June 4, 2020
Hi There!

Here are important updates to the Paycheck Protection Plan (PPP) via the Flex Act.

Contact us when we can be of assistance.

Thank you and be well!

Rich Pavano, CPA
203.933.1679
More PPP changes have passed the House and Senate in the form of the Flex Act. Now, it is on to the President who is expected to sign it.

Key points and explanations:

Drops the PPP threshold required to be spent on payroll from 75% down to 60%.   Sounds great, but not really. Now reaching the payroll percentage is a cliff-type requirement. If you do not hit the 60% in payroll, you will be ineligible for any forgiveness. (There is some chatter about changing that back to the sliding scale, but you cannot plan on it). It is extremely important to calculate your payroll out and make sure you can hit the 60%. If you cannot, please call us at 203.933.1679 for assistance.

The eight-week period can be extended to 24 weeks. This gives borrowers more time to reach full forgiveness. This is huge because companies will not have to rely on trying to push through questionable or difficult-to-calculate expenses such as certain pension costs, etc. Just keep paying payroll and keep your employees off unemployment.

The loan payback period has been extended from two years to five years. Any amounts not forgiven will turn into a loan at 1% interest.

The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to February 15, 2020 levels due to COVID-19-related operating restrictions. YOU MUST DOCUMENT THESE CONDITIONS. Have employees sign papers that they were offered and refused to come back. Document time and date of phone calls, conversations, etc.

Borrowers can apply for a PPP loan through December 31, 2020. The prior deadline was June 30, 2020.

Unfortunately, the Flex Act does not attempt to supersede the IRS determination that no deduction will be allowed for tax purposes for otherwise deductible expenses that result in forgiveness of PPP loans. This means that even though the PPP loan forgiveness is not taxable income, the expenses paid using PPP funds will not be deductible.

For those of you whose eight weeks are coming up soon, this is great news. However, please keep reading our emails for additional changes/fixes/updates.

Reminder : These rules are not applicable until the President signs the bill.