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Public Policy Newsletter Article

President Signs into Law Measure Amending Paycheck Protection Program (PPP)

  • 2020-06-18T15:00:00.000+0000
  • California
  • Author: Laure Fabrega

On June 5, the President signed into law H.R. 7010, the Paycheck Protection Program Flexibility Act. The bill passed in the House on May 28 by a 417-1 vote and in the Senate by unanimous consent on June 3rd.

It relaxes some requirements for companies eligible to participate in the Paycheck Protection Program (PPP), including more time and flexibility to qualify for loan forgiveness, less stringent payroll expenses requirements, and ability to defer payroll taxes, among others.

The PPP was created by the CARES Act on March 27 to offer low-interest loans guaranteed by the Small Business Administration (SBA) to help small businesses keep employees on the payroll, and received $310 billion in additional funding on April 23 under the Paycheck Protection Program and Health Care Enhancement Act.

H.R.7010 will:

• Extend to December 31 (from June 30) the deadline to incur qualifying costs for loan forgiveness over a 24 week-period (from 8). The deadline to apply for a loan remains June 30.
• Extend to December 31 (from June 30) a period in which loans can be forgiven if businesses restore staffing or salary levels that were previously reduced. The provision would apply to worker and wage reductions made from February 15 through 30 days after enactment of the CARES Act.
• Maintain forgiveness amounts for companies that document their inability to rehire workers employed as of February 15, and their inability to find similarly qualified workers by the end of the year.
• Require businesses to spend at least 60 percent of their PPP funds on payroll expenses to qualify for full loan forgiveness (from the current 75 percent). A business that doesn’t meet the payroll threshold can still receive partial forgiveness.
• Repeal a provision from the CARES Act that barred companies with forgiven PPP loans from deferring their payroll tax payments.
• Allow borrowers to defer principal and interest payments on PPP loans until the SBA compensates lenders for any forgiven amounts, instead of the current six-month deferral period. Borrowers that don’t apply for forgiveness would be given at least 10 months after the program expires to start making payments.
• Establish a minimum loan maturity period of five years following an application for loan forgiveness, instead of the current two-year deadline set by the SBA. That provision would apply to PPP loans issued after the measure is enacted, though borrowers and lenders could agree to extend current loans.