On Wednesday night, the Senate voted unanimously in favor of the Paycheck Protection Flexibility Act. This new legislation makes key adjustments to the timeline for spending Paycheck Protection Program (PPP) funds and revises how loan recipients are required to allocate the money.
The President is expected to sign the bill into law.
Here is a brief overview of the key provisions contained in the bill:
- Loan recipients now have 24 weeks to spend the funds. Previously, they had to use all the money within eight weeks.¬† Eligible recipients who received a loan before the date of enactment may elect to use the shorter 8-week period, if desired.
- The percentage of the loan money required to be devoted to payroll expenditures has been reduced from 75% to 60%. This item does come with a new catch‚Äîif a borrower fails to spend at least 60% of the loan money on payroll, then the entire loan becomes unforgivable.
- The minimum term period for PPP loans is extended from two years to five years.
- PPP loan recipients whose loans are forgiven may delay payroll tax payments (the employer‚Äôs share of FICA payroll taxes) for two years. Half of the taxes are due in 2021 and the other half in 2022.¬† Previously, Section 2302 of the CARES Act excepted any taxpayer who had PPP indebtedness forgiven from being eligible for the payroll tax deferral.
- The deadline for rehiring employees and restoring wages to pre-pandemic levels is extended from June 30, 2020 to December 31, 2020.
- Loan recipients may mitigate a reduction to ¬†loan forgiveness due to headcount if they can provide evidence that, despite good faith efforts, they were unable to recall a portion of their workforce and/or that it was not possible to sufficiently reopen their business in a way that complies with safety standards.
The deferral period for repayment is changed from 6 months to until the date the forgiveness amount is remitted to the lender.¬† If a recipient does not apply for forgiveness, the deferral period is 10 months.