House Votes to Ease Paycheck Protection Program Restrictions
Earlier today, voting by proxy, the House voted 417-1 to approve legislation known as the Paycheck Protection Program Flexibility Act, giving small business owners greater flexibility to spend their PPP loan proceeds and still seek forgiveness of those loan amounts.
As passed by the House, the legislation would:
- Modify the so-called 75/25 rule, which requires loan recipients to limit nonpayroll costs to no more than 25% of the amount to be forgiven. The new ratio would require at least 60% of the forgiven amount to be comprised of payroll costs and no more than 40% on other allowed nonpayroll costs.
- Extend the covered period that businesses have to use the funds from 8 weeks to 24 weeks.
- Push back to December 31 the current June 30 safe harbor deadlines to rehire workers and restore wages.
- Change documentation requirements for employers who say they’ve been unable to rehire laid-off employees.
- Extend the time recipients have to repay the loan from 2 years to 5 years.
- Clarify that a borrower doesn’t have to start repaying a loan until the SBA determines whether it can be forgiven.
- Let companies that get loan forgiveness defer payroll taxes.
The Senate has put forward a plan similar to the House bill and last week had bipartisan agreement to change the loan forgiveness period to 16 weeks (not 24 weeks as the House has approved). The Senate bill also maintained the 75/25 rule, but would allow businesses to spend the money on personal protective equipment and other infection-preventing investments, provisions that aren’t in the version passed by the House. The Senate will not convene again until next week and it remains to be seen how the bills will be reconciled and moved forward.