House Sends to Senate Legislation Relaxing Some PPP Loan Forgiveness Rules

Capital Corner – Sikich’s Analysis of Tax Developments in Washington

While the COVID-19 pandemic has slowed many parts of the country, Congress has continued to push forward with legislation to assist businesses and workers. They have passed four separate pieces of legislation, and they will be working on another large bill in June. Congress is also working on a smaller separate bill designed to address several issues related to the recent CARES Act legislation adopted in late March 2020.


One of the key provisions with the CARES legislation was the “Paycheck Protection Program” (PPP) loan. The PPP loan program was focused on providing funding to small businesses to assist them primarily with employee payroll, lease payments, interest on mortgages, and utilities. A key feature within the PPP loan was the opportunity for borrowers to have these loans forgiven. Yes, the PPP loan would be forgiven if spent in the required manner over the eight-week period after the loan was disbursed. In mid-May, the SBA provided guidance on loan forgiveness to assist borrowers. The delay in issuing this guidance coupled with a slowdown for many businesses caused concern among borrowers that they might be unable to maximize their PPP loan forgiveness.

Paycheck Protection Program Flexibility Act of 2020

Many businesses and trade associations passed their concerns with the loan to Congress. Legislation was drafted and had bi-partisan support. On May 28, 2020, the House passed the Paycheck Protection Program Flexibility Act of 2020 (H.R.7010) by a vote of 417-1. Several items in this bill to note are as follows:

  • This legislation extends the PPP loan forgiveness period from eight weeks to 24;
  • It replaces the 75/25 rule introduced by the SBA with a 60/40 rule: 60% for payroll costs and 40% for non-payroll costs;
  • It also entitles businesses that receive PPP loan forgiveness to the new payroll tax deferral (another CARES provision);
  • The bill ensures small businesses won’t be as impacted by high unemployment benefits as the date for rehiring of employees would be extended to December 31, 2020; and
  • It creates a safe harbor for businesses that are required to open at reduced capacity, although it is uncertain exactly what this may entail.


While there is wide support for this bill in the House, it still needs to work through the Senate, which is  back in session this week. The Senate was looking at a 16-week period; not the 24-week period included in the House version, and there are a few other differences to iron out as well. So while there is support to make these changes, nothing is a done deal and we will continue to monitor the bill this week in the Senate. Please contact your Sikich advisor with any questions.


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