Text H R 7010 116th Congress 2019- : Paycheck Protection Program Flexibility Act of 2020

Together, we will develop a strategy to optimize the guidance issued at that time. Under the First Interim Final Rule published April 15, 2020, a business with a 20% or more owner who had been convicted of any felony in the previous 5 years was barred from applying for a PPP loan. Repayment term for new loans is 5-10 years, a significant increase from the original 2 years contemplated by the PPP. Those who entered into agreements before June 5th are eligible for the extended payback period if the lender agrees.

• The minimum maturity date for PPP loans has been increased from two years to five years.
• After receiving the questionnaire from the lender, the entity has ten business days to complete and return the questionnaire to the lender.
• After exhausting administrative remedies, a business may request judicial review in federal district court of the Small Business Administration’s final decision.
• No more than 25% of non-payroll costs would be eligible for loan forgiveness.
• See how we help organizations like yours with a wider range of payroll and HR options than any other provider.

Two entities are affiliates if one entity owns at least 50 percent of the other. Two entities are also affiliates of each other if one controls — or has the power to control — the other. Two entities are also affiliates of each other if another entity controls, or has the power to control, them both. Having the power to control does not necessarily imply that the power is actually exercised. If an external party has at least 50 percent ownership, it has the power to control. Million each, nor had it explained how it would perform oversight of PPP loans that were smaller than that threshold.

Congress Passes Paycheck Protection Program Flexibility Act

Instead, the borrower will receive partial loan forgiveness, based on the requirement that 60 percent of the forgiveness amount must be attributable to payroll costs. The program provided that the federal government would forgive the loans in an amount equal to the total money spent Summary Of Paycheck Protection Program Flexibility Act on payroll and other specified costs during an eight-week period after the disbursement of the loan. The amount of loan forgiveness would be reduced proportionally based on calculations involving reductions in full-time employees and wages in excess of 25% for certain employees.

• In fact, lenders are encouraging businesses to apply through multiple lenders, to increase their chances of getting processed in time.
• As mentioned above, payroll expenses are capped for individuals earning over $100,000.
• The Flexibility Act amends the guidance issued by the SBA and Department of the Treasury to require that borrowers use at least 60% of the PPP loan amount for payroll costs, and at most 40% of the PPP loan amount for non-payroll costs .
• This bill modifies provisions related to the forgiveness of loans made to small businesses under the Paycheck Protection Program implemented in response to COVID-19 (i.e., coronavirus disease 2019).
• Two entities are also affiliates of each other if one controls — or has the power to control — the other.
• Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

Existing PPP loans made before the new legislation retain their original two-year term, but may be renegotiated between a lender and a borrower to match the 5-year term permitted under the PPP Flexibility Act. “Small business rescue loan program hits $349 billion limit and is now out of money”. This is true even if the borrower requested no forgiveness at all of the loan.

Am I Eligible for a PPP loan?

List of current employees, current pay rate, and expected wages during the 8-week period following the loan. Allows adjustment to forgiveness for borrowers that could not find qualified employees or were unable to restore business operations to Feb. 15, 2020 levels due to pandemic related restrictions. This is in addition to the previous guidance that employees that declined offers to be rehired at the same hours and wages can be excluded from the forgiveness calculation. Lowers the proportion of funding that must be used toward payroll from 75 percent to 60 percent. However, the forgiveness is no longer tiered, so businesses must spend at least 60 percent of their total PPP loan on payroll expenses in order to receive any amount of forgiveness. The Paycheck Protection Program created under the “CARES Act” has been the cause of some confusion and concern since its enactment back in March 2020. In an effort to ease anxiety over looming deadlines, the Paycheck Protection Program Flexibility Act (the “Flexibility Act”) was signed into law on June 5, 2020, to address some of the program’s shortcomings.

For PPP loans that already have been received, the maturity date can be extended to up to 5 years if the lender agrees to the extension. For loans made before June 5, 2020 could also extend the loan to 5 years if the borrower and lenders mutually agree to extend the maturity. Allows an employer that receives a PPP loan to defer certain payroll taxes.

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The above owner-employee compensation limits do not apply if the individual owns less than 5% of the S corporation or C corporation. The Paycheck Protection Program allows entities to apply for low-interest private loans to pay for their payroll and certain other costs.

