On June 5, 2020, the Paycheck Protection Program Flexibility Act (the “PPPFA”) was signed into law. Generally, the PPPFA is intended to make it easier for recipients of Paycheck Protection Program (“PPP”) loans under the CARES Act to qualify for forgiveness, and includes the following significant changes:
- Extension of Maturity Date for Unforgiven PPP Loan Balances. The PPPFA extends the minimum maturity date for PPP loans from two (2) to five (5) years. This only applies to the unforgiven balance of the loans.
- Extension of Covered Period. The term during which a recipient may use its proceeds for forgivable purposes has been extended from 8 weeks to the earlier of (i) 24 weeks, or (ii) December 31, 2020. However, recipients who received a loan prior to June 5, 2020 may elect to keep their existing 8 week period.
- Extension of Deadline for Safe Harbor to Rehire Employees. Recipients now have until December 31, 2020 to rehire laid off or furloughed employees and not be penalized in their forgiveness.
- Safe Harbors for Employee Unavailability and Covid-19 Safety Measures. Additionally, recipients will not be penalized in their forgiveness if they are (A) able to document (i) an inability to rehire individuals who were employees of the eligible recipient on February 15, 2020; and (ii) an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or they are (B) able to document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.
- 75% Payroll Expense Requirement becomes 60% Payroll Expense Requirement. Previously, a recipient had to spend at least 75% of their PPP funds on payroll expenses. Now, recipients must only spend 60% on payroll expenses, thereby increasing the amount they can spend on non-payroll expenses from 25% to 40%. However, what qualifies as a forgivable expense has not changed.
- Deadline to Apply for Forgiveness. Recipients have until the date that is 10 months after the end of their covered period (see paragraph 2, above) to apply for forgiveness.
We will continue to update our clients on important PPP guidance as it becomes available. For further assistance, please contact your regular Katz Teller attorney, or John Gierl at firstname.lastname@example.org, Gabriel Kurcab at email@example.com, or Jake Purcell at firstname.lastname@example.org.