file IRS Form 1040

Schedule F and then report Schedule F income on IRS Form 1040 Schedule 1) should

use IRS Form 1040 Schedule F in lieu of Schedule C.

The calculation for self-employed farmers and ranchers without employees is the same

as for Schedule C filers that have no employees, except that Schedule F line 9 (gross

income) should be used to determine the loan amount rather than Schedule C line 31

(net profit).

The calculation for self-employed farmers and ranchers with employees is the same as

for Schedule C filers that have employees with several exceptions. First, in place of

Schedule C line 31 (net profit), the difference between Schedule F line 9 (gross income)

and the sum of Schedule F lines 15, 22, and 23 (for employee payroll) should be used.

Second, employer contributions for employee group health, life, disability, vision and

dental insurance (portion of Schedule F line 15 attributable to those contributions) and

employer contributions for employee retirement contributions (Schedule F line 23)

should be used in place of those respective lines on Schedule C.

The documentation requirements are the same as for Schedule C filers except the 2019

IRS Form 1040 Schedule 1 and Schedule F must be included with the Second Draw PPP

Loan application in place of IRS Form 1040 Schedule C. Additionally, for farmers and

ranchers with employees, IRS Form 943 should be provided in addition to, or in place

of, IRS Form 941, as applicable.

Question: How do partnerships apply for Second Draw PPP Loans and how is the

maximum Second Draw PPP Loan amount calculated for partnerships (up to $2

million)? Should partners’ self-employment income be included on the business entity

level Second Draw PPP Loan application or on separate Second Draw PPP Loan

applications for each partner? (Note that PPP loan forgiveness amounts will depend, in

part, on the total amount spent during the covered period following disbursement of the

PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount

that can be borrowed for partnerships (partners’ self-employment income should be

included on the partnership’s PPP loan application, individual partners may not apply

for separate PPP loans):

As of March 12, 2021

• Step 1: Compute 2019 payroll costs by adding the following:

2019 Schedule K-1 (IRS Form 1065) Net earnings from self-employment of

individual U.S.-based general partners that are subject to self-employment

tax, multiplied by 0.9235,

up to $100,000 per partner;

• Compute the net earnings from self-employment of individual

U.S.-based general partner that are subject to self-employment tax

from box 14, Code A of IRS Form 1065 Schedule K-1 and subtract

(i) any section 179 expense deduction claimed in box 12; (ii) any

unreimbursed partnership expenses claimed; and (iii) any depletion

claimed on oil and gas properties.

• if this amount is over $100,000 for a partner, reduce it to

$100,000;

• if this amount is less than zero for a partner, set this

amount at zero;

2019 gross wages and tips paid to employees whose principal place of

residence is in the United States (if any), up to $100,000 per employee,

which can be computed using:

• 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-

column 1) from each quarter,

• Plus any pre-tax employee contributions for health insurance or

other fringe benefits excluded from Taxable Medicare wages &

tips,

• Minus (i) any amounts paid to any individual employee in excess

of $100,000, and (ii) any amounts paid to any employee whose

principal place of residence is outside the United States;

2019 employer contributions for employee (but not partner) group health,

life, disability, vision, and dental insurance, if any (portion of IRS Form

1065 line 19 attributable to those contributions);

2019 employer contributions to employee (but not partner) retirement plans,

if any (IRS Form 1065 line 18); and

2019 employer state and local taxes assessed on employee compensation,

primarily state unemployment insurance tax (from state quarterly wage

reporting forms), if any.

• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1

by 12).

This treatment follows the computation of self-employment tax from IRS Form 1040 Schedule SE Section A

line 4 and removes the “employer” share of self-employment tax, consistent with how payroll costs for employees in

the partnership are determined.

If the partnership is using 2020 payroll costs and the Form 1065 for 2020 has not yet been completed, fill out the

form.

As of March 12, 2021

• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.

