Important Pro-Employer Amendments to the CARES Act
On June 4, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020, which amended the PPP loan provisions of the CARES Act in several helpful ways. These provisions include:
- Extending the time for which PPP Loan funds can be spent, and still be eligible for forgiveness, to 24 weeks from origination of the loan, or through December 31, 2020, whichever is earlier;
- Reducing the percentage of PPP Funds that must be spent on payroll costs from 75% to 60%;
- Allowing use of PPP funds for purchasing PPE, and other worker health-related expenses;
- Extending the repayment term of PPP Loan amounts that aren’t forgiven to 5 years; and
- Granting greater flexibility in the requirement to re-hire eligible workers as a condition of loan forgiveness.
Another significant change was allowing those business who received PPP loans that may be forgiven the benefit of the payroll tax deferral benefits of the CARES Act. Under the original CARES Act, business were allowed to defer the payment of the employer’s share of FICA due between March 27, 2020 to December 31, 2020 (50% of which must be repaid by December 31, 2021, with the remainder due by December 31, 2022). Recipients of PPP Loans that are forgiven, however, were originally excluded from this deferral. That exclusion is now removed.
For businesses struggling to survive during the pandemic, these measures can serve as real lifelines to allow continued operation. But each has potential traps for the unwary.
To learn more about whether your business qualifies for these programs, and the steps to ensure you receive the full benefit of them, call one of the Tax Attorneys at Anderson & Jahde.