The PPP Flexibility Act

Big Update! Paycheck Protection ProgramRapid progress is being made in the passage of the Paycheck Protection Program Flexibility Act. The bill was introduced in the House on May 15, 2020. It was just signed into law on June 5, 2020.

PPP Flexibility Act

What exactly does the PPP Flexibility Act change?

  • Covered Period – Under the current program, the covered period for the PPP is 8-weeks. The proposed legislation changes the timeframe to 24-weeks from loan origination, or December 31, 2020 (whichever is earlier). This is huge for businesses that received the PPP but were still under shutdown orders from their state or county. However, it appears that this change will not modify the covered period for self-employed individuals using the PPP funds to pay themselves.
  • Forgiveness limitation – The bill raises the non-payroll portion of the forgivable loan amount from 25% to 40%. This means you have an additional 15% of potentially forgivable mortgage interest, rent and utility expenses that you can include.
  • Maturity date – Changes the minimum maturity date of any unforgiven portion of the PPP Loan to 5-years. This seems to be a much more reasonable re-payment period considering the affects of COVID-19 are likely to last for several years. For small businesses, this gives more flexibility in their business recovery and repayment of any unforgiven loan amount.

Don’t let your guard down! Remain diligent in tracking and documenting all expenses that are paid using your PPP Loan funds. Don’t allow poor record keeping stop you from obtaining full loan forgiveness.

PPP Loan Forgiveness Under the Current Guidelines

The SBA released the Paycheck Protection Program Loan Forgiveness Application in May 2020. SBA Form 3508, an 11-page document, can be found on the SBA website. The application outlines the eligible payroll cost and non-payroll cost documentation requirements.Payroll Documentation submission requirements:

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  • Tax forms or third-party payroll service provider reports showing the payroll tax filings reported, or that will be reported, to the IRS as well as state quarterly business and individual employee wage reporting and unemployment insurance tax filings reports.
  • Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that were included in the forgiveness amount.
  • FTE documentation showing the average number of FTE employees on payroll per month between February 15, 2019 and June 30, 2109 as well as between January 1, 2020 and February 29, 2020.

Non-Payroll Documentation submission requirements (verifying the existence of the obligations/services prior to February 15, 2020 as well as eligible payments from the Covered Period):

  • Business mortgage interest payments – copy of lender amortization schedule and receipts or cancelled checks verifying payments; or lender statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period.
  • Business rent or lease payments – copy of current lease agreement and receipts or cancelled check verifying payments; or lessor account statements from February 2020 through one month after the end of the Covered Period.
  • Business utility payments – Copy of invoices from February 2020 and those paid during the Covered Period and receipt, cancelled checks, or account statements.

There are additional documents that each borrower must maintain but are not required for submission. We recommend keeping extremely detailed records and copies of all expenditures related to your PPP Loan funds.Safeguarding Small Business Act (S3596)

Lastly, we are keeping an eye on the Safeguarding Small Business Act introduced on May 4, 2020 in the Senate. This bill amends the CARES Act to remove all tax liability associated with loan forgiveness under the Paycheck Protection Program. Under current IRS tax codes, the expenses that are forgiven under the PPP Loan are no longer tax-deductible and this goes against what Congress had in mind when the CARES Act was introduced. The bill was read in the Senate and then referred to the Committee on Finance and has had no notable activity since May 4, 2020.We are here to help. If you are overwhelmed looking at the PPP Forgiveness Application or are questioning what documentation you need to pull together to insure your loan is forgiven, we’d love to help. Reach out to us at or and schedule a phone appointment with one of our advisors.

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