Senate Passes Paycheck Protection Program Flexibility Act of 2020


As Michelman & Robinson previously reported, the U.S. House of Representatives recently introduced the Paycheck Protection Program Flexibility Act of 2020 (the Flexibility Act). That bill, albeit slightly amended, was passed by the House early last week, and the Senate followed suit yesterday (June 3), passing the Flexibility Act by voice vote. The text of the legislation can be found here.

The major provisions of the bill, as passed, give business owners more flexibility and time to use PPP loan money and still qualify for forgiveness. The important details of the legislation are described below.

Q. What modifications does the Flexibility Act make to existing statutory provisions related to PPP loan forgiveness?

A. The bill makes the following four substantive changes to PPP provisions as they relate to loan forgiveness:

  • It establishes a minimum maturity of five years for a PPP loan that has a remaining balance after forgiveness
  • It extends the period during which a borrower may use PPP loan proceeds for certain expenses while remaining eligible for forgiveness to 24 weeks after the date of loan origination or December 31, 2020, whichever is earlier
  • It raises the non-payroll portion of a forgivable loan amount from the current 25% up to 40% (to receive loan forgiveness, borrowers must now use at least 60% of PPP loan proceeds for payroll costs and may use the remaining loan funds for (a) any payment of interest on a covered mortgage obligation (not including prepayment or payment of principal), (b) any payment on a covered rent obligation, or (c) a covered utility payment)
  • It allows borrowers that received a loan before the date of enactment of the Flexibility Act to elect for the covered period applicable to their PPP loan to end eight weeks after loan origination

Q. What other changes will the Flexibility Act bring to the PPP and CARES Act?

A. In addition to the foregoing modifications related to loan forgiveness, 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 amount of the PPP loan that was forgivable. If a borrower is unable (1) to rehire former employees or hire similarly qualified employees for any unfilled positions or (2) to return to a pre-coronavirus level of business activity due to necessary compliance with federal requirements related to COVID-19, then the amount of the PPP loan that is forgivable must be determined without regard to employee reduction
  • Allows borrowers to defer PPP loan payments until they receive compensation for forgiven amounts (and borrowers who do not apply for forgiveness now have 10 months from the PPP’s expiration to begin making payments)
  • Allows borrowers whose PPP loans have been forgiven to defer payment of payroll taxes

Q. Will the Flexibility Act be signed into law?

A. Most likely. Now that the bipartisan legislation has passed both the House and Senate, President Trump is expected to sign it into law.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.