After hours on Wednesday, June 3 the Senate unanimously passed the Paycheck Protection Flexibility Act (link) which grants extension and relief measures for those who received PPP loans. This is expected to be signed into law by the President shortly.
The following is a summary of the legislation’s main points compiled by the AICPA:
- PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
- The payroll expenditure requirement drops to 60% from 75%.but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
- Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
- The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
- Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
- The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
You can access the PPP Loan Forgiveness Application, instructions and worksheets here (link).
The AICPA has provided a thorough and free loan forgiveness Excel calculator which is updated as guidance is released, which can be found here (link)
We are available to discuss this newly released information. Please call us at 203-852-7088 or email if you have questions.
This PPP loan guidance and information continues to change on a daily basis and as it does, we will keep you up to date.