PAYCHECK PROTECTION PROGRAM FLEXIBILITY ACT OF 2020
Flexibility to the Paycheck Protection Program
Paycheck Protection Program Flexibility Act of 2020, (H.R. 7010) was signed into law by President Trump on June 5th. Since being established as part of the Coronavirus Aid, Relief and Economic Security Act in March 2020, the Paycheck Protection Program (PPP) has been the subject of additional stimulus bills, legal guidance and interim final rules. The Paycheck Protection Program Flexibility Act of 2020, provides borrowers with greater flexibility in spending PPP funds. The bill, which passed with a bipartisan vote, makes the following amendments to the PPP to provide flexibility and relief to borrowers: Amendments to PPP included in bill H.R. 7010:
- Payroll Costs vs. Non-Payroll Costs: For forgiveness eligibility, the bill reduces the portion of PPP funds that must be spent on payroll costs from 75% to 60%, and raises the non-payroll cost limitation from 25% to 40%.· There is no loan forgiveness if at least 60% of the funds are not spent on payroll costs.· The non-payroll portion of the loan can still only be spent on rent, interest and utilities.
- Covered Period Extension: The bill extends the covered period during which borrowers must spend the PPP funds to be eligible for forgiveness. The business now has 24 weeks from the date of origination of the loan to spend the money instead of 8 weeks. In addition, the business will now have 10 months after the 24-week period to apply for forgiveness. The last date any business can spend PPP money now goes from June 30th to December 31st.
- Loan Repayment Terms: The bill extends the minimum loan term for the un-forgiven portion of PPP loans from two years to five years.
- Extension of Tax Deferral: The Flexibility Act removes some exclusionary restrictions so employers with PPP loans may include certain tax deferral programs.
- Extension of Rehiring Safe Harbor: The bill extends the rehiring safe harbor by six months to provide borrowers with additional time to restore payroll levels or rehire employees without facing a reduction in the amount of forgiveness for which they are eligible. The original date was June 30, 2020, and the new date is Dec. 31, 2020.
The SBA, Treasury and IRS are expected to provide Guidance updates to the requirements, forms and documents due to the changes in the regulations. The programming for the PPP reports in payroll systems will be updated based on the upcoming SBA changes. Once the IRS and SBA releases this information, we will make further updates to the reporting options to assist with the PPP Loan Forgiveness process. Legal Disclaimer: California Payroll is not engaged in the practice of law, accounting, or HR counsel. The content in this email should not be construed as legal advice. California Payroll will not be able to advise or assist in the calculation of your PPP loan forgiveness. If you have legal questions concerning your situation or the information you have obtained, you should consult with a licensed professional, CPA or Attorney.