This morning, the President signed into law the Paycheck Protection Program (PPP) Flexibility Act of 2020, which makes several significant modifications to the PPP provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Notably, this new law makes the following changes:
- Reduces the percentage of forgivable expenses that must be allocated to payroll costs from 75% to 60%;
- Extends the covered period for forgiveness calculations from eight (8) weeks to 24 weeks from the origination date of the loan;
- Expands the timeframe for making the determination for rehiring from June 30 to December 31, 2020;
- Provides partial forgiveness reduction relief in the event a borrower can document that they are unable, on or before December 31, 2020, to either rehire or replace individuals who left their employ during the pandemic OR return to their pre-COVID level of business activity;
- Extends the repayment term from 2 years to 5 years; and
- Repeals the provision of the CARES Act that barred PPP forgiveness recipients from deferring employer payroll taxes.
These modifications are important to dealers who have applied for and received PPP loans and who intend to seek loan forgiveness. NADA has revised its guidance on PPP loan forgiveness to reflect the PPP Flexibility Act’s modifications to the program and its impact on loan forgiveness.
Further, new SBA/Treasury guidance is anticipated in the coming weeks. For the time being, however, dealers with PPP loans should reconsider their individual approach to loan forgiveness with the advice of their legal, accounting, and banking advisors.
NJ CAR, with the assistance of Withum and Arent Fox LLP, will be conducting a webinar on the PPP Flexibility Act on Wednesday, June 10, 2020 at 10 a.m. You can register HERE.