With this new legislation, the requirement of using 75% of PPP funds for payroll has been reduced to a 60% requirement. There is some confusion over whether if a business owner doesn’t meet that 60% requirement, none of the loan will be forgiven – more detail is needed on this. The qualifying expenses remain the same as before, although some businesses are pushing to see whether they can use part of the funds to cover the costs of required PPE. The legislation also extended the amount of time businesses have to use PPP funds from 8 to 24 weeks. There has been no change in how businesses calculate their payroll expenses; they simply have more time to do so. For self-employed and higher-earning individuals, the cap is still $100,000 used over 8 weeks (the same calculation as before). The previous deadline to get staffing levels back to normal was June 30, 2020; the new deadline is December 31, 2020. All of these changes are intended to make the loan more forgivable.
If part of a PPP loan is not forgiven, the bank has 60 days to approve your loan forgiveness application and then the SBA has 90 days to approve it. After that, a small business has six months before it is required to make its first payment on the loan. This deferral process can actually push the date of the first payment out to May 2021, allowing businesses more time to restore cash flow. Under the original law, businesses couldn’t take advantage of the payroll tax deferment allowed in other parts of the CARES Act, where employers could take up to two years to pay some employer-related payroll taxes. That has been changed; under the new legislation, employers who received PPP loans can also take advantage of payroll tax deferment. The SBA and Treasury will have to redo the lengthy document they just produced with guidelines for banks and borrowers concerning the debt forgiveness process, but that will likely take them some time.
The IRS just came out with a nice two-page summary of the (potentially confusing) new employer tax credits that came out under the CARES Act. Businesses that received a PPP loan can’t participate in certain credits, so the flowchart pertains more to businesses that did not receive a PPP loan.
There has still been no movement on the bill that would ensure that payroll-related expenses are considered deductible.
Heather will now be appearing on the show every Monday to give ongoing updates. Tune in next Monday at noon on the PAC-TV community channel and Plymouth government channel (Comcast 13 and 15, and Verizon 43 and 47), or online at PAC-TV’s streaming channel. You will have the opportunity to ask questions via email. The email address will be shown onscreen during the PAC-TV broadcast.