Publish Date

Jun 05, 2020

New Flexibility Added to Paycheck Protection Program (PPP)

A&M Tax Advisor Weekly

Today, the President signed the Paycheck Protection Program Flexibility Act of 2020, H.R. 7010 (PPPFA), which provides greater flexibility for the recipients of Small Business Act loans under the Paycheck Protection Program (a PPP loan).  The following is a summary of the key relevant provisions of the law. Unless specified to the contrary, the provisions of the law apply to all PPP loans, including those that have been previously issued.

Extended Maturity Date for Loans

As a result of the PPPFA, all PPP loans that are made on or after today, will have a minimum maturity of five years.  With respect to PPP loans that were made prior to today, the PPPFA does not impact the maturity date. However, it does permit lenders and borrowers to mutually agree to modify the terms of a covered loan to conform with the extended maturity provided for new PPP loans.

Extension of Safe Harbor to Rehire Employees
Under the CARES Act, borrowers could qualify for the Full-time Equivalent Employees Reduction Safe Harbor, which exempted borrowers from the reduction in forgiveness amount due to a reduction in full-time equivalent employees, if the full-time equivalent employees were restored by June 30, 2020.  The PPPFA extended the safe harbor deadline so that borrowers will be eligible for the safe harbor if the reductions in employee levels are restored by December 31, 2020.

Extension of Deadline to Use Proceeds

Under the CARES Act, borrowers had eight weeks to use the loan proceeds (the covered period) and be eligible for forgiveness.  The PPPFA extended the covered period to the earlier of (1) the date that is 24 weeks after the date of origination of the loan or (2) December 31, 2020.  While this extension will apply to all PPP loans, the PPPFA allows recipients that received a loan prior to today to elect to have the covered period end on the date that is 8 weeks after the origination date of the loan.

Exemption for Reduction of Full-time Equivalent Employees

Under the PPPFA, borrowers that have a reduction of full-time equivalent employees will still be able to qualify for full loan forgiveness for the period beginning on February 15, 2020 and ending on December 31, 2020, if they can document in good faith that:

  • They are unable to rehire individuals who were employees on February 15, 2020 and 
  • They are unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020.

Exemption for Inability to Return to the Same Level of Business Activity

Borrowers will still be able to qualify for full loan forgiveness for the period beginning on February 15, 2020 and ending on December 31, 2020 if they can document, in good faith that:

  • They are unable to return to the level of business activity at which they were operating before February 15, 2020 and
  • That inability is due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19…,on%20eligible%20non%2Dpayroll%20expenses.