Image of a computer keyboard with a key that reads "PPP Paycheck Protection Program"

PPP Flexibility Act Signed Into Law!

Filed under:

Affordable Housing, Construction, COVID Updates, Dental, Family Business, FQHC, Healthcare, Nonprofit, Private Companies, Small Business Services

On June 5th the President signed into law H.R. 7010, the Paycheck Protection Program (PPP) Flexibility Act of 2020.  The changes in the Act should make it easier for business owners to achieve full forgiveness under the PPP. 

Below are the major items that have changed:

  • The use of funds has been extended from 8 weeks to 24 weeks, but borrowers can elect to use the original 8-week covered period.
  • For full forgiveness, payroll costs must now exceed at least 60% (reduced from 75%) of the total loan proceeds, but now there is a catch.  If the borrower does not exceed at least 60%, then none of the loan is forgiven.
  • Under the original law, borrowers were required to return their workforce to their pre-pandemic levels by June 30th.  Under the new law, that has been extended to December 31st
  • The legislation provides an exemption for employers from a reduction in loan forgiveness if they are able, in good faith, to show documentation for one of the following:
    • The employers could not find a qualified employees to hire.  This is a big “win” for employers in specialized industries like healthcare or other professional employees.
    • The employer could not restore business to a comparable level of activity because of social distancing or other Federal health guidance.
  • For loans made on or after June 5th, repayment of loan proceeds not forgiven can be paid back over 5 years (increased from 2 years) at 1% and the payments don’t begin until the date on which the SBA makes determination on loan forgiveness (could be up to 150 days after submission of the application). For loans made before June 5th, the repayment term is 2 years unless mutually agreed upon with the bank.
  • Borrowers will be eligible for the deferral of payment of the employer’s share of Social Security payroll taxes (6.2%), regardless of whether the borrower receives loan forgiveness. Borrowers would pay 50% of the deferred amount in 2021 and 50% in 2022.

If you have questions or concerns you should consult your tax adviser and how this Act will affect your ability to achieve loan forgiveness.

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