The partnership’s 2019 IRS Form 1065 (including K-1s) must be provided to

substantiate the applied-for Second Draw PPP Loan amount. If the partnership has

employees, other relevant supporting documentation, including the 2019 IRS Form 941

and state quarterly wage unemployment insurance tax reporting form from each quarter

(or equivalent payroll processor records or IRS Wage and Tax Statements) along with

records of any retirement or group health, life, disability, vision, and dental insurance

contributions must also be provided to substantiate the PPP loan amount. If the

partnership has employees, a payroll statement or similar documentation from the pay

period that covered February 15, 2020 must be provided to establish the partnership was

in operation and had employees on that date. If the partnership has no employees, an

invoice, bank statement, or book of record establishing the partnership was in operation

on February 15, 2020 must instead be provided.

Question: How is the maximum Second Draw PPP Loan amount calculated for S

corporations and C corporations (up to $2 million)? (Note that PPP loan forgiveness

amounts will depend, in part, on the total amount spent during the covered period

following disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount

that can be borrowed for corporations, including S and C corporations:

• Step 1: Compute 2019 payroll costs by adding the following:

2019 gross wages and tips paid to your employees whose principal place of

residence is in the United States, up to $100,000 per employee, which can be

computed using:

• 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-

column 1) from each quarter,

• Plus any pre-tax employee contributions for health insurance or

other fringe benefits excluded from Taxable Medicare wages &

tips,

• Minus (i) any amounts paid to any individual employee in excess

of $100,000, and (ii) any amounts paid to any employee whose

principal place of residence is outside the United States;

2019 employer group health, life, disability, vision, and dental insurance

contributions (portion of IRS Form 1120 line 24 or IRS Form 1120-S line 18

attributable to those contributions);

2019 employer retirement contributions (IRS Form 1120 line 23 or IRS

Multiply by 3.5 if your business is in the Accommodation and Food Services sector and the business activity code

reported on your most recent IRS Form 1065 Line C begins with 72.

Note that employer contributions for group health, life, disability, vision, and dental insurance for S-Corporation

employees who own more than a 2 percent stake in the business (or employees who are family members of such

owners) are not included in this figure as such contributions are already included in gross wages.

As of March 12, 2021

Form 1120-S line 17); and

2019 employer state and local taxes assessed on employee compensation,

primarily state unemployment insurance tax (from state quarterly wage

reporting forms).

• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1

by 12).

• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.

The corporation’s 2019 IRS Form 941 and state quarterly wage unemployment

insurance tax reporting form from each quarter (or equivalent payroll processor records

or IRS Wage and Tax Statements), along with the filed business tax return (IRS Form

1120 or IRS 1120-S) or other documentation of any retirement and group health, life,

disability, vision, and dental insurance contributions, must be provided to substantiate

the applied-for Second Draw PPP Loan amount. A payroll statement or similar

documentation from the pay period that covered February 15, 2020 must be provided to

establish you were in operation and had employees on that date.

Question: How is the maximum Second Draw PPP Loan amount calculated for eligible

nonprofit organizations

(up to $2 million)? (Note that PPP loan forgiveness amounts

will depend, in part, on the total amount spent during the covered period following

disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount

that can be borrowed for eligible nonprofit organizations (eligible nonprofit religious

institutions or other eligible nonprofits without an IRS Form 990 filing requirement, see

the next question):

• Step 1: Compute 2019 payroll costs by adding the following:

2019 gross wages and tips paid to your employees whose principal place of

residence is in the United States, up to $100,000 per employee, which can be

computed using:

• 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-

column 1) from each quarter,

• Plus any pre-tax employee contributions for health insurance or

other fringe benefits excluded from Taxable Medicare wages &

tips,

• Minus (i) any amounts paid to any individual employee in excess

of $100,000, and (ii) any amounts paid to any employee whose

principal place of residence is outside the United States;

2019 employer group health, life, disability, vision, and dental insurance

contributions (portion of IRS Form 990 Part IX line 9 attributable to those

Multiply by 3.5 if your business is in the Accommodation and Food Services sector and the business activity code

reported on your most recent IRS Form 1120 Schedule K, line 2A (IRS Form 1120-S item B) begins with 72.

As of March 12, 2021

contributions);

2019 employer retirement contributions (IRS Form 990 Part IX line 8); and

2019 employer state and local taxes assessed on employee compensation,

primarily state unemployment insurance tax (from state quarterly wage

reporting forms).

• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1

by 12).

• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.

The nonprofit organization’s 2019 IRS Form 941 and state quarterly wage

unemployment insurance tax reporting form from each quarter (or equivalent payroll

processor records or IRS Wage and Tax Statements), along with the filed IRS Form 990

Part IX or other documentation of any retirement and group health, life, disability,

vision, and dental insurance contributions, must be provided to substantiate the applied-

for Second Draw PPP Loan amount. A payroll statement or similar documentation from

the pay period that covered February 15, 2020 must be provided to establish you were in

operation and had employees on that date. Eligible nonprofits that file IRS Form 990-

EZ should rely on that form and those that do not file an IRS Form 990 or 990-EZ,

typically those with gross receipts less than $50,000, should see the next question.

Question: How is the maximum Second Draw PPP Loan amount calculated for eligible

nonprofit religious institutions, veterans organizations, and tribal businesses (up to $2

million)? (Note that PPP loan forgiveness amounts will depend, in part, on the total

amount spent during the covered period following disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount

that can be borrowed for eligible nonprofit religious institutions, veterans organizations

and tribal businesses:

• Step 1: Compute 2019 payroll costs by adding the following:

2019 gross wages and tips paid to employees whose principal place of

residence is in the United States, up to $100,000 per employee, which can be

computed using:

• 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-

column 1) from each quarter,

• Plus any pre-tax employee contributions for health insurance or

other fringe benefits excluded from Taxable Medicare wages &

tips,

• Minus (i) any amounts paid to any individual employee in excess

Multiply by 3.5 if your business is in the Accommodation and Food Services sector and the business activity code

reported on your most recent IRS Form 990 Part VIII, adjacent to line 2A begins with 72.

As of March 12, 2021

of $100,000, and (ii) any amounts paid to any employee whose

principal place of residence is outside the U.S.;

2019 employer group health, life, disability, vision, and dental insurance

contributions;

2019 employer retirement contributions and

2019 employer state and local taxes assessed on employee compensation,

primarily state unemployment insurance tax (from state quarterly wage

reporting forms).

• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1

by 12).

• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.

The entity’s 2019 IRS Form 941 and state quarterly wage unemployment insurance tax

reporting form from each quarter (or equivalent payroll processor records or IRS Wage

and Tax Statements), along with documentation of any retirement and group health, life,

disability, vision, and dental insurance contributions, must be provided to substantiate

the applied-for Second Draw PPP loan amount. A payroll statement or similar

documentation from the pay period that covered February 15, 2020 must be provided to

establish you were in operation and had employees on that date.

Question: I am an LLC owner. Which set of instructions applies to me?

Answer: LLCs should follow the instructions that apply to their tax filing status in the

reference period used to calculate payroll costs (2019 or 2020)—i.e., whether the LLC

filed (or will file) as a sole proprietor, a partnership, or a corporation in the reference

period.

Question: What other documentation can an applicant provide for the purpose of

substantiating payroll costs used to calculate the applied-for Second Draw PPP Loan

amount?

Answer: An applicant may provide IRS Form W-2s and IRS Form W-3 or payroll

processor reports, including quarterly and annual tax reports, in lieu of IRS Form 941.

Additionally, very small businesses that file an annual IRS Form 944 or agricultural

employers that file an annual IRS Form 943 should rely on and provide IRS Form 944

or IRS Form 943 in lieu of IRS Form 941.

An applicant may provide records from a retirement administrator to document

employer retirement contributions. An applicant may also provide records from a health

Multiply by 3.5 if your business is in the Accommodation and Food Services sector (NAICS code that begins

with 72, e.g., a hotel, restaurant, bar).

As of March 12, 2021

insurance company or third-party administrator for a self-insured plan to document

employer health insurance contributions.

10.

