June 3, 2020
On June 3, 2020, the Senate, by unanimous consent, cleared the bill the House passed on May 28th to extend the Paycheck Protection Program (PPP). The President is expected to sign the bill soon.
The bill known as the Paycheck Protection Flexibility Act (H.R. 7010) includes the following provisions:
- Extends the PPP loan forgiveness period to include costs incurred over 24 weeks after a loan is issued or through Dec. 31, whichever comes first.
- Businesses that received a loan before this legislation becomes law can keep the current eight-week period.
- Extends to December 31 from June 30 a period in which loans can be forgiven if businesses restore staffing or salary levels that were previously reduced.
- This provision applies to worker and wage reductions made from Feb. 15 through April 26, 2020 (30 days after the enactment of the CARES Act)
- Extends the deadline to apply for a PPP loan to Dec. 31 from June 30.
- Maintains forgiveness amounts for companies that document their inability to rehire workers employed as of February 15th, and their inability to find similarly qualified workers by the end of the year.
- Employers that can substantiate they couldn’t resume their business levels of prior to Feb. 15 because they were following federal requirements for sanitization or social distancing will be covered separately.
- Requires at least 60% of forgiven loan amounts must be from payroll expenses.
- Allows borrowers to defer principal and interest payments on PPP loans until the SBA compensates lenders for any forgiven amounts, instead of the current six-month deferral period.
- Borrowers that don’t apply for forgiveness would be given at least 10 months after the program expires to start making payments.
- Repeal a provision of the CARES Act barring companies with forgiven PPP loans from deferring their payroll tax payments.
- For PPP loans issued after the measure is enacted, the maturity period is five years following an application for loan forgiveness rather than the current two-year deadline set by the SBA
- For loans issued prior to this legislation, borrowers and lenders may agree to extend current loans.
We’ll update our clients with more detail once the legislation becomes law. We are still waiting for guidance from the SBA on the original provisions of the Paycheck Protection Program. SBA will need to revise the Forgiveness Application. Both SBA and IRS will need to issue guidance relating to the Paycheck Protection Flexibility Act.
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