June 3, 2020
By: Courtney Williams
The Senate passed the Paycheck Protection Program (PPP) Flexibility Act of 2020. (Click here for a summary of the House of Representatives version that was sent to the Senate.) The Senate, however, entered a letter in the Congressional Record clarifying that the Act does not authorize the SBA to accept applications for new PPP loans past June 30, 2020. Therefore, June 30, 2020 remains the deadline to obtain a PPP loan, which is contrary to the bill passed in the House last week.
There was no change to the requirement that 60% of the loan amount must be used for payroll costs to be eligible for forgiveness. Consequently, employers should ensure that they use at least 60% of the total loan amount received, not just the amount forgiven, for payroll costs; otherwise, there will be no forgiveness.
A provision of the Act that was not included in our previous summary is the ability to defer the employer’s portion of Social Security taxes. Under the CARES Act, an employer can defer paying its portion of Social Security taxes that would otherwise be due during the period beginning on March 27, 2020 and ending on December 31, 2020. One-half of the deferred taxes are due December 31, 2021, and one-half is due December 31, 2022. However, the deferral stopped once an employer had a PPP loan forgiven.
The Act eliminated this exception from the CARES Act. As a result, an employer may continue deferring its portion of Social Security taxes through December 31, 2020, regardless of when the PPP loan is forgiven.
This summary is based upon what we know as of this writing. No assurance of the completeness, comprehensiveness, correctness, or currency of the information is provided. The materials and information presented are not, are not intended to be, and should not be relied upon or construed as legal advice. Receipt of the information alone does not create an attorney-client relationship. Before making any decision or taking any action, you should consult with a professional adviser who has been provided with all pertinent facts relevant to your situation.
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