Trump Signs Bill Easing Paycheck Protection Program Requirements
June 15, 2020
President Donald Trump has signed into law a bill that gives employers more flexibility when using Paycheck Protection Program (PPP) funds and applying for loan forgiveness. The new legislation will help employers by providing time to use PPP loan funds and still have the loan forgiven.
Lawmakers from both sides of the aisle supported making changes to the PPP to address complaints from employers that the existing rules were unfeasible. U.S. House of Representatives passed the bipartisan Paycheck Protection Program Flexibility Act (PPPFA) in a 417-1 vote on May 28, and the Senate passed the bill by unanimous consent on June 3.
Highlights of the Act are as follows:
- Extends the covered period for forgiveness from 8 weeks to 24 weeks. Note – eligible recipients that received loans before this goes into place can still utilize the 8 week period if desired.
- Lowers the requirement that funds be used for payroll costs from 75% to 60% (ie 40% of the loan can be used for non-payroll costs)
- Extends the deadline to restore employee count at February 15, 2020 from June 30, 2020 to December 31, 2020
In addition, exemptions to the FTE reduction were added as follows for those that were not able to restore their business or get their workers back by 12/31/20 as follows:
“During the period beginning on February 15, 2020, and ending on December 31, 2020, the amount of loan forgiveness under this section shall be determined without regard to a proportional reduction in the number of full-time equivalent employees if an eligible recipient, in good faith—
“(A) is able to document—
“(i) an inability to rehire individuals who were employees of the eligible recipient on February 15, 2020; and
“(ii) an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
“(B) is able to document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.
- The deferral period for beginning repayment of the portion of the loan that was not forgiven was changed from 6 months to the date on which the amount of forgiveness is remitted to the lender. If a borrower doesn’t ask for forgiveness the deferral period is 10 months.
- Any portion of the loan that is not forgiven is now due over 5 years rather than 2 years.
- Payroll taxes are now allowed to be deferred (previously a business could not take advantage of payroll tax deferral relief if they had a PPP loan).
*The regulations and guidance surrounding this topic are very fluid. We strongly encourage every client work closely with their CPA when developing their strategy for forgiveness along with preparing the application.