Small Business

Congress Considers Relaxing PPP Rules

The PPP legislation saga continues.

As if this PPP madness couldn’t get any more confusing, on Thursday the U.S. House approved legislation that would relax rules regarding Paycheck Protection Program (PPP) loan forgiveness. If passed by the Senate, and subsequently signed into law, it could drastically change how small business owners use their PPP loan proceeds.

Although this change would once again alter the guidance regarding loan forgiveness it is a welcomed change that would create more flexibility for PPP loan recipients seeking loan forgiveness.

The Highlights: What’s in The Bill?

  • H.R. 7010, Paycheck Protection Program Flexibility Act of 2020, would amend the Small Business Act and the CARES Act to modify certain provisions related to the forgiveness of loans under the paycheck protection program.
  • Extends the time for recipients to use the PPP funds from 8 weeks to 24 weeks.
  • Reduces the percentage of funds to be used for payroll from 75% to 60%.
  • Extends the term of the loan for any portion that fails to qualify for loan forgiveness from 2 years to 5 years.
  • Adds additional exemptions for a reduction in employee head count for an inability to rehire individuals and/or an inability to return to the same level of business activity due to compliance with governmental agencies.

AICPA Welcomes The Change

Back in April, the AICPA requested the Treasury to provide flexibility for the 8-week period in order to assist businesses to be able to meet the requirements and obtain loan forgiveness. 

This additional flexibility will allow business owners more time and more funding to bring back employees while states begin to open back up. The extension of the covered period to 24 weeks gives PPP loan recipients 4 additional months to increase their head-counts to post pandemic levels.

The increase in loan proceeds that are eligible to pay against other expenses such as utilities, rent and mortgage interest would be increased from 25% to 40% which will allow more flexibility for business owners with substantial overhead cost especially those in larger cities.

What’s Next?

The Bill passed by the House was done so in a bi-partisan manner so there is a spark of hope that these provisions may make it past the Senate. If it does pass then it would mean many business owners, and accountants, can take a breather from PPP guidance.

The additional 4 months of relief and additional exemptions for businesses unable to increase headcount would make it much easier to qualify and obtain loan forgiveness. But as we know, it’s not official until it’s signed into law.

The information contained herein is is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined though consultation with your tax adviser. This article represents the views of the author only and does not necessarily represent the views or professional advice of this publication or the author’s employer.

Jeremias Ramos is a CPA working at a nationally recognized full-service accounting, tax, and consulting firm with offices conveniently located throughout the Northeast. Jeremias specializes in tax and business consulting with focus areas in real estate, professional service providers, medical practitioners, and eCommerce businesses.

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