THE PAYCHECK PROTECTION PROGRAM FLEXIBILITY ACT (PPPFA)

The Paycheck Protection Program Flexibility Act (PPPFA) passed nearly unanimously by the U.S. House of Representatives and U.S. Senate.  President Trump signed it into law on Friday June 5, 2020.  The PPPFA was intended to ease some of the forgiveness provisions of the CARES Act passed on March 27, 2020, as well as correct some of the deficiencies of the CARES Act.  Here are some of the highlights.

  • Time Period to Use the Loan Proceeds – The time period for PPP loan borrowers to expend loan proceeds was extended from 8 weeks to 24 weeks. This provides more time to small businesses to use PPP-provided funds.  Current PPP borrowers can elect either an 8-week covered period or a 24-week covered period.  New borrowers will have to use a 24-week covered period.  The covered period cannot extend beyond December 31, 2020.
  • Flexibility on use of PPP Proceeds – Recall, the CARES Act did not have any requirement on the amount required to be used on payroll costs in order to receive forgiveness.  The Small Business Administration (SBA) added a requirement that at least 75% of the loan proceeds must be spent on payroll costs to achieve full forgiveness.  The PPPFA provided additional flexibility to PPP loan borrowers on how they use those proceeds by lowering the amount required to be spent on payroll to qualify for full loan forgiveness — to 60%.  While the PPPFA made this 60% a “cliff”, the Treasury Department issued a June 7, 2020 statement advising of its intention to abolish the 60% cliff, but no more details are available at this time.   
  • Extended Date to Rehire and/or Eliminate Reduced Salary and Wages –  Under the CARES Act, the date to rehire employees was June 30, 2020. This is the period by when an employer may rehire employees or eliminate a reduction in salary, or wages that would otherwise reduce the forgivable amount of a paycheck protection loan.  The date is extended to December 31, 2020.
  • Reduced Headcount Penalty – The PPPFA removes a reduced-headcount penalty for businesses facing workforce challenges by providing that the forgiveness amount must be determined (and shall not be reduced due to a reduction in the number of employees) if the recipient is (1) unable to rehire former employees and is unable to hire similarly qualified employees, or (2) unable to return to the same level of business activity due to compliance with federal requirements or guidance related to COVID-19.  A borrower should be able to document this in good faith.
  • Loan Term – Originally, the loans had a 2-year term.  The PPPFA extended the term to 5 years for PPP loans that originate after the passage of the PPPFA (June 5, 2020).  For example, for any PPP Loans or parts of Loans that are not forgiven, they will become a 5-year loan.  For existing PPP loans, banks and borrowers are permitted to mutually agree to modify the maturity terms to adjust for this change.
  • Payroll Tax Deferral – Under the PPPFA, PPP borrowers with loan forgiveness may also qualify for the COVID-19 related tax credit to defer payroll taxes, which had been previously prohibited.
  • Deferral of Loan Payments – Payment are not due until after the bank receives the forgiveness amount for your loan from the SBA. However, if the borrower does not apply for forgiveness for 10 months after the last day of the covered period, payments will become due 10 months after the end of the covered period.  This new deferral does not apply to borrowers who elect the 8-week covered period.

NOTE: – According to the Small Business Administration (SBA), there remain funds available for PPP loans.  As of June 6, 2020, there still remains approximately $160 billion of funds available.  The PPP application deadline remains June 30, 2020.

We can expect additional guidance as well as modified application and forgiveness forms from the Treasury and SBA in the future.

The contents are intended for general informational purposes only and are not tax or legal advice. You are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

House Passes Bill to Loosen Rules on PPP Loans

On May 28, 2020, the House overwhelmingly passed a bill to loosen key rules for the Paycheck Protection Program (PPP).

The plan would:

  • Reduce the percentage of aid money that must be spent on payroll from 75% to 60%
  • Extend the window businesses have to use the funds from 8 weeks to six months
  • Push back a June 30 deadline to rehire workers
  • Extend from two years to five years the time new PPP loans must be paid back if the amount provided does not convert to a grant
  • Let companies receiving loan forgiveness defer payroll taxes

The bill is now headed to the Senate.

