Awaited Relief for Small Businesses
The President is expected to sign the Paycheck Protection Program Flexibility Act of 2020. The U.S. Senate passed the House version of the legislation last night, which expands the opportunities for taxpayers that receive a Paycheck Protection Program (PPP) loan.
Here are the key highlights:
- Loan payback period increased from 2 years to a minimum of 5 years. This provision applies to PPP loans awarded after the President signs the legislation. The payback period of an existing loan can be extended to a minimum of 5 years based on the agreement between the borrower and the lender.
- The 8 week period (with reference to spending sufficient money on forgivable expenses) has been extended to either 24 weeks from the loan origination date or December 31, 2020, whichever occurs first. Loan recipients can continue to use the 8 week period rather than extending it to the 24 weeks.
- The date to restore the employee count has been extended to December 31, 2020 from June 30, 2020.
- The employee count reduction will not apply if the loan recipient can document:
- An inability to rehire individuals who were employees on February 15, 2020 or an inability to hire similarly qualified employees to fill those positions before December 31, 2020.
- An inability to return to the same level of business activity as it was operating before February 15, 2020 due to compliance requirements established by various health organizations.
- The requirement to use at least 75% of the loan for payroll costs has been reduced to 60% and the requirement to use not more than 25% on non-payroll costs has been increased to 40%. If the payroll costs don’t reach the 60%, none of the loan is forgiven.
- The 6 month deferral of PPP loan repayments has been extended to the period ending with the point when the loan forgiveness application is given to the lender. The period can’t be extended beyond 10 months after the 8 or 24 week covered period ends.
- The business can defer the employer’s portion of the Social Security taxes even though they have a PPP loan forgiven. The deferral allows 50% of the deferred taxes to be paid by December 31, 2021 and the remainder is to be paid by December 31, 2022.
The effective date of the key provisions is the date of the original legislation unless specifically mentioned above.
Please contact us at 401-831-0200 if you would like to discuss how this legislation applies to your situation.