Tax Alert: Congress Passes Favorable PPP Loan Legislation
June 4, 2020 - Last week, the U.S. House of Representatives overwhelmingly passed the Paycheck Protection Program Flexibility Act of 2020 (“Act”). On Wednesday, the U.S. Senate approved the bill and it will now be sent to President Trump to sign into law. The Act modifies several provisions of the Paycheck Protection Program (“PPP”), the U.S. Small Business Administration (“SBA”) loan program established as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

Loans made under the PPP are eligible for forgiveness if the borrower meets certain requirements, including the use of the loan proceeds for qualifying expenses. The ACT makes several key changes to those requirements including:

  • Decreases the amount that must be spent on payroll costs from 75% to 60%.

  • Extends the period over which qualifying expenses must be paid from 8 to 24 weeks after the loan issuance date.  Borrowers that received loans prior to the law’s enactment date may choose to apply the original 8-week period.

  • Extends the period in which borrowers can restore previous staffing or salary levels and still qualify for loan forgiveness from June 30, 2020 to December 31, 2020. The Act also provides exemptions to the reduction to PPP loan forgiveness based on employee staffing levels.

  • Extends the repayment period for the amount of a PPP loan that is not forgiven from 2 to 5 years.

  • Extends the period that a borrower may defer principal and interest payments on loan proceeds that will be repaid from 6 to 10 months. The Act also provides a deferral of principal and interest payments until the SBA compensates lenders for forgiven loan amounts.

  • Extends the application deadline for a PPP loan from June 30, 2020 to December 31, 2020.

  • Removes the CARES Act restriction that made borrowers with forgiven PPP loan proceeds ineligible to defer payroll tax payments.

Whitley Penn has a task force of professionals available that can help you with the matters related to your PPP loan and any other matters related to the small business loan process. Please contact us if you have any questions or require additional assistance. 

Whitley Penn is continually monitoring the tax and economic developments related to the coronavirus pandemic and will send out additional alerts in the future. For previous tax alerts regarding the CARES Act and SBA loan programs, please see the Whitley Penn COVID-19 resource page at . In the interim, please call your Whitley Penn tax advisor if you have any questions or require any additional information.