PPP Loan Extension, Updates and Modifications in Progress in the House and the Senate
As our economy begins on a path to some form of normalcy, we are still dealing with the consequences of the economic devastation of the coronavirus. However, the PPP Loan program, of which Gross McGinley, LLP has been documenting the various twists and turns, continues to adapt and modify to the changing economic conditions. What are the latest proposed PPP Loan extensions, updates and modifications?
PPP Loan Updates in the U.S. House of Representatives
On May 28, 2020 the U.S. House of Representatives passed the Payment Protection Flexibility Act of 2020 (H.R. 7010) out of the house, a new bill easing several Payment Protection Program (PPP) restrictions and providing for more flexibility to businesses for PPP Loan forgiveness.
The new bill modifies the existing PPP as follows:
- The PPP Loan term is extended from two (2) years to five (5) years;
- The covered period recipients must use the PPP Loan funds is extended from 8 weeks to 24 weeks, or December 31, 2020, whichever is earlier;
- A recipient who has already received a PPP Loan, prior to the enactment of these amendments, may choose to continue with the 8-week covered period;
- Deadline to rehire workers is extended from June 30, 2020 to December 31, 2020;
- This possible bill also provides new exemptions on employee availability which would determine the amount of loan forgiveness without regard to a proportional reduction in the number of full-time employees. However, this is contingent upon the recipient showing good faith that it is unable to rehire an employee or hire a replacement, or that the loan recipient has been unable to return to the same level of business because of COVID-19;
- Changes the percentage of loan proceeds that must be used for payroll costs from Seventy-Five Percent (75%) to Sixty Percent (60%) and includes a provision that Forty Percent (40%) of such amount may be directed towards payment of interest on any covered mortgage interest obligation, rent obligation, or covered utility payment;
- Finally, this proposed bill would allow recipients that receive loan forgiveness to continue to defer payroll taxes.
It’s important to note that this bill has only been passed by the House of Representatives. For those of you who don’t remember School House Rocks, this means this bill has still not yet been passed into law.
How is the Senate addressing the PPP Loan program?
The Senate is considering its own bill, which, unfortunately, the legislative text is still unavailable. However, contemporaneous new reports (here and here) indicate that some of the following items are being considered:
- The Senate version apparently contains an extension of the current eight-week period to 16 weeks
- Additionally, the proposed Senate version would keep the percentage of the loan that must be spent on payroll at 75%, and purportedly doesn’t offer a modification or reduction on the amount which can be used for qualified interest and bill payment.
- The deadline to apply for the program would be extended from June 30, 2020 until December 31, 2020.
What’s next for the PPP Loan program?
In light of the possible dueling legislation, there are three (3) possibilities for how we might see these modifications be completed.
First, the Senate could pass the House’s version of House Resolution 7010. If this passes, it would then head to President Trump’s desk for signature or veto. This is the least likely outcome as it appears that there are some significant difference between what the House and Senate are proposing.
Second, the Senate could take up and debate the House’s bill and make modifications to the bill. Upon passage by the Senate, this new bill would be sent back to the House of Representatives which would require passage by a majority of the House Members.
The third, and final, other possible option is that both the House and Senate pass separate bills, which, would then be placed in a “Conference Committee.” When the House and Senate Conference Committee finally works out a compromise, that bill will go back to both the House and Senate for final approval.
As always, we at Gross McGinley, LLP will keep on top of these PPP Loan updates and developments for you and let you know of any relevant changes which can affect your health, wealth and livelihood.