On June 3rd the U.S. Senate passed the Paycheck Protection Flexibility Act in a unanimous voice vote. The bill was previously passed by the House and according to Forbes and the Association of International Certified Professional Accountants (AICPA) is expected to be signed by the President.

The legislation was introduced by Republican Rep. Chip Roy of Texas and Democratic Rep. Dean Phillips of Minnesota and will give small businesses relief when seeking PPP loan forgiveness.

 

If signed into law, the time given to new PPP loan recipients to spend funds while still being eligible for forgiveness will extend from eight weeks to 24 weeks although current borrowers have the option for either. This new time period will also apply to rehiring laid-off and furloughed employees, making both deadlines December 31st.

Other changes made under the new bill will include:
• The "75/25 rule", which in order to qualify for loan forgiveness required at least 75% of borrowed PPP money to be spent on payroll, leaving the remaining for other costs such as rent, utilities or mortgage payments. The new bill will reduce that percentage to 60% but is now a cliff, where if the proposed threshold is not met it will completely eliminate forgiveness while the original percentage was a sliding scale, only reducing the eligible amount if it wasn't reached.

• Borrowers will have five years to repay their loan instead of two years.

• Loan forgiveness will not be reduced if the borrower is able to prove an inability to rehire employees or individuals similarly qualified, or an inability to restore business operations to the same level as before February 15th due to COVID-19 related restrictions.

• PPP loan recipients will be allowed to delay payroll tax payments.