By Bello Welsh LLP
On June 4, 2020, the Senate passed the Paycheck Protection Program Flexibility Act of 2020. It has already passed the House, so it now goes to the president for signature. The primary changes are as follows:
- The period in which employers must spend the funds has been extended from 8 weeks to 24.
- The amount that must be spent on payroll has been dropped, from 75% to 60%.
- The language of the bill suggests that if less than 60% of the funds are spent on payroll there will be no loan forgiveness at all. This obviously is a very important development, which we hope will be made clear when related Rules are published. In the meantime, however, it is very important to track the PPP expenditures to make sure that at least 60% are dedicated to payroll expenses.
- The amount of loan forgiveness will be determined without regard to a proportional reduction in the number of full-time equivalent employees if the employer is able to document that:
- it is unable to rehire individuals who were employees on February 15, 2020; and
- it is unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
- it is unable to return to the same level of business activity as the business was operating on or before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.
- Borrowers who do not get full forgiveness will have 5 years to repay the loans, instead of 2.
As always, we will keep you informed of developments.