The U.S. Senate passed the House version of the Paycheck Protection Program (PPP) and the President is expected to sign it.
The updated legislation, passed Wednesday night, will triple the time allotted for small businesses and other PPP loan recipients to spend the funds and still qualify for forgiveness of the loans. Following is a summary of the legislation’s main points compiled by the AICPA:
- PPP borrowers can choose to extend the eight-week period to 24-weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
- Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness is not eliminated if the 75% threshold isn’t met. The original House bill intended the sliding scale to remain in effect at 60%. Senators Marco Rubio and Susan Collins indicated that technical tweaks could be made to the bill to restore the sliding scale.
- Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must now be done by December 31, a change from the previous deadline of June 30.
- The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they do not fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to February 15, 2020, levels due to COVID-19 related operating restrictions.
- Borrowers now have five years to repay the loan instead of two years for new loans initiated after the bill is signed into law. For loans initiated prior to the bill date, the borrower will have to work with the lender to amend the loan terms if they choose and if they are not receiving full forgiveness. The interest rate remains at 1%.
- The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
As always, we are here to help you successfully navigate through the loan forgiveness application process.