• Brian Senjem

Paycheck Protection Program Flexibility Act

The PPP Flexibility Act includes some major changes to the PPP

For the full text of the bill, click here. This bill includes some significant changes to the original PPP; details of which are below. 1) Extension of the Covered Period   a) Instead of the initial 8-week covered period, businesses can choose to extend this period to 24 weeks from the date of the loan's origination.       b) The covered period cannot extend beyond December 31, 2020.      c) If you were planning on using the original 8-week covered period (or alternative payroll covered period), this is still an option. The 24-week covered period is NOT a requirement. 2) Percentage Change for Payroll Costs vs Non-Payroll Costs      a) Borrowers must spend at least 60% on payroll.  This amount is down from the original requirement of 75%.      b) This means that up to 40% of the loan proceeds can be used on non-payroll costs (e.g. rent, utilities, etc). IMPORTANT: Borrowers MUST spend at least 60% on payroll costs or NONE of the loan will be forgiven. 3) Extended Period to Restore FTEs/Salaries:      a) The original June 30th deadline for restoring FTEs or salary/hourly wages has been extended through December 31, 2020      b) As long as FTEs or salary/hourly wages are restored to February 15, 2020 levels any time prior to December 31, 2020, no reduction in forgiveness will be required. 4) Exceptions for Not Restoring Your Workforce:  a) In the period from February 15, 2020 through December 31, 2020, the amount of loan forgiveness will NOT be reduced when a borrower experiences a loss of FTEs if the borrower, in good faith, is able to document ANY of the below:         i. There was an inability to rehire individuals who were employees on February 15, 2020         ii. There was an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020         iii. There was an inability to return to the same level of business activity that the business was operating at before February 15, 2020 due to compliance with government orders.              - For example, if restaurants are unable to fully open by December 31, 2020 due to government orders, any loss in FTEs resulting from such restrictions should NOT be taken into account in computing a required reduction in the forgivable amount. 5) Deferral of Payroll Taxes Option Extended      a) Businesses electing to defer the Employer portion of Social Security taxes can now opt to defer these taxes through the end of 2020.  Originally, the law stated that they must stop deferring once the loan was forgiven.          i. Payment of these taxes remains the same: 50% must be paid in 2021 and the remainder must be paid in 2022 6) Repayment and Deferral Period Adjustments      a) Borrowers will have 5 years to repay any loan proceeds that are not forgiven. This is an increase from 2 years in the original bill.      b) The original bill required lenders to defer the payment of principal and interest for 6 months.  The new bill allows for deferral until the date the lender receives the forgiveness amount from the SBA. As with everything, these updates bring more uncertainty.  It is expected that the SBA will issue further clarification on outstanding questions in the coming days/weeks.  We will continue to keep you updated as more information is released. We recommend you work closely with your CPA and/or attorney throughout this process. Easytrack's team is here to help so please don't hesitate to contact us.

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