On May 28, 2020, the House passed the Paycheck Protection Program Flexibility Act of 2020 (the “Act”). The bill, which is anticipated to pass the senate, would institute changes welcome to many small businesses by offering many such businesses some much needed additional flexibility in spending PPP loan proceeds. The Act gives businesses additional time to spend the loan proceeds by changing the “covered period” from eight weeks to 24 weeks (although existing loan recipients may elect for the covered period to be 8 weeks). The Act also changes the 75/25 rule, under which, in order to receive full loan forgiveness, businesses must spend at least 75 percent of loan proceeds on payroll and only 25 percent of loan proceeds may be used for other expenses such as rent and utilities. Under the Act, businesses would be able to use up to 40 percent of the loan proceeds to cover interest on any covered mortgage obligations, payment on any covered rent obligation, or covered utility payment. Sixty percent of loan proceeds must be used for payroll costs.
Additionally, the Act:
• Extends the period of time under which employers would have to rehire employees.
• Offers additional exemptions for (1) employers who are unable to rehire employees and are also unable to rehire similarly qualified employees for unfilled positions, and (2) employers who are unable to return to the same level of business activity, due to compliance with certain federal safety standards.
• Permits recipients of PPP loan proceeds to defer payment of employer payroll taxes.
Additional information will be provided as it becomes available.