Paycheck Protection Flexibility Act of 2020


The U.S. Small Business Administration (SBA) released on June 17, 2020 a revised loan forgiveness application for the Paycheck Protection Program (PPP). The SBA also unveiled a new EZ application for forgiveness of PPP loans.

The applications reflect changes to the PPP made by the Paycheck Protection Flexibility Act of 2020, P.L. 116-142, which became law on June 5th The applications and instructions are available in the links below:

Congress passed the Paycheck Protection Flexibility Act to make it easier for small businesses and other PPP borrowers to qualify for full loan forgiveness.

Major changes include:

1. The PPP Flexibility Act extends this 8-week “forgiveness period” to 24 weeks after the date of disbursement of the PPP loan to the PPP borrower, but in no event ending later than December 31, 2020.

2. June 30, 2020 is the deadline to apply for the PPP loan for businesses.

3. The PPP Flexibility Act has relaxed the requirement from 75% to 60% of the PPP loan proceeds to be used towards “payroll costs” (as such term is defined in the CARES Act).

4. Prior to enactment of the PPP Flexibility Act, a PPP borrower had until June 30, 2020 to eliminate a reduction in employment, salary and wages that would otherwise reduce the forgivable amount of its PPP loan. The PPP Flexibility Act extends this safe harbor period to December 31, 2020. In addition, the Act provides that PPP borrowers will not experience a reduction in their forgiveness amount due to a decline in the FTE employee count if the PPP borrower, in good faith, is able to document:

a. an inability to rehire individuals who were employees of the PPP borrower on February 15, 2020; and (ii) an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or

b. an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.

5. Borrower payments of principal, interest, and fees on PPP loans is extended to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).

6. For loans made after June 5, 2020, the PPP Flexibility Act extends the maturity date to at least a minimum of 5 years for PPP loans disbursed on or after the date of enactment of the Act. For PPP loans disbursed prior to the enactment of the PPP Flexibility Act, the Act permits PPP borrowers and lenders to mutually agree and modify the existing maturity terms to conform with the new minimum of 5 years maturity for any remaining outstanding balance of a PPP loan after determination of forgiveness.

7. The PPPFA permits borrowers to apply to delay the payment of employer payroll taxes required to be made during the period from March 27, 2020 to December 31, 2020 such that 50% of the amount is due on December 31, 2021 with the remaining 50% due December 31, 2022. Ask your payroll service provider for additional information if interested.

8. Owner replacement compensation under the new rules, is either:

a. Eight weeks’ worth (8/52) of 2019 net profit (up to $15,385) for an eight-week covered period or

b. 2.5 months’ worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period.”

Please note, as the SBA and Treasury continue to issue guidance and instructions the information above may change.

We are not under any obligation to update the content on this site, and changes in the law may have occurred since the content was published which may cause it to no longer be accurate. Please use this for informational purposes only. It should not be relied upon as tax or legal advice. Contact our office at (760) 423-0133 or via email info@solowitzyehcpa.com