Congress Passes the Paycheck Protection Program Flexibility Act of 2020

June 4, 2020

On June 3, 2020the U.S. Senate passed the Paycheck Protection Program Flexibility Act (H. R. 7010) which was previously approved by the House of Representatives on May 28, 2020. H. R. 7010 was written to focus exclusively on the Paycheck Protection Program (PPP) as a response to concerns raised by PPP loan borrowers.  

There are several significant changes to the PPP from H. R. 7010 which are summarized below. 

It should be noted that this law has not yet reached the President’s desk. Furthermore, the SBA and Treasury have yet to release guidance pertaining to the latest revisions to the PPP. Aprio anticipates further instructions for borrowers and lenders to be provided as well as modifications to the SBPPP Loan Forgiveness Application released on May 15, 2020. 

Criteria Prior Guidance H. R. 7010
Covered Period* 8 weeks from date of PPP loan disbursement The earlier of 24 weeks from date of PPP loan disbursement or
December 31, 2020
Usage of Funds A minimum of 75% of forgivable funds must be used on payroll costs with a maximum of 25% used on non-payroll costs A minimum of 60% of the covered loan amount must be used on payroll costs with a maximum of 40% used on non-payroll costs
Extension of Safe Harbor for Compensation and FTE Reductions Salary or hourly wage reductions or FTE reductions would not reduce forgiveness if restored by June 30, 2020 Salary or hourly wage reductions or FTE reductions would not reduce forgiveness if restored by December 31, 2020
Deferral of Loan Payments 6 months from the date of loan origination 10 months after the last day of the Covered Period
FICA Tax Deferral Employers can defer payment of FICA from the period of March 27, 2020 through date of PPP loan forgiveness – half to be paid in 2021 and the other half paid in 2022 Employers can defer payment of FICA from the period of March 27, 2020 through December 31, 2020 – half to be paid in 2021 and the other half paid in 2022
Loan Maturity 2 years For loans originated on or after enactment, 5 years
New Safe Harbors Based on Employee Availability – Rehire/Hiring FTE reductions would not reduce forgiveness if the borrower can document in good faith the inability to rehire individuals who were employees on February 15, 2020 or the inability to hire similarly qualified employees for unfilled positions by December 31, 2020
New Safe Harbors Based on Employee Availability –Compliance with Health and Human Services, Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration FTE reductions would not reduce forgiveness if the borrower can document in good faith an inability to return to the same level of business activity as such business was operating before February 15, 2020, 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

*For borrowers of PPP loans originated prior to the enactment of H. R. 7010, there is an election to be made pertaining to the covered period – 8 weeks or 24 weeks. 

Let Aprio Help

Aprio has established a dedicated PPP loan forgiveness team that is continuously monitoring new guidance from Congress, the SBA, as well as the Treasury and the IRS, to ensure we have the latest information when advising our clients.  

If you would like to discuss PPP loan forgiveness contact Aprio’s dedicated PPP loan forgiveness team for a consultation. 

Disclaimer for services provided relative to SBA programs and the CARES Act
Aprio’s goal is to provide the most up to date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.

The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.

Due to the evolving nature of the situation and the lack of final published rules, Aprio cannot guarantee that additional changes or updates won’t be needed or forthcoming and the original advice given by Aprio may be affected by the evolving nature of the situation.

You need to evaluate and draw your own conclusions and determine your Company’s best approach relative to participation within these programs based on your Company’s specific circumstances, cash flow forecast and business strategy.

In situations where resources are provided by third parties, those services should be covered under a separate agreement directly with that service provider. Aprio is not responsible for the actions of any other third party.

Aprio encourages you to contact your legal counsel to address the legal implications of the impact of the CARES Act and specifically your participation in any of the SBA programs.

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About the Author

Justin Elanjian

Justin Elanjian, CPA, is the Partner-in-Charge of Aprio’s Paycheck Protection Program (PPP) & Employee Retention Credit (ERC) Services. As a national PPP expert, prominent speaker and strategic business advisor, Justin helps both lenders and borrowers navigate the complexities of the PPP. He also helps his clients realize benefits from other stimulus package programs, such as the ERC, and is committed to strengthening his clients’ balance sheets and helping them achieve what’s next. Justin also leads a team of more than 50 professionals who share his passion for helping businesses maximize the federal COVID relief programs.