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Paycheck Protection Program Flexibility Act of 2020

On June 3, 2020 Congress passed a bill titled Paycheck Protection Program Flexibility Act of 2020, which was signed by President Trump on June 5th, 2020. The legislative intent was to amend and modify certain provisions related to the forgiveness of loans under the Paycheck Protection Program (“PPP”), thereby making the PPP more flexible by providing further loan forgiveness benefits for PPP recipients.

The following are most important changes to the PPP:

    • PPP borrowers may elect to extend the current period to calculate forgivable expenses from eight to 24 weeks. Borrowers may elect, however, to keep the original eight-week period. Under this new provision more borrowers would be able to reach full forgiveness of their loans.
    • Borrowers will have five years to repay the loan instead of two. The interest rate will remain at 1%.
    • The initial payroll expenditure requirement of 75% drops to 60%. PPP recipients would be required to spend at least 60% on payroll in order for the loan to be forgiven.
    • Borrowers may use the now extended period of twenty-four weeks to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. The original deadline of June 30, 2020 is now changed to December 31, 2020.
    • The Paycheck Protection Program Flexibility Act also includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness in case they do not fully restore their workforce. The PPP had already provided borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages before the pandemic. The new bill allows borrowers to adjust the forgiveness amounts because they could not find qualified employees or were unable to restore business operations to February 15, 2020 levels due to COVVID-19 related operating restrictions.
    • Finally, the bill allows businesses that took a PPP loan to delay payment of their payroll taxes, which was not allowed under the CARES Act.

The following are clarifications to the original PPP:

    • Qualified Payroll: The bill clarifies that cash compensation includes gross salary, wages, gross tips, gross commissions, overtime, paid leave (excludes FFCRA leave), allowance for dismissal or separation and bonuses.
    • Amounts paid to owners (owners-employees or self-employed) may be included but will be capped at $15,385.00, or the updated period (twenty-four weeks) equivalent of their compensation in 2019, whichever is lower.
    • Personal property items, such as copiers and other common business items, that are leased by a business can be included in the calculation non-payroll costs that may be forgiven.
    • Interest paid on real and personal property, including equipment, automobiles, and other personal property used for business purposes, may be forgiven.

Should you have any questions concerning the PPP, please feel free to contact us online or give us a call at 954-384-6114