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Congress Passes the Payroll Protection Program’s (PPP) Flexibility Act of 2020

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Small Business gets the well needed “Shot in the Arm” from favorable law change to the Payroll Protection Program from Congress.

This past week, Congress passed very favorable and well-needed changes to the Payroll Protection Program (“PPP”) to assist small businesses. This bill was signed into law by the President on June 5, 2020. Both parties were in favor of these changes as small businesses struggle with maintaining prior Covid-19 business levels or just plain re-opening.

Currently, there is still available PPP money available for small business so if your business hasn’t applied, there is still time but time is running out, as the program is scheduled to close on June 30th. Some of the PPP program changes are:

  1. Extending the “Covered Period” from 8 weeks to 24 weeks. Without this extension, businesses that receive PPP borrowings had 8 weeks to spend the PPP money from the date the PPP loan was funded. For many businesses, they were having a very difficult time spending this money on payroll when their businesses were closed or operating at reduced levels. Now, PPP borrowers have the option to use 24 weeks as its covered period to spend the money but that 24 week period can’t go beyond December 31, 2020. This flexibility is designed to make it easier for businesses to reach full, or almost full, forgiveness.
  2. A minimum of 60% of the PPP money must be used on payroll costs with a maximum of 40% used on non-payroll costs. Previously, a minimum of 75% must have been used for payroll costs.
  3. One technical rule required businesses to restore certain employee wages and a business head count (or full-time employee equivalents) to pre-pandemic levels in order to obtain full forgiveness. This must be done by December 31, 2020, the previous deadline was June 30, 2020.
  4. New PPP Borrowers have 5 years to repay any non-forgiven PPP loans back to the bank. Originally, the PPP loan term is 2 years. Also, loan payments commenced 6 months after the loan originated and the new change states the first loan payment starts 10 months after the last day of the covered period.
  5. Additionally, there are new safe harbors to obtain full forgiveness for businesses that can’t bring back certain employees because of the business’ inability to rehire individuals due to certain qualifications and/or new work place environmental standards published by the Secretary of Health or other certain governmental agencies.
  6. Lastly, any employer was able to defer the employer’s share of FICA tax through the end of this year. Any amount deferred was paid back 50% on December 31, 2021 and the remaining 50% balance on December 31, 2022. If a small business received a PPP loan and had applied for PPP forgiveness, then that business could no longer defer any FICA tax after receiving PPP forgiveness. Under the new rules, all businesses can defer the FICA through the end of the year, even if the small business obtained PPP forgiveness.All of these changes are welcomed changes to the small business community; however, this PPP program still contains a lot of traps for the unwary so continue to consult your business advisor to achieve the maximize forgiveness.

All of these changes are welcomed changes to the small business community; however, this PPP program still contains a lot of traps for the unwary so continue to consult your business advisor to achieve the maximum forgiveness.

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