Paycheck Protection Flexibility Act
June 4, 2020
Article courtesy Yeo & Yeo
On June 3, the Senate passed the House version of the Paycheck Protection Flexibility Act, which will:
- Give businesses 24 weeks to spend their PPP loan proceeds instead of 8 weeks.
- Require that only 60% of proceeds be spent on payroll expenses, versus the previous 75% constraint.
- Extend the deadline that businesses must rehire workers, from June 30 to December 31.
- Provide a loan repayment term of five years instead of two years for any loan dollars not forgiven.
- Allow borrowers to defer the employer share of Social Security taxes (6.2%), regardless of whether the borrower receives forgiveness or not. 50% of deferred Social Security tax would be due in 2021, with the other 50% due in 2022.
Note one significant change: The original PPP rules allowed partial loan forgiveness if a company used less than 75% of the loan for payroll, but the new House and Senate bill states that none of the loan will be forgiven if the new 60% threshold is not met. The entire loan will need to be repaid if payroll expenses are less than 60%.