House of Representatives and Senate create more flexibility for Paycheck Protection Program
A new bill, which significantly relaxes the terms and restrictions for the Paycheck Protection Program (PPP), overwhelmingly supported by the House of Representatives, is on its way to President Donald Trump for signature after the Senate cleared the bill on June 4.
The PPP was initially created and funded by the $2.2 trillion CARES Act passed in March and further supplemented by an additional $320 billion in April after proving to be exceedingly popular. The act seeks to relax requirements small businesses must follow to receive and use emergency funding under the PPP. The act will make access to and use of PPP funds more flexible by implementing the following new provisions.
- The new bill would change the PPP’s sunset date from June 30th to December 3.
- If approved, the act would provide small businesses with more time to use PPP funding by extending the period in which businesses may qualify for loan forgiveness from eight weeks to 24-weeks.
- Businesses would no longer be forced to spend 75 percent of PPP funds on payroll in order for the loan to be forgiven. Instead, the legislation would lower the percentage of money required to be spent on payroll to 60 percent. This would allow small businesses to use up to 40 percent of the funds on other expenses, such as utilities and rent.
- The new legislation would also allow businesses that receive PPP funding to defer payroll taxes.
The act faced an early roadblock in the Senate when Senator Ron Johnson, R-Wis., objected to a unanimous voice vote. Johnson requested that the Senate and House small business committees prepare a letter clarifying that extension to the PPP only applies to spending and does not extend the application deadline. It is unclear when that letter will be provided. Despite the initial objection, the Senate ultimately passed the legislation and did not make any further changes to the House version. Although no additional appropriation for the PPP was included in the act, there remains an overall sense of urgency to make the PPP more accessible and useful to small businesses. This push comes during the ongoing battle to pass an additional $3 trillion relief package that will certainly face additional opposition.
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