On May 28, 2020, the U.S. House of Representatives passed the Paycheck Protection Program Flexibility Act of 2020 (the Act), new legislation meant to provide additional assistance to small businesses and loosen regulations related to the Paycheck Protection Program (PPP). Should this bill become law, it would make major adjustments to the PPP.
The Act makes a few notable changes to PPP’s current loan forgiveness guidelines by:
- extending the period for which a PPP Loan may be obtained to December 31, 2020;
- increasing the length of time that small businesses can use PPP funds while still qualifying for loan forgiveness from eight weeks to either 24 weeks or December 31, 2020, whichever occurs first;
- lowering the loan amounts, which must be spent on payroll expenses, to qualify for loan forgiveness from 75% to 60%;
- allowing small businesses that receive PPP loan forgiveness to defer their payroll taxes; and
- allowing full loan forgiveness for small businesses without regard to their ability to rehire all full-time employees lost due to the COVID-19 pandemic, so long as the small business can demonstrate an inability for their business to operate at the same capacity it did before February 15, 2020.
Besides providing some tax benefits to businesses, the Act is primarily aimed at providing more latitude for employers to decide how they wish to use their PPP funds, and to maximize loan forgiveness in order to stimulate the economy. The bill’s sponsors, Congressmen Chip Roy and Dean Phillips, believe that doing so will enable companies to better prepare for the future while continuing to provide for their employees during this difficult time.
PilieroMazza is monitoring the rapidly changing COVID-19 crisis and will provide updates when more guidance is released by the government. We also invite you to visit the Firm’s COVID-19 Client Resource Center to access resources that will help businesses navigate the effects of the COVID-19 pandemic. If you need immediate assistance, please contact us at [email protected].