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).
