Paycheck Protection Program Flexibility Act of 2020

On Wednesday, June 3rd, the U.S. Senate passed the Paycheck Protection Program Flexibility Act of 2020 (the Act).  The Act modifies the Paycheck Protection Program (PPP) contained within the CARES Act and is expected to be signed by President Trump.

The significant modifications to the PPP are:

  • PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-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%, but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
  • 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, 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. 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 because they could not find qualified employees or were unable to restore business operations to February 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.

2020 Estimated Tax Payments:

For our clients who are making personal estimated income tax payments in 2020, a reminder that 1st and 2nd quarter estimated payments are due to the IRS on July 15th, 2020 and Montana 2nd quarter estimates are due on June 15, 2020, and 1st quarter estimates are due on July 15, 2020.

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