Senate Passes Paycheck Protection Program Extension, Legislation Awaits President’s Signature
On Wednesday night, the U.S. Senate approved by voice vote H.R. 7010, the House-passed Paycheck Protection Program Flexibility Act of 2020. The legislation extends elements of and makes certain other adjustments to the Paycheck Protection Program (PPP). This Small Business Administration lending program was created by the Coronavirus Aid, Relief, and Economic Security Act, to help small employers meet payroll and other expenses as businesses and the nation deal with the economic effects of the novel coronavirus pandemic.
Importantly, if certain conditions are met, PPP loans can be forgiven and treated as a grant. Payroll expenses can include employer contributions to defined contribution and defined benefit retirement plans, as well as providing group health care coverage, including payment of insurance premiums.
Among its provisions, the legislation now presented to President Trump—who is expected to sign it into law—would have the following effects.
- Extend from 8 to 24 weeks from the time of loan origination the period in which expenses paid with a PPP loan could be eligible for loan forgiveness (not to extend beyond December 31, 2020)
- Reduce from 75% to 60% the portion of a loan that must be used for payroll expenses (vs overhead, etc.) and remain eligible for loan forgiveness
- Extend from 2 to 5 years the period for loan repayment for borrowed amounts not forgive
- The documented inability to hire similarly qualified placement employees or to rehire former employees will not be an impediment to loan forgiveness
- A borrower who received a PPP loan before enactment of this legislation may elect that the covered period run for 8 (vs 24) weeks