Paycheck Protection Update for 6/3/2020
On May 28th the House passed the Paycheck Protection Program (PPP) Flexibility Act of 2020 (H.R. 7010) which is intended to address the challenges that business owners have faced with their PPP loans and the requirement to spend their loans in the 8-week timeframe. It includes an expanded ‘covered’ period of 24 weeks and extends the rehiring deadline. Highlights of the Bill along with other comments from the last week regarding the PPP loans include the following:
• Increases to 40% the amount of non-payroll costs that can be used to satisfy loan forgiveness (currently it can be no more than 25% of the total loan forgiveness calculation).
• Extends the program to December 31 from June 30; and extends loans from 2 to 5 years.
• The Senate was not in session last week, so they will need to finish their bill this week and then go to conference committee to reconcile differences.
• There was an update on 5-29-20 on the ‘interim final FAQs’: Question 45 had a date change to 05-18-20 (not significant). Otherwise, there were no changes from last Friday (05-22-20) when they issued several new questions and answers.
• There are some changes related to the lender and SBA in setting the timing of loan forgiveness application reviews: 60 days for lenders after receiving the application; 90 days for SBA after receiving the information from the lender. Currently, there is no deadline required by the PPP borrowers to file the forgiveness application. We are certain this will be the subject of additional FAQs.
• The most that can be recovered for owner-employees is $15,385 across all businesses. Also, owners-employee compensation is capped at their 2019 compensation amounts (see 05-22-20 FAQs)
• Distributions to S-Corporation stockholders are not considered wages.
• Both houses of Congress are drafting legislation to make the compensation and non-compensation costs used for loan forgiveness to be tax-deductible.
• Our final suggestion is to not to start working on the loan forgiveness application because it will change.
We will continue to provide you with updates as information becomes available.