On Friday, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 which significantly lowers the requirements for PPP loan forgiveness. The most significant provisions of the Act are as follows:
24 Week Forgiveness Period
You now have much more time to spend your PP loans funds. The covered period has been extended from 8 weeks to 24 weeks (or December 31, 2020). You now have 24 weeks from the origination date of your loan to spend your PPP loan funds and still receive forgiveness.
December 31, 2020 is the final cutoff date for eligible expenses. So, for loans being disbursed July 16 and later, this means that you will not have a full 24 weeks.
The extension applies to all loans, but those with existing loans can still choose to go with the original 8-week period, which allows you to apply for forgiveness sooner.
Previously, you were required to spend 75% of your PPP loan on payroll, and the remaining 25% on rent, utilities, and mortgage interest in order to get your loan forgiven. This was known as the 75/25 rule. In order to get loan forgiveness under the new Act, the required percentages have changed to 60% of the loan being used on payroll, and the remaining 40% on other eligible expenses (which remain defined as mortgage interest, rent, and utilities).
Payroll Tax Deferral
Previously, if your loan was forgiven, payroll taxes would have become due immediately. This has been changed under the new Act, which preserves the ability to defer payroll taxes until December 31, 2020.
Extended Employee Rehiring Date
The deadline that employers have to rehire employees that were laid off between February 15 and April 26, or restore employee wages that were reduced between February 15 and April 26, is extended from June 30 to December 31, 2020.