Paycheck Protection Program Flexibility Approved by Congress

By Laurie Baskin posted 06-17-2020 14:02


Sent: June 10, 2020

On the evening of June 3, the Senate agreed to a House-passed package of changes to the Paycheck Protection Program (PPP), sending H.R. 7010 The Paycheck Protection Flexibility Act of 2020 to the President's desk for approval.

While Congress continues to work on additional forms of COVID-19 federal relief, lawmakers agreed to the following near-term changes to the Paycheck Protection Program:

  • Extends the forgivable loan expenditure period from the current 8 weeks to 24 weeks after the loan origination date
  • Extends the end date of the covered loan expenditure period from June 30, 2020 to December 31, 2020
  • Removes the requirement imposed by the Small Business Administration (SBA) that 75% of expenses be associated with payroll expenses for full loan forgiveness, and instead requires that borrowers expend at least 60% of the covered loan amount on payroll costs, in order for the loan to be eligible for forgiveness
  • Exempts borrowers from the proportional reduction of loan forgiveness related to retained full-time-equivalent positions in cases in which the borrower is unable to return to the same level of business activity due to compliance with federal requirements or guidance related to COVID-19
  • Allows Paycheck Protection Program loan recipients to be eligible for the deferral of certain payroll taxes under Section 2302 of the CARES Act
  • Extends the loan maturity period for paying back unforgiven portions of the loan from 2 years to 5 years

Even as both the House and Senate approved the package, substantial questions remain over how the provisions are meant to be interpreted, including how borrowers might elect to apply an expenditure period of 8 or 24 weeks, and whether the new 60% payroll expenditure threshold would be an absolute minimum threshold for any loan forgiveness eligibility.

The President signed this bill into law on June 5, and now the Treasury Department and Small Business Administration will have to quickly amend their PPP guidelines and regulations, as well as amend the recently released Borrower's Loan Forgiveness Application. To date, more than 104,000 PPP forgivable loans totaling $7.6 billion have been awarded to the Arts, Entertainment, and Recreation Sector.

PPP Loan Forgiveness Guidelines Released

At the end of May, the U.S. Department of the Treasury and the Small Business Administration released guidance related to the Paycheck Protection Program's loan forgiveness process. Below are links to the previously issued loan forgiveness form, the new interim rules for loan forgiveness, and the new interim rules detailing how the SBA will review loan eligibility and the amount entitled to loan forgiveness. While some aspects of the guidance will need to be adjusted to reflect the new provisions of the Paycheck Protection Program Flexibility Act, it is important to become familiar with the broad approach of the planned loan forgiveness process.