The First Loan Forgiveness Rule capped the amount of loan forgiveness for payroll compensation attributable to an owner-employee to either eight weeks’ worth of their 2019 compensation (up to $15,385) for an eight-week covered period or 2.5 months’ worth of their 2019 compensation (up to $20,833) for a 24-week covered period per owner in total across all businesses. There was no exception in the rule based on the owner-employee’s percentage of ownership.
The new IFR provides that an owner-employee in a C- or S-corporation who has less than a 5 percent ownership stake will not be subject to the owner-employee compensation rule. The IFR describes the exemption as intending to cover owner-employees who have no meaningful ability to influence decisions over how loan proceeds are allocated. It should be noted that the IFR applies this exception only to corporate entities and does not provide an exception for partnerships or limited liability companies.