As you may have read the PPP Loan forgiveness changes have been approved by the Senate. The bill is called the “Payroll Protection Flexibility Act.” It being sent to President Donald Trump, who is expected
to sign it. I have posted a video on our YouTube channel describing these changes in plain English (I hope). My gut tells me this may be one of the last major changes in legislation, but more clarifying guidance will need to be issued via FAQ. Keep in mind, even after the President signs
this bill, the changes need to be incorporated into the SBA Loan Forgiveness application that was first released May 15 th . Even after the 11-page application was released the SBA released additional
“interim final regulations” on May 22nd that provided little new information than what was on the original form.
Be patient and fasten your seatbelt.
All these changes are a good thing that allows the business owner to use the funds in a manner that matches Governor Holcomb’s Back on Track guidelines. For example, many clients received PPP funds in early May but were not allowed to open their doors until late May or even in June.
The following is summary of the legislation main points that have been complied by the AICPA and taken from the Journal of Accountancy article “PPP forgiveness changes coming as Senate passes House bill” dated 6/4/2020.
PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
The payroll expenditure requirement drops to 60% from 75% but 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.
Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they do not fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill
allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
We all know this is very frustrating. We are all in the middle of the game and the referees keep changing the rules. All we can do is take the rules and interpret them the best we can and continue to run our businesses the best we can in this environment. If you have any specific questions regarding this or other accounting or tax matters give us a ring or drop us an email.