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PPP Forgiveness – Credit Cards

Once a business has applied and received economic relief through the Paycheck Protection Program (PPP) the question may arise whether credit card statements count as utilities for the forgiveness application. The credit card statement itself is not eligible for PPP forgiveness, but the statement may provide evidence of eligible expenses.

Pursuant to SBA Form 3508, PPP Forgiveness Application, businesses can submit documentation such as copy of invoices, cancelled checks or account statements verifying eligible payments. Credit card bills are account statements and may contain payments to utility companies for water, heat, electricity, gas, internet and telephone. If you pay an eligible expense by credit card be sure to make a cash payment on your credit card within your covered period to ensure that the SBA counts it as use of proceeds.

For example, XYZ corporation pays the gas bill using the corporate American Express business credit card. The gas bill is $132.14. By the end of the month, but before the end of the covered period, XYZ corporation submits a $132.14 payment to American Express. In this case, XYZ corporation would use its American Express bill and bank account statements to confirm the eligible expense and use of proceeds. However, if XYZ corporation submits a payment of $300 to American Express, only the $132.14 would count towards the use of proceeds. The remaining use of the funds for interest and miscellaneous charges over time would be ineligible expenses for PPP forgiveness.

The SBA has not issued guidance relating to whether some portion of a credit card minimum payment would count towards PPP forgiveness. Revisiting the XYZ corporation example, what would happen if the payment submitted was $40 for the American Express card, which represents the minimum balance? Would the SBA accept the $40 as the amount paid for PPP forgiveness? Would the SBA prorate the payment by dividing utility expenses versus all expenses? It is unclear how the SBA would handle such an occurrence.

Credit cards are an essential resource for businesses. Depending on the company’s situation, credit card statements may be vital when applying for PPP forgiveness. The application requires evidence of the expenses paid, regardless if its cash, check, or credit card. As a result, Barbee Tax recommends submitting your credit card statements, when applicable.

For questions related to the PPP forgiveness, please feel free to call Barbee Tax at (708) 405-2112.

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