Senate Passes PPP loan forgiveness proposed version of the law.
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To our valued clients,

On June 3, 2020, the Senate passed legislation which eases some of the tough requirements regarding forgiveness of PPP loans. This new law called  “Paycheck Protection Program Flexibility Act of 2020” (H.R. 7010) is expected to be signed by the President soon and is outlined below:

  1. Borrowers Can Extend the 8 Week Period to 24 Weeks. Previously, the covered period was 8 weeks from the date the loan proceeds were deposited.
  2. The 75% Payroll Requirement Now Becomes 60%. The limitation on forgiveness would become a 60/40 ratio between payroll and non-payroll costs as opposed to the 75/25 rule that had been in place.
  3. Penalties and Calculations for the Reduction in Work Force. In terms of reductions for FTEs there is significant easing if you can document (A) an inability to rehire individuals and an inability to replace them with similarly qualified individuals by December 31st OR (B) an inability to return to the same level of business as February 15, 2020, due to compliance requirements caused by COVID-19 between March 1 and December 31. We anticipate additional guidance on what “the same level of business” entails.
  4. Repayment Period Extended to Five Years with 1% Interest. Any new PPP loans would have a five-year repayment schedule. Existing loan repayment schedules would remain at two years unless mutually agreed to by lender and borrower.
  5. Two Year Deferral of Employer’s Share of Payroll Taxes for All Employers. The payroll tax deferral of the employer’s share of Social Security tax is extended beyond the time that forgiveness is determined and up through December 31, 2020. It is still the case that half of any payroll taxes deferred would be due by December 31, 2021, and the remainder by December 31, 2022.
We will continue to monitor the ongoing PPP legislative proposals and will provide updates as they arise.
Please call your trusted Machen McChesney advisor if you have any questions.
Best Regards,

Martin D. Williams, CPA,
Managing Partner
Machen McChesney, LLP

Montgomery: 1761 Taliaferro Trail | Montgomery AL 36117

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