On June 5, 2020, H.R. 7010 legislation, known as the Paycheck Protection Program Flexibility Act (PPPFA), was passed and signed by the President. This new legislation provides much needed relief for borrowers as they seek forgiveness of their loan amounts. Listed below are some questions and answers providing the latest changes in the PPP loan forgiveness process. This is what we currently know, and our commitment is to keep you informed as specifics of the PPP Flexibility Act are updated.

1. Did the PPP loan covered period change?
   • Yes! The PPP loan covered period was extended from eight weeks to 24 weeks. A borrower may now apply for loan forgiveness based on payroll and non-payroll costs incurred or paid beginning on the date the PPP loan proceeds were deposited and ending 24 weeks later or ending on December 31, 2020, whichever date is earlier.
2. What percentage of the proceeds must an employer spend on total payroll costs to be eligible for forgiveness?
   • Employers must now spend a minimum of 60%—rather than the previous 75%—of PPP funds on payroll costs. The 60% is based on the original loan amount. This leaves 40% to be spent on other qualifying non-payroll costs.
3. How long do businesses have to rehire employees for loan forgiveness?
   • Employers now have until December 31, 2020, rather than June 30, 2020, to rehire certain laid-off workers if they are seeking loan forgiveness. If the full-time equivalents (FTEs) headcount or salary/hourly wages are restored to February 15th levels any time prior to the end of 2020, no reduction in forgiveness will occur. Exceptions to the rehire rule may apply based on employee availability or compliance with COVID-19 guidelines established for worker or customer safety 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.
4. How has the new legislation changed the maturity date on repaying any amount that is not forgiven?
   • The new act extends the maturity date of the PPP loans—for any portion of a PPP loan that is not forgiven—from two years to five years.  This provision of the act only affects borrowers whose PPP loans are disbursed after its enactment. However, pre-PPPFA borrowers and lenders may agree to amend the loan terms to conform to the new five-year limit.
5. Can businesses defer certain payroll taxes even if they received a PPP loan?
   • Under the PPPFA, borrowers will also be able to defer payroll taxes even if they receive loan forgiveness. The CARES ACT incentive allowed employers to defer the employer’s 2020 6.2% Social Security tax until the end of 2021 (50%) and 2022 (50%). This deferral was only available, however, to a borrower of a PPP loan until the moment the loan was forgiven.

The new legislation allows an employer to double dip; a borrower of a PPP loan may now also defer ALL its 2020 Social Security tax burden into 2021 and 2022, even if the PPP loan is forgiven prior to December 31, 2020.

Employers should continue to diligently document their use of the PPP loan funds. By being diligent now, employers will be able to quickly and accurately substantiate their use of the loan and increase their odds of full forgiveness when loan forgiveness time comes.  

TRP Sumner is committed to assisting our clients with their loan forgiveness process. This process may seem complicated to many business owners, and it is our aim to reduce their stress and frustration with this process. We are here to help! Give us a call at one of our three locations in Fayetteville or Dunn, NC. You may also visit our website at www.trpsumner.com for more information.