On June 4, 2020, the President signed into law the Paycheck Protection Program Flexibility Act after it passed the Senate with a unanimous vote. The bill drafted by the House extends certain provisions of the Paycheck Protection Program (PPP) to provide small businesses with relief in the timeframe and use of their PPP loan funds.
The most notable changes of the PPP Flexibility Act were:
- Extension of the period to use funds from 8 weeks to the earlier of 24 weeks or Dec. 31, 2020, which provides relief for businesses with longer payroll schedules and greater leeway to reach maximum forgiveness.
- Decrease in required use of funds for payroll from 75% to 60% ‐ but the 60% is a cliff, meaning 60% of funds must be used for payroll expenses or none of the loan is forgiven. The first iteration of the PPP required 75% of the funds be used for payroll or only part of the loan would be forgiven. Some senators are still pushing for a sliding scale, which could result in an edit to the bill at a later date.
- Deferment of payroll taxes for those who receive loan forgiveness, which was not allowed as part of the original CARES Act.
- Extension of June 30 rehiring deadline to Dec. 31, giving employers more time to restore their workforce as the economy begins to reopen at various stages across the states.
- Increased leeway on loan forgiveness for demonstrating rehiring challenges or reopening challenges including:
- Inability to rehire an individual after a good faith effort who was an employee as of Feb. 15, 2020.
- Inability to hire similarly qualified employees on or before Dec. 31, 2020.
- Inability to return to same level of business activity prior to Feb. 15, 2020.
- Increase of minimum loan maturity to 5 years from 2 years (the interest rate remains 1%).
June 30 remains the deadline for applying for a PPP loan.
On June 8, U.S. Treasury Secretary Steven T. Mnuchin and Small Business Administration (SBA) Administrator Jovita Carranza issued a statement following the enactment of the Paycheck Protection Program (PPP) Flexibility Act providing a few points of clarity, below are several, please refer to the statement for the rest:
- Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
- Lower the requirements that 75 percent of a borrower’s loan proceeds must be used for payroll costs and that 75 percent of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each of these requirements. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
For assistance with your forgiveness application or any further qyestions, please reach out to us. At this time, the majority of our staff are currently working from home, which means the best means for contact is via email. We continue to work hard to ensure your personal and business needs are met during these tumultuous times. Stay safe and healthy!
Walter & Shuffain, P.C.