2
Expands covered period to
24 weeks
The most meaningful change in the act
is the expansion of the covered period in
which the borrower was required to use
the PPP loan in order to later obtain forgiveness.
The covered period has been increased
from 8 weeks from the receipt of
the loan to now the earlier of 24 weeks or
December 31, 2020. This is the most significant
change since many businesses
are still closed or only partially open and
their initial 8 week covered period will
expire soon. This gives all borrowers several
more weeks to use the PPP funds for
payroll and other allowable expenditures.
Borrowers are not required to
adopt the 24-week period and can elect
to use the 8-week period.
3
Decreases the current payroll
costs percentage
In addition to the expansion of the covered
period to 24 weeks there are other
important changes related to how the
borrower spends the PPP loan. The first
of these items contains both good news
and bad news. The new bill decreases the
requirement that the borrower spend at
least 75% of the loan on “payroll costs”
down to 60% of the loan. This is very
good news and allows a company to use
up to 40% on non-payroll costs such as
rent, mortgage interest and utilities.
However, the language in the new bill is
worded poorly and now says
“to receive loan forgiveness under this
section, an eligible recipient shall use at
least 60 percent of the covered loan
amount for payroll costs…”
4
Extends time to cure salary
reductions and FTEs
The next item to help borrowers is that
they now have a longer period of time to
restore salaries and replace employee
staffing up to pre-February 15, 2020
levels. The new law extends this deadline
from June 30 until December 31, 2020.
5
Deferral of Social Security
payroll taxes
Deferral of the employer’s portion of social
security taxes was allowed to be deferred
under the CARES Act until the
borrower received notice that his PPP
loan was forgiven. Under the PPPFA, a
borrower may now defer all of its 2020
Social Security tax to 2021 and 2022 even
if the PPP loan is forgiven prior to December
31, 2020.
6
More clarification needed
While the Flexibility Act will help borrowers
in many ways, especially increasing
the opportunity for full forgiveness,
there are still questions that need to be
answered. For example, with the expansion
of the covered period from 8 weeks
to 24 weeks, one can assume that the
maximum forgivable payroll to an individual
will increase from $15,385 to
$46,154 ($100,000 limit/52 weeks * 24
weeks). However, this is only an assumption
at this point, and we expect the Small
Business Administration to release another
round of FAQs to answer many of
these issues.
Brian Howell, CPA is Shareholder of Tax and
Consulting Services at Bland Garvey, CPAs and
Wealth Advisors. Brian’s 35 years of experience
allows him to assist dentists with challenging
and day-to-day accounting and tax issues. He
earned his Bachelor of Business Administration-
Accounting from Baylor University. Brian is also
a graduate of Leadership Richardson Class
XXVI and Texas Society of CPAs Leadership
Development Institute. He is a member of the
American Institute of CPAs (AICPA), Texas Society
of CPAs (TSCPA), Dallas Society of CPAs
and PrimeGlobal, an international association of
independent accounting firms.
For more information, call (972) 231-2503 or
send email to: [email protected].
The problem with this language is that it
implies that unless you spend at least
60% on payroll costs there will be no
loan forgiveness. It is possible that this
could be altered by legislative action, but
we will have to wait for further guidance
on this.
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