PPP forgiveness changes when the Senate passes the law


The U.S. Senate passed the House version of the Paycheck Protection Program (PPP) bill on Wednesday night, tripling the time small businesses and other PPP loan recipients had to spend, yet still qualifying for the forgiveness Loan.

The bill was passed unanimously after Wisconsin Senator Ron Johnson initially blocked it. One of the key provisions is a change in the threshold for the amount of PPP funds that must be spent on wages and salaries to be 60% of the loan amount.

The approval of the Senate sent the house bill, called Paycheck Protection Protection Actto President Donald Trump, who signed it on Friday.

The vote had to be unanimous as the Senate does not meet officially. That meant any senator could force a delay in the matter until the Senate returned to Washington with enough members for a quorum and vote.

Senate leaders from both parties urged the legislation to pass on Wednesday as the first eight-week window clock for first-time PPP loan recipients had recently expired. Johnson dropped his objections after Senate Chairman Mitch McConnell agreed to add one letter The congressional report clarifies that June 30th remains the deadline for applying for a PPP loan.

The following is a summary of the key pieces of legislation put together by the AICPA:

  • Current PPP borrowers can extend the period from eight weeks to 24 weeks or keep the original eight week period. New PPP borrowers have a 24 week coverage period, but it cannot go beyond December 31, 2020. This flexibility is intended to make it easier for more borrowers to achieve full or near total forgiveness.
  • In the language of the house bill, the payroll requirement drops from 75% to 60% but is now a cliff, which means that borrowers must spend at least 60% on payroll, otherwise no loan will be made forgive. Currently, a borrower must reduce the amount eligible for forgiveness if less than 75% of the eligible funds are used for wages and salaries. However, forgiveness will not be eliminated if the 75% threshold is not met. Chip Roy (Texas) MP, who co-sponsored the bill in the House of Representatives, said in a House speech that the bill intends to keep the sliding scale at 60%. Senators Marco Rubio and Susan Collins said technical changes could be made to the bill to restore the sliding scale. ((To update: SBA and Treasury made it clear on June 8th that the 60% threshold is not a cliff and that partial forgiveness below 60% is available.)
  • Borrowers can use the 24 week period to bring their workforce and wages back to pre-pandemic levels necessary for full forgiveness. This must be done by December 31st, a change from the previous June 30th deadline.
  • The legislation includes two new exemptions that allow borrowers to achieve full PPP lending even if they fail to fully restore their workforce. Previous guidelines already allowed borrowers to exclude employees who had declined offers in good faith from calculations, which were to be reinstated at the same hours and wages as before the pandemic. The new invoice allows borrowers to make adjustments as they were unable to find qualified employees or were unable to roll back business operations to February 15, 2020 due to COVID-19-related operational restrictions.
  • New borrowers now have five years to repay the loan instead of five. Existing PPP loans can be extended up to 5 years if the lender and the borrower so agree. The interest rate remains at 1%.
  • The bill also allows companies that have taken out a PPP loan to delay paying their wage taxes, which was prohibited under the CARES Act.

In a statement released on Friday, AICPA thanked Congress for the flexibility legislation and encouraged small businesses to apply for PPP loans.

“CPA firms have worked tirelessly to help their small business customers understand the best possible way of understanding PPP policies and apply for financial relief,” said Mark Koziel, CPA, executive vice president of AICPA – Firm Services, in the statement . “Some small businesses may have been reluctant to apply for PPP funding because the old award rules were challenged. We encourage CPA companies to share how the PPP Flexibility Act has significantly improved these rules, which can help more small businesses seek relief. “

Erik Asgeirsson, CEO and President of CPA.com, said the improved US unemployment rate for May showed that the PPP is having a significant impact on employee retention and hiring.

“Over the past two months, the 44,000 AICPA-affiliated CPA companies have played a critical role in providing their customers with the business convenience they need,” Asgeirsson said in the statement. “We will continue to work with the AICPA leadership [small business funding] Coalition to answer new questions related to these recent changes. “

The PPP in brief

The PPP kicked off in early April with $ 349 billion in funding that was depleted in less than two weeks. Congress provided an additional $ 310 billion a vote on April 21However, demand for the program soon waned due to controversy over public companies and other large companies that were granted credit. Concerns about the availability of lending under the program rules also contributed to small businesses and other eligible entities keeping a watchful eye on the program.

Congress set up the PPP to provide aid to small businesses during the coronavirus pandemic under the $ 2 trillion Coronavirus Aid, Aid and Economic Security Act (CARES), PL 116-136. Legislation authorized the Treasury Department to use the SBA’s 7 (a) Small Business Lending Program to fund up to $ 10 million per borrower credit that qualified businesses could spend to cover payrolls, mortgage interest, rentals and utilities .

PPP funds are available to small businesses that were operating with 500 or fewer employees on February 15, including tax-exempt nonprofits, veterans’ organizations, tribal businesses, the self-employed, sole proprietorships, and independent contractors. Companies with more than 500 employees can also apply for loans in certain situations.

The AICPA Page Resources for the Paycheck Protection Program houses resources and tools created by the AICPA to help manage the economic impact of the coronavirus.

For more news and reports on the coronavirus and how CPAs deal with the outbreak-related challenges, please visit YofAon the coronavirus resource page or subscribe to our email notifications for the latest PPP news.

– –Jeff Drew (([email protected]) is a YofA Editor-in-chief.

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