Yesterday, the House of Representatives passed a new bill easing rules for PPP loans. The Senate has similar legislation in process, so it seems likely something comparable to the House bill will soon become law.
Following are highlights from the bill:
Extension of Eight-Week Forgiveness Period
The house changes the period in which PPP loan proceeds can be spent and count toward forgiveness to 24-weeks from the original eight-week period. However, there is also a hard cut-off of December 31, 2020 for the spending to count toward forgiveness.
Easing of FTE Reduction
The legislation provides an additional exception to the reduction of loan forgiveness if the business can document that during the period from March 1, 2020 through December 31, 2020, it was unable to return to the same level of business activity it had before February 15, 2020.
In addition, the FTE reduction won’t apply if the employer can document its inability to rehire the same employees or similarly qualified employees by December 31, 2020.
Expansion of Employer Payroll Tax Payments to Businesses with PPP Forgiveness
The original CARES Act allowed employers to defer payment of the employer portion of Social Security Tax (or half of the self-employment tax). Fifty percent was deferred to December 31, 2021 and the other 50% was deferred to December 31, 2022. However, the original act prohibited any business who had PPP loan forgiveness from receiving the deferral. The House legislation allows businesses to defer the Social Security taxes even if they receive loan forgiveness on a PPP loan.
Extension of Loan Maturity for PPP Loans
The House legislation extends the maturity of any portion of unforgiven PPP loans to a minimum of five-years instead of the prior maximum of 2 years.
Prospects in the Senate
Earlier versions of House legislation contained numerous provisions that were opposed by Senate Republicans. This new legislation stripped out all the provisions other than those listed above. The Senate has proposed bills similar to this House legislation and prospects for passing this package or a similar package look very good. If the Senate does pass this legislation and President Trump signs it into law, most businesses will be able to have their PPP loans forgiven.
If you have any questions about PPP loans and this development, reach out to us at 303-989-7600.