Issue Brief: Spending rules for PPP loans changed by congress
Some good news this morning regarding changes to the Paycheck Protection Program that were approved by Congress and are expected to be signed by the President. Below is a brief that the National Newspaper Association released.
Congress has passed the Paycheck Protection Program Flexibility Act of 2020, HR 7010, a bill supported by the National Newspaper Association. The President is expected to sign the bill today (Thursday) and to put it into immediate effect. Here is what the bill does:
- Allows borrowers to spend their funds over 24 weeks from the date they received their loans, instead of requiring all funds to be spent by June 30.
- Allows up to 40% (previously 25%) of forgivable loans to be used for the allowable nonpayroll expenses: rent, mortgage interest, utilities, interest on prior SBA loans.
- Sets a Dec 31, rather than June 30, deadline for rehiring employees to achieve full FTE complements from the baseline.
- Extends the period for paying back any unforgiven portion of loans to five years, rather than two years.
The bill applies only to the period for spending the funds. No new applications will be accepted after June 30, 2020. Money remains available for businesses that have not yet applied. Majority Leader Mitch McConnell said the Senate is committed to replenishing funds if the money runs out before June 30.
The bill also does not change the categories of allowable spending for forgivable loans and it does not address the deductibility of payroll and other covered expenses. Senate leaders in their floor statements on June 3 said they are committed to continuing to work on other legislation to fix flaws in the program.
The bill also does not make clear whether a business may opt to wrap up its spending period and apply for forgiveness before Dec. 31. NNA expects further information on this option from the Treasury Department shortly.
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