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THE PRESIDENT IS EXPECTED TO SIGN
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The U.S. Senate passed the House version of the Paycheck Protection Flexibility Act on the evening of Wednesday, June 3, 2020. The President is expected to sign this bill.

Here is the link to the House bill H.R. 7010
Paycheck Protection Flexibility Act.
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“Many forms of Government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.”

– Winston S Churchill, 11 November 1947

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The Key Provisions are:

1. Change in the threshold for PPP funds required to be spent on payroll costs to qualify for forgiveness to 60% of the loan amount, previously 75% had to be for payroll.
2. The date to restore your FTE headcount and/or wage reductions has been set now to December 31,2020, previously it was June 30, 2020.
3. The window (covered period) to spend on allowed expenditures to be counted for forgiveness has been expanded from 8 weeks to now 24 weeks. However, you can still elect to use your original 8-week period.
4. The PPP Flexibility act explicitly addresses a situation where a company cannot find qualified employees to restore their headcount. The Flexibility act says that if you cannot resurrect your business because of the COVID-19 pandemic or its economic effect, then they are not going to reduce your forgiveness for the employment FTE reduction.
5. Longer loan term. Previously, a 2-year maturity on the unforgiven PPP loan had to be repaid.  That has been changed to now a 5-year maturity.

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PPP borrowers can choose to extend the covered period from an 8-week period to a 24-week period, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.  However, the new Flexibility Act, as it stands now, provides that if you don’t spend at least 60% on payroll costs, then none of the PPP Loan will be forgiven.  Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.

Many businesses have reported an inability to rehire employees because they are making more on unemployment than they made working or that qualified replacements cannot be found. The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill goes even further, allowing borrowers to adjust their FTE shortfall because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions. This would give businesses an additional six months to rehire employees or claim the exceptions and restore payroll levels without incurring any reduction in the forgiven amount.

PPP Loan borrowers now have five years to repay any unforgiven PPP Loan amount instead of just two years.  The interest rate remains at 1%.
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Observations.

1. Now that we have a 24-week covered period to choose from, the new maximum pay for an employee during the 24-week period, I think, would be $46,154 ($100,000 divided by 52-weeks times 24-weeks.)
2. The forgiveness approval application could start at 12/31/2020, and not be resolved well into 2021. What does that do for our 2020 estimated payments if we don’t know if our loan is going to be forgiven and how much of our expenses will be disallowed?  Extensions or Amended returns?
3. Now that the Covid-19 infection rate is slowing, see Covid-19 guidance, hopefully we can all get back to our normal lives soon. There is good reason to be optimistic about the future of our economy, before we got into this whole Corona mess, all indicators were positive.

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Some things to consider.  If you haven’t reached full operations and have some PPP money left, maybe you should think about slowing the rehire to preserve payroll funds for when the activity in your business requires.  Those businesses that hired employees back right after they received their PPP loan in April 2020 could be in worse shape if they did the patriotic thing and rehired all their employees back, even when there was nothing for them to do.  They paid those employees and are now just a couple of weeks away from the end of the original 8 weeks.  While another similar business furloughed their employees, now they are just a couple of weeks away as well.  The only difference, the business that didn’t hire back their employees, gets rewarded because they now have funds to start again paying employees over the next 16 weeks when business is now ramping up again.  I know this is difficult, but perhaps there are good reasons to examine your ramp-up strategy by possibly furloughing employees, preserving the funds, then ramping-up gradually to get to the December 31, 2020 restoration point.
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Update on Stimulus Check

Most stimulus checks have now been distributed with over 159 million Americans receiving their payments.

If you don’t file taxes and you haven’t received a stimulus check, you can submit your information through IRS Non-Filers Tool by Oct. 15 to get your payment. Americans with income below $12,200 and who haven’t filed a tax return for 2018 and 2019 can use the tool to add basic personal information in order to receive the payment.

Those who pay taxes and believe they’re eligible for a stimulus payment but didn’t receive one will be able to claim it when they file their tax returns for 2020. For those who want their payment quicker, try calling the IRS Economic Impact Payment line at 800-919-9835
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Should you have any questions, please give us a call (561) 995-0064.
Or you can submit a question on our Q&A below:

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