Congress Provides More Flexibility for Paycheck Protection Program

The House and Senate recently passed the Paycheck Protection Program Flexibility Act of 2020.  The bill currently awaiting the President’s signature modifies provisions related to loan forgiveness for small businesses under the Paycheck Protection Program implemented in response to COVID-19.  A major change in the bill extends the covered period during which a loan recipient may use the funds for certain expenses from 8 weeks to 24 weeks.


The excerpt from the Summary by the House is as follows:

Specifically, the bill establishes a minimum maturity of five years for a paycheck protection loan with a remaining balance after forgiveness. The bill also extends the covered period during which a loan recipient may use such funds for certain expenses while remaining eligible for forgiveness. The bill raises the non-payroll portion of a forgivable covered loan amount from the current 25% up to 40%.

The bill extends the period in which an employer may rehire or eliminate a reduction in employment, salary, or wages that would otherwise reduce the forgivable amount of a paycheck protection loan. However, the forgivable amount must be determined without regard to a reduction in the number of employees if the recipient is (1) unable to rehire former employees and is unable to hire similarly qualified employees, or (2) unable to return to the same level of business activity due to compliance with federal requirements or guidance related to COVID-19.

Additionally, the bill revises the deferral period for paycheck protection loans, allowing recipients to defer payments until they receive compensation for forgiven amounts. Recipients who do not apply for forgiveness shall have 10 months from the program’s expiration to begin making payments.

The bill also eliminates a provision that makes a paycheck protection loan recipient who has such indebtedness forgiven ineligible to defer payroll tax payments.

Lastly, the bill is designated as an emergency requirement pursuant to the Statutory Pay-As-You-Go Act of 2010 (PAYGO) and the Senate PAYGO rule.


We expect to see additional commentary and answers to frequently asked question interpreting the bill.  An open issue relates to the increase in the non-payroll portion of a forgivable covered loan to 40%.  The bill indicates “To receive loan forgiveness under this section, an eligible recipient shall use at least 60 percent of the covered loan amount for payroll costs.”  The word shall may imply that an eligible recipient does not receive any loan forgiveness if they do not use at least 60% of the covered loan for qualified payroll costs.

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