Question: How is the maximum Second Draw PPP Loan amount calculated for a

corporation or nonprofit not in operation for the full one-year period preceding February

15, 2020? (Note that PPP loan forgiveness amounts will depend, in part, on the total

amount spent during the covered period following disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount

that can be borrowed:

• Step 1: Compute total payroll costs from when first in operation in 2019 or 2020

through the end of calendar year 2020 by adding the following:

Gross wages and tips paid to your employees whose principal place of

residence is in the United States, up to $100,000 per employee annualized,

which can be computed using:

• IRS Form 941 Taxable Medicare wages & tips (line 5c-column 1)

from each quarter the business was in operation,

• Plus any pre-tax employee contributions for health insurance or

other fringe benefits excluded from Taxable Medicare wages &

tips,

• Minus (i) any amounts paid to any individual employee in excess

of the product of $8,333 and the number of months in operation

through 2020, and (ii) any amounts paid to any employee whose

principal place of residence is outside the United States;

Employer group health, life, disability, vision, and dental insurance

contributions;

Employer retirement contributions; and

Employer state and local taxes assessed on employee compensation,

primarily state unemployment insurance tax (from state quarterly wage

reporting forms).

• Step 2: Calculate the average monthly payroll costs (divide the amount from Step 1

by number of months in operation from 2019 through the end of 2020).

• Step 3: Multiply the average monthly payroll costs from Step 2 by 2.5.

The entity’s IRS Form 941s and state quarterly wage unemployment insurance tax

reporting form from each quarter the entity was in operation (or equivalent payroll

Note that employer contributions for group health, life, disability, vision, and dental insurance for S-Corporation

employees who own more than a 2 percent stake in the business (or employees who are family members of such

owners) are not included in this figure as such contributions are already included in gross wages.

Multiply by 3.5 if your business is in the Accommodation and Food Services sector and the business activity code

reported on your most recent income tax return (Form 1120 Schedule K, line 2A for corporations, Form 1120-S item

B for S-corporations, and Form 990 Part VIII, adjacent to line 2A for nonprofits) begins with 72.

As of March 12, 2021

processor records or IRS Wage and Tax Statements), along with documentation of any

retirement and group health, life, disability, vision, and dental insurance contributions,

must be provided to substantiate the applied-for Second Draw PPP Loan amount. A

payroll statement or similar documentation from the pay period that covered February

15, 2020 must be provided to establish you were in operation and had employees on that

date.

11.

Question: I am self-employed (or a partnership) and was in operation on February 15,

2020, but was not in operation for the full one-year period preceding February 15, 2020.

I have filed or will file a Form 1040 Schedule C or Schedule F (or Form 1065) for 2020.

What reference period should I be using to compute my Second Draw PPP Loan

amount?

Answer: In this case, your maximum Second Draw PPP Loan amount is the average

monthly payroll based on the number of months in which you were in operation from

2019 through the end of calendar year 2020, excluding costs over $100,000 on an

annualized basis.

• Step 1: Compute total applicable owner compensation across 2019 (if in operation

that year) and 2020 income tax returns:

o For self-employed Schedule C filers who use net profit (regardless of

whether they have employees), it is the sum of the value of Form 1040

Schedule C line 31 net profit.

 If this amount is less than zero, set this amount to zero;

o For self-employed Schedule C filers with no employees who use gross

income, it is the sum of the value of Form 1040 Schedule C line 7 gross

income.

 If this amount is zero or less than zero, you are not eligible for a

Second Draw PPP loan;

o For self-employed Schedule C filers with employees who use gross

income, it is the sum of the difference between the gross income amount on

Form 1040 Schedule C line 7 and the employee payroll costs from the sum

of Form 1040 Schedule C lines 14, 19, and 26.

 If this amount is less than zero, set this amount to zero;

o For self-employed farmer or rancher with no employees, it is the sum of

the value of Form 1040 Schedule F line 9 gross income.

o For self-employed farmer or rancher with employees, it is the sum of the

difference between the gross income amount on Form 1040 Schedule F

If you have not completed your applicable 2020 return, fill it out.

Any other employee payroll costs not reported on those lines but included in line 28 total expenses must also be

subtracted from gross income.

As of March 12, 2021

line 9 and employee payroll costs from the sum of Form 1040 Schedule F

lines 15, 22, and 23.

