Senate Passes PPP Flexibility Act of 2020
On Wednesday evening, the Senate passed the House bill, Paycheck Protection Program Flexibility Act of 2020, creating more flexibility for PPP loan recipients to spend the funds and still qualify for forgiveness of the loans. Under the bill, borrowers can choose to extend the eight-week period to use the PPP funds to 24 weeks. The bill also revises the June 30 deadline for spending the PPP funds to Dec. 31 to accommodate the new 24-week window. Additionally, the bill changes the ratio for payroll to other fixed costs, raising the non-payroll portion of a forgivable covered loan amount from 25% up to 40%. The Senate approval sends the House bill to President Donald Trump, who is expected to sign it.

The following is a summary of the legislation’s main points compiled by the AICPA, which can be found in this Journal of Accountancy Article:
  • PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
  • Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met. Rep. Chip Roy (Texas), who co-sponsored the bill in the House, said in a House speech that the bill intended the sliding scale to remain in effect at 60%. Senators Marco Rubio and Susan Collins indicated that technical tweaks could be made to the bill to restore the sliding scale.
  • Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
  • The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
  • Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
  • The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
Paycheck Protection Program
Flexibility Act of 2020

Hold the Old or Grab the New?
Rethinking the Game From Scratch
Both House and Senate have passed legislation (H.R. 7010) radically overhauling the scope and mechanics of PPP loan forgiveness. Many of the bullets we were sweating will fall to the ground. But, which new ones will emerge?
If you haven’t filed for PPP loan forgiveness yet, don’t. The way we play this game must be rethought from scratch. [Rethink = To reconsider or involve oneself in reconsideration, especially profoundly.] The time for doing so is now.
Paycheck Protection Program Flexibility Act of 2020
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