The U.S. Senate passed the House version of anticipated changes to the Paycheck Protection Program (PPP) legislation late Wednesday night.
The bill passed in a unanimous voice vote hours after Wisconsin Sen. Ron Johnson initially blocked it. The Senate approval sends the House bill, called the Paycheck Protection Flexibility Act, to President Donald Trump and he is expected to sign it. The vote had to be unanimous because the Senate is not officially in session meaning that any Senator could force the matter to be delayed until the Senate returned to Washington with enough members for a quorum and a vote.
Following is a summary of the legislation’s main points as compiled by the AICPA:
• PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
• The payroll expenditure requirement drops to 60% from 75%.but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
• Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
• The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
• Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
• Borrowers can now defer the employer’s share of FICA payroll taxes for two years. Half of the payroll taxes will be due in 2021, with the rest due in 2022.