Paycheck Protection Program Loan Forgiveness Overhauled… Again!

On June 3, Congress passed another Paycheck Protection Program (“PPP”) forgiveness Act that gives much-needed relief to many small businesses that were not able to take complete advantage of the relief intent of the original bill.

The new PPP bill does the following:

  1. Extends the period from 8 to 24 weeks during which the borrower must spend the loan proceeds.
  2. Reduces the percentage of the funds spent on payroll from 75 % to 60 %. It should be noted however that if the payroll costs go below 60%, the entire loan will be ineligible. Previously a partial reduction of the forgiveness was permitted.
  3. The “covered period” is the earlier of the 24 weeks or December 31, 2020.
  4. The “safe harbor” regulations passed recently allowed borrowers to rehire employees up to June 30, 2020. This was intended to help borrowers who received PPP funds but were unable to open their business during the 8-week period. The new bill extends the re-hiring period to December 31, 2020.
  5. If a borrower was unable to rehire employees in good faith from February 15, 2020 to December 31, 2020, the requirements for documenting these efforts have been relaxed.
  6. To the extent a PPP loan cannot be forgiven, the loan term for payback has been extended from 2 years to 5 years.
  7. The new law permits a borrower to BOTH receive PPP funds AND take advantage of the Deferred Payroll Taxes program.
  8. The Employer Payroll Tax Deferral provision of the CARES ACT allowed businesses to defer paying some payroll taxes (FICA and Medicare) up to an employee’s first $5,000 of wages paid due in 2020, by paying half of the deferred amount until December 2021, and the other half until December 31, 2020. BUT, if an employer took advantage of this provision, under the original legislation the employer could not receive a PPP loan. This prohibition has now been removed.

As you can see, the PPP program is in a constant state of flux.

While we do not expect to see any further legislation, there will be a significant amount of regulations and interpretations over the next several months as PPP borrowers begin the process of applying for PPP loan forgiveness. As always, Marshall Jones is ready to help you in any way we can. Contact us using our online form or by calling (404) 231-2001