At A Glance
On Wednesday evening, the Senate passed the House Bill HR 7010 PPP Flexibility Act of 2020. The bill passed with no amendments to the House version and now awaits signature from President Trump. The Act will:
- Extend the forgiveness eligibility timeline from eight weeks to the earlier of:
- 24 weeks from the loan origination date, or
- December 31, 2020
- Allow borrowers who had a forgiven PPP loan to defer employer SS tax
- Allow borrowers to use PPP funds for more non-payroll costs.
Extension of Covered Period
The extension provides additional time for employers to apply for a PPP loan under the program. The Act will also change the Covered Period applicable to loan forgiveness to the earlier of 24 weeks after the loan origination date or December 31, 2020. This provides borrowers more time to use the loan funds.
Additionally, the Act reduces the 75% payroll costs rule to 60%, allowing borrowers to spend more loan proceeds on non-payroll costs and still be eligible for forgiveness. Lastly, the Act provides a safe harbor from the reduction in loan forgiveness amount due to a reduction in FTE employees if certain conditions are met.
Payment of Employer Payroll Taxes Delayed
The CARES Act permits employers to defer the deposit and payment of the employer’s portion of social security taxes that otherwise would be due between March 27, 2020, and Dec. 31, 2020. Currently, borrowers who have PPP loans forgiven are ineligible for the payroll tax deferral for any time after the date the PPP loan is forgiven. The PPP Flexibility Act eliminates this restriction.
The bill must be signed by President Trump to become effective, the president has indicated support of the bill and we anticipate he will sign by the end of the week. Paylocity is prepared to revise our PPP Loan reports to ensure alignment with the PPP Flexibility Act changes once it is signed into law. We will provide an update once it is signed.
Thank you for choosing Paylocity as your Payroll Tax and HCM partner.
This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.