amount of loan forgiveness to the lender. if the business does not apply for loan forgiveness, then the business is not required to begin to pay principal or interest to the lender until ten months plus 24 weeks after the date the loan proceeds were disbursed to the business. for ppp loans that the small business administration approved on or after june 5, the ppp loan must have a maturity of at least five years. for other ppp loans, the ppp loan has a maturity of two years; each lender has the option to extend the maturity of these ppp loans longer. ppp loans have an interest rate of 1 percent. each ppp loan is guaranteed by the u.s. small business administration. an applicant need not provide any collateral or personal guarantees in order to apply or be approved for a ppp loan. a ppp loan is a non-recourse loan, unless the loan proceeds are used for unallowable purposes. allowable use of loan proceeds ppp loan proceeds may generally be used for payroll costs. payroll costs include gross salary and wages, tips, vacation leave, sick leave, holiday pay, furlough pay, bonuses, severance pay, and other compensation paid to employees, up to $46,154 per employee. payroll costs also include the employer's cost for health insurance benefits for its employees and retirement benefits for its employees, neither of which are counted against the $46,154 limit per employee. employer-paid state taxes assessed on employee compensation, such as state unemployment tax, are allowable payroll costs. emergency paid sick leave and emergency family medical leave, the employer's portion of social security and medicare taxes, and federal unemployment tax must be excluded from payroll costs. in the case of a sole proprietor, independent contractor, or self-employed person, allowable payroll costs include owner-compensation replacement, up to 15.38% of their net self-employment profit in 2019, up to a maximum of $20,833. health insurance benefits and retirement benefits for an owner of the business are not allowable payroll costs. ppp loan proceeds may also be used for certain non-payroll costs. allowable non-payroll costs include business payments of mortgage interest, other interest, rent, and utilities, such as electricity, gas, water, telephone, internet, and transportation utility fees assessed by state and local governments. ppp loan proceeds cannot be used to compensate outside independent contractors that provide services to the business, nor to compensate employees whose primary residence is not in the united states. if the business operates internationally, ppp loan proceeds must only be used for the benefit of its operations in the united states and its possessions. calculation for borrowers with employees the principal of a ppp loan will be either partially or fully forgiven under certain circumstances. a business may apply for loan forgiveness at any time on or before the maturity date of the loan, including before the covered period ends in the case of a business that has expended all of the ppp loan proceeds for which forgiveness is requested. ppp loan forgiveness is generally based on what the loan proceeds were spent on, to what extent the business maintained or rehired its employees, and to what extent it maintained the wages and hours of its employees. take the business's average number of full-time equivalent (fte) employees per month during the 24 weeks after the loan proceeds were disbursed, and divide it by the average number of ftes per month between february 15, 2019, and december 31, 2019. multiply the above by the total amount paid for payroll costs, mortgage interest, rent, and utilities during the 24 weeks after the loan proceeds were disbursed. if, during the 24 weeks of the loan, the business reduced any employee's wages by more than 25% when compared to the previous calendar quarter, reduce the above amount by the amount of the reduction in wages. one fte is equal one worker who worked at least 40 hours per week. fte for someone who worked fewer than 40 hours per week is equal to the number of hours worked per week divided by 40. alternatively, the business may choose to consider each and every worker who worked fewer than 40 hours per week to be 0.5 fte each. in an exception to the above, the business will not be required to reduce its ppp loan forgiveness due to a wage reductions or a decrease in ftes in the following cases. the business received a ppp loan of $50,000 or less. the business made a good-faith, written offer to rehire a particular employee during the 24-week period, and the employee declined the offer. an employee was fired for cause, voluntarily resigned, or voluntarily requested and received a reduction in work hours. the business rehired employees by december 31. the business restored wage or hour reductions by december 31. the business was unable to rehire its employees on february 15 and was also unable to hire similarly qualified employees by december 31. the business is unable to return to its previous level of business activity due to compliance with requirements or guidance from the department of health and human services, the centers for disease control and prevention, or the occupational safety and health administration between march 1 and december 31, involving covid-19-related standards for worker safety or customer safety. a business can receive loan forgiveness on all of its payroll costs. additionally, it may receive forgiveness for an amount of non-payroll costs up to 66.67% of the amount it spent on payroll costs. the total amount of loan forgiveness cannot exceed the total amount of the ppp loan. the amount of loan proceeds used for unallowable purposes is ineligible for forgiveness. knowingly using loan proceeds for unallowable purposes is fraud. calculation for self-employed individuals and owner-employees if the ppp loan was made before june 5, 2020, and the borrower chooses to use an 8-week covered period, then the maximum amount of loan forgiveness for compensation for self-employed individuals and owner-employees is equal to the lesser of 15.38% of their 2019 compensation or $15,385 per individual in total across all businesses. for other borrowers who are self-employed or are owner-employees, the maximum amount of loan forgiveness for compensation for self-employed individuals and owner-employees is the lesser of 20.83% of 2019 compensation or $20,833 per individual in total across all businesses. if the individual files a