Paycheck Protection Program Flexibility Act of 2020 Becomes Law, Easing Restrictions on Loan Forgiveness

 

Today, President Trump signed H.R. 7010, the Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”). The new law amends provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) specifically related to forgiveness of the loans under the Paycheck Protection Program (“PPP”). The legislation saw overwhelming bipartisan support, passing by a vote of 417-1 in the House and unanimous consent in the Senate. As its name suggests, PPPFA aims to reduce restrictions for loan recipients to ultimately obtain forgiveness.

Highlights of PPPFA

  • Repayment Term Amended from 2 to 5 Years
    • Under PPP, loan recipients were required to repay loans within 2 years. PPPFA amends the repayment term to 5 years.
  • The “Covered Period” is Extended from 8 to 24 Weeks
    • Under the original PPP loan program, the covered period ended on June 30, 2020. PPPFA extends the covered period to December 31, 2020.
  • Employee Rehire Deadline Extended
    • Under the original PPP loan program, loan recipients were required to rehire employees by June 30, 2020, in order to have their salaries and wages count under “payroll costs.” The deadline for rehiring employees to count is now extended to December 31, 2020 under PPPFA.
  • Requirements for Employee Retention Reduced
    • PPPFA includes new exceptions to loan recipients’ reduced head count. First, if the employer is able to document an inability to rehire individuals who were employees of the eligible recipient on February 15, 2020 as well as an inability to hire similarly qualified employees for unfulfilled positions on or before December 31, 2020, their reduction may be excused.
    • Second, if the employer is able to demonstrate that it was unable to return to the same level of business activity as such business was operating at before February 15, 2020 because of COVID-19 related worker or customer safety requirements, their reduction in headcount may be excused.
  • Percentage Attributed to “Payroll Costs” is Decreased
    • Under the original PPP loan program, eligible recipients were required to use at least 75% of the covered loan amount for payroll costs in order to receive loan forgiveness. Under PPPFA, this amount is decreased, and eligible recipients need only use 60% of the covered loan amount for payroll costs.
  • Payment of Employer Payroll Taxes Delayed
    • PPPFA amends the CARES Act to allow employer recipients of PPP loans who wish to obtain forgiveness to defer payment of their payroll taxes for Social Security through December 31, 2020.