Paycheck Protection Program Flexibility Act of 2020 Heads to President’s Desk

Last updated June 4, 2020

Following passage by the U.S. Senate on June 3, 2020, the much-anticipated Paycheck Protection Program Flexibility Act of 2020 now heads to President Trump’s desk.

If enacted into law without any changes, the legislation will make the following amendments to the Paycheck Protection Program (“PPP”) loan forgiveness provisions of the CARES Act, significantly easing the burden on businesses seeking to qualify for complete forgiveness of PPP loans:

  • The 8-week period for loan expenditures will be extended to 24 weeks. The period during which a business must expend its PPP loan proceeds on eligible expenses in order to be eligible for loan forgiveness will be extended from 8 weeks to 24 weeks (but not past December 31, 2020).
  • The 75% payroll requirement will be reduced to 60%. The portion of a PPP loan that must be spent on payroll costs during the covered period, in order to be eligible for forgiveness, will be reduced to 60% (from 75%), and the permitted portion for non-payroll costs will be increased to 40% (from 25%).
  • Employers will have until December 31, 2020, instead of June 30, 2020, to eliminate reductions in employees, salary, or wages, to avoid reductions in loan forgiveness.
  • Reductions in employees that cannot be reversed with rehires or new hires or that result from compliance with health and safety requirements will not affect forgiveness determinations. The forgivable amount of a PPP loan will be determined without regard to a reduction in employees if the business is able to document, in good faith, that it is unable to rehire former employees and is unable to hire similarly qualified employees by December 31, 2020, or that, due to compliance with federal health and safety requirements or guidance related to COVID-19, it is unable to return to the same level of business activity that it had prior to February 15, 2020.

In addition to the foregoing provisions, the bill, if enacted, will also provide that:

  • For businesses that have a remaining loan balance after partial forgiveness, lenders will be required to provide for loan payment deferments until the date that the lender receives the forgiveness amount.
  • For loans made after enactment of the bill, the minimum loan term for any remaining balance after forgiveness will be five years. For loans that were made before enactment of the bill, the lender and borrower may mutually agree to increase a shorter loan maturity to the bill’s minimum five year term, or longer. In all cases, the maximum loan term applicable to PPP loans is ten years from the date on which the borrower applies for forgiveness.
  • A business that fails to apply for forgiveness within 10 months after the end of the covered period will be required to begin making loan payments on the date that is 10 months after the end of the covered period.
  • Businesses that have their PPP loans forgiven will not be excluded from the application of Section 2302 of the CARES Act, which provides for the deferral of payment of certain employer payroll taxes.

CSG will continue to track this legislation and any additional PPP legislation or guidance. If you have any questions regarding any federal or state economic assistance programs, please reach out to your CSG attorney.

For additional information pertaining to the coronavirus outbreak, please visit CSG’s COVID-19 Resource Center.

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