Yesterday, the Senate approved H.R. 7010 (Paycheck Protection Program Flexibility Act of 2020), a bill that amends several provisions of the Paycheck Protection Program (PPP). The bill, which passed the House last week and now heads to the President’s desk for signature, will provide relief for borrowers as they seek forgiveness of their PPP loans. Below are significant changes from the pending legislation:
- Extends the covered period, the measurement period that PPP funds have to be used for eligible costs to qualify for forgiveness, from 8 to 24 weeks. Expanding to a 24-week covered period may increase the eligible wages amount per employee, pending specific guidance and instructions. An organization receiving a loan prior to this enactment may elect to use an 8-week covered period.
- Extends eligibility for the program from June 30, 2020 to December 31, 2020.
- Extends the date that organizations have to rehire employees or eliminate a reduction in wages, that would otherwise reduce the forgivable amount, from June 30, 2020 to December 31, 2020.
- Extends the period for paying back portions of the loans that are not forgiven from 2 years to at least 5 years. Additionally, the bill revises the deferral period for PPP loans, allowing recipients to defer payments until lenders receive remittance for forgiven amounts. Recipients who do not apply for forgiveness shall have 10 months from the program’s expiration to begin making payments.
- Changes the SBA-imposed requirement that 75% of PPP loan proceeds be used to pay for payroll expenses to at least 60% of loan must be used for payroll.
- Ensures that successful PPP applicants would now be eligible to defer 2020 payroll taxes, 50% until 2021 and 50% until 2022, something that was prohibited under the CARES Act.
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