The Paycheck Protection Program Flexibility Act (“PPPFA”) was signed into law on June 5, 2020 and extends and revises certain deadlines and loan forgiveness terms under the existing Paycheck Protection Program (“PPP”), including the following:
Percentage of loan proceeds required to be used for payroll costs decreased from 75% to 60%.
PPP loan recipients must use at least 60% of loan proceeds to pay for payroll costs and may use up to 40% of loan proceeds to make mortgage (not including prepayment of any mortgage), rent, or utility payments.
Opportunity to elect to extend the period to spend loan proceeds.
Borrowers may elect to extend the 8-week period during which time loan proceeds must be used to the earlier of 1) 24 weeks beginning day the loan was received, or 2) December 31, 2020.
Borrowers who received loans prior to the enactment of the PPPFA may still elect to use the original 8-week measurement period.
Extension of the deadline to rehire employees, reinstate wages and exemption of proportional loan forgiveness reduction for some borrowers.
For borrowers electing to extend the measurement period, the deadline for rehiring employees and reinstating wages will be extended to December 31, 2020. If these borrowers re-hire employees or reinstate wages before December 31, 2020, they will be eligible for full forgiveness.
Borrowers who received loans prior to the enactment of the PPPFA and elect to use the original 8-week measurement period must re-hire employees or reinstate wages by June 30, 2020 in order to be eligible for full forgiveness.
Borrowers will be exempt from the proportional reduction in loan forgiveness for reductions in workforce or employee wages if they are able to document any of the following:
- An inability to rehire individuals who were employees on February 15, 2020 by December 31, 2020;
- An inability to hire similarly qualified employees for open positions by December 31, 2020; or
- That between March 1, 2020 and December 31, 2020, the borrower was unable to return to the same level of business activity the business was operating at as of February 15, 2020 due to their compliance with safety requirements for workers or customers related to COVID–19 (e.g., sanitation, social distancing).
Revisions to repayment deferral period for all loans, and increased minimum maturity date for loans issued after the enactment of the PPPFA.
For any borrowers who receive loans after the enactment of the PPPFA, the minimum loan maturity date is extended from 2 years following the date of receipt of the loan to 5 years.
The minimum maturity date is not extended for borrowers who received loans prior to the enactment of the PPPFA. These borrowers must reach an agreement with their lenders if they wish to extend the maturity date of their existing loans.
Removal of payroll tax deferment exceptions for PPP loan recipients whose loans are forgiven before December 31, 2020.
The CARES Act included a provision generally allowing employers to defer the payment of payroll taxes for wages paid between March 27, 2020 and December 31, 2020. The deferred taxes would be required to be paid in two equal installments on December 31, 2021 and December 31, 2022.
Under these original terms, employers who received funds under the PPP would not be permitted to continue deferring payroll tax payments beginning the date that a final decision granting partial or full loan forgiveness is issued to them by the SBA.
The PPPFA removes this exception for PPP loan recipients. All PPP loan recipients may continue deferring the payment of payroll taxes even if they apply for and are granted partial or full forgiveness of their loan on or before December 31, 2020.
We have prepared a side-by-side comparison of the original terms of the PPP and the revisions and amendments outlined in the PPPFA. A link to our earlier guidance regarding the CARES Act and the terms of the PPP can be found here.
Please don’t hesitate to reach out to Daniel Grimsrud (email@example.com), Libby Davydov (firstname.lastname@example.org) or Bernadette Senyana (email@example.com) if you have questions regarding these latest developments or need specific guidance related to the PPP.