Paycheck Protection Program Flexibility Act Signed into Law
As we surmised in a recent blog, on June 3, 2020, the U.S. Senate unanimously passed the U.S. House of Representative version of the Paycheck Protection Program modification legislation (H.R. 7010). On June 5, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law by President Trump. What changes will be made to the program under the Paycheck Protection Program Flexibility Act?
While the Bill does not move the June 30, 2020 deadline to apply to receive a loan under the Paycheck Protection Program (PPP), the Bill does modify the provisions of the CARES Act dealing with the PPP in a number of significant ways:
- The covered period is extended from 8-weeks to 24-weeks, thereby moving the June 30, 2020 deadline to spend the PPP funds to December 31, 2020.
- A borrower who has already received a PPP loan, prior to the enactment of these amendments, may choose to continue with the 8-week covered period.
- A borrower can have until December 31, 2020, instead of June 30, 2020, to restore their full time equivalent levels and salary/wages to pre-pandemic levels in order to avoid the forgiveness reduction provisions.
- The requirement for payroll cost expenditures is reduced from Seventy-Five Percent (75%) to Sixty Percent (60%), which then results in Forty Percent (40%) of such amount eligible for payment of interest on any covered mortgage interest obligation, rent obligation, or covered utility.
- Employer will be eligible for two exceptions allowing them to achieve full forgiveness if they do not restore their workforce to pre-pandemic levels if they can demonstrate they could not find qualified employees or were unable to restore business operations to February 15, 2020 levels due to COVID-19 related operating restrictions, such as those imposed by the CDC and OSHA.
- New borrowers will have five (5) years rather than two (2) years to repay any portions of the loan that are not forgiven.
- A borrower will be entitled to a complete payment deferral of principal, interest and fees on a PPP loan until the date on which an amount equal to the amount of forgiveness for that borrower is remitted by SBA to the lender.
- A borrower may also now delay payment of their payroll taxes, which was not permitted under the CARES Act.
As always, we at Gross McGinley, LLP will keep on top of developments like the passing of the Payment Protection Program Flexibility Act for you and let you know of any relevant changes which can affect your health, wealth and livelihood. Additionally, it is anticipated that further guidance will be issued explaining to both borrowers and banks as to how to implement these changes to PPP Loans that were issued prior to the enactment of this legislation.
This blog was originally published June 4, 2020 and was updated June 8, 2020, after President Trump signed it into law.
Attorney Loren Speziale collaborates with business owners and human resource professionals, providing legal guidance for a wide variety of operational and personnel matters.