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Paycheck Protection Program Flexibility Act

Paycheck Protection Program Flexibility Act

On June 5, 2020, President Trump signed legislation (H.R. 7010) enacting the Paycheck Protection Program Flexibility Act (PPPFA) which amends the CARES Act’s Payroll Protection Program (PPP). Some of the key amendments are as follows:

  • The covered period during which borrowers must spend the PPP funds received was expanded to 24 weeks (from eight weeks) or December 31, 2020, whichever is earlier. This is effective immediately and applicable to all loans as if the language was part of the original CARES Act. However, borrowers may choose to retain the eight-week covered period if they received their PPP loans prior to June 4, 2020.
  • The date when workers must be rehired was extended to December 31, 2020 (originally June 30, 2020).
  • The PPPFA lessened rehiring requirements by adding a loan forgiveness exemption based on employee availability from February 15 through December 31, 2020. During this time, loan forgiveness will be determined without regard to a proportional reduction in the number of full-time equivalent employees if the borrower can document in good faith that:
    • They are unable to rehire former employees on February 15, 2020 and are also unable to hire similarly qualified employees for unfilled positions by December 31, 2020; or
    • They are unable to return to their pre-COVID-19 level of business activity (prior to February 15, 2020) because of federal safety and health requirements (issued from March 1, 2020 through December 31, 2020) for sanitation, social distancing, or any other worker or customer COVID-19-related safety requirement.
  • Businesses now have five years to repay a loan and the first payment will be deferred for six months after a forgiveness determination. This is only applicable to loans made on or after June 5, 2020.
  • The allocation of funds that must be used for payroll was modified to requires borrowers to spend 60 percent of the loan on payroll and then 40 percent can be used for other expenses (the prior allocation was 75 percent payroll and 25 other expenses).
  • Employers may delay paying employer payroll taxes for Social Security through December 31, 2020. This is effective immediately and applicable to all loans as if the language was part of the original CARES Act.

The Small Business Association and Treasury Department are expected to release detailed guidance on the PPPFA and more.

Read US H.R. 7010

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