Paycheck Protection Program Flexibility Act Passed
On Friday, June 5, 2020, the Paycheck Protection Program Flexibility Act (“PPPFA”) was signed into law. The PPPFA is the latest measure directed towards relieving the effects of the Covid-19 pandemic on workers and employers. Salient provisions of the PPPFA include:
- Extending the time in which borrowers are required to spend the proceeds of the loans. The initial eight-week period from origination of the loan has been extended to the earlier of 24 weeks after origination, or December 31, 2020.
- Decreasing the amount of the loan the employer must spend on payroll costs to qualify for loan forgiveness. That amount is decreased from 75% to 60%. This increases the amount that can be spent for rent, utilities, and mortgage interest from 25% to 40%.
- Lengthening the time for repayment from 2 years to 5 years for loans that are not forgiven.
- Extending from June 30, 2020 to December 31, 2020 the deadline for employers to rehire employees laid off between February 15, 2020 and April 26, 2020 or restore employee wages reduced between February 15, 2020 and April 26, 2020.
- Prior to the PPPFA, employers’ payroll taxes were due immediately upon loan forgiveness. Now, borrowers can defer the employer’s share of FICA payroll taxes for 2 years. Half of the payroll taxes will be due in 2021, and the other half will be due 2022.
We are available to consult with you on any questions you may have concerning this alert.
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Peter Janovsky is a partner in the commercial litigation and bankruptcy groups at Zeichner Ellman & Krause. He represents institutional and individual clients, including domestic and international financial institutions, real estate developers, and family businesses.