On Friday June 5, 2020 the President signed the Paycheck Protection Flexibility Act into law. In this video, Nicole Teska, CPA, CFE, and Bob Teska, CPA, CCIFP, discuss some key points of the legislation.
Highlights from the Newly Passed Legislation
- The maturity date for PPP loans is extended to 5 years from 2 years. This applies to new loans issued after effective date of this legislation, however, lenders and borrowers can renegotiate existing PPP agreements.
- Extends the covered period of loan forgiveness from 8-weeks to 24-weeks, but can’t extend beyond December 31, 2020. However, if you already have a PPP loan outstanding, you can still elect to use 8-weeks.
- Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by December 31, 2020 which is a change from the previous deadline of June 30, 2020.
- The legislation includes two new exceptions, allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. The exceptions include:
- Employer who is unable to rehire same employees hired as of February 15, 2020 and who is unable to hire similarly qualified individuals by December 31, 2020 or
- Employer who is able to document inability to return to same level of business activity as such business was operating at before February 15, 2020 due to certain health restrictions.
- Changes the rule of how proceeds are spent from 75% payroll and 25% nonpayroll to 60% payroll and 40% nonpayroll.
- Changes the loan payment deferral period from six months to until the date which the amount of forgiveness is remitted to lender.
- Recipient must submit within 10 months after last day of covered period, otherwise payment clock starts at 10 month date.
- Recipients of PPP loans are now allowed to defer payment of Employer Payroll Taxes (6.2%) under the CARES Act.
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