House Passes Bill to Expand Paycheck Protection Program

The U.S. House of Representatives passed by a 417-1 margin on Thursday, May 28, the Paycheck Protection Program Flexibility Act of 2020. This legislation would modify certain core terms of this Small Business Administration (SBA) emergency lending program. The Paycheck Protection Program (PPP) was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020. Under the program, qualifying small businesses may apply for loans from the SBA to retain employees on their payrolls, and—especially attractive to business owners—the loans are forgiven if certain conditions are met.

As provided in the CARES Act, PPP loans taken to cover 8 weeks of program-eligible expenses can be forgiven (no repayment required). Although mortgage, rent, and other business expenses are included, to be eligible for forgiveness, 75 percent of a loan amount must—under current rules—be used for employee payroll expenses. Certain employee benefits, including defined contribution and defined benefit plan employer contributions, health insurance benefits (including premium payments), and certain employee leave benefits can be considered payroll expenses.

Today’s House-passed legislation would extend the 8-week period to 24 weeks, and would change the 75 percent payroll requirement to 60 percent.

The legislation would also relax certain loan forgiveness provisions in recognition that an employer may be unable to rehire some former employees or to find similarly qualified employees. Loan amounts not forgiven could be repaid over a period of 5 years instead of 2 years as under current rules.

Members of the U.S. Senate have been discussing a similar bill, one said to expand the 8-week period to 16, not 24 weeks. If the Senate is unable to pass its version of PPP revisions this week, which seems likely, its bill could be taken up when the Senate returns to Washington, D.C., next week.