On June 5, President Trump signed the Paycheck Protection Program Flexibility Act (PPPFA) of 2020 (H.R. 7010) which provides more flexibility for participants in the Paycheck Protection Program (PPP) program.

The PPP is a provision included in the CARES Act (P.L. 116-136, the Act) that authorizes a certain amount of forgivable loans to small businesses to pay their employees during the COVID-19 pandemic. 

The CARES Act also defers the payment of 50% of an employer’s payroll taxes until Dec. 31, 2021 and defers the remaining 50% until Dec. 31, 2022.  Prior to the PPPFA, these deferrals didn’t apply to any taxpayer that had indebtedness forgiven on a PPP loan. PPPFA, however, permits all eligible employers to take advantage of this deferral even if they had PPP debt forgiven.

Another welcome change from the original CARES Act, PPPFA requires that only 60% of the PPP loan be spent on payroll costs, instead of 75% under the original CARES Act.  

In addition, the CARES Act required a business to rehire the same number of full-time employees (or full-time equivalents) by June 30, 2020 to qualify for loan forgiveness. The PPPFA extends this deadline to December 31, 2020 – in addition to providing exceptions if an employer is unable to rehire the required number of employees.

By far the most welcome news in the PPPFA, is that borrowers now have 24 weeks to spend their PPP loan proceeds on payroll costs in order to receive forgiveness. Contrast this to 8 weeks under the original CARES Act. And for any PPP loan that is not forgiven, borrowers now have five years to repay the loan instead of the previous two years.

For help with your PPP-related matters, call Cantrell & Cantrell, PLLC – Houston’s premier tax law firm. Our experts are at the very top of the field of tax compliance and together have well over 100 years’ experience in tax law and accounting.  You can reach us at (713) 333-0555.