Paycheck Protection Program (PPP) Update

Paycheck Protection Program (PPP) Update
The Legislature has been trying to address numerous concerns that businesses have had with the Paycheck Protection Program (PPP) and their forgiveness eligibility. On Thursday, May 28, 2020, the U.S. House approved the Paycheck Protection Flexibility Act, H.R. 7010. The following is a summary of H.R. 7010, and its proposed PPP revisions:
 
1. Forgiveness Period to Use Funds
The House bill extends the eight (8) week forgiveness period that businesses are expected to spend or incur allocated funds to twenty-four (24) weeks. The bill further extends the deadline for the PPP coverage period from June 30, 2020 to December 31, 2020. These extensions will provide businesses that are prohibited from operating by the government or are operating at a reduced capacity with greater flexibility in spending PPP funds. Borrowers that have previously received PPP loans may still elect to have the initial eight (8) week period govern forgiveness.  
 
2. Payroll Allocation Requirement
The bill lowers the payroll allocation requirement from 75% of allocated funds to 60%. This allocation amendment would entitle businesses to direct more funds to other business related costs such as interest on mortgage obligations, rent, and utilities.
 
3. Loan Term and Deferral of Principal, Interest, and Fees
The bill extends the minimum loan period for PPP loans from two (2) years to five (5) years and allows deferral of payment of principal, interest, and fees until the date on which the amount of forgiveness is determined. If a borrower fails to apply for forgiveness within ten (10) months after the last day of the covered period, payments of principal, interest, and fees will be deferred for at least ten (10) months. These amendments will allow businesses to better manage their repayment obligations.
  
4. Employee Availability
The bill prohibits a reduction in loan forgiveness for businesses that were unable to rehire current employees or qualified employees for unfilled positions. This amendment further prohibits a reduction in loan forgiveness in situations where businesses were unable to return to regular operations due to rules regarding maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19. 
 
5. Deferral of Payroll Taxes
The bill eliminates paragraph (3) of Section 2302(a) of the CARES Act. This paragraph prohibits borrowers that receive forgiveness to defer payroll taxes. Therefore, the main benefit of this amendment is to allow companies eligible for forgiveness to delay payment of payroll taxes.
 
The Paycheck Protection Flexibility Act, H.R. 7010, can be found here.
 
It is anticipated that this bill will be considered by the Senate next week. We will keep you updated as these events unfold. 
 
This is not the first time a bill has been introduced to modify the terms of the PPP. U.S. Senators Marco Rubio (R-FL), Ben Cardin (D-MD), Jeanne Shaheen (D-NH), and Susan Collins (R-ME) previously tried to pass the Paycheck Protection Program Extension Act which extended the deadline for spending PPP loans to sixteen (16) weeks. U.S. Senator Joe Manchin (D-WV), Mitt Romney (R-UT), Patrick Leahy (D-VT), Cory Gardner (R-CO), and Ron Wyden (D-OR) introduced the Paycheck Protection Program Deadline Extension Adjustment for Loans (DEALS) Act which proposes to extend the loan forgiveness period from eight (8) to sixteen (16) weeks and amend the rehire date from June 30th to sixteen (16) weeks after the PPP loan is awarded. U.S. Senators Michael Bennet (D-CO) and Todd Young (R-Ind.) previously proposed to increase PPP coverage to sixteen (16) weeks if businesses have suffered revenue losses of more than 25%. U.S. Senator Cory Gardner (R-CO) also previously suggested to increase the PPP loan amount to four times the average monthly payroll amount.  
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