PPP Flexibility Act Signed On June 5th, 2020, Has More Flexibility With Forgiveness Requirements

Below is a recap from the Journal of Accountancy on the new changes to the PPP loan. Much of what many have been doing for compliance (with the original law) may no longer be correct based on the new changes. Changes include:

• LAYOFFS NOW RECOMMENDED: It is now recommended that employers layoff the employees that are not working and have them collect unemployment. This will most likely benefit both employer and their employees.
• 8 WEEKS CAN BE EXTENDED: If an employer is not currently a PPP borrower, they can extend the eight-week period to 24 weeks, although they can still opt to keep the original eight-week time frame. All new PPP borrowers will automatically have 24 weeks covered, but this cannot extend beyond December 31, 2020. This change is designed to make it easier for borrowers to receive almost full or full forgiveness.
• PAYROLL EXPENDITURES DROP: In the newly passed bill, the payroll expenditure requirement drops to from 75% to 60%. However, it is now a “cliff”, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met. (Update: SBA and Treasury clarified on June 8 that the 60% threshold is not a cliff and that partial forgiveness is available under 60%.)
• 24 WEEKS TO RESTORE WORKFORCE: Borrowers now have a full 24-week period to return their workforce staff and wages to the pre-pandemic levels needed for full forgiveness. The previous June 30th deadline is now extended to December 31st.
• NEW EXCEPTIONS FOR FULL FORGIVENESS: Two expectations are now in place for borrowers to achieve full PPP load forgiveness when they fail to fully restore their workforce. Prior guidelines allowed borrowers to leave out employees who turned down good faith offers for rehire from calculations. Now, the new law also allows adjustments if borrowers couldn’t find qualified employees to hire or to return operations to pre-COVID-19 (Feb 15th, 2020) levels.
• MORE TIME TO PAY: All new borrowers have five years to repay the loan. This was previously set at two years. All existing borrowers can extend their PPP repayments to five years if both the lender and the borrower agree. Interest is still 1%.
• DELAY PAYROLL TAXES: Under the first CARES Act, payroll taxes could not be delayed. Now, PPP load recipients can delay payroll taxes.

Need any assistance with your PPP loan and the new changes? Please contact Halsey Resources. We are happy to help!

RESOURCES:

https://www.journalofaccountancy.com/news/2020/jun/ppp-loan-forgiveness-changes-coming.html

https://www.natlawreview.com/article/treasury-issues-updated-ppp-faqs-addressing-layoffs-and-rehires-loan-forgiveness