On Friday, June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 (the Act), which makes modifications to the Program designed to enhance its effectiveness in providing relief to small businesses. The core elements of the Act are as follows: 

1. Changes to limitations on forgiveness. Prior to the Act’s enactment, a Paycheck Protection Program (PPP) loan recipient was required to spend 75 percent of the loan forgiveness amount on payroll. The Act has reduced this amount to 60 percent in order to afford small businesses more flexibility in utilizing the funds. However, the list of expenses eligible for forgiveness remains unchanged. Businesses may now use up to 40 percent of their loan forgiveness amount for payment of interests on any covered mortgage (excluding prepayments), rent, and utilities.
2. Extension of covered period. The Act has extended the period covered by the program from June 30, 2020 to December 31, 2020. In addition, the covered period for the use of loan funds has been extended to the earlier of December 31, 2020 or 24 weeks after the origination of the loan. 
3. Worker rehire changes. The Act has extended the period during which a worker must be rehired for the worker’s salary to meet the safe harbor requirements and, therefore, be included in the loan forgiveness amount. The worker rehire deadline thus has shifted from June 30, 2020 to December 31, 2020. Further, the Act relaxes the hiring requirement to give small businesses additional flexibility to address business realities. Specifically, if an employer is unable to rehire an employee, that employee’s wages may still be counted towards the loan forgiveness amount if the business can provide evidence of its inability to restore normal business levels or rehire the affected worker. 
4. Repayment term and deferral term modified. The Act extended the term of loan repayment from two to five years and modified the deferral period for loan recipients. Previously, lenders were required to defer payments until six months (and not more than one year) after the date the loan was funded. The most recent changes require that lenders defer payments until the date on which the amount of forgiveness is remitted to the lender. 
5. FICA tax deferral. The Act allows loan recipients to continue the deferral of employer FICA taxes through December 31, 2020. Any deferred taxes will be due as follows: 50% on December 31, 2021 and 50% on December 31, 2022. 

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