On Wednesday, May 27, 2020, the U.S. House of Representatives passed the Paycheck Protection Program Flexibility Act by a vote of 417-1.
Senate Majority Leader Mitch McConnell has said he hopes to bring the bill to a Senate vote “soon.”
There is good news here – the House bill:
• Extends the window businesses have to use the PPP Loan funds (covered period) from 8 weeks to 24 weeks.
• Reduces the percentage of PPP loan proceeds which are required to be used for payroll-related expenses from 75% to 60%, leaving 40% available for other covered expenses, such as rent, mortgage payments, and utilities.
• Pushes the June 30, 2020 deadline for rehiring workers (in order for those employees not to count against an employer’s PPP loan forgiveness) to December 31, 2020.
• Provides flexibility for business owners who can demonstrate that they were unable to rehire workers, or that they were unable to open due to government mandated business closures or inability to meet safety standards and still maintain the same number of workers.
• Extends the repayment period for PPP loans from 2 years following issuance of the loan to 5 years. Interest of 1% is unchanged.
However, the Senate has not yet voted on the House bill, and there is some opposition to it in its present form. Some Senators favor an alternate bill, which would extend covered period to 16 weeks, rather than 24 weeks, and would retain the mandate that 75% of loan proceeds be spent on payroll-related expenses for businesses to obtain loan forgiveness.
In the meanwhile, at this point in time PPP loan forgiveness is governed by existing guidance, including the latest two Interim Final Rules issued on May 22, 2020 (read our blog post on these Rules here).
To download the PPP Loan Application Forgiveness package, please click here.
It is worth noting that some $120 billion in PPP loan funds have not yet been distributed – it is not too late to apply, if you qualify.
If you are at all uncertain about PPP Loan Forgiveness or the Application, please seek guidance from your advisor. You will want to make sure you get your facts and figures in order before submitting your loan forgiveness application to your lending institution.
New and potential legislation notwithstanding, we recommend that you track your covered expenses and time periods meticulously, and that you gather and maintain documentation verifying the number of full-time equivalent employees and their pay rates (there are several dates for which this one task must be performed), as well as your payments of eligible payroll costs, eligible mortgage and interest payments, rent, and utilities.
Stay tuned for further developments, which will be coming!
If you have questions on the PPP, please click here to email us directly – we are here to help.
Until next Wednesday –