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Congress Passes Law With Substantial Changes To The Remission Of PPP Loans Man’s pepper with trout

[co-authors: James Stevens, Matthew Roberts, Lindsay Austin, Jeremy Tomes]*

Persistent questions regarding loan cancellation, a key feature of the Small Business Administration (SBA) Paycheck Protection Program (PPP) created by the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), have been addressed in legislation passed by Congress. . On May 28, 2020, the House of Representatives passed the Paycheck Protection Program Flexibility Act of 2020 (HR 7010) (PPPFA) by a vote of 417-1, and the bill was quickly sent to the US Senate for further consideration. thorough. Although there were initial objections from some senators, the Senate ultimately passed the PPPFA unanimously on June 3, 2020. The bill is now submitted to the President for signature.

The PPPFA was adopted with bipartisan support as the initial eight-week coverage period countdown recently expired for the first recipients of PPP loans. The bill provides for relief from the rebate by, among other things, changing the length of the period covered by which PPP borrowers must spend PPP funds to qualify for a rebate and by changing the mandatory proportions in which PPP funds must be spent. be spent in order to qualify for a loan. forgiveness.

Here is a summary of the main provisions of the PPPFA:

  • Extends the repayment term of the unsatisfied portions of PPP loans to 5 years for all new loans. Existing loans keep their terms of 2 years, although the bill allows lenders and borrowers to negotiate a longer term.

  • Extends the last date of the period during which PPP loans can be requested and disbursed from June 30, 2020 to December 31, 2020 (although the application deadline is expected to remain at June 30, 2020, as noted below).

  • Extends the period during which borrowers must use the proceeds of a PPP loan from 8 weeks after the loan disbursement date to the earlier of the following dates between (i) 24 weeks after the loan disbursement date and (ii) the December 31, 2020 (“use and discount period covered”)).

  • Reduces the minimum percentage of loan proceeds that must be used to cover salary costs in order to qualify for a loan discount from 75% to 60%.

  • Expands the discount reduction exemption related to reductions of full-time equivalent employees based on employee availability. Specifically, the amount of the rebate will not be affected by a reduction in the number of full-time equivalent employees if the borrower is able to prove their inability to rehire people, hire employees with similar qualifications, or take over the job. same level of commercial activity as before. operate before February 15, 2020, due to compliance with regulatory requirements or guidelines established by the Department of Health and Social Services, the Center for Disease Control and Prevention or the Occupational Safety and Health Administration between March 15, 2020 and December 31, 2020, and related to maintaining sanitation standards, social distancing or any other worker or customer safety requirements related to COVID-19.

  • Requires borrowers to request loan forgiveness within 10 months of the borrower’s end of use and forgiveness period if forgiveness is to be requested.

  • Ensures full access to payroll tax deferral for companies taking out PPP loans.

  • Extends the deadline for rehiring and reinstating wage and salary reductions from June 30, 2020 to December 31, 2020, in order to offset the effect of the improvement in unemployment insurance.

  • Extends payment deferrals until the date the rebate amount is remitted to the lender by the SBA or 10 months after the use and remission period.

  • The text of the invoice can be found at

Senator Ron Johnson (R-Wisc.) Initially blocked an attempt to pass the bill quickly, but we understand he later agreed not to oppose its passage after receiving a letter from negotiators of the Small Business Committee specifying that the extension of the program until December 31, 2020, only applies to expenses (i.e. forgiveness) and not to PPP requests. Based on this, we anticipate that the PPP application deadline will remain on June 30, 2020.

Key points to remember

The PPPFA makes substantial changes to the PPP loan cancellation rules and guidelines that were previously provided by the Treasury Department () and the SBA, the effect of which will be to allow borrowers to have more of their PPP loans. canceled. When the PPPFA is promulgated by the President, PPP lenders are likely to need additional guidance from the Treasury and the SBA to effectively implement the changes. PPP borrowers will be best served by contacting their respective PPP lenders to determine their best course of action with respect to the loan cancellation request. In addition, once the PPPFA is promulgated, the current loan forgiveness request (Form SBA 3508) provided by the SBA will need to undergo revisions to comply with the changes made to the PPPFA. In the immediate term, PPP borrowers who can currently request a rebate should continue to delay such deposits until the PPPFA is enacted and further guidance is provided by the Treasury and SBA in this regard.

* Troutman Sanders