An aptly titled bill, President Trump signed the Paycheck Protection Flexibility Act into law on June 5, 2020. The Act would ease several restrictions on companies that borrow money under the Paycheck Protection Program (PPP). You can read more about the Paycheck Protection Program here and here. Generally, the new Act gives businesses more time and flexibility to make qualifying expenditures on loan forgiveness as well as allowing businesses with forgiven loans to defer payroll taxes.
Some of the more important provisions include:
- Extending the PPP loan forgiveness period to include costs incurred over 24 weeks (rather than the previously set 8 week period) after a loan is issued or through December 31st, whichever comes first. Current borrowers who received loans prior to the Act’s enactment may still elect the shorter 8 week period.
- Extending the period from June 30th to December 31st for businesses to restore previously reduced staffing or salary levels. This provision applies to worker and wage reductions made from February 15th through April 26th.
- Maintain forgiveness amounts for companies that document their inability to rehire workers employed as of February 15th, and their inability to find similarly qualified workers by the end of the year.
- Companies may also be covered separately if they show that they couldn’t resume business levels from before February 15th because they were following federal sanitization or social distancing requirements.
- Lowering the required payroll expenses threshold from 75% to 60% to qualify for full loan forgiveness.
- Raising the cap on the amount of forgivable loan proceeds for non-payroll expenses from 25% to 40%, while still maintaining the PPP’s existing restrictions on use of the loan proceeds.
- Extending the maturity date of newly issued PPP loans from 2 years to 5 years.
About the Author:
Heather Mims is an associate attorney at Centre Law & Consulting. Her practice is primarily focused on government contracts law, employment law, and litigation. Heather graduated magna cum laude from the George Mason School of Law where she was the Senior Research Editor for the Law Review and a Writing Fellow.