We plan to discuss legislative updates during our next free webinar on Wednesday, June 3.  Click here to register: https://us02web.zoom.us/webinar/register/WN_-M0pBsjMST-YuFXZnGsHXw

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

Bucks Back to Work Small Business Grant

Bucks County has outlined a new grant program to help small businesses that have been negatively impacted by COVID-19.

http://buckscounty.org/government/CommunityServices/BacktoWorkGrantProgam

To qualify, applicants must be for-profit businesses, founded no later than 2018, that have less than $700,000 gross annual revenue and fewer than 50 employees. Primary operations and headquarters must physically be located in Bucks County, and a majority of revenue must be generated in Bucks, not outside locations. Please see the above link and Fact Sheet for a complete list of eligibility requirements.

Bucks County business owners are invited to a Zoom webinar TODAY, May 21, 2020. If interested, you must register for the Zoom session by 12:00 PM. See the above link for more details.

Applications will be accepted on Tuesday, May 26 ONLY, between the hours of 5 AM and 9 PM.

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

SBA Extends “Necessity” Certification Return-By Date to May 18, 2020

Yesterday afternoon the SBA extended until May 18, 2020 the PPP loan return-by date related to the PPP loan “necessity” certification. This is the second extension of the return-by date which allows PPP borrowers who determine they cannot meet the necessity certification required for all PPP loans to return the funds. This extension is intended to allow PPP borrowers to consider how the safe-harbor announced yesterday related to the necessity certification (FAQ46) might apply to their situation .

As indicated by the SBA in FAQ45, for purposes of the Employee Retention Tax Credit, borrowers that return the PPP funds by the return-by date will be treated as though they had not received a PPP loan. This will allow such borrowers to take advantage of the tax credit to the extent they are otherwise eligible.

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

SBA Announces Safe Harbor for PPP Loan “Necessity” Certification

Today the SBA again updated its FAQs related to PPP loans, this time with a welcome safe harbor to the “necessity” certification required by all borrowers. In FAQ46, the SBA announced that “any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” This is good news for many borrowers who had determined a need for the PPP loan but were worried that the SBA might not agree with their assessment.

As you are aware, over the past few weeks the “necessity” certification for a PPP loan has been in the news and on everyone’s minds. As part of the PPP application, every borrower was required to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” In response to several large public companies receiving PPP loans, the SBA issued FAQ31 which focused on whether large companies had the ability to access other sources of liquidity and reiterating the requirement that the PPP loan must be a necessity. This guidance was later extended to all borrowers, causing many borrowers to question whether the SBA would agree with the borrower’s determination that the loan was “necessary” and whether they should return the loan just to be safe. The SBA set an initial date of May 7, 2020 for borrowers to return the PPP loan if they could not meet the “necessity” certification. In FAQ43, the SBA extended the return-by date to tomorrow, May 14, 2020.

Today’s FAQ announcement clarifies that the SBA will accept that the necessity certification was made in good faith by borrowers (including their affiliates) that received less than $2 million in total of PPP loans. It also provides that borrowers receiving in excess of $2 million, while unable to rely on the safe harbor, may still be able to meet the necessity certification based on their individual circumstances. The SBA reiterated that loans in excess of $2 million will reviewed by the SBA for compliance with PPP program requirements.

The link below is the text of the FAQ, and it explains the reasoning behind this decision. https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

SBA to Provide Exemption from Loan Forgiveness Reduction for Non-Returning Employees

Yesterday the Small Business Administration (SBA) issued a new FAQ which helps PPP borrowers whose employees elect not to return to work.  As set forth in the CARES Act, the PPP loan amount eligible for forgiveness is to be reduced, in part, if a PPP borrower’s average number of full-time equivalent employees during the 8-week loan period is less than the average number of such employees previously employed by the borrower. 

One issue beyond the control of PPP borrowers is employees that do not accept rehire offers, potentially effecting a PPP borrower’s ability to receive full forgiveness.  The SBA announced that they will be issuing guidance which will exclude laid-off employees that do not accept rehire offers from the loan reduction calculation if the following requirements are met:

  1. The PPP borrower makes a good faith, written offer of rehire;
  2. The rehire offer is for the same salary/wages and the same number of hours;
  3. The employee rejects the offer of rehire; and
  4. The rejection is documented by the PPP borrower.