Originally, PPP loan borrowers whose loans are subsequently forgiven were specifically precluded from taking advantage of this deferral by the CARES Act. Many commentators have opined that the CARES Act and subsequent loan forgiveness guidance issued by the SBA have been ineffective for many small businesses for myriad reasons. Specifically, many workers are unwilling or unable to return to work due to restrictions imposed by many states, which makes it difficult for employers to comply with the compressed eight-week time period to qualify a borrower’s use of PPP funds for forgiveness. A business that pays biweekly or more frequently may choose to use an alternative payroll covered period for payroll costs instead. The alternative payroll covered period begins on the first day of the first pay period beginning after the date the loan proceeds were received. The alternative payroll covered period does not apply to non-payroll costs.

The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. To implement the PPPFA, SBA revised its first PPP interim final rule, which was posted on April 2, 2020. As described in detail inour announcement on June 8, 2020,the new rule updates provisions relating to loan maturity, deferral of loan payments, and forgiveness provisions. In the NIPAs, PPP loans to businesses that are forgiven are classified as a subsidy to the employers. Although administered as a “loan”, the general intention is that these loans will be forgiven if the program’s requirements are satisfied.

H.R.7010 – Paycheck Protection Program Flexibility Act of 2020116th Congress (2019-

Second-time loans are limited to businesses with fewer than 300 employees that experienced at least a 25 percent drop in gross receipts in a 2020 quarter compared to the same quarter in 2019. Loans may be forgiven if the loan is used for payroll, interest payments on mortgages, rent, and utilities. However, the amount that is forgiven would be reduced proportionally by non-exempted reductions in the number of retained employees compared to the prior year or a 25 percent or greater reduction in employee compensation.

The bill extends this Safe Harbor from June 30, 2020 until December 31, 2020. This addresses difficulties employers are having related to rehiring workers, finding replacement workers, and continued delays in reopening. Senate passed by voice vote the Paycheck https://quickbooks-payroll.org/ Protection Program Flexibility Act of 2020 (H.R. 7010). The House of Representatives had approved this bill with near unanimity on May 28. Generally, the PPP provides low-interest, forgivable loans to small businesses affected by the COVID-19 pandemic.

Exceptions to Full Forgiveness Guidelines Contained in the PPP Flexibility Act

Furthermore, the organization must utilize the PPP loan proceeds first in order to sustain its workforce, and the organization should take steps to preserve federal funds for restarting work on the federally funded project. The report showed that, while the Small Business Administration had worked quickly to implement the PPP, the urgency caused confusion throughout the implementation of the PPP. The confusion added to the economic stress that employees were already experiencing from the pandemic. On April 23, the Small Business Administration released guidance stating that it is unlikely that a publicly traded business with substantial market value and access to capital markets would be eligible for a PPP loan.

• The PPP provides a Safe Harbor that allows borrowers an extended time to restore full-time equivalent employees and salary or wages that were reduced between February 15, 2020 and April 26, 2020, while still obtaining loan forgiveness.
• The House of Representatives overwhelmingly voted on May 28 to give small-business owners more flexibility regarding the forgiveness of Paycheck Protection Program loans.
• Repayment term for new loans is 5-10 years, a significant increase from the original 2 years contemplated by the PPP.
• The above owner-employee compensation limits do not apply if the individual owns less than 5% of the S corporation or C corporation.
• Note that at least 60% of the total PPP loan proceeds borrowed under the PPP must be spent on payroll costs; otherwise the loan is not eligible to be forgiven.

The Tenpenny Integrative Medical Center, which is the osteopathy clinic of anti-vaccination activist Sherri Tenpenny, received a $72,000 loan. The Center for Countering Digital Hate identified PPP loans made to the National Vaccine Information Center, to Joseph Mercola’s online business group, to the Informed Consent Action Network, as well as to Robert F. Kennedy Jr.’s Children’s Health Defense.

