Paycheck Protection Program Flexibility Act
Yesterday evening (Wednesday, June 3, 2020), the Senate passed the much-anticipated Paycheck Protection Program Flexibility Act of 2020, which was delivered by the House on Thursday of last week. It is expected to move to the President for signature today June 4, 2020.
Many business owners who received the first wave of funds were nearing the end of the original 8 weeks covered period and were eagerly waiting for this revised guidance. Once signed into law the new bill will extend the covered period from 8 weeks to 24 weeks. The bill will also increase the percentage of non-payroll expenses eligible for forgiveness
Significant changes to the forgiveness requirements are:
- The covered Period is extended from 8 weeks to the earlier of 24 weeks or December 31, 2020. Recipients may elect the original 8 week period.
- Maximum allowable payroll per employee is increased from $15,385 to $46,154 during the extended covered period
- The safe harbor date to restore FTE count to pre COVID levels is extended from June 30, 2020 to December 31, 2020.
- Reduces the required spend on eligible payroll costs from 75% to 60% of forgivable funds. This will allow recipients to spend up to 40% of the loan proceeds on non-payroll, eligible expenses.
- Overrides the original SBA term of 2 years on unforgiven funds. The new Bill stipulates that the payback will be a minimum of 5 years and a maximum of 10 years. In order to receive this benefit the borrower will need to agree to change the term with the lender.
- Employers who received PPP Loan forgiveness may also qualify for payroll tax derement.
Recipients of PPP loan funds will need to determine if they should stay with the 8 week covered period or adopt the longer 24 week period. When making this decision consideration will need to be given to the amount of funds spent to date, proportion of money spent between payroll and other eligible expenses, foreseeable staffing requirements should they elect the 16 week extension, current FTE count. There may be other items unique to their respective business that may need to be taken into consideration.
As with the PPP program the passage of the bill will trigger an updated SBA Forgiveness Application. As it stands the bill indicates that recipients of funds will have 10 months from the end of the covered period to apply for forgiveness.