Much Needed Amendments Passed For PPP Loan Forgiveness Program

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On June 5, 2020 President Trump signed the Paycheck Protection Program (PPP) Loan Forgiveness Amendment, known as the PPP Flexibility Bill.

The amendment includes some much-needed adjustments in order to provide employers the relief they need to keep their businesses open long term.  

75% Requirement Reduced to 60% Only: Under the Flexibility Bill businesses have only have to spend 60% of the loan money on payroll instead of the previous 75%.

Covered Period Extended: Additionally, the employers would have 24-weeks, or until December 31, 2020 (whichever is earlier) to use these funds as opposed to the original 8-weeks. A borrower can still use the original 8-week covered period if they so choose. This will allow businesses who are not open, or only partially open a longer period to spend the borrowed funds. As part of the Flexibility Bill, period for allowable use of the loan was extended from June 30, 2020 to December 31, 2020, whether within or outside of the covered loan period.

Extension of Safe Harbor: Another change is that safe harbor date of June 30, 2020 to rehire laid off employees and/or restore reduced wages of employees was extended to December 31, 2020. This provides borrowers more time to bring back furloughed employees.

Additional Borrower Exceptions: Employers also will avoid having the forgiveness amount reduced if the borrower is able to document and can establish, in good faith, it was unable to: 1) rehire an individual that was laid off after Feb. 15, 2020, and employer is unable to hire similarly qualified employees for unfilled positions, or 2) employer was unable to return to the same level of business activity it was at before Feb. 15 2020 due to compliance with U.S. Department of Health and Human Services (HHS), Centers for Disease Control and Prevention (CDC) or Occupational Safety and Health Administration (OSHA) guidance.

Extension of Maturity Date: The maturity date of any new loans has been extended from two years to five years. The Bill allows existing PPP borrowers and lenders to mutually agree to modifications to the term of PPP loans that were already distributed at the two-year maturity term.

Extension of Deferral Period: The deferral period has been extended from six months to the date on which the amount of forgiveness is determined or 10 months after the last day of the covered period if the borrower fails to apply for forgiveness within 10 months.

Payroll Tax Deferral Permitted: The amendment now allows for borrowers who applied for PPP forgiveness to take advantage of Section 2302 of the CARES Act, which allows companies to delay the payment of payroll taxes.

As previously reported, the regulations are changing frequently and there are still unanswered questions.  Additionally, these Program changes will impact the forgiveness application which we believe will require updates, stay tuned for more details on any changes to the application as they become available.  If you have any questions or concerns about your PPP loan or application, please do not hesitate to contact McKague Rosasco LLP.

By: Adrian Hoppes

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