Brownstein Client Alert, May 28, 2020
Earlier today, the House passed the Paycheck Protection Program Flexibility Act (H.R.7010) 417-1. The legislation, which was updated late Wednesday, would make a number of changes to the Paycheck Protection Program (PPP) as enacted under the Coronavirus Aid, Relief and Economic Security (CARES) Act (P.L.116-136).
If passed by the Senate and enacted into law, the bill would:
- Extend forgiveness for expenses incurred beyond the current eight-week covered period to 24 weeks after a loan is issued or through Dec. 31, whichever comes first.
- Amend the current requirement that 75% of the forgivable loan be used for payroll expenses such that:
- 60% must be used for payroll expenses; and
- 40% may be used for the interest on any mortgage obligation, rent or utility payments (i.e. qualified non-payroll expenses).
- Extend the loan maturity period to five years, instead of the current two-year deadline for repayment set by the Small Business Administration (SBA). This will only apply to loans following passage.
- Ensure businesses accepting PPP loans have full access to payroll tax deferment.
- Expand the availability of loan forgiveness for businesses that are unable to rehire workers that were employed as of Feb. 15 or find similarly qualified workers to fill positions. Companies that are unable to resume pre-COVID-19 operational levels would still qualify for loan forgiveness if they comply with guidance from the Department of Health and Human Services (HHS), the Centers for Disease Control and Prevention (CDC), and the Occupational Safety and Health Administration (OSHA).
- Extend the deferral period for principal and interest payments on PPP loans until the SBA has compensated lenders for forgiven amounts. Businesses that do not apply for loan forgiveness within 10 months of the last day of the covered period have at least 10 months after the last day of the covered period to start making payments.
- New applications may only be received until June 30, 2020.
The legislation now heads to the Senate, where it is not expected to pass as drafted. When it returns on June 1, Senate Majority Leader Mitch McConnell (R-KY) has said the Senate will instead consider its own bipartisan legislation to modify the PPP, the Paycheck Protection Program Extension Act (S.3833).
Differences between the House and Senate bills will need to be ironed out before the final version is enacted into law. House Majority Leader Steny Hoyer (D-MD) claimed earlier this week that House and Senate negotiators are nearing agreement.
The amended Paycheck Protection Program Flexibility Act can be found here.
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The information in this article is accurate as of the publication date. Because this law in this area is changing rapidly, and articles are not automatically updated, continued accuracy cannot be guaranteed.