U.S. House of Representatives Passes H.R. 7010 to Modify PPP Loan Forgiveness Calculation (Paycheck Protection Program Flexibility Act of 2020)

U.S. House of Representatives Passes H.R. 7010 to Modify PPP Loan Forgiveness Calculation (Paycheck Protection Program Flexibility Act of 2020)

On May 28, 2020, the U.S. House of Representatives passed H.R. 7010 that provides several modifications to the calculation of PPP loan forgiveness and repayment terms.  The bill passed with an overwhelming 417 to 1 vote. 

The bill is now in the U.S. Senate for review and debate, so it is not law yet; however, it is clear from the House vote that the legislature is listening to small business owners who are struggling to meet the 8-week covered period spending and re-hire provisions.  This 8-week period is particularly challenging for businesses located in states where mandatory stay at home orders are still in place and for those industries that operate where customers and employees interact in close physical proximity (i.e. restaurant/bars, gyms, salons, tattoo shops).

The significant provisions of the new bill are as follows: 

1.     Extend the covered period from 8 weeks to 24 weeks from date of loan origination or December 31, 2020, whichever comes first.

2.     Extend the June 30, 2020 “safe harbor” rehire date to December 31, 2020.

3.     Eliminate the proportional reduction of forgiveness due to an employer’s inability to re-hire enough full-time equivalent (FTE) employees due to shutdown orders on or before December 31, 2020. 

4.     Reduce the amount of PPP Loan proceeds required to be spent on payroll related costs from 75% to 60%.

5.     Extend the repayment deferral period of unforgiven loan proceeds from 6 months to 1 year.

6.     Extend the repayment period of any unforgiven PPP loan amounts from 2 years to a minimum of 5 years.

7.     Require loan repayments to begin 10 months after the last day of the covered period, if no application for forgiveness is filed.

8.     Allow PPP loan recipients to be eligible to participate in the payroll tax payment deferral provisions of the CARES Act. 

The above provisions will likely be modified by the Senate but are a good indication of where the actual final law may end up.

FMD is monitoring the progress of this bill closely, and we will post an update as soon as we know more.  In the meantime, please continue to visit our website for continuing updates on all COVID-19 related matters. www.fmdcpas.com