UPDATE: Trump Signs Changes to Paycheck Protection Program (PPP) into Law
On Friday, June 5th President Trump signed into law the bill known as the “Paycheck Protection Program Flexibility Act of 2020” (H.R. 7010), which was passed by the House of Representatives last week. The United States Senate passed significant amendments to the Paycheck Protection Program (“PPP”) aimed at providing borrowers additional flexibility for using loan proceeds as they seek to recover from the effects of the COVID-19 pandemic.
Most notable changes are below including the elimination of the ability to participate in the Social Security Tax deferral program and receive forgiveness.
Bill Highlights Include:
- An extension of the covered period during which loan proceeds can be used from eight weeks to 24 weeks.
- A reduction in the percentage of eligible forgiveness expenses that must be spent on payroll costs from 75% to 60%, allowing borrowers to use up to 40% of their eligible forgiveness expenses on mortgage interest, rent, and utility obligations. Significantly, though, the bill states that borrowers “shall” use up to 60% of the “covered loan amount” on payroll costs, which, if enforced literally by the SBA, would eliminate the possibility of partial forgiveness for those borrowers who do not meet this threshold.
- An extension of the safe harbor period for rehiring full-time equivalent employees (“FTEs”) and for undoing salary and wage reductions from June 30 to December 31, 2020. This gives borrowers six additional months to restore employee headcount and to undo cuts previously made to salaries and wages in order to avoid reductions in loan forgiveness.
- Finally, the bill eliminates the prohibition on deferment of payroll taxes under CARES Act § 2302 for borrowers who receive loan forgiveness, meaning borrowers can now receive forgiveness and continue to defer 50% of their portion of the FICA tax until December 21, 2021, and the remaining 50% until December 31, 2022.
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