NAICU Washington Update

House Votes to Provide Flexibility to Paycheck Protection Program

May 29, 2020

With a show of wide bipartisan support, the U.S. House of Representatives passed the Paycheck Protection Program (PPP) Flexibility Act of 2020 to make adjustments to the Small Business Administration’s (SBA) lending program for businesses and nonprofits with 500 or fewer employees that is part of the CARES Act.  

In an effort to more accurately reflect the impact of COVID-19 on businesses, the bill, which moves to the Senate for approval, modifies loan forgiveness requirements by allowing flexibility in how payroll costs are calculated. Specifically, the bill reduces the amount of the funds that must be used for payroll costs from 75 percent to 60 percent.

The bill also extends the “covered date” in which the funds must be used to 24 weeks after origination or December 31, 2020, whichever comes first. The bill also allows PPP recipients to take advantage of the delay in employer payroll taxes provided to other employers in the CARES Act.  

Importantly, rather than calculating loan forgiveness based on the number of FTE employees retained over the covered period, the bill provides an exemption based on employee availability for the period of February 15 through December 31, 2020.

For example, if a business is able to demonstrate an inability to rehire employees or similarly qualified employees over that period, those employees will not count against it in loan forgiveness. This is in line with guidance previously issued by the SBA.

Similarly, if a business can document an inability to return to the same level of business activity to that before February 15, due to compliance with CDC or public health requirements, loan forgiveness will not be affected. 
These changes would apply to any PPP resources issued since the CARES Act passed in March. 

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