Such modification must be mutually agreed to between bank and borrower. The Act and subsequent guidance have provided much needed flexibility on key issues for businesses seeking to use PPP loan proceeds efficiently and effectively during the COVID-19 crisis. Under the Act, the deadline for applying for a PPP loan was June 30, 2020; however, on July 4, 2020, President Trump signed Bill S.4116 into law, which extended the PPP loan application deadline to August 8, 2020. The covered period will be the earlier of 24 weeks from the loan origination date or December 31, 2020. This provision only applies to PPP loans made on or after June 5, 2020, or to any existing loan if the borrower and lender agree to amend the loan documents to provide for a five-year maturity. Whoever processes your application first will receive an SBA approval number for your business .

Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the Administration, and company that receives funding through a Small Business Investment Company. Congress has opened up the application process to FinTech companies as well, so you can use them to apply, as well. Here are is a current list of FinTech companies that can also help you apply for these loans.Biz2Credit,BlueVine,Cross River,Divvy,Kabbage,Fundera,Funding Circle,Lendio,Nav,PayPal,Quickbooks Captial, andVeem. For a copy of the agreement form for Non-Bank and Non-Insured Depository Institution Lenders,click here.

This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded. The U.S. House and Senate recently passed the Paycheck Protection Program Flexibility Act of 2020 , which has been signed into law by the President.

The Flexibility Act has now completely modified the covered period, extending such period to the earlier of 24 weeks after loan origination or December 31, 2020. Borrowers who received loans prior to the enactment of the Flexibility Act now have the option to either utilize the new 24-week covered period or to continue utilizing the original eight-week covered period. The Flexibility Act amends the guidance issued by the SBA and Department of the Treasury to require that borrowers use at least 60% of the PPP loan amount for payroll costs, and at most 40% of the PPP loan amount for non-payroll costs .

What is the Paycheck Protection Program? (A Simple Guide)

To address this issue, the Act now extends the PPP program “covered period” until December 31, 2020, and gives employers 24 weeks, rather than eight weeks to spend PPP proceeds. However, a congressional letter was added to the record to clarify that no new PPP loans may be originated after June 30, 2020. The PPP Flexibility Act changes this deferral period to end when the PPP loan forgiveness amount is remitted to the lender. Also, if a borrower fails to apply for forgiveness within 10 months after the last day of the covered period, the borrower shall make payments of principal, interest, and fees beginning no earlier than 10 months after the covered period ends. The text of the law appears to create a cutoff precluding loan forgiveness for borrowers that spend less than 60% of PPP loan proceeds on payroll costs—as opposed to a reduction in the amount of forgiveness, as reflected in previous guidance. We expect additional guidance from SBA and the Department of Treasury to prevent this cutoff. The CARES Act also provides that PPP loan forgiveness will be decreased in the event a borrower reduces, by more than 25%, the cash compensation of one or more employees who received no more than $100,000 in cash compensation on an annualized basis in all pay periods of 2019.

Also see ourCoronavirus (COVID-19) Resource Centerfor additional resources, which is updated daily. This publication should not be construed as legal advice or legal opinion on any specific facts or circumstances.

The Small Business Owner’s Guide to theCARES Actprovides a useful list of resources for small business owners who want to know what resources are right for them. Government guarantee of 7 loans would be increased to 100% through December 31, 2020. After that date, guarantee percentages would return to 75% for loans exceeding $150,000 and 85% for loans equal to or less than $150,000. Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals.

Loan payment deferral period

Several of these amendments are retroactive to the date of enactment of the CARES Act, as required by section 3 of the Flexibility Act. The CARES Act only allows forgiveness for the amount of PPP loan funds spent on eligible expenses, which include payroll costs, interest on any covered mortgage obligation, payments on any covered rent obligation, and covered utility payments. The SBA then issued guidance that at least 75% of a borrower’s loan forgiveness amount had to be spent on payroll costs. The PPP Flexibility Act relaxes this limitation and requires that, in order to be granted forgiveness, at least 60% of PPP funds must be spent on payroll costs, with the remaining 40% available to spend on other eligible expenses. The PPP Flexibility Act codifies this safe harbor, stating that loan forgiveness will not be reduced if the borrower can, in good faith, document an inability to rehire former employees or hire similarly qualified employees on or before December 31, 2020. Under the CARES Act, small businesses, including the self-employed, may take out loans up to $10 million that can be used for up to six months of average monthly payroll costs from the last year.