Accounting, Paycheck Protection Program

Paycheck Protection Program Flexibility Act Now Law

On Wednesday, June 3, 2020, the  U.S. Senate unanimously passed HR 7010, the Paycheck Protection Flexibility Act.  President Trump signed it into law on June 5.

Some of the significant components include:

  • Current Paycheck Protection Program (PPP)  borrowers may elect to keep the previous 8-week covered period or they can change to the newly approved 24-week covered period. New PPP loan borrowers must use the 24-week period.  In all cases, the covered period may not extend past December 31, 2020.
  • A borrower applying for loan forgiveness will now be required to spend 60% of the loan proceeds on payroll costs – down from 75%. However, the language in the Act makes it clear that a borrower must spend at least 60% of the proceeds on payroll costs to get any loan forgiveness.  The earlier CARES Act created a sliding scale for calculating the loan to be forgiven.
  • There are no changes in the definitions of payroll or non-payroll costs.
  • New language regarding situations for employees who do not return and if a borrower cannot find a qualified individual to fill an open position. In either case, these occurrences will not cause a penalty to the borrower due to an FTE reduction.
  • The unforgiven portion of PPP Loans will be a 5-year loan at the existing 1% rate.
  • Deferral of payments will be extended until the lender determines loan forgiveness amount.
  • FICA deferral – originally not allowed under the CARES Act – will now be allowed for 2020. This will allow taxpayers to defer 100% of employer FICA contributions for 2020 until 2021 and 2022 (50% due each year).

For additional information, please click on the image below to review the Summary of the Paycheck Protection Program Act Analysis prepared by the NAPEO, the National Association of Professional Employer Organizations.

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