U.S. Senate Approves Bill Amending and Clarifying Terms of the Paycheck Protection Program

June 5, 2020 - News Releases

On June 3, 2020, the United States Senate passed the House of Representatives’ Paycheck Protection Program (PPP) reform bill, titled the Paycheck Protection Program Flexibility Act. The bill now awaits President Trump’s signature.

As many of you know, the PPP was a critical component of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law in late March 2020, and was intended in large part to provide emergency loans to small businesses suffering from the effects of the COVID-19 pandemic. Unfortunately, the rush to pass the CARES Act and sign it into law created a number of unanticipated consequences, including leaving various questions about loan forgiveness, tax consequences, and the like unanswered.

When signed into law, the new Act will extend to 24 weeks the period of time during which borrowers must use funds to qualify for forgiveness, and will change the 75/25 rule to a 60/40 rule. Under the 75/25 rule, to qualify for loan forgiveness borrowers were required to use at least 75% of loaned money to cover payroll costs, and no more than 25% for certain other costs. The new Act changes that requirement to at least 60% for payroll costs, and no more than 40% for other costs. In addition, the new Act will make the maturity date for certain PPP loans that are not forgiven five years instead of two.

If the Paycheck Protection Program Flexibility Act is passed into law, Wyoming practitioners advising clients on legal issues related to PPP loans should familiarize themselves with the intricacies of the Act. More information can be found at https://www.congress.gov/bill/116th-congress/house-bill/7010.

Rob Jarosh
Billie LM Addleman
Hirst Applegate, LLP