Paycheck Protection Program Flexibility Act (H.R. 7010) – What You Need to Know

On June 3, 2020, the Senate passed with bipartisan approval H.R. 7010 Paycheck Protection Program Flexibility Act of 2020. The bill revises provisions associated with the forgiveness of small business loans. The bill establishes a new minimum maturity of five years for the remaining balance of the loan after forgiveness in comparison to the previous amortization of two years. It will also extend the covered period of forgiveness from 8 to 24 weeks and decrease the portion of the money received through PPP that must be spent on payroll from 75% to 60%.

The bill extends the period in which an employer may rehire or eliminate a reduction in employment, salary, or wages that would otherwise reduce the forgivable amount of a paycheck protection loan. However, the forgivable amount must be determined without regard to a reduction in the number of employees if the recipient is (1) unable to rehire former employees and is unable to hire similarly qualified employees, or (2) unable to return to the same level of business activity due to compliance with federal requirements or guidance related to COVID-19.

Additionally, extensions make it easier for loan recipients to have 100% of their PPP forgiven. This should also allow the borrower to submit less information for calculating the forgivable amount.  For example, if the amount of payroll over the Extended Covered Period is sufficient to qualify for 100% forgiveness, the Borrower may not have to provide documentation related to Group Health, Group Retirement, State and Local Taxes, Mortgage Interest, Rent Expense, and Utility Expense, resulting in a simpler forgiveness process.

The bill also includes revisions to the deferral period for paycheck protection loans, allowing recipients to defer payments until they receive compensation for forgiven amounts. Recipients who do not apply for forgiveness shall have 10 months from the program’s expiration to begin making payments.

The bill also eliminates a provision that makes a paycheck protection loan recipient who has such indebtedness forgiven ineligible to defer payroll tax payments.