Current Federal Tax Developments

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500-Employee Count for PPP Loan Qualification Counts All Employees not Just Full Time Equivalents

The SBA continues to add to the frequently asked questions for payroll protection program loans, adding a new question 36 regarding the 500-employee threshold for PPP loans under the CARES Act.[1]

The newly added question provides:

Question: To determine borrower eligibility under the 500-employee or other applicable threshold established by the CARES Act, must a borrower count all employees or only full-time equivalent employees?

Answer: For purposes of loan eligibility, the CARES Act defines the term employee to include “individuals employed on a full-time, part-time, or other basis.” A borrower must therefore calculate the total number of employees, including part-time employees, when determining their employee headcount for purposes of the eligibility threshold. For example, if a borrower has 200 full-time employees and 50 part-time employees each working 10 hours per week, the borrower has a total of 250 employees.

By contrast, for purposes of loan forgiveness, the CARES Act uses the standard of “fulltime equivalent employees” to determine the extent to which the loan forgiveness amount will be reduced in the event of workforce reductions.


[1] “Paycheck Protection Program Loans Frequently Asked Questions (FAQs),” April 26, 2020 version, https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf, retrieved April 26, 2020