Small Business Taxes & Management
Special Report
President Signs Bill Easing Rules for PPP Forgiveness
Small Business Taxes & ManagementTM--Copyright 2020, A/N Group, Inc.
The President has signed the Payroll Protection Program Flexibility Act (PPPFA) significantly liberalizing the rules with respect to the Paycheck Protection Program (PPP).
- Under the new rules participants can elect to extend the qualifying period to 24 weeks or keep the eight-week period. Thus, for full forgiveness borrowers would have to spend the money on qualifying purposes within either the original eight weeks or 24 weeks.
- Under the old rules, for full forgiveness borrowers would have to spend 75 percent of the funds on payroll; the remaining 25 percent could be spent on rent, mortgage payments or other qualifying uses. Loan forgiveness would be based on a prorated portion of the qualifying funds used. Under the new law only 60 percent of the funds need be spent on payroll. But, the new law, as written contains a "cliff" rule. If the full amount of the loan isn't used for qualifying purposes, none of the loan is forgiven. Apparently the cliff rule wasn't what was intended and some Senators expect a technical correction bill to once again put forgiveness on a sliding scale.
- The previous June 30 deadline for full restoration of the workforce count for full forgiveness no longer applies. Instead, borrowers have 24 weeks to bring workers back for full forgiveness.
- Amounts not forgiven may now be repaid over five years (instead of two). The interest rate remains at 1 percent.
- Under the old rules you could exclude from the workforce replacement requirement and employee who turned down a good faith offer to be rehired under the same terms as before the crisis. The new bill adds two new exceptions. One if a borrower is unable to find qualified employees and another if the borrower is unable to restore business operations to February 15, 2020 levels because of COVID-19 related operating restrictions.
- The bill allows borrowers to also delay payment of payroll taxes, something that was not allowed under the original rules.
Copyright 2020 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536
--Last Update 06/12/20