House and Senate Pass Paycheck Protection Program Flexibility Act of 2020June 05, 2020
Both the House and the Senate have passed the “Paycheck Protection Program Flexibility Act of 2020” (H.R. 7010) which modifies the Paycheck Protection Program (PPP). The President signed the act on June 5, 2020. In this article, we take a look at some of the key changes.
*This blog has been updated as of June 5, 2020.
On June 3, the Senate passed the Paycheck Protection Program Flexibility Act of 2020 (the Act). The President signed the act into law on June 5, 2020. The Act gives PPP borrowers more time to spend PPP funds and have those expenses be eligible for forgiveness.
Here are some of the key points of the Act:
- Extension of the 8 week period – PPP borrowers now have the ability to extend the 8 week forgiveness period to a 24 week forgiveness period. This extension will allow borrowers the opportunity to maximize forgiveness of the loan. PPP borrowers still have the ability to utilize the original 8 week period of the loan.
- Re-hire Exemption – Extended the deadline to restore employee count and wages to pre-COVID 19 levels from June 30, 2020 to December 31, 2020 in order to qualify for full forgiveness.
- Reduce Payroll Spending Requirements – The Act reduces the minimum eligible payroll costs spending requirement of the loan proceeds from 75% to 60%. However, a key change is that 60% of the loan must be spent on eligible payroll costs during the covered period or none of the loan will be forgiven. Previously, there was no minimum spending requirement to be eligible for forgiveness, only that a minimum of 75% of the total amount forgiven had to be spent on eligible payroll costs. Members of Congress have said that an all or nothing approach was not the intention of the Act and a technical fix is expected in upcoming legislation.
- Extension of Maturity Date – The Act extends the maturity date of all loans from two years to five years. This encompasses the amount of PPP proceeds not forgiven that convert to a loan.
- Payroll Tax Deferral – Allows PPP borrowers who apply for forgiveness to defer payment of certain employer payroll taxes. Previously, PPP borrowers were ineligible to participate in this program once they received forgiveness under the PPP program.
We will be covering the key points of the Act mentioned above in more detail in our upcoming PPP Loan Webinar on June 11, 2020. Click here to register.
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