As anticipated, the House of Representatives passed legislation on Thursday, May 28, that ease some of the restrictions regarding how PPP loans may be spent. The bill (H.R. 7010), which was passed with overwhelming bipartisan support (417-1), will still need to be passed by the Senate and signed by President Trump. We fully expect some of these details to change in the Senate, however below are some of the highlights from H.R. 7010 as it currently stands:
- Extension of covered period from 8 weeks to 24 weeks.
- Increase forgivable non-payroll expenses from 25% to 40%.
- Extension of application deadline from June 30, 2020 to December 31, 2020.
- Currently, over $140B of funds remain available.
- Extension of loan terms from 2 years to 5 years.
- Permit PPP borrowers to access payroll tax deferment options.
- We believe this continues exclude the Employee Retention Credit for PPP recipients.
Again, these details are not set in stone. However, given the bipartisan support in the House of Representatives to change these rules, we fully expect the Senate to be under significant pressure to agree to some level of changes.
Currently, PPP expenses that are forgiven are non-deductible for tax purposes. It is expected that a correction will be made during the summer months in conjunction with a Phase 4 relief package.
What this means for you . . .
Businesses should have internal conversations soon, if not immediately, to understand the rate of spend of PPP funds. For those businesses that may have been concerned that a full utilization of PPP funds was not possible during the 8-week covered period, this covered period expansion provides an opportunity for such businesses to achieve maximum forgiveness of their PPP loan. For those businesses that were planning to meet their full use of the funds, modifications to the allowed non-payroll percentage provides an opportunity to reach that maximum sooner than may have been originally anticipated. As has been through this entire CARES Act process, this continues to be an evolving program with many changes. We look forward to seeing what the Senate produces next week, and we will provide you another update at that time.
Please reach out to us with any questions.