Paycheck Protection Program Flexibility Act of 2020
June 4, 2020
Dear Clients, Colleagues and Friends,
Yesterday, the Senate unanimously passed H.R. 7010 – Paycheck Protection Program Flexibility Act of 2020. The bill must now be signed by the President to become law. Here are some of the key points of the bill:
- Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
- Extends the covered period, during which a borrower may use such funds for certain expenses while remaining eligible for forgiveness, from an eight-week period to 24 weeks, or until the end of the year, whichever comes first.
- Extends the period for borrowers to rehire or eliminate reductions in employment to December 31, 2020.
- Borrowers will be eligible for loan forgiveness if they spend at least 60% of their Paycheck Protection Program (PPP) loan proceeds on payroll costs and up to 40% on any covered mortgage interest obligations, covered rent obligations or covered utility payments.
- Provides a provision that allows loan forgiveness to be determined without regard to a proportional reduction in the number of full-time equivalent employees if the borrower in good faith can document an inability to rehire individuals who were employees of the borrower on February 15, 2020 and there is an inability to hire a similarly qualified employee for the unfilled position on or before December 31, 2020. The same provision applies if the borrower is able to document an inability to return to the same level of business activity as of February 15, 2020 due to compliance requirements establisahed or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration.
- Borrowers are now eligible to defer their employer’s share of Social Security payroll taxes (6.2%), regardless of whether the borrower receives loan forgiveness.
P&N will continue to monitor the latest guidance issued by the U.S. Department of the Treasury. In addition to a revised PPP loan forgiveness application, there are still numerous topics that require further guidance to be issued by the U.S. Department of the Treasury.
If you have any questions or need further information, please contact your P&N professional directly, or dial 212-736-0055 for immediate help. For additional updates and guidance regarding COVID-19, please visit the ‘News’ section of our website at www.pntax.com. Stay Safe.
Presti & Naegele