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Volume X, Number 187

July 03, 2020

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Key Takeaways from PPP Flexibility Act

On June 4, 2020, Congress passed the Paycheck Protection Program Flexibility Act of 2020 (“PPP Flexibility Act”), which provides a number of adjustments to the Paycheck Protection Program and expands which employers can defer remittance of their 6.2% share of Social Security. This Legal Update provides a snapshot of the changes to the Paycheck Protection Program and summarizes tax deferral changes that will become law upon President Trump’s signature.

Changes to Paycheck Protection Program
The following table highlights key changes to the Paycheck Protection Program found in the PPP Flexibility Act:

Topic

Original Treatment (under CARES Act and SBA regulation)

PPP Flexibility Act Treatment

Potential Impact

Maturity of PPP loan balance after forgiveness determination

Two years

At least five years for loans issued after the enactment of the PPP Flexibility Act

For existing loans, borrowers and lenders are able to mutually agree to a loan maturity date that is longer than the two years that had been directed by SBA regulations

Covered Period

End date of June 30, 2020

End date of December 31, 2020

The point in time to assess the return to pre COVID-19 headcount and wages has increased flexibility

Applicable window for determining forgiveness

Eight weeks after the origination of the loan

Twenty-four weeks after the origination of the loan

Borrowers will have more time in which to spend PPP funds, and have them count towards the forgiveness determination

Percentage of PPP loan proceeds spent on Payroll Costs to maximize forgiveness

75% must be spent on Payroll Cost, with a proportional reduction in the forgiven amount to the extent below that threshold

60% must be spent on Payroll Cost, with borrowers potentially being ineligible for forgiveness if that threshold is not met

Borrowers will be able to use more PPP funds on permitted expenses other than payroll costs, but missing the 60% threshold may result in zero forgiveness

Updates to Tax Deferral

The PPP Flexibility Act also makes a significant change to the CARES Act provisions that allowed employers to defer remittance of their 6.2% share of Social Security for over two years. The CARES Act allows employers to defer payment of 50% of their Social Security liability until December 1, 2021 and the other 50% until December 31, 2022. A similar deferral is allowed for self-employed individuals. However, the deferral was only available to those who did not receive a PPP loan. The PPP Flexibility Act has removed this restriction. All employers may now defer their 6.2% share of Social Security tax regardless of whether they obtained a PPP loan.

©2020 von Briesen & Roper, s.cNational Law Review, Volume X, Number 156

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About this Author

James Wawrzyn, von Briesen Roper Law Firm, Milwaukee and Waukesha, Corporate and Healhcare Law Attorney

James Wawrzyn counsels clients on commercial contract negotiation, mergers and acquisitions, supply-chain alternatives, and general corporate matters. James collaborates with clients to identify and implement their priorities. For each project, James has a results-oriented approach. He continuously engages the stakeholders to recognize and actively address obstacles to finalizing priority items.

James is skilled in the preparation and negotiation of technology-based agreements such as master services, development and licensing...

414-287-1476
Robert Teuber, von Briesen Roper Law Firm, Milwaukee, Corporate and Tax Law Attorney

Rob Teuber is a Shareholder focusing his practice on tax disputes and controversies for clients nationally, regionally and locally. From a national perspective, Rob assists in resolving IRS tax audits, Tax Court litigation, personal liability assessments, tax collection matters, Offers in Compromise and foreign financial account disclosures. From a state and local perspective, he works with clients to address sales, employment, income and property tax controversies.

Representative Matters and Experience

  • Representation of individuals and businesses in federal income and employment tax audits and State of Wisconsin income, withholding and sales tax audits.

  • Contesting asserted liabilities through federal and Wisconsin appeal procedures and the United States Tax Court.

  • Challenging assertions of personal liability for federal employment taxes and state withholding and sales tax liabilities.

  • Assisting clients in federal and Wisconsin tax collection matters including installment agreements; Offers in Compromise and uncollectible classifications.

  • Challenging property tax assessment and valuation disputes before Boards of Review and in the Wisconsin Courts.

  • Assisting clients in federal and state voluntary disclosure proceedings; foreign bank account disclosures and compliance, seller’s permit revocation proceedings and non-filer case resolution.

  • Analyzing tax and economic considerations for new and existing businesses, structuring transactions and preparation of agreements for a variety of business deals.

414-270-2538