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Volume 20.21

Last night, the U.S. Senate passed the House version of Paycheck Protection Program (PPP) legislation (“Paycheck Protection Flexibility Act”).  The legislation will triple the time allotted for PPP loan recipients to spend the funds and still qualify for forgiveness of the loans.

The following is a summary of some of the legislation’s main points:

  • PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This should allow most borrowers to achieve full forgiveness.
  • The payroll expenditure requirement drops to 60% from 75%.  However, 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.  This is an important feature as many businesses were merely attempting to keep the business in a position where activities could be maintained, even with a minimum level of activity.  Additionally, many employers were having difficulty rehiring employees due to the amount these employees are receiving in unemployment benefits.
  • 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 December 31, 2020.  Previously employment had to be restored by June 30, 2020.
  • 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.

The Health Group, LLC will be providing additional information in the next few days as the details of the legislation are fully digested.