Posted on June 5 2020

Coronavirus Update 6/5/20 – Paycheck Protection Flexibility Act

EMERGENCY UPDATE — Friday, June 5 —

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Congress Passes Paycheck Protection Flexibility Act;
President Trump Signs Into Law.
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To our clients: 

On Wednesday evening, June 3, 2020, the Senate passed the bipartisan Paycheck Protection Program Flexibility Act of 2020 (HR 7010). President Trump signed the bill into law this morning. The bill provides for increased flexibility to borrowers regarding Paycheck Program Protection (PPP) loans and their potential forgiveness. While this bill addresses a number of issues with the PPP program, there remain others that will hopefully be resolved by a technical corrections bill currently being drafted.

Key Changes to PPP Program per HR 7010

• An extension of the PPP forgiveness period from eight to 24 weeks

• A reduction of the amount of PPP funds required to be spent on payroll from 75% to 60%

• An extension of the two-year repayment period for PPP funds not forgiven

• An extension of the rehiring deadline from June 30, 2020 to December 31, 2020

• Allowed eligibility for payroll tax deferrals

We will provide more details regarding the above changes as they become available.

Future Bills?

We are also closely following two other bills that are under consideration by Congress.

The first is the aforementioned technical corrections bill. As currently written, HR 7010 contains what appears to be an unintended error. According to the bill, partial forgiveness is eliminated if a small business PPP loan recipient does not use at least 60% of its PPP proceeds for payroll. As such, any business not spending at least 60% of its PPP loan on allowable payroll expenses would not be eligible for any forgiveness, regardless of the circumstances.

The second bill under consideration is the bipartisan Small Business Expense Protection Bill (S 3612). You may recall in our update on May 4, 2020, we explained that IRS had released Notice 2020-32, in which the IRS made it clear that expenses paid with forgiven PPP loan proceeds would not be deductible for income tax purposes. Per the SBA, PPP loan proceeds are not considered taxable income. It was the intent of Congress that PPP loan proceeds would not be taxable, and that any expenses paid with PPP loan proceeds would be tax deductible.

The purpose of S 3612 is to clarify that the receipt and forgiveness of a PPP loan would not preclude businesses from deducting expenses paid with such funds.

Please continue to follow our website for additional updates as more information becomes available.

MillerSearles LLC | Certified Public Accountants | Advisors