The Paycheck Protection Program Flexibility Act was signed into law on June 5, 2020. The Act is intended to amend the Paycheck Protection Program to provide additional flexibility around the use of PPP loan funds and the qualifications for loan forgiveness. Below is a summary of some of the key changes:
- Current PPP loan recipients may now choose to extend the period to use PPP loan funds from eight weeks to 24 weeks (or no later than December 31, 2020).
- Loan recipients can use the 24 week period to rehire employees, which is required to seek full loan forgiveness. This must be done by December 31, 2020, which is an extension beyond the previous deadline of June 30, 2020.
- The Act reduces the amount of loan funds that are required to be used for payroll costs by dropping the requirement to 60% from the previous 75%. The remaining 40% may be used for other operating costs such as mortgage interest, rent and utilities.
- Loan recipients whose funds are disbursed after the new Act will have five years to repay the loan. The Act allows existing PPP loans to be repaid over five years, rather than the previous two year requirement, if the lender and the borrower both agree.
- The Act allows businesses that have a PPP loan to also defer their Social Security payroll taxes. Previously, the PPP did not allow deferment of these taxes on the forgivable portion of the loan.
For full details please see this link. Employers seeking additional clarification on the new Act should consult with their CPA or legal counsel.
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