 If this amount is less than zero, set this amount to zero.

o For partnerships, it is the sum of Schedule K-1 (IRS Form 1065) net

earnings from self-employment of individual U.S.-based general partners

that are subject to self-employment tax, multiplied by 0.9235.

 Compute the net earnings from self-employment of individual U.S.-

based general partner that are subject to self-employment tax from

box 14, Code A of IRS Form 1065 Schedule K-1 and subtract (i) any

section 179 expense deduction claimed in box 12; (ii) any

unreimbursed partnership expenses claimed; and (iii) any depletion

claimed on oil and gas properties. If this amount is less than zero, set

this amount to zero.

• Step 2: If the amount from Step 1 is greater than the product of $8,333 and the

number of months in operation from 2019 through the end of 2020, set it to this

value.

o For partnerships, this cap applies separately to each general partner.

• Step 3: If the entity has employees, enter the amount computed from following the

instructions from FAQ 10 Step 1, otherwise enter 0.

• Step 4: Calculate the average monthly payroll costs (add Step 2 and Step 3 together

and then divide that sum by the number of months in operation from 2019 through

the end of 2020).

• Step 5: Multiply the average monthly payroll costs from Step 4 by 2.5.

Your applicable income tax return (Form 1040 Schedule C, Form 1040 Schedule F, or

Form 1065 (including K-1s)) from 2019 (if applicable) and 2020 must be provided to

substantiate the applied-for Second Draw PPP loan amount. If you had employees, your

IRS Form 941s and state quarterly wage unemployment insurance tax reporting form

from each quarter the entity was in operation (or equivalent payroll processor records or

IRS Wage and Tax Statements), along with documentation of any retirement and group

health, life, disability, vision, and dental insurance contributions must be provided to

substantiate the applied-for Second Draw PPP Loan amount. Additionally, a payroll

statement or similar documentation from the pay period that covered February 15, 2020

must be provided to establish you were in operation and had employees on that date. If

you did not have employees, an invoice, bank statement, or book of record establishing

you was in operation on February 15, 2020 must instead be provided.

Multiply by 3.5 if your business is in the Accommodation and Food Services sector and the business activity code

reported on the most recent income tax return (IRS Form 1040 Schedule C line B for self-employed who are not

farmers or ranchers and Form 1120-S item B for partnerships) begins with 72.

As of March 12, 2021

12.

Question: If I used payroll costs from the prior 12 months when computing my First

Draw PPP Loan amount, can I continue to use those figures to compute my Second

Draw PPP Loan amount?

Answer: No, payroll costs from the precise 12-month period prior to the First Draw

PPP Loan cannot be used to compute the Second Draw PPP Loan amount. Any

borrower that used payroll costs from the prior 12 months when computing its First

Draw PPP Loan amount can calculate the amount for its Second Draw PPP Loan

amount using calendar year 2019 or calendar year 2020 payroll costs.

A borrower that

used calendar year 2019 for its First Draw PPP Loan amount may continue to do so.

13.

Question: Can I enter NAICS code 72 on my Second Draw PPP Loan application if the

business activity code line was left blank on my business’s most recently filed income

tax return?

Answer: If an entry for this line is missing from your tax return, you should report the

industry code that is most applicable to your business’ primary business activity. If

your business is in the Accommodation and Food Services sector (e.g., a hotel,

restaurant, bar), you can only report a NAICS Code beginning with 72 if you can

substantiate this with alternative documentation, such as permits or licenses issued by

local governments that are unique to this sector.

14.

Question: In addition to pre-tax employee contributions for health insurance, what are

the other pre-tax employee contributions for fringe benefits that may have been

excluded from IRS Form 941 Taxable Medicare wages & tips that is part of employee

gross pay?

Answer: Employee contributions and deductions from pay for flexible spending

arrangements (FSA) or other nontaxable benefits under a section 125 cafeteria plan,

qualified transit or parking benefits (up to $270 a month), and group life insurance (for

up to $50,000 of coverage) may have been excluded from IRS Form 941 Taxable

Medicare wages & tips. However, pre-tax employee contributions to retirement plans

are included in Taxable Medicare wages & tips and should not be added to that figure to

arrive at gross pay.

15.