form 1040 schedule c or schedule f, then the maximum is further limited to the amount of their 2019 net profit on their schedule c or schedule f. in the case of a general partner, the maximum is further limited to the amount of their 2019 net earnings from self-employment, less claimed section 179 depreciation deduction, unreimbursed partnership expenses, and depletion from oil and gas properties, and then multiplied by 92.35%. in the case of a self-employed individual, including a filer of either form 1040 schedule c or schedule f and general partners, they cannot claim loan forgiveness for retirement contributions and health insurance contributions separately because these costs are already included in their net self-employment income. if the borrower is a self-employed individual, additional loan forgiveness is not allowed for rent or mortgage interest. the compensation of an owner-employee of at least 5% of the c corporation is allowable and limited to the amount of their 2019 employee cash compensation, employer retirement contributions on their behalf, and health insurance contributions on their behalf. for each of these owner-employees, health insurance benefits and retirement contributions are allowable costs and do not count against the maximum amount of loan forgiveness for compensation above. for an owner-employee that owns more than 5% of either an s corporation or a c corporation, retirement plan contributions attributed to the owner are allowable and count toward ppp loan forgiveness, up to 20.833% of the owner's retirement plan contribution amount in 2019. the compensation of an owner-employee of an s corporation is limited to the amount of their 2019 cash compensation and employer retirement contributions on their behalf, but it cannot separately include health insurance contributions made on their behalf because these contributions are already included in their cash compensation. for an owner-employee of a s corporation, health insurance benefits and retirement contributions are allowable costs but do count against the maximum amount of loan forgiveness for compensation above. the above owner-employee compensation limits do not apply if the individual owns less than 5% of the s corporation or c corporation. in that case, owner-employee compensation are treated the same as any non-owner employee's compensation, and qualifies for ppp loan forgiveness for up to $46,154 of compensation for a 24-week covered period as well as additional amounts for retirement plan expenses, health benefits paid for the owner-employee and their family, and state unemployment taxes on their compensation. application process the business may use one of three ppp loan forgiveness applications, depending on their situation. the business completes the ppp loan forgiveness application and gives it to the lender along with any required documentation. at that point, the lender has 60 days to send a decision and a request for payment to the small business administration. when the lender does so, the small business administration has 90 days to remit the appropriate forgiveness amount to the lender, including accrued interest on that amount, subject to small business administration's review of the loan or the loan application. the business must then pay any remaining principal and accrued interest to the lender by the end of the maturity of the ppp loan. if the small business administration determines that a business that received a ppp loan was ineligible for the ppp loan, the small business administration may have recourse against individual shareholders, members, or partners of the business for non-payment of the ppp loan, and the lender will be required to repay the processing fee it had received from the small business administration. a business will be able to seek reconsideration and appeal of the small business administration's decisions. for those businesses that received ppp loans early in the process, eligibility for applying for loan forgiveness began as early as may 27, 2020, eight weeks after the first distributions of ppp loan proceeds. on august 4, 2020, the small business administration issued guidance to clarify the process for lenders to review forgiveness applications. the guidance addressed issues regarding the submission process; employee, independent contractor and sole proprietor compensation; non-payroll costs and payroll cycle calculations. borrowers may use scanned copies of paperwork in lieu of in-person meetings with lenders. record retention each business must keep documentation related to the ppp loan for a minimum of six years after the date its ppp loan is forgiven or the date the ppp loan is paid in full, whichever is later. the business must send the documentation to the small business administration and its inspector general upon request. the small business administration and its inspector general may review any ppp loan. income taxes ordinarily, loan forgiveness is considered taxable income, but forgiveness of a ppp loan is not considered taxable income. a business may take a tax-deduction for business expenses that resulted in loan forgiveness. appeal process a business may appeal the small business administration's official written decisions regarding ppp loans and ppp loan forgiveness. decisions made by a private lenders may not be appealed. a lender may not appeal the small business administration's decisions. a business must file a petition to appeal with the office of hearings and appeals by 30 days after a borrower's receipt of the small business administration's final ppp loan review decision or 30 days after the lender notifies the business of the small business administration's final ppp loan decision, whichever is earlier. during the appeal, the business should demonstrate that there was a clear error based on evidence. an administrative law judge or an administrative judge will decide whether there was a clear error of fact or law. the judge may affirm the small business administration's decision, deny the small business administration's decision, or remand the matter back to the small business administration for additional consideration. a judge will not reverse a decision by the small business administration entirely because a different decision could have been made. the judge will generally make a decision within 45 calendar days. the judge's decision will generally be made publicly available unless the judge places a protective order or