Both the House and Senate approved the Paycheck Protection Program Flexibility Act (H.R. 7010) which modifies provisions related to the forgiveness of loans made under the Paycheck Protection Program (PPP).  The President is expected to sign this bill as soon as it reaches his desk.

The following changes are being made with this new legislation:

Covered Period

Previous Regulation:

PPP funds must be spent within eight weeks of loan origination.

New Regulation:

Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period cannot extend beyond Dec. 31, 2020.

Payroll Costs

Previous Regulation:

The limit of covered non-payroll expenses (rent, mortgage interest payments and utilities) is 25% of total loan expenses for max loan forgiveness.

New Regulation:

Borrowers must spend at least 60% on payroll expenses or none of the loan will be forgiven.

Workforce Levels

Previous Regulation:

Borrowers must use the 8-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. Deadline is June 30, 2020.

New Regulation:

Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. Deadline is December 31, 2020.

Loan Forgiveness Reduction for Full-Time Equivalent (FTE) Employee Retention/Recruitment

Previous Regulation:

Borrowers are required to return to pre-crisis staffing levels for maximum loan forgiveness. Regulatory guidance sets a four-part test for borrowers seeking maximum loan forgiveness if they could not hire back all FTEs:

  • Written offer for same wage/hours
  • Offer Rejection
  • Employer maintains records
  • Employer reports this rejection to state unemployment office within 30 days

Additional Regulation:

Two additional exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce include:

  • Show an inability to hire “similarly qualified employees” before Dec. 31, 2020,
  • Show an inability to return to the “same level of business activity” as prior to Feb. 15, 2020 due to new standards for sanitation, social distancing, or any other safety requirements.

Terms of Loan

Previous Regulation:

Two-year loan period at a 1% fixed interest rate. Loan payments deferred for six with interest accruing over that period.

New Regulation:

New PPP loans will have 5-year loan periods. Existing PPP loans can be extended up to 5 years if the lender and borrower agree.

Payroll Tax Deferment

Previous Regulation:

PPP borrowers cannot deduct payroll tax expenses that would otherwise be deductible if they use the PPP loans to cover the expense and the loan is forgiven.

New Regulation:

PPP borrowers will have full access to payroll tax deferment.

Updated PPP Forgiveness Guide

*This document simplifies complex Acts as it is understood by Time Equipment Company. It is not to be taken as legal advice. The regulations for this program are changing. For further information about the Paycheck Protection Program please visit www.sba.gov or www.coronavirus.gov