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PPP Flexibility Passes the US Senate

June 4, 2020

Yesterday, the US Senate passed a bipartisan bill, the Paycheck Protection Program Flexibility Act, on a voice vote.  This bill makes the following changes to the Paycheck Protection Program:

  • Extends the loan term from 8 weeks to 24 weeks
  • Lowers the percentage of loan proceeds that must be used on payroll from 75% to 60%
  • Extends the PPP from June 30th to December 31, 2020

Unfortunately, it does not expand the program to 501(c)(6) non-profits. We will continue to push to make this change as Congress takes up the Phase Four bill later this month.

Following is a summary of the legislation’s main points compiled by the AICPA: 

  • PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
  • The payroll expenditure requirement drops to 60% from 75%.but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
  • Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
  • The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
  • Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
  • The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
Posted on
June 4th 2020
Written by
Charleston Metro Chamber
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