Yesterday afternoon, the Senate unanimously approved H.R 7010, the Paycheck Protection Program Flexibility Act of 2020. As we previously reported, the House of Representatives passed the bill last week in an attempt to address major issues with the Paycheck Protection Program (PPP). The bill now heads to the President, he is expected to sign the bill into law.
The bill makes significant changes to the PPP and will provide immediate and critically important relief for borrowers who have endured weeks of uncertainty with regard to the rules, terms, and expectation of forgiveness often coupled with the financial devastation of partial or total mandated government shut down orders.
We have hosted 16 webinars and invested hundreds of hours firm wide to understand the constantly evolving guidelines and provided guidance on potential strategies to ensure maximum forgiveness. The passing of this bill does offer substantial relief to borrowers in the areas most critically in need of relief.
This Bipartisan bill addresses these concerns and introduces several modifications to the program. They are listed below:
- Covered period is extended from June 30, 2020 to December 31, 2020 and the 8 week period is increased to 24 weeks or December 31, 2020 (whichever is earlier).
- The bill adds an exemption for reduction in forgiveness related to the FTE count if an eligible recipient:
- is unable to rehire an individual who was an employee of the eligible recipient on or before February 15, 2020;
- is able to demonstrate an inability to hire similarly qualified employees on or before December 31, 2020; or
- is able to demonstrate an inability to return to the same level of business activity as such business was operating at prior to February 15, 2020.
- Reduces the limitation of 75% of forgivable amount must be spent on payroll costs to 60%,
- Option to elect to have covered period remain 8 weeks after origination
- Allows deferral of payroll taxes beyond PPP forgiveness decision.
As with all things PPP, questions remain. There still exists an urgent need for clarification. Tony Nitti, CPA, MST at Forbes, offered an excellent summary of some of those concerns, you can read that article HERE.
- Will $100K cap align with CARES Act and increase maximum amount per employee to $46,154? Current guidance, including Code in the Federal Register limits that amount to $15,384. Will any clarification also apply to owners across the various entity types?
- Language of H.R. 7010 related to the 60% payroll cost provision reads, “to receive loan forgiveness under this section, an eligible recipient shall use at least 60 percent of the covered loan amount for payroll costs…”
- This language can be read as eliminating any forgiveness at all if you do not spend 60% on eligible payroll costs (a definition that has evolved many times and still contains ambiguity)
We will discuss the changes, these questions, and more at a webinar tomorrow at noon. Registration information will be available shortly.
Please reach out to firstname.lastname@example.org with questions.
We are in this together,
Brinker Simpson & Company, LLC
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice & cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).