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Financial Planning > College Planning > Student Loan Debt

Latest PPP Loan Bill Has Not Reduced Confusion: Attorney

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The unending confusion surrounding the Paycheck Protection Program continues.

The Paycheck Protection Program Flexibility Act that passed the Senate Friday and was signed into law by President Donald Trump the same day is intended to provide businesses with more time and flexibility to keep their employees on the payroll.

While SBA, in consultation with Treasury, will promptly issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing the new legislative amendments to the PPP, Veena Murthy, a principal at Crowe LLP in Washington, says immediate guidance is needed in one area.

In a Monday comment shared with ThinkAdvisor, Murthy, who joined Crowe in January from the Joint Committee on Taxation, where she was legislation counsel and advised the House Ways and Means and Senate Finance committees on tax policy including the 2017 tax reform and the Secure Act, explained that the changes to the PPP as part of this new law “allow existing borrowers to keep the 8-week period for their loan, rather than the law’s change to a 24-week period.”

However, she continued, “it doesn’t clarify that existing borrowers can keep the June 30 end date for the rehire safe harbor, rather than the law’s change to Dec. 31. There are many borrowers who want to keep the 8-week period and it’s critical for them to keep the June 30 rehire date.”

Treasury and SBA, Murthy said, “need to put forth guidance on this IMMEDIATELY so that these borrowers can make a decision. If the point of the law was ‘flexibility’ then keeping the 8-week period should mean the borrower can also keep other aspects related to that period on which they’ve been making decisions all along.”

SBA and Treasury laid out how the modifications enacted Friday will implement the following changes:

  • Ease the requirements that 75% of a borrower’s loan proceeds must be used for payroll costs and that 75% of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60% for each of these requirements. If a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60% of the loan forgiveness amount having been used for payroll costs.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before Feb. 15, due to compliance with health and safety requirements or guidance issued between March 1 and Dec. 31 by federal agencies.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on Feb. 15, and unable to hire similarly qualified employees for unfilled positions by Dec. 31, 2020.
  • Increase to five years the maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5.
  • Extend the deferral period for borrower payments of principal, interest and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
  • In addition, the new rules will confirm that June 30 remains the last date on which a PPP loan application can be approved.

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