PPP Loan Forgiveness Changes Coming
PPP Loan Forgiveness changes coming as Senate passes House Bill
The U.S. Senate passed the House version of Paycheck Protection Program (PPP) legislation Wednesday night, giving small businesses and other PPP loan recipients more time to spend the funds and still qualify for loan forgiveness. The vote had to be unanimous because the Senate is not officially in session.
The Senate approval sends the House bill, called the Paycheck Protection Flexibility Act, to President Donald Trump, who is expected to sign it.
Below is a summary of the new legislations key components compiled by the AICPA:
- PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period.
- The payroll expenditure to qualify for forgiveness is dropped from 75/25 to 60/40 (payroll costs/non-payroll costs)
- 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 new legislation includes two exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. The new bill allows for employers to adjust 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 remainds at 1%.
- The bill allows businesses that took a PPP loan to also delay payment to their payroll taxes, which was prohibited under the CARES Act.
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