On Thursday, May 28, 2020, the U.S. House of Representatives passed H.R. 7010, a bill that would provide businesses greater flexibility in how they spend Paycheck Protection Program (PPP) loan proceeds while still allowing those expenses to qualify for loan forgiveness. The House bill passed with a nearly unanimous, bipartisan vote of 471-1 and modifies several of the restrictions in the existing PPP. A similar measure to amend the PPP has been introduced in the Senate, which is likely to take up the issue next week.
The House bill would amend the PPP to provide businesses the following relief:
- Change the eligibility for loan forgiveness by reducing the portion of the loan proceeds that must be spent on payroll from 75% to 60%, which would allow up to 40% of the funds to be spent on certain qualified non-payroll items such as rent, mortgage interest, and utilities.
- Change the eligibility for loan forgiveness by extending the time period for businesses to spend the loan proceeds from the current eight-week period to 24 weeks.
- Increase the minimum loan term from two years to five years.
- Permit businesses seeking loan forgiveness to defer payroll taxes without penalty.
- Extend the rehiring safe harbor from June 30, 2020, to December 31, 2020. This would give businesses an additional six months to rehire employees or restore payroll levels without incurring any reduction in the forgiveness amount.
- Provide exemptions in eligibility for loan forgiveness for employee unavailability when an employer is unable to rehire an employee or hire a replacement (the SBA’s interim final rule provides for a similar exemption), and for the inability to return to the same level of business due to compliance with certain COVID-19- related orders or other circumstances.
The bill is next headed to the Senate for consideration, while the Senate is simultaneously considering its own version of the bill. The Senate version differs slightly from the version passed by the House. For example, it would extend the current eight-week period to 16 weeks, and would keep the percentage of the loan that must be spent on payroll at 75%. If the Senate’s version is passed, a conference committee may be called to resolve the differences between the House and Senate versions. Alternatively, the Senate could choose to pass an amended version of the House bill, which would then return to the House for additional votes.
If and when the Senate acts, we will send out an additional alert.