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BHBM Tax Law Alert | PPP Reform Bill


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FEDERAL UPDATE


U.S. Senate Approves House’s Bill to Reform Paycheck Protection Program

On June 3, 2020, the U.S. Senate unanimously passed the House’s “Paycheck Protection Program Flexibility Act of 2020” (the “Bill”). The Bill seeks to amend the provisions of the Paycheck Protection Program (the “PPP”), which was established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) that was signed into law on March 27, 2020. The Senate’s approval sends the Bill to the President, who is expected to sign it.

The Bill’s key provisions provide:

  • New PPP borrowers will have a 24-week covered period from the date of receipt of the loan proceeds to use the proceeds and qualify for forgiveness, but the covered period cannot extend past December 31, 2020.
  • Current PPP borrowers can choose to extend the 8-week period to 24 weeks or keep the original 8-week period.
  • Borrowers can now spend up to 40% of the loan proceeds on non-payroll costs and still have the entire amount of the loan forgiven. In other words, the payroll expenditure requirement is now 60% of the total loan amount instead of 75%. However, as the Bill is currently written, the 60% payroll expenditure requirement creates a forgiveness cliff, meaning that borrowers must spend at least 60% of the loan proceeds on payroll or none of the loan will be forgiven. It is likely that the Bill will be revised to create a sliding forgiveness scale for borrowers who spend less than 60% of the loan proceeds on payroll costs.
  • Borrowers who do not fully restore their workforces can still receive full loan forgiveness if they can document:

(1) an inability to rehire individuals who were employees of the borrower on February 15, 2020, and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or

(2) an inability to return to the same level of business activity that the business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, and related to worker or customer safety requirements made necessary by the pandemic.

  • New PPP borrowers may repay the loan in 5 years instead of 2 years. Current PPP borrowers must obtain consent from their lenders to receive an extension of the loan period.
  • Borrowers who receive loan forgiveness are eligible to defer payment of their payroll taxes.

To visit our COVID-19 Business Resource Center, including our previous Tax Law Alerts, click here.


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