Jeran Van Alfen, CFP®
Payroll Protection Program Updates June 10, 2020
Congress just passed the PPPFA (Payroll Protection Program Flexibility Act) to amend certain provisions of the original PPP. Here are the key changes to be aware of:
The covered period has been expanded.
Originally, borrowers had eight weeks to use the funds in order to be eligible for forgiveness. Now the covered period for proceeds to be eligible for forgiveness is the earlier of 24 weeks from the date that funds are received or December 31, 2020. There is also flexibility to elect the shorter 8-week period if preferred.
The covered period also determines the time for headcount and compensation obligations.
The covered period selected will determine the amount of time that employers will have to maintain headcount and compensation levels in order to meet forgiveness requirements.
The new amendment also allows exemptions for employers who cannot re-hire employees to still be eligible for forgiveness. Here are the exemptions:
A documented inability to re-hire individuals who were employees before February 15, 2020 and a documented inability to re-hire similarly qualified employees.
A documented inability to return to the same level of business activity as the business was operating before February 15, 2020 due to requirements established by the Secretary of Health and Human Services, the Director of Centers for Disease Control and Prevention or the Occupational Safety and Health Administration during the period of March 1, 2020 and December 31, 2020.
Reduced requirement for proceeds to be used for payroll
The requirement for loan proceeds to be used for payroll costs to be eligible for forgiveness has been lowered from 75% to 60%. Now 40% of the loan proceeds can be used for other eligible expenses and still be forgiven.
Loan deferral modification
Previously loan payments could be deferred for 6 – 12 months. Now, the deferal period can last until the amount of loan forgiveness is remitted to the lender. However, if the borrower fails to apply for loan forgiveness within a 10 month period, then loan payment deferral will cease at the end of 10 months.
Payroll tax deferral
Under the original rules, employers who received PPP funds could not take part in payroll tax deferral provided by the CARES Act. This has changed and now PPP borrowers can take advantage of payroll tax deferral.
The second wave of PPP funding is still available if you are in need. If you have already received PPP funding, make sure to follow up with your lender on the loan forgiveness application process. Most payroll providers are providing support as well to help you navigate what reporting is needed for your loan forgiveness documentation.