Legal Guest Column

Legal guest column PAYCHECK PROTECTION PROGRAM FLEXIBILITY ACT OF

2020 SIGNED INTO LAW BY: BOB BARTON, MANAGING PARTNER; ASHLEY CARVER MEREDITH, ASSOCIATE; RYAN GONZALES ASSOCIATE, TAYLOR PORTER LAW FIRM President Donald Trump signed into law the Paycheck payment. As currently written, if a borrower does not spend Protection Program Flexibility Act of 2020. The Act at least 60% of the loan amount on payroll costs, none of its modifies provisions related to the forgiveness of loans made loan amount will be forgiven. Members of Congress have to small businesses under the Paycheck Protection Program. indicated, however, that technical tweaks could be made The following is a summary of the Act’s key provisions: partial forgiveness. •The Act extends the covered period during which borrowers may use loan proceeds for eligible expenses •PPP loans made after the enactment of the Act will have a from 8 weeks to 24 weeks or until the end of the year, minimum maturity of 5 years. Though existing PPP loans whichever comes first, and borrowers have until December maintain their 2 year maturities, the Act allows lenders and 31, 2020, to restore reductions in employee headcount and borrowers to mutually agree to modify the existing 2-year wages. Borrowers that received their PPP loans prior to the maturity to conform with the 5-year maturity provided in enactment of the Act, however, may choose to opt out of the the Act. extension and continue using the original 8-week covered period if the shorter covered period produces a more •The Act eliminates a CARES Act provision that makes PPP favorable result for the borrower. loan borrowers ineligible for deferment of payroll taxes. •For borrowers that are unable to restore reductions in payroll taxes regardless of whether the borrower receives employee headcount to pre-pandemic levels, the Act forgiveness of a PPP loan. provides two new exceptions to the loan forgiveness rules. Under the first exception, a borrower will not be penalized On June 17, the SBA, in consultation with the Department for a reduction in the number of full-time equivalent of the Treasury, posted a revised, borrower-friendly (FTE) employees if the borrower, in good faith, is able PPP loan forgiveness application implementing the PPP to document an inability to rehire individuals who were Flexibility Act of 2020. In addition to revising the full employees on February 15, 2020 and an inability to hire forgiveness application, SBA also published a new EZ similarly qualified employees for unfilled positions on or version of the forgiveness application that applies to before December 31, 2020. Under the second exception, a borrowers that: are self-employed and have no employees; borrower will not be penalized for a reduction in FTE if it or did not reduce the salaries or wages of their employees is able to document an inability to return to the same level by more than 25%, and did not reduce the number or hours of business activity as such business was operating at before of their employees; or Experienced reductions in business February 15, 2020 due to compliance with requirements activity as a result of health directives related to COVID-19, established or guidance issued by the Secretary of Health and did not reduce the salaries or wages of their employees and Human Services, the Director of the Centers for Disease by more than 25%. Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on The EZ application requires fewer calculations and less March 1, 2020 and ending December 31, 2020, related to the documentation for eligible borrowers. Both applications maintenance of standards for sanitation, social distancing, give borrowers the option of using the original 8-week or any other worker or customer safety requirement related covered period (if their loan was made before June 5, 2020) to COVID–19. or an extended 24-week covered period. These changes •To be eligible for loan forgiveness borrowers now must businesses to realize full forgiveness of their PPP loan. use at least 60% (rather than 75%) of the loan amount for “payroll costs” and may use up to 40% for: i) payment of *All updated documents can be accessed at SBA.gov as interest on any covered mortgage obligation; ii) payments of the PPP loan rules continue to be updated* rent on covered rent obligations; or iii) any covered utility to restore the bill to a sliding scale which would allow for Employers now would be able to defer paying the relevant will result in a more efficient process and make it easier for www.abcpelican.org/newsletter 48