Question: How should a borrower account for federal taxes when determining its

payroll costs for purposes of the maximum loan amount, allowable uses of a PPP loan,

and the amount of a loan that may be forgiven?

Answer: Payroll costs are calculated on a gross basis without regard to federal taxes

imposed or withheld, such as the employee’s and employer’s share of Federal Insurance

Contributions Act (FICA) and income taxes required to be withheld from employees’

Borrowers who are not self-employed (including sole proprietorships and independent contractors) are also

permitted to use the precise 1-year period before the date on which the Second Draw Loan is made to calculate

payroll costs if they choose not to use 2019 or 2020.

As of March 12, 2021

pay. As a result, payroll costs are not reduced by taxes imposed on an employee and

required to be withheld by the employer. However, payroll costs do not include the

employer’s share of payroll tax. For example, the wages of an employee who earned

$4,000 per month in gross wages, from which $500 in federal taxes was withheld, count

as $4,000 in payroll costs. However, the employer-side federal payroll taxes imposed

on the $4,000 in wages are excluded from payroll costs under the statute.

16.

Question: Is there a limit on the dollar amount of Second Draw PPP Loans a corporate

group can receive?

Answer: Yes, businesses that are part of the same corporate group cannot receive

Second Draw PPP Loans in a total amount of more than $4 million. For purposes of this

limit, businesses are part of a single corporate group if they are majority owned, directly

or indirectly, by a common parent.

17.

Question: I am self-employed and have no employees. How do I calculate my

maximum Second Draw PPP Loan amount if I use gross income?

Answer: The following methodology should be used to calculate the maximum amount

that can be borrowed if you are self-employed and have no employees, and your

principal place of residence is in the United States, including if you are an independent

contractor or operate a sole proprietorship (but not if you are a partner in a partnership;

see Question #4), and you use gross income:

• Step 1: Find your 2019 IRS Form 1040 Schedule C line 7 gross income amount.

If this amount is zero or less, you are not eligible for a PPP loan.

• Step 2: Calculate the average monthly gross income amount (divide the amount

from Step 1 by 12). If this amount is more than $8,333.33, reduce it to $8,333.33.

• Step 3: Multiply the average monthly gross income amount from Step 2 by 2.5.

The definition of “payroll costs” in the CARES Act, 15 U.S.C. 636(a)(36)(A)(viii), excludes “taxes imposed or

withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period”. As

described above, the SBA interprets this statutory exclusion to mean that payroll costs are calculated on a gross

basis, without subtracting federal taxes that are imposed on the employee or withheld from employee wages. Unlike

employer-side payroll taxes, such employee-side taxes are ordinarily expressed as a reduction in employee take-

home pay; their exclusion from the definition of payroll costs means payroll costs should not be reduced based on

taxes imposed on the employee or withheld from employee wages. This interpretation is consistent with the text of

the statute and advances the legislative purpose of ensuring workers remain paid and employed. Further, because

the reference period for determining a borrower’s maximum loan amount will largely or entirely precede the period

during which borrowers will be subject to the restrictions on allowable uses of the loans, for purposes of the

determination of allowable uses of loans and the amount of loan forgiveness, this statutory exclusion will apply with

respect to such taxes imposed or withheld at any time, not only during such period.

If you are using 2020 amounts and you have not yet completed a 2020 return, fill it out and compute the value.

Multiply by 3.5 if your business is in the Accommodation and Food Services sector (NAICS Code 72) and the

business activity code reported on your most recent IRS Form 1040 Schedule C line B begins with 72.

As of March 12, 2021

Your 2019 IRS Form 1040 Schedule C must be provided to substantiate the applied-for

Second Draw PPP Loan amount. You must also provide a 2019 IRS Form 1099-MISC

detailing nonemployee compensation received (box 7), IRS Form 1099-K, invoice, bank

statement, or book of record establishing you were self-employed in 2019 and a 2020

invoice, bank statement, or book of record establishing you were in operation on

February 15, 2020.

18.

Question: I am self-employed and have employees. How do I calculate my maximum

Second Draw PPP Loan amount (up to $2 million) if I use gross income? (Note that

PPP loan forgiveness amounts will depend, in part, on the total amount spent during the

covered period following disbursement of the PPP loan.)

