Dear Booksellers, I’m turning today’s email over to ABA’s Advocacy Team for an important PPP update: New changes coming to the Paycheck Protection Program (PPP): Late Wednesday, June 3, the Senate passed the House’s Paycheck Protection Program Flexibility Act. The legislation now goes to President Trump’s desk for signature. (Note: This bill will not change the IRS’s ruling on the deductibility of forgiven PPP funds. ABA is still advocating for this change). The White House has not specifically said Trump will sign the bill, but the president has been supportive of the program in the past. If signed into law, the PPP Flexibility Act would make the following changes to the program: Set the minimum loan maturity to five years: This change only applies to loans made on or after the bill becomes law. However, the bill does not prohibit lenders from amending the maturity terms for pre-existing loans. Contact your lender for more information. Extend the program to December 31, 2020: PPP was set to expire on June 30, 2020. This new change would allow businesses to receive PPP loans until the end of 2020. Extend the eight-week time period to 24 weeks: The “covered period” was originally eight weeks. This bill would extend the time period for borrowers to use PPP funds and seek forgiveness to the earlier of 24 weeks after loan origination or December 31, 2020. If you have not yet taken out a PPP loan, you will have to limit your loan amount to what you will be able to spend by the end of the year if you want to seek forgiveness. (Borrowers who took out loans before this change can elect to use the original eight-week time period.) Add exemptions based on employee availability: The new bill will add exemptions to loan forgiveness reductions where borrowers can document (1) an inability to rehire individuals who were employed on February 15, 2020, and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020, OR (2) an inability to return to the same level of business activity as before February 15, 2020, due to government requirements or guidance related to sanitation standards, social distancing, or other COVID-19-related requirements. Alter the 75/25 rule to 60/40: The Small Business Administration and Treasury Department implemented a rule stating that PPP borrowers seeking forgiveness must use at least 75% of the loan for payroll costs. The new legislation would change this to at least 60% of the loan for payroll costs. The language in the bill may be interpreted as making any borrower spending less than 60% on payroll costs ineligible for any forgiveness. The SBA and Treasury may issue guidance clarifying if borrowers can still receive partial loan forgiveness. Extend deferral period: The new legislation would defer payments of principal and interest on the loan until the date loan forgiveness is remitted to the lender. Borrowers who do not apply for forgiveness will not begin repayment until 10 months after the last day of the covered period (either the eight-week period, 24-week period, or December 31, 2020, depending on the individual circumstance). Delay payment of certain employer payroll taxes: Borrowers who have PPP loans forgiven will be allowed to delay the payment of the employer portion of social security taxes for all payroll paid from March 27, 2020, through the end of 2020. Fifty percent is payable on December 31, 2021, and 50 percent is payable on December 31, 2022. See more information here (although it is not updated to reflect the new bill since it is not yet law).
If you have further questions about the Paycheck Protection Program Flexibility Act or the Paycheck Protection Program, you can reach the Advocacy Team at [email protected]. Thanks to Dave and Molly for this important information and for their ongoing lobbying efforts on behalf of members. ABA is here for all of you. Please reach out if there is anything we can help with. We are an incredibly creative, resilient, supportive industry. We’ll get through this, together. Best,
Allison |
