Small Business Taxes & Management
President Signs Bill Easing Rules for PPP Forgiveness
Small Business Taxes & ManagementTM--Copyright 2020, A/N Group, Inc.
The President has signed the Payroll Protection Program Flexibility Act (PPPFA) significantly liberalizing the rules with respect to the Paycheck Protection Program (PPP).
- Under the new rules participants can elect to extend the qualifying period to 24 weeks or keep the eight-week period. Thus, for full forgiveness borrowers would have to spend the money on qualifying purposes within either the original eight weeks or 24 weeks.
- Under the old rules, for full forgiveness borrowers would have to spend 75 percent of the funds on payroll; the remaining 25 percent could be spent on rent, mortgage payments or other qualifying uses. Loan forgiveness would be based on a prorated portion of the qualifying funds used. Under the new law only 60 percent of the funds need be spent on payroll. But, the new law, as written contains a "cliff" rule. If the full amount of the loan isn't used for qualifying purposes, none of the loan is forgiven. Apparently the cliff rule wasn't what was intended and some Senators expect a technical correction bill to once again put forgiveness on a sliding scale.
- The previous June 30 deadline for full restoration of the workforce count for full forgiveness no longer applies. Instead, borrowers have 24 weeks to bring workers back for full forgiveness.
- Amounts not forgiven may now be repaid over five years (instead of two). The interest rate remains at 1 percent.
- Under the old rules you could exclude from the workforce replacement requirement and employee who turned down a good faith offer to be rehired under the same terms as before the crisis. The new bill adds two new exceptions. One if a borrower is unable to find qualified employees and another if the borrower is unable to restore business operations to February 15, 2020 levels because of COVID-19 related operating restrictions.
- The bill allows borrowers to also delay payment of payroll taxes, something that was not allowed under the original rules.
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--Last Update 06/12/20