The Senate unanimously passed the House bill adding some much-needed changes to the Paycheck Protection Program on Wednesday, June 3, 2020. The bill titled Paycheck Protection Program Flexibility Act of 2020 passed the House on May 28th with a vote of 417-1 and is now awaiting the President’s signature.
Under this bill, small businesses will have the option to extend the covered period from 8 weeks to the earlier of 24 weeks or December 31, 2020. Additionally, the bill extends the repayment terms of the loan from two years the five years.
Another area of concern that has been addressed in this bill is the requirement that 75% of the loan be used for payroll. The new legislation has reduced the 75% requirement to 60%, allowing borrowers to spend up to 40% of the loan funds on rent, utilities, and mortgage interest. But there is a catch, according to Sen. Marco Rubio of Florida “people need to know that the way the Treasury has told us they are going to interpret that bill — if you don’t spend 60% of your money on payroll, if you only spend 59.9%, you will get zero forgiveness.”
The bill extends the time to rehire employees, pushing back the June 30th deadline to December 31st. Under this section congress added, the forgivable amount will not be reduced if the number of employees cannot be brought back to original levels due to being unable to rehire former employees and unable to hire similarly qualified employees, or if the business is unable to return to the same level of activity due to compliance with federal requirements or guidance related to COVID-19.
The bill also allows for loan recipients who have their loans forgiven to be eligible to continue to defer payroll tax payments through December 31, 2020.