Congress Considering Major Changes to Paycheck Protection Program Through New Bill
In an effort to provide further relief to struggling businesses relying on the PPP loans to remain solvent through the COVID-19 pandemic, the House of Representatives has overwhelmingly passed the Paycheck Protection Flexibility Act. The important aspects of the new bill are detailed below:
- The maximum loan length has been extended from two years to five years;
- The “covered period” of the loan (length of time that the loan may be allowed to cover eligible expenses) has been extended. Rather than 8 weeks, it is now the sooner of 24 weeks or December 31, 2020. This means that borrows have a much larger window of time to use the PPP funds for necessary expenditures;
- The necessary amount of the loan required to be spent on “payroll”-related concerns has been lessened from 75% to 60% of the total loan;
- All relevant deadlines of June 30, 2020 have been moved to December 31, 2020. Importantly, this means that employers have a much longer time to apply for, and receive, a PPP loan. Perhaps more relevant, however, is the fact that employers now have until December 31, 2020 to re-hire employees let go due to COVID-19 concerns (since February 15, 2020). As a reminder, forgiveness of PPP loan amounts will be lessened if an employer does not have the same number of full-time employees (including FTEs) as before February 15, 2020 when these emergency COID-19 orders began;
- Removes restrictions and exclusions on deferrals of employer payroll tax payments first detailed in the CARES Act.
This measure has not yet become law, as it has yet to be passed by the Senate and signed by the President, but the overwhelming bipartisan support makes these next steps likely to follow soon. FNA will provide updates as this law works through the lawmaking process.
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Heather Reynolds, ESQ