Paycheck Protection Program Flexibility Act of 2020

President Trump signed the Paycheck Protection Program Flexibility Act of 2020, amending the Small Business Act and the CARES Act and modifying certain provisions related to the forgiveness of loans under the Paycheck Protection Program (PPP). One important modification allows recipients of loan forgiveness under PPP to defer payroll taxes.
Highlights of the legislation are as follows:

  • Current PPP borrowers can extend the “covered period” from eight weeks to 24 weeks. New PPP borrowers will have a 24-week covered period, but the covered period cannot extend beyond December 31, 2020, making it easier for more borrowers to reach full, or almost full, forgiveness.
  • Lowers the amount of PPP funds that must be spent on payroll from 75% to 60%, requiring borrowers to spend at least 60% on payroll or none of the loan will be forgiven.
  • Extends the “covered period” for the loan from June 30 to December 31.
  • Delays employer payroll tax payments through the end of 2020.
  • For full forgiveness, borrowers can use the 24-week period to restore their workforce and wages to pre-COVID-19 levels by December 31. Previously, the deadline was June 30.
  • Borrowers are allowed to receive full PPP loan forgiveness even if they do not fully restore their workforce. Previous guidance allowed borrowers to exclude from their calculations employees who rejected good faith offers to be rehired at the same hours and wages before COVID-19. Now, borrowers can make adjustments if they cannot find qualified employees or are unable to restore business operations to levels before COVID-19.
  • New borrowers have five years to repay the loan instead of two years. With agreement from their lender, existing PPP loans can be extended up to five years. The interest rate remains 1%.

These changes were needed because most businesses were nearing their eight-week loan forgiveness period. Some industries were having difficulty rehiring employees because unemployment benefits were more than their work wages.
With many interpretations of the PPP guidelines for the loan forgiveness application, it is best to contact our task force to assist with the preparation. Contact one of the team members below for assistance.
Mark R. Dreher, CPA – Managing Partner
Barry S. Graham, CPA, CMA – Senior Audit Manager

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