Paycheck Protection Program Changes


Last Friday, June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 (PPPFA). The Act, among other things, makes it easier for recipients of the Paycheck Protection Program (PPP) to qualify for full loan forgiveness.

The following is a summary of the Act’s main points effective as of the date of the law signed by the President, June 5, 2020:

  • The covered period to use PPP loans is extended from 8 weeks to 24 weeks from the date of origination (but not later than December 31, 2020). This gives PPP recipients longer to use the funds to meet eligibility for forgiveness, helping those that are not able to bring back employees in the original 8-week period due to current conditions.
    • Current borrowers still have the option to use the original 8-week period.
    • New borrowers after June 5, 2020 must use the 24-week covered period or December 31, 2020, whichever is earlier.
    • The deadline for new applications is still June 30, 2020.
  • The payroll expenditure requirement is reduced from 75% to 60%, allowing more of the loan proceeds to be used for eligible mortgage interest, rent and utilities and still qualify for forgiveness.
    • The original CARES Act legislation required at least 75% of the loan forgiveness amount to be attributable to payroll costs or the forgiveness amount would be reduced.
    • The Act changes the payroll expenditure requirement to 60% of the loan amount or the forgiveness amount will be reduced.
  • Borrowers have a longer period of time to restore their workforce. Under the CARES Act, loan forgiveness would be reduced if borrower’s number of full time equivalent (FTE) employees and total wages dropped below pre-COVID-19 levels. However, an exception applied if the number of FTE’s and total wages were restored before June 30, 2020. Under the PPPFA, the exception is met if the number of FTE’s and total wages are restored by December 31, 2020.
  • Additional exceptions are provided under the PPPFA for the FTE reduction. Loan forgiveness will not be reduced for a reduction in FTE’s if the borrower can document the inability in good faith to:
  • Rehire individuals who were employees on February 15, 2020, and an inability to hire similarly qualified employees by December 31, 2020, or
    • Return to the same level of business operations from before February 15, 2020 due to compliance with requirements established or guidance issued related to COVID-19.
  • The repayment period for new (unforgiven) loans is extended from 2 to 5 years.
    • Existing loans can have maturity extended if lender and borrower agree.
    • The interest rate is still 1%.
  • Loan payments deferred until loan forgiveness is determined and remitted to the lender.
    • Under the CARES Act, loan payments were to be deferred for 6-12 months.
    • Borrower has 10 months after the covered period ends to apply for forgiveness or payments will be required at that 10th month.
  • Recipients of PPP loans are now eligible to defer employer’s share of payroll taxes under the CARES Act.
    • Previously disallowed to defer payroll taxes and receive a PPP loan.
    • The deferral is for the employer’s portion of Social Security and Medicare taxes for 2020 to be paid 50% in 2021 and 50% in 2022.

PKS & Company, P. A. is a full service accounting firm with offices in Salisbury, Ocean City and Lewes that provides traditional accounting services as well as specialized services in the areas of retirement plan audits and administration, medical practice consulting, estate and trust services, fraud and forensic services and payroll services and offers financial planning and investments through PKS Investment Advisors, LLC.

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