On Thursday, May 28, the House of Representatives nearly unanimously approved the Paycheck Protection Flexibility Act, a bill designed to loosen the restrictions for PPP loan forgiveness. Key provisions of the Act include:
- An increase in the amount of time PPP recipients have to spend the proceeds (i.e., the covered period) from 8 weeks to 24 weeks
- A decrease of the percentage recipients must spend on payroll-related costs to qualify for loan forgiveness from 75 percent to 60 percent
- An extension of the deadline to rehire workers from June 30, 2020 to December 31, 2020
- An extension of the minimum term period for the loans from two years to five years
- The ability for companies whose loans are forgiven to delay the payment of payroll taxes
The House bill now moves to the Senate, which had been working on its own bill to modify the PPP rules. While the Senate's version would have also increased the covered period to 16 weeks, it would have kept the 75 percent payroll cost requirement intact. However, the Senate failed to reach agreement on its version last week. Lawmakers are hopeful that the Senate will instead take up the House bill for a vote next week.
While none of this legislation has yet been signed into law, we wanted to keep you apprised of the situation. The news that reform is potentially on the way will no doubt be greatly welcome - particularly for companies that will struggle to spend 75 percent of their loan proceeds on payroll costs amidst continued business shutdowns. We will continue to update you as more information becomes available.
If you have any questions about these or any other matters, please contact your Kreischer Miller relationship professional or any member of our team. We also continue to update our COVID-19 Resource Center, which you can access here.
Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.