July 5, 2020

Volume X, Number 187

July 03, 2020

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Congress Passes the PPP Flexibility Act

On June 3, 2020, Congress passed the PPP Flexibility Act to loosen requirements for loan forgiveness for CARES Act Paycheck Protection Program (PPP) borrowers. The new forgiveness rules will allow borrowers to extend the period for spending the loan proceeds to 24 weeks from the date of disbursement, an increase from the eight-week period originally required. The PPP program will be extended from June 30, 2020, to Dec. 31, 2020. The loan application cutoff date, however, remains June 30, 2020.

Further, the deadline for rehiring laid off employees is extended from June 30 to Dec. 31, 2020, to give small businesses more time to resume normal operations. The rule reducing forgiveness for employers who have not rehired employees by the deadline has also been made more flexible. The reduction in forgiveness will not be applied if the employer is unable to rehire its laid off employees, find similarly qualified employees, or return to the business’s pre-Feb. 15, 2020, level of operations.

The Act also overrides certain rules issued by the SBA to implement the Act. The rule that 75% of the loan proceeds must be spent on payroll has been lowered to 60%, allowing small businesses to allocate up to 40% of the funds to other permissible non-payroll uses including rent and mortgage payments, utilities and payment of interest on preexisting loans. Previously, if a business did not meet the 75% threshold, only a portion of that loan would not be forgiven. The new law now makes the entire loan unforgivable if the new 60% threshold is not met. 

The Act lengthens the minimum maturity term of any unforgiven balance on a PPP loan to five years. An SBA rule had previously set the maturity of unforgiven amounts to two years.

Last, the Act contains an important tax provision, which will now allow a company to continue to defer payment of its share of social security taxes even after its PPP loan is forgiven. Under the payroll tax deferral provision in the CARES Act, a company could defer its share of social security taxes accruing through the end of 2020, paying half of the deferred amount by Dec. 31, 2021, and the other half by Dec. 31, 2022, but could not defer taxes accruing after its PPP loan was forgiven. The PPP Flexibility Act changes this result, allowing a company to continue tax deferral after forgiveness of its PPP loan.

©2020 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume X, Number 156


About this Author

Lee Ann Anderson GreenBerg Traurig ShareHolder DC NY Capital Markets Corporate Finance Insurance Insurance Regulatory & Transactions

Lee Ann Anderson focuses her practice on capital markets, structured finance and corporate transactions, with broad experience in U.S. and cross-border securities offerings.

Lee Ann counsels issuers and investment banks on certificates of deposits, including rates-, commodities-, equity-, and proprietary index-linked products. She has wide-ranging experience in debt and equity capital markets, securitizations, and other structured finance transactions. Her practice has included scores of domestic and international debt and equity offerings, as well as securitizations of receivables...

Carl Fornaris, Greenberg Traurig Law Firm, Miami and Washington DC, Finance and Corporate Law Attorney

Carl A. Fornaris is an attorney in firm's Financial Regulatory and Compliance Practice. With 24 years of legal experience, Carl advises banks and their holding companies, investment advisers, securities broker dealers, gaming firms, money services businesses and other financial institutions on all aspects of their business. These include  licensing, capital-raising transactions, acquisitions and divestitures, USA PATRIOT Act/BSA/AML compliance and OFAC sanctions programs (including permissible financial activities in Cuba), critical examination reports and enforcement proceedings, Dodd-Frank Act compliance (including Volcker Rule implementation), new products and FATCA. Throughout his career, Carl has counseled clients in their dealings with the Federal Reserve, OCC, FDIC, FinCEN, SEC, FINRA, Florida Office of Financial Regulation, New York Department of Financial Services and other state supervisory authorities.

Carl is also active representing lenders and credit parties in financing transactions, particularly credits to non-U.S. loan parties, asset-based credits, acquisition financing and stand-by letters of credit.

Carl is a past General Counsel of the Florida International Bankers Association and sits on its Board of Directors. Previously, he served as Head of Legal and Compliance for the Latin America region of Barclays Bank PLC, with responsibility for managing legal and compliance matters throughout the region. Carl is an adjunct professor in the Business Law Department of the University of Miami. He began his legal career in Washington, D.C. with an international law firm.

Barbara Jones, Greenberg Traurig Law Firm, Los Angeles, Private Equity, Corporate and Energy Law Attorney

Barbara A. Jones is a member of the firm’s Global Securities practice group and co-chairs the firm's Blockchain Task Force. She is also co-coordinator of the firm’s interdisciplinary Conflict Minerals Compliance Initiative. Barbara maintains a diverse corporate and securities law practice across industry groups, emphasizing complex international and domestic transactions, including blockchain/cryptocurrency transactions, private and public financings (including ICOs), dual listings, mergers and acquisitions, strategic collaborations and joint ventures, and licensing...

Marvin Kirsner, Greenberg Traurig Law Firm, Boca Raton, Tax Law Attorney

Marvin A. Kirsner is an attorney at the Boca Raton office where his primary areas of practice deal with corporate, transactional and industry specific tax issues. He serves as the co-chair of the State and Local Tax (SALT) Practice.


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Robert Mangas, Greenberg Traurig Law Firm, Washington DC, Government Policy, Energy and Environmental Law Attorney

Rob Mangas is Co-Managing Shareholder of the Washington, D.C. office and focuses his practice on advocacy before the U.S. Congress and federal agencies. He represents clients in a variety of different industry sectors, and is experienced in navigating U.S. House and Senate Rules and in legislative drafting.


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