(June 4, 2020) *UPDATE: Senate Passes House Bill – read article
On Thursday, May 28, 2020, the U.S. House of Representatives approved the Paycheck Protection Flexibility Act, H.R. 7010, to help ease loan forgiveness requirements for small businesses under the new Paycheck Protection Program (PPP). Key measures within the bill include:
- extends the time recipients can spend their funds from 8 weeks to 24 weeks.
- lowers the 75/25 payroll expense requirement for loan forgiveness to 60/40, which would allow borrowers to shift funds to other costs such as rent and utilities as needed
- extends deadline to rehire workers from June 30 to December 31
- extends the two-year term for the loan repayments to five years
The Senate also has its own PPP extension bill in the works, which proposes doubling the loan spending timeframe from eight weeks to 16 weeks, extending the PPP loan application deadline and allowing businesses to use their funds to purchase protective equipment for employees, amongst other amendments. It would not change the 75/25 payroll expense requirement, which is supported by Treasury Secretary Mnuchin. Although the bill failed to pass before adjourning this week, a vote is expected next week followed by negotiations between the two chambers.
The issue of tax-deductibility of expenses subject to forgiveness was not addressed in either of these bills due to timing, as many companies are reaching the end of their 8-week period. We expect additional guidance to be forthcoming in future legislation. While we cannot predict passage, a variety of sources are speculating that this has bipartisan support in both chambers of Congress.
It is expected that SBA will issue an extensive number of additional Q&A responses that will further clarify the forgiveness regulations. We will keep you posted on the continued movements of these rules.
Our BMF Advisors stand ready to help with questions on PPP loans, forgiveness or other answers you need to keep your business moving forward. Contact us if you or your business needs:
- Guidance on documenting the necessity of the PPP loan and the ultimate forgiveness
- Assistance with the calculation of the amount of PPP loan forgiveness.
- Assistance with projecting the usage of funds in accordance with the PPP program over the measurement period.
- Guidance on the completion of the PPP loan forgiveness application.
Visit our COVID-19 Resource Center for information and resources for you and your business.
