On May 4, the IRS revised its newly released frequently asked questions (“FAQs”) to clarify the interaction of the Paycheck Protection Program (“PPP”) with the employee retention credit.  FAQ 79 now indicates that an employer that repays its PPP loan by May 7, 2020, in accordance with rules issued by the Small Business Administration (“SBA”), the employer will be treated as though it had not received a covered loan under the PPP for purposes of the Employee Retention Credit. Therefore, the employer will be eligible for the credit provided the employer is otherwise an “eligible employer.”

In our article of April 30, we highlighted a concern that the shifting PPP terms combined with media attention and a public outcry had led many employers who “received” a PPP loan to repay them during a safe harbor period for repayment under SBA rules.  Because the FAQs did not address the issue, we were worried that some employers might be left ineligible for both the PPP and the retention credit.  That may still be true for employers who are required to be aggregated with another employer who received a PPP loan, but will no longer be a concern for those who received a PPP loan, and repaid it by May 7, 2020.