To all –
Both the SENATE AND THE HOUSE passed the bill that adds flexibility to the PPP loan program!
Now the President needs to sign the bill and he is expecting to sign it in the very near future.
Below are a few of the very favorable changes:
1- The covered period to spend the money to obtain forgiveness will be increased from 8 weeks to 24 weeks. This is HUGE plus for businesses that have been closed where they weren’t able to spend PPP money because many employees weren’t working. The start date to the 8 week period is the date the SBA funded the business with the PPP loans.
2- The SBA stated that at least 75% of the amount forgiven had to be spent on payroll costs. The other 25% could be spent on rent, utilities and interest. The 75% cap will decrease to 60% which will allow more businesses to spend money as it needs to without losing forgiveness.
3- There is a reduction in the forgiveness amount if the business doesn’t bring back all its employees or restore certain employee’s salary to pre COVID-19 levels. These reductions are referred to as the full time equivalent safe harbor and wage reduction safe harbor. Under current law, those eligible businesses must bring these levels back by June 30th. Under this bill, the June 30th date will be extended until December 31, so more businesses will be able to qualify for the safe harbor.
4- All businesses can elect to defer the payment of the employer share of the FICA tax through December 31, 2020 and pay 50% of the deferred amount on December 31, 2021, and the other 50% on December 31, 2022. In effect, this is an interest free loan. Under this new PPP rule, any employer that elects to defer the employer share of FICA tax can do so through December 31, 2020. If this change didn’t pass, those businesses would have had to stop the deferral once any portion of the PPP was forgiven.
All of the above provisions are important and the President will need to sign the bill so it becomes law as many businesses are approaching the end of the 8 week covered period and decisions will have to be made in the next few weeks.
If you have any questions how this effects your business, then please give me a call.
Best and be safe,
Barry L. Sunshine, CPA | Senior Tax Partner
485 Madison Avenue | New York | NY 10022
100 Quentin Roosevelt Blvd | Garden City | NY 11530