House Introduces Bill Proposing Changes to PPP

H.R. 6886 proposes to amend the Paycheck Protection Program to allow more flexibility for businesses in how they use and repay their PPP loans.

The bipartisan Paycheck Protection Program Flexibility Act of 2020 (H.R. 6886) introduced on 15 May 2020 proposes changes to the Paycheck Protection Program under the CARES Act. The proposed changes include allowing businesses that have loans forgiven to also delay paying the employer portion of payroll taxes—a change for which Worldwide ERC® advocated. The bill has bipartisan support.

Loan Forgiveness Beyond 8-Weeks

The bill would allow businesses us use their loan proceeds beyond the original 8-week timeline. The sponsors argue that 8 weeks do not work for businesses that are prohibited from opening their doors or can do so only with restrictions and that this would give them the flexibility to use their loan proceeds until they are fully back to work and demand returns. This will help avert some furloughs and layoffs.

Eliminate Requirement to Use 75% for Payroll

The bill would permit businesses to use more than 25% of the loan proceeds to fund expenses other than payroll. The PPP loans currently require businesses to use 75% of the loan proceeds to fund payroll. The sponsors note that for many businesses, payroll does not represent 75% of their monthly expenses and many businesses have fixed expenses (such as mortgage, rent, and utilities) that affect their business continuity and exceed 25% of their monthly costs.

Eliminate 2-Year Loan Term Restrictions

The bill would allow lenders to issue loans with repayment terms longer than 2 years. The sponsors note that according to the American Hotel and Lodging Association, full recovery for that industry following both the 9/11 terrorist attacks and the 2008 recession took more than two full years. Many other industries will be similarly affected, and this provision provides for the possibility that it will take some businesses more than two years to achieve sufficient revenue to pay back the loan.

Allow Payroll Tax Deferral and PPP Loan Forgiveness

The bill would ensure full access to payroll tax deferment for businesses that take PPP loans and have those loans forgiven. The sponsors note that the purpose of PPP and the payroll tax deferment was to provide businesses with capital to weather the crisis and that businesses need access to both sources of cash flow to survive.

Extend Rehiring Deadline

To receive loan forgiveness under the current PPP rules, a business must rehire employees by 30 June 2020. The bill would align the rehiring deadlines with the expiration of unemployment insurance, which exceeds the wages of many workers. Some businesses are finding it difficult to rehire employees because they are making more on unemployment than they were working.