On Thursday, May 28th, the House passed a bill with large bipartisan support to make it easier for recipients of Paycheck Protection Program (PPP) loans to qualify for forgiveness of the funds. The Paycheck Protection Program Flexibility Act (H.R. 7010) will effectively eliminate many of the hurdles that recipients of PPP loans face.
A few of the major changes to forgiveness requirements include:
- Extension of the Covered Period from 8 weeks to 24 weeks (or the end of the year, whichever comes first)
- Lowers the portion of PPP funds that must be used for payroll from 75% to 60%, allowing 40% to be used toward other non-payroll, eligible costs such as rent and utilities.
- Increases the maximum payroll amount for the extended Covered Period from $15,385 to $46,154 per employee
- Extends the Full Time Equivalent (FTE) safe harbor date from June 30, 2020 to December 31, 2020, which allows employers more time to restore their FTE count to pre-COVID-19 numbers.
- Outlines additional FTE reduction exemptions for changes in business activity and allowing exemptions for borrowers who are unable to hire similarly qualified employees
- Extends the loan term of any funds not forgiven to 5 years from 2 years
- Allows businesses who qualify for loan forgiveness to also defer the employer portion of payroll tax, which would be paid in two installments (50% by 12-31-2021 and 50% by 12/31/2022)
The changes included in this bill will provide some much needed guidance and relief to PPP loan recipients, many of which are small businesses. While this bill has not yet passed the Senate, we remain hopeful that the legislation will be enacted sometime over the next week. The AICPA has released a statement applauding the bill saying, “it looks forward to further action on a final bipartisan bill as the Senate has demonstrated interest”. There is also a separate bill that has been introduced in the Senate with some variations compared to the bill that passed in the House.
However, we do advise that if you are approaching the end of your 8-week Covered Period to continue complying with the forgiveness requirements that are currently in place.
Our team is monitoring this situation closely and will send out additional information as it is released. Please contact your trusted Scheffel Boyle team member with questions. We are always here to help.