On Friday June 5, 2020, the President signed H.R. 7010, cited as the “Paycheck Protection Program Flexibility Act of 2020” into law.  The Paycheck Protection Program (PPP) is part of “The Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) that was signed into Law on March 27, 2020.  The new Flexibility Act provided many positive changes to the PPP, which will benefit all businesses that have or are about to receive PPP funding.  Below are the changes that Congress adopted to the original PPP requirements.

• Eligibility Period
  • PPP loans must be made for the period prior to December 31, 2020. Originally the date was June 30, 2020.
• Use of PPP Loans – No changes were made to this category
  • The funds received under the PPP loan requirements must be for the following expenses:
    • Payroll (salaries, wages, vacation, parental, family, medical, or sick leave, severance, retirement benefits, and state or local taxes)
    • PPP funds cannot be used to pay salaries over $100,000
    • Costs for related group health care benefits
    • Employee commissions and tips
    • Interest on mortgage payments (not applicable for principle portion of payments) and on additional debt incurred prior to obtaining the loan
    • Rent and utilities
  • Payment Forgiveness
    • For the first 24 weeks from the origination date of the loan, or December 31, 2020, specified funds may be forgiven when used for payrolls costs, mortgage interest, rent, and utility as described above.  Originally the period was for 8 weeks or June 30, 2020.
    • The amount of loan forgiveness cannot exceed the principle amount of the loan
    • To get the full benefit of loan forgiveness, the business must use at least 60% of the PPP loan for the payroll costs mentioned above. The business may use up to 40% of the PPP loan on rent, utilities, Interest on mortgage payments, or on additional debt that was in place on or before February 15, 2020.  This is a decrease from the original requirement that 75% of the PPP loan had to be used for payroll costs.
    • The amount of forgiveness will be reduced by the comparison of current year and prior year full time equivalents (FTEs). However, additional relief from the FTE requirement is now available, if the business, in good faith is able to document:
      • An inability to rehire individuals who were employees on February 15, 2020 and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
      • The business is able to document their inability to return to the same level of business activity, as they were operating at before February 15, 2020, due to requirements issued related to the maintenance of sanitation, social distancing, or other worker or customer safety requirements related to COVID-19, which were issued by either the Secretary of Health and Human Services, Director for the Center of Disease Control and Prevention, or the Occupational Safety and Health Administration, beginning on March 1, 2020 and ending of December 31, 2020
    • Businesses must submit applicable supporting documentation to request the available loan forgiveness within 10 months after the last day covered by the PPP loan.
  • Delay of Payment of Employer Payroll Taxes
    • Businesses that received a PPP loan will now be eligible to defer the 6.2% of the employer’s share of Social Security Taxes on payroll paid between April 1, 2020 and December 31, 2020. This deferral is also available for sole proprietors and partners that are subject to the self-employment tax.  50% of the amount deferred is due on December 31, 2021 and the remaining 50% deferred is due on December 31, 2020.
  • Payment Deferral
    • Payments can be deferred until the date that the amount of loan forgiveness is determined under section 1106 of the CARES Act and the funds are reimbursed back to the lending institution.
    • If a business fails to apply for forgiveness of a PPP loan within 10 months after the last day covered by the PPP loan, payments of principal, interest and fees on the PPP loan will be required, beginning on the day after the 10^th
  • PPP Loan Terms
    • The amount of the PPP loan that is not forgiven and is required to be paid back, now carries a minimum payback of period of 5 years. This has been increased from the original minimum period of 2 years.

At BKC, our experienced professionals are available to help businesses navigate through the available options and compliance reporting.  For more information, please contact us at (908) 782-7900 or info@bkc-cpa.com.  Find more helpful articles here.