Congress passed the Paycheck Protection Program Flexibility Act of 2020 (PPPFA) with the Act passing the Senate by unanimous consent in the early evening hours of June 3, 2020 with President Trump signing into law the morning of June 5, 2020. The Act changes many provisions in the original PPP loan and forgiveness program enacted as part of the CARES Act.

Below are a few of the highlights… There is NO RUSH to fill out the forgiveness application. The Treasury and SBA will issue new regulations on the changes enacted and issue a NEW forgiveness application.

Forgiveness Changes

• Borrowers have the option to extend the 8-week covered period to 24 weeks. Any new borrowers automatically receive the 24 week covered period, ending December 31, 2020.
• The 75% payroll cost requirement is reduced to 60%, however, the new 60% covered payroll cost is mandatory to allow for any forgiveness. In other words, if at least 60% is not spent on allowed payroll costs, there will be ZERO forgiveness.
• Changes and exceptions added for the number of Full-Time Equivalent (FTE) Employees required for loan forgiveness:
  • Safe harbor date rolled back to December 31, 2020
  • Calculation will allow an exception if the employer can document:
    • Could not rehire the employees on payroll as of February 15, 2020
    • Could not find similarly qualified employees by December 31, 2020
    • Unable to restore business activity to Feb 15, 2020 levels due to continuing COVID-19 related government operating restrictions.

Loan Changes

• PPP Loans now have a minimum maturity of 5 years (increased from 2 years)
• PPP Loan payments are deferred until SBA determines the amount of forgiveness.
• Borrower must apply for forgiveness within 10 months of the end of their covered period (in most cases this will be 10 months from the end of the 24 week period mentioned above).

Payroll Taxes

• 2 year deferral allowed of Employer FICA (Social Security taxes) – 6.2% of wages (does NOT include Employer Medicare tax 1.45% of wages)
  • 50% due in 2021, remainder due in 2020

Again, these are the highlights and we are waiting for the regulations and clarifications coming from Treasury and SBA. Many of the clarifications will need to address self-employed individuals, as the impact to those loan recipients are unclear as to the application of these changes.

If you have NOT applied for or received funding under a PPP Loan and determined your company needs assistance during these times, there are still funds available for disbursement by SBA. Please contact your bank for details. The final deadline to receive PPP Loan funding is June 30, 2020.

Please note, the COVID-19 legislation changes are coming daily, so we are striving to get the most relevant and up to date information to you in a timely manner. Due to this, many of our past emails are now inaccurate and should not be relied upon.

If you would like assistance or to discuss this further, please reach out to us.