Answer: The following methodology should be used to calculate the maximum amount

that can be borrowed if you are self-employed with employees, including if you are an

independent contractor or operate a sole proprietorship (but not if you are a partner in a

partnership; see Question #4), and use gross income:

• Step 1: Find your 2019 IRS Form 1040 Schedule C line 7 gross income amount.

Subtract 2019 employee payroll costs summed from Form 1040 Schedule C lines

14, 19, and 26.

If this amount is less than zero, set this amount at zero.

• Step 2: Divide the gross income amount from Step 1 by 12. If this amount is more

than $8,333.33, reduce it to $8,333.33.

• Step 3: Calculate the sum of:

2019 gross wages and tips paid to your employees whose principal place of

residence is in the United States, up to $100,000 per employee, which can be

computed using:

• 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-

column 1) from each quarter,

• Plus any pre-tax employee contributions for health insurance or

other fringe benefits excluded from Taxable Medicare wages &

tips,

• Minus (i) any amounts paid to any individual employee in excess

of $100,000, and (ii) any amounts paid to any employee whose

principal place of residence is outside the United States;

2019 employer contributions for employee group health, life, disability,

vision, and dental insurance (the portion of IRS Form 1040 Schedule C line

14 attributable to those contributions);

2019 employer contributions to employee retirement plans (IRS Form 1040

Schedule C line 19); and

If you are using 2020 amounts and have not yet completed a 2020 return, fill out the required portions and

compute the values.

Any other employee payroll costs not reported on those lines but included in line 28 total expenses must also be

subtracted from gross income.

As of March 12, 2021

2019 employer state and local taxes assessed on employee compensation,

primarily state unemployment insurance tax (from state quarterly wage

reporting forms).

• Step 4: Calculate average monthly payroll costs for employees (divide the amount

from Step 3 by 12).

• Step 5: Sum the amounts from Step 2 and Step 4 and multiply by 2.5.

Your 2019 IRS Form 1040 Schedule C, IRS Form 941 and state quarterly wage

unemployment insurance tax reporting form from each quarter (or equivalent payroll

processor records or IRS Wage and Tax Statements), along with documentation of any

retirement or group health, life, disability, vision, and dental insurance contributions,

must be provided to substantiate the applied-for Second Draw PPP Loan amount. A

payroll statement or similar documentation from the pay period that covered February

15, 2020 must be provided to establish you were in operation and had employees on that

date.

19.

Question: If I report farm or ranch income as an LLC, qualified joint venture, or

partnership, may I use gross income to determine loan amount?

Answer: Only self-employed farmers and ranchers who file an IRS Form 1040

Schedule F with their Form 1040 and report Schedule F farm income on IRS Form 1040

Schedule 1 may use gross income to determine the loan amount. Single member LLCs

and qualified joint ventures, as defined by IRS,

that file Schedule F with their Form

1040 may use gross income to determine their loan amount. Only one spouse in a

qualified joint venture may submit a PPP loan application on behalf of the qualified

joint venture.

Partnerships and partners must calculate loan amounts as directed in Question 4 above.

20.

Question: If I am a self-employed individual who is eligible to use gross income from

both Schedule C and Schedule F to calculate loan amount, how do I calculate loan

amount?

Answer: Calculate your maximum loan amount by following the relevant guidance for

calculating maximum loan amount for self-employed individuals (either with or without

employees) using gross income from Schedule C and separately for using gross income

from Schedule F. Add the two results together to calculate your maximum loan amount.

In the applicable Box A on SBA Form 2483-SD-C, include amounts from both Schedule

C and Schedule F.

Multiply by 3.5 if your business is in the Accommodation and Food Services sector and the business activity code

reported on your most recent IRS Form 1040 Schedule C line B begins with 72.

A qualified joint venture for federal income tax purposes means (1) the only members of the joint venture are a

married couple who file a joint return and each file Schedule C or F with their Form 1040, (2) both spouses

materially participate in the trade or business, and (3) both spouses elect not to be treated as a partnership.