Paycheck Protection Plan Loan Forgiveness...3 Paycheck Protection Program Flexibility Act...

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COVID-19 CARES ActPaycheck

Protection PlanLoan

Forgiveness


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Paycheck Protection Program Flexibility Act

• Passed 417-1 by House of Representatives on May 28, 2020

• Passed by voice vote in Senate on June 3, 2020

• Signed into law by President on June 5, 2020


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1.Extension of 8-Week Period to the earlier of 24 Weeks or Dec. 31, 2020a)Whichever period you choose, maintenance of workforce

requirements apply to that periodb)Borrowers with outstanding loans as of the date of enaction of

this legislation will have option to choose between periods


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2. 75% Payroll Costs “Test” is now a 60% Requirementa)Old law – forgiveness proportionately reduced to the extent that

“other costs” (permitted rent, utilities, and interest on secured debt) exceed 25% of total costs

b)New law – at least 60% of the loan amount must be used for payroll costs or you forfeit forgiveness altogether

c) Remaining open question: Will the per-employee compensation limit increase to $46,153 (for employees who earn over $100K on an annualized basis)?


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3. Deadline for calculation and penalties for reduction in work force moved from June 30th to Dec. 31st, 2020a)Follows 24-week period for calculating forgivable costsb)Extends “amnesty rehire date” for calculating and comparing

FTE to Dec. 31st


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3. Deadline for calculation and penalties for reduction in work force moved from June 30th to Dec. 31st, 2020a)Remaining question: What is the FTE comparison date? It is

unclear if the FTE can be cured any time before December 31, 2020 or if you need to have the same headcount on December 31 as you had on February 15. The wording in the CARES Act says “not later than June 30, 2020,” yet the instructions accompanying the forgiveness application actually ask for the FTE headcount AS OF June 30, 2020. PPPFA does not clarify this question.


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4. Exception that preserves forgiveness for those who try to rehire but cannot. Must document:a)Inability to rehire prior employees, andb)Inability to find qualified employees to hire, orc) Inability to restore pre-virus levels of activity due to social

distancing or other Federal Health Guidance


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5. Repayment period for non-forgiven balances extended from 2 years to 5 years for any new loans after the date of enactmenta)Interest rate remains at 1%, accrued from date of loan and

forgiven only to extent loan is forgivenb)For any existing loans, lenders and borrowers can mutually

agree to modify the existing terms.c) Repayment can be deferred until the date that the amount of

forgiveness is remitted to the lender by the SBA


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5. Repayment period for non-forgiven balances extended from 2 years to 5 years for any new loans after the date of enactmentd) Borrowers will now have to apply for forgiveness within 10

months after the last day of the covered period for forgiveness.

e) Remaining question: Can you apply for forgiveness at the end of the 8-week period rather than having to wait until the end of the 24-week period?


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6. Allows eligibility to defer employer portion of social security payroll tax to PPP borrowers, regardless of whether loan is forgiven or nota)50% of deferred amount would be due by Dec. 31, 2021;

remainder would be due by Dec. 31, 2022b)Only applies to 6.2% employer share of lay employee social

security (NOT clergy SECA)


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7. IRS Deductibility of expenses paid with forgiven PPP loan proceeds still at issuea)Most applicable to for-profit companiesb)May impact accounting rules for financial statements, even for

tax exempt entities


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Principal Takeaways• Based on your expenditures to date and ability to maintain

workforce, consider carefully whether the 8- or 24-week forgiveness period makes the most sense for you

• Consider what you need to do to ensure that your payroll costs are at least 60% of your total forgiveness costs


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Updated SBA Forms and Guidance for PPP Loan Forgiveness

https://www.sba.gov/sites/default/files/2020-05/3245-0407%20SBA%20Form%203508%20PPP%20Forgiveness%20Application.pdf


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Paycheck Protection Program Forgiveness Calculation Example

Using AICPA Template


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Paycheck Protection Plan Loan Forgiveness...3 Paycheck Protection Program Flexibility Act...

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