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Congress has passed the Paycheck Protection Program Flexibility Act of 2020, HR 7010, a bill supported by the National Newspaper Association (NNA). The President is expected to sign the bill today and to put it into immediate effect.
How does this impact businesses’ PPP loans?
• “Covered Period” is now 24 weeks, or Dec. 31.
• Required payroll ratio is lowered to 60% (from 75%)
• Up to 40% allowed for utilities, mortgage interest, etc. However, the bill does not change the categories of allowable spending for forgivable loans, and it does not address the deductibility of payroll and other covered expenses. Senate leaders in their floor statements on June 3 said they are committed to continuing to work on other legislation to fix flaws in the program.
• Removes forgiveness reduction for businesses that were unable to rehire employees or hire new employees to return to pre-disaster employment levels.
• Extends the loan term to 5 years at 1%.
• Borrowers have 10 months from the end of the covered period to submit a forgiveness application.
• Owners can receive PPP and are still allowed to defer payroll taxes.
Note: As of May 30 more than $120 billion is still available for businesses that want a PPP loan. The bill applies only to the period for spending the funds. No new applications will be accepted after June 30, 2020. Money remains available for businesses that have not yet applied. Majority Leader Mitch McConnell said the Senate is committed to replenishing funds if the money runs out before June 30.
The Alabama SBDC is working on a forgiveness application walk-through that reflects the new PPP guidelines.
The bill also does not make clear whether a business may opt to wrap up its spending period and apply for forgiveness before Dec. 31. The NNA expects further information on this option from the Treasury Department soon.