Last night, the Senate passed legislation already approved in the House that substantially changes the Paycheck Protection Program (PPP) for the better.
This bill extends the period that that funds may be used and eligible for forgiveness originally at 8 weeks but through this bill, it is extended to 24 weeks after PPP funds have been dispersed or until December 31, 2020. Borrowers will be able to choose to have the 8-week period apply or can elect to have the new 24-week period. This act also extends the application period for PPP loans to December 31, 2020.
The PPP Flexibility Act also removes the 75% test that was originally required to be spent on payroll, health insurance, and pension contributions and replaces it with a 60% requirement. In this legislative update, if you don’t hit 60% you will not be eligible for any forgiveness.
Another substantial change is the extension of the loan repayment period. Under this bill, payments may be deferred up to 10 months after the 8-week or 24-week period ends. The loan must be paid within 5 years of receiving the loan.
Through this legislation, employers will be able to defer paying the 6.2% payroll tax that employers are charged for a period of 2 years, irrespective of receiving forgiveness under the PPP program.
New provisions were also made to allow certain employees who are not rehired to be considered to have come back if the borrower can show they were unable to return to the same level of staffing because of a federally required sanction, social distancing, or similar requirement or that they were unable to find a similarly qualified employee.
The recent SBA rule requiring employers to notify unemployment authorities of employees who do not return to work will remain in force.