Today, President Trump signed a bipartisan bill that makes significant changes to the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) established as part of the CARES Act on March 27, 2020. The Paycheck Protection Program Flexibility Act of 2020 provides important fixes sought after by business groups and extends the timeframe for PPP loan recipients to spend the money and quality for forgiveness.
Key provisions include:
- Extension of the 8-week “covered period” to calculate loan forgiveness to 24 weeks or the end of the year, whichever comes first, for new PPP loans;
- Current PPP borrowers can elect to extend the 8-week “covered period” to 24 weeks or the end of the year;
- The deadline to restore employment/wage levels required to avoid reductions in forgiveness are extended by the 24 week period but must be done by December 31, 2020;
- Additional exceptions to loan forgiveness reductions for inability to find qualified workers or to restore business activity levels;
- Extension of the repayment period to as long as 5 years (instead of 2);
- Loan recipients will be eligible for forgiveness if 60% of the loan is spent on payroll (rather than 75%), HOWEVER, if the 60% threshold is not met, none of the loan is eligible for forgiveness; and
- Ability to defer payment of employer payroll taxes that was previously prohibited under Section 2302 of the CARES Act relating to employers with PPP loan forgiveness.
We anticipate release of updated FAQs from the Treasury and/or SBA with further clarity and interpretations of the updated legislation. GRF CPA & Advisor’s (GRF) COVID-19 Response team continues to monitor developments and we will provide more information to clients as additional guidance becomes available.
Bookmark GRF’s COVID-19 Response resource page for the latest information and resources to help businesses, nonprofits and individuals weather the pandemic and resulting economic crisis. If you have questions related to the PPP or loan forgiveness, contact your CPA or email email@example.com.