Paycheck Protection Program Flexibility Act of 2020 Signed Into Law
On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 (PPPFA) to address many concerns expressed by the small business community around the Paycheck Protection Program (PPP) aimed at providing COVID-19 relief.
The new legislation attempts to address the growing concern among small business owners that the PPP loans simply don’t meet their needs. In some cases, the extra $600-per-week in unemployment benefits established by the CARES Act has snarled efforts by businesses to bring workers back, with employees reluctant to forfeit a bigger paycheck and return to their job when the risk of contracting the virus remains high. Since being signed into law, the Small Business Administration (SBA) has said it will issue new forgiveness guidelines for PPP loan recipients.
The PPPFA eases the restrictions on how the money must be spent in order to be forgiven. Loan recipients now only must spend 60 percent of the aid on maintaining payroll, including salary, health insurance, leave and severance pay rather than the previous 75 percent rule. The remaining 40 percent can go toward non-payroll costs like rent/leases, mortgage interest, and utilities. Essentially, the PPPFA reduces the percentage of loan proceeds that must be spent on payroll costs from 75 percent to 60 percent, enabling businesses to spend more on overhead and fixed expenses such as rent and utilities.
A concern among small business owners who tapped the PPP – a $610 billion fund established at the end of March – was that guidelines on how to spend the money were too strict and could potentially leave them on the hook for the money.
The PPPFA also clarifies that loan forgiveness will not be reduced based on an employer’s inability to rehire employees if the employer can document:
- Written offers to rehire individuals who were employees of the organization on February 15, 2020; or
- An inability to hire similarly qualified employees for unfilled positions by December 31, 2020.
Additionally, forgiveness will not be reduced for failure to maintain employment levels if the organization is able to document an inability to return to the same level of business activity as existed prior to February 15, 2020, due to compliance with COVID-19-related guidance for:
- Social distancing; or
- Worker or customer safety requirements from the Health and Human Services (HHS), the Centers for Disease Control and Prevention (CDC), or the Occupational Safety and Health Administration (OSHA) between March 1 and December 31, 2020.
- Promptly issue rules and guidance;
- Issue modified application form; and
- Issue modified loan forgiveness application
Boeckermann Grafstrom & Mayer (BGM) will provide insight on the rules and guidance once the SBA and Treasury issue them. If you have any questions at this time, please contact your BGM professional or Cory Parnell at firstname.lastname@example.org. We are proud to advise you and offer you and your business the support it needs. Providing our clients with the highest level of service remains our top priority.
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