The U.S. Senate, on June 3, 2020, approved H.R. 7010, referred to as the “Paycheck Protection Program Flexibility Act of 2020.” This advances to the president legislation that was previously approved with nearly unanimous support in the U.S. House of Representatives. If signed into law, this legislation would extend the so-called “covered period” for borrowers to spend loan proceeds received under the Paycheck Protection Program (PPP) and qualify for forgiveness. This legislation would also make other significant changes to the terms of PPP loans, many of which are now at the end of their original eight-week covered period. Some initial questions and answers based on this legislation are provided below:
- Does the new legislation automatically extend the covered period for all PPP borrowers?
No, the legislation provides that borrowers who received their PPP loan before the new legislation is enacted will be able to elect between their original eight-week covered period or the new covered period that ends on the earlier of 24 weeks after their loan was originated or December 31, 2020. New PPP loan borrowers would automatically have the extended covered period. Note, however, that the legislation does not increase the per person cap on permitted payroll costs, meaning that no more than $15,385 in direct cash compensation paid per employee will qualify for forgiveness.
It is unclear how this legislation would affect the “alternative payroll covered period” authorized by the Small Business Administration (SBA) in recent rulemaking and the PPP loan forgiveness application form. For more information on these topics, see our earlier update.