The information below includes releases issued by BenderCPA during the COVID-19 pandemic. These posts include summaries of tax law changes and relief provisions granted by the IRS and state/local authorities that impact our clients. While we try to be as detailed as possible, we ask that clients contact their BenderCPA advisor with any questions before taking action based on a post to ensure your intended outcome is achieved.
As promised, we have kept a close watch on new legislation that affects the Paycheck Protection Program (PPP) and have an important update for you.
The Paycheck Protection Flexibility Act of 2020 or HR7010 (https://www.congress.gov/bill/116th-congress/house-bill/7010/text) was signed into law by the President last week and offers adjustments to PPP loans—particularly regarding forgiveness calculations. Key changes are as follows:
· Covered time period extended—The period of time to use loan money has been extended from 8 to 24 weeks. This means that you have more time to apply funds to qualified expenses that maximize loan forgiveness.
· Payroll tax payments deferred—Originally under the Cares Act, employers who received the PPP Loan could not also defer employer social security payroll tax payments. HR7010 adjusted this to allow any employer with social security payroll tax payments due between March 27, 2020 and December 31, 2020 to pay half of the amount due by the end of 2021 and the remainder by the end of 2022.
· Payroll threshold adjusted—Originally, the Department of Treasury and the SBA determined that 75 percent of a PPP loan had to be used for payroll in order for the loan to be forgiven. The 75 percent threshold has been adjusted to 60 percent with the new law. Full loan forgiveness will only be granted if at least 60 percent of funds are used for payroll costs.
· Safe harbor date extended—The original Cares Act included safe harbor exceptions to restore or attempt to restore employee positions and any pay reductions by June 30, 2020. These exceptions still exist, but the date to restore has been adjusted to December 31, 2020.
· Loan payment deferral and loan term extended—The original 6-month deferral for repayment of PPP loans has been extended to 10 months. Payments are only required on the amount of the loan that is not forgiven. In addition, PPP loans can now have up to a five-year term under HR7010. It’s unclear at this point how banks will accommodate these changes into existing promissory notes. As such, any businesses who do not expect to have complete forgiveness should work with their banks to amend loan documents as needed.
We hope this update helps. Again, we will continue to closely monitor new legislation and inform you on the key changes that may affect your PPP loan.