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Senate Passes - Paycheck Protection Program Flexibility Act … the forgiveness rules are changing again

Ship made of dollar banknote floating in water-1As an update to our June 2, 2020 blog entitled “SHOULD YOU APPLY FOR PPP LOAN FORGIVENESS NOW?” the U.S. Senate passed the House version of Paycheck Protection Program Flexibility Act legislation by voice vote with unanimous consent on Wednesday night (June 3, 2020). The bill now heads to President Donald Trump, who is expected to sign it.

Although we will have to wait for specific rules to be issued again by Treasury and the Small Business Administration (SBA), as was stated in more detail in our earlier blog, some of the more relevant changes include:

  • Increases the time for businesses to spend their loan money on payroll in order for it to be forgiven from the current eight-week deadline to 24 weeks.

  • Extends the June 30, 2020 rehiring deadline for laid-off employees to December 31, 2020.

  • Reduces from 75% to 60% the requirement that loan money must be spent on payroll in order for the loan to be forgiven. (Although, under the language of the bill as passed, the payroll expenditure requirement drops to 60% from 75%, that creates an “all or none”  forgiveness scenario, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, the borrower’s amount of the loan that is forgiven is reduced if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold is not met.  Representative Chip Roy (Texas), who co-sponsored the bill in the House, said in a speech that the bill intended the sliding scale to remain in effect at 60% and indicated that technical tweaks could be made to the bill to restore the sliding scale.)

  • Provides more flexibility on loan forgiveness for employers if they show they were unable to rehire employees or reopen to business in a way that complies with safety standards.

  • Extends the time borrowers have to repay the loan from two (2) years to five (5) years. The interest rate remains at one (1) percent.

  • Allows all employers to take advantage of the CARES Act deferral of the 6.2 % employer portion of social security payroll taxes, regardless of whether they have had a PPP loan forgiven.

We will continue to monitor the bill as it goes to President Donald Trump for signature, and once signed, the additional guidance issued by the Treasury and SBA. If you want to discuss these provisions and the possible impact on decision making, please contact us.

 

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