Paycheck Protection Program Extended

This article was updated on June 3, 2020. Updates to this article will be made as new information becomes available.

Schneider Downs continues to track the evolving landscape of Federal financial programs offered due to the disruption caused by the coronavirus crisis (COVID-19). On June 3, 2020, the Senate passed a bill that makes many borrower-friendly changes to the popular Paycheck Protection Program (PPP). The bill will need to be signed by President Trump before taking effect.

Under the Paycheck Protection Program Flexibility Act, H.R. 7010, (Flexibility Act) the covered period of the borrower’s loan will be extended to the end of the earlier 24 weeks from the date of the loan origination or December 31, 2020.  This is a welcome change for many borrowers whose organizations have been shut down due to state and local orders.  Many others are just starting to open their doors, but will not be back up to pre-pandemic levels for some time. 

The Flexibility Act does give borrowers that have received a PPP loan prior to the enactment of the Flexibility Act the option to elect an 8-week covered period, which is likely also beneficial to those businesses that are able to utilize all the loan proceeds within the covered period. 

The Flexibility Act also provides relaxed rehire exemptions related to loan reductions if a borrower is unable to rehire individuals who were employed as of February 15, 2020, or unable to return to the same level of business activity due to compliance with requirements established by various governmental entities.  Documentation of a borrower’s inability will be required.

The minimum maturity of the remaining loan portion has been extended to five (5) years from the earlier established term of two (2) years.  The maximum term of ten (10) years under the CARES Act remains unchanged.  Additionally, the deferral period of loan payments has been revised to be the earlier of the date on which the amount of loan forgiveness is determined and remitted to the lender [from the SBA] or ten (10) months following the end of the covered period. 

Another borrower-friendly provision of the Flexibility Act, that isn’t directly related to the PPP loan, is that the Flexibility Act repeals the portion of the CARES Act that disallowed a borrower receiving forgiveness of a PPP loan the ability to defer certain federal payroll tax.  This will allow for a payroll tax deferral for all businesses even if the PPP loan is forgiven. 

One area potentially not friendly to borrowers is the wording of the relaxing of the payroll and non-payroll limitation.  The Flexibly Act revises that limitation; however, the wording states that to be eligible for forgiveness, the borrower shall incur at least 60% of the covered loan amount for payroll costs.  This wording may result in a reduction of loan forgiveness if the SBA were to literally interpret the law as only allowing for forgiveness if the borrower meets the 60%/40% requirement.  We will continue to monitor this provision and interpretations.

If you need more information or assistance regarding the PPP, please reach out to any of your contacts at Schneider Downs or contact Joel Rosenthal (jrosenthal@schneiderdowns.com).

 

 

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on

Paycheck Protection Program UPDATE JULY 7
A Virtual Success: The ACFE Holds 31st Annual Global Fraud Conference
IRS Guidance Provided on the Silo of CARES Act NOLs
Extended Deadlines Granted for Ohio Property Tax Collection
Additional Guidance and Relief for Opportunity Zones from the IRS
Volatility is Back … and It is Here to Stay

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

contactsd@schneiderdowns.com
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

contactsd@schneiderdowns.com
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102