On Friday, June 5th, the Payroll Protection Program Flexibility Act of 2020 was signed into law. The act extends the time and gives practices more flexibility in spending while still qualifying for loan forgiveness.

Key Points:

Extension of the 8 Week Spending Period: Originally, practices had 8 weeks from the time they received the loan to spend the funds if they were to qualify for full loan forgiveness. (The timing was just one of several requirements). With the Flexibility Act, this has been extended to 24 weeks.

Extension of Re-Hire Deadline: A key requirement to qualify for full loan forgiveness was that the practice restore wages and employee count to pre-COVID-19 levels by the end of June. This deadline has been extended to the end of the year (December 31, 2020)

Reduction in the Required Fraction of Payroll Spending: The earlier incarnation of the PPP requires 75% of funds to be spent on eligible payroll costs to qualify for full loan forgiveness. This has been decreased to 60%. ( The way the legislation is now written, it appears that that 60% is an all-or-nothing threshold – if you don’t meet it, there will be no loan forgiveness. It is widely believed that this was not the intent of the act and that a legislative fix will be forthcoming.)

Extension of Loan Payback Period: For the amount of PPP funds converted to a LOAN (ie; that portion NOT eligible for forgiveness), the loans must be paid back over 5 years (increased from the 2 years previously specified in the CARES Act.)

Deferral of Payroll Taxes: Previously, program participants receiving loan forgiveness were ineligible to defer payment of payroll taxes. The new program re-establishes that eligibility.

In addition to the increased flexibility, the act provides much anticipated clarification, particularly of which expenses are eligible for forgiveness. Nonetheless, there are still murky areas, and further clarifications are expected – but with the deadline extended to 24 weeks for spending the funds, there should be enough time flexibility to adjust spending as the clarifications are made. Stay tuned!

Here is a link to the act itself: https://www.congress.gov/bill/116th-congress/house-bill/7010/text