The FAQ cautioned both employers and employees, that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

Employers in Pennsylvania may want to consider completing and filing a Form UC-1921W (Refusal of Suitable Work) with the PA Department of Labor and Industry as one method of documenting the employment rejection (although the FAQ does not discuss methods of documentation).  Filing this form may also assist with an employer’s unemployment compensation rate for next year.  

If you have any questions, please reach out to us.  We are here to help. 

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

Expenses Paid with Forgivable PPP Loans Not Deductible

The Internal Revenue Service (IRS) recently released guidance on the deductibility of expenses reimbursed by a Payment Protection Program (PPP) loan that is then forgiven. In Notice 2020-32, the IRS states that no deduction is permitted for expenses normally deductible to the extent the expenses were reimbursed by a PPP loan that was forgiven. The disallowance is to prevent a double benefit by preventing a deduction for excluded income.

Some lawmakers disagree with the IRS’ guidance. They believe the intent of the program was to provide small businesses with liquidity to retain their employees. The notice is contrary to that intent.

A spokesperson for House Ways and Means Committee Chairman Richard Neal stated, “We are planning to fix this in the next piece of response legislation.”

Our office is monitoring this situation closely and will provide you with updates as needed. Please call our office if you have any questions.

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

MontcoStrong Small Business Grant Program

On April 6, 2020, Montgomery County Board of Commissioners announced the MontcoStrong Small Business Grant Program. Applicants must be a for-profit business with a physical location in Montgomery County, Pennsylvania, employing no more than 50 individuals and impacted by the COVID-19 pandemic. For full details visit www.montcopa.org/MontcoStrongSBGP. Applications will be accepted beginning on Wednesday, April 8, 2020 at 11 a.m.

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

Some Banks Closing Window to Submit PPP Application

We have been informed that some banks have reached or are reaching their maximum lending limit for the SBA’s Paycheck Protection Program (PPP) and may not be able to accept additional requests for a loan through the PPP. Please contact your bank for more information. If your bank is one of the banks that have met its cap, we suggest that you contact another bank that you have worked with in the past, particularly large regional banks. The Economic Injury Disaster Loan (EIDL) remains another option for small businesses, and application for the EIDL can be made in addition to the PPP.

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.

PA Loan Program for Small Businesses: CWCA

CASI Payroll Plus continues to research the latest forms of assistance available to small businesses.

The COVID-19 Working Capital Access (CWCA) Program is administered by the Pennsylvania Industrial Development Authority (PIDA) and provides critical working capital financing to small businesses located within the Commonwealth that are adversely impacted by the COVID-19 outbreak. All CWCA loan applications must be submitted through your respective county economic development organization.
https://dced.pa.gov/programs/covid-19-working-capital-access-program-cwca/<https://linkprotect.cudasvc.com/url?a=https%3a%2f%2fdced.pa.gov%2fprograms%2fcovid-19-working-capital-access-program-cwca%2f&c=E,1,lHqC_Y2B_g-W8_es2qAhmQSztjgAs5_R9Dyjf8gbQUx2zAAQVkvmQbQB3FkJWM9MV3rXpUpr5TXmbG37MQe0GBkAGixCwYHJSYq_2KZfUx8,&typo=1>

Also, the COVID-19 Economic Rapid Response Loan Program is a one-time emergency grant-to-loan program administered by the Redevelopment Authority of the County of Bucks and targeting tourism and hospitality businesses (for select municipalities in lower Bucks).
http://www.bcrda.com/municipal-grant-program-for-covid-19-emergency-relief/<https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fwww.bcrda.com%2fmunicipal-grant-program-for-covid-19-emergency-relief%2f&c=E,1,BFdeet36Hjz8vrk3TtsMtzEhe-XeBxNHXxDafGUwJCF_ZwpwKs-X-GTH-QcBURSX3wF8BDvxcA-nM-aYiWalG7u0avd6w4Qa4LISYSGO9g,,&typo=1>

Please call your accountant or call CASI Payroll at 215-716-2165 for more information.

This communication should not be construed as tax or legal advice or tax or legal opinion on any specific facts or circumstances. This communication does not create any accountant/client or attorney/client privilege. The contents are intended for general informational purposes only, and you are urged to consult a tax advisor or lawyer concerning your own situation and legal questions.