Payroll Protection Flexibility Act – Relaxed Rules on PPP Forgiveness
On Friday June 5th President Trump signed new legislation (Payroll Protection Flexibility Act) that relaxes Payroll Protection Program (PPP) rules in regards to forgiveness. This may have a favorable impact on PPP loans that were previously deemed partially unforgivable based on past guidance. SmartBooks will continue to review these and future changes and assess the direct impact as it relates to the forgiveness of your PPP loan.
Please note, the new legislation includes the following changes:
- PPP borrowers can choose to extend the 8 week covered period to 24 weeks, or they can opt to keep the original 8 week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
- The payroll expenditure requirement drops to 60% from 75%.
- 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 31st, a change from the previous deadline of June 30th.
- The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they do not fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic.
- The new bill allows borrowers to adjust forgiveness if they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020 levels due to COVID-19 related operating restrictions.
- Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
- The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
Need some additional guidance?
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