Congress Passes the Paycheck Protection Program Flexibility Act
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On June 3, 2020, the U.S. Senate passed the Paycheck Protection Program Flexibility Act, in the form passed earlier by the U.S. House of Representatives.
06.04.20
You can read our previous alert analyzing the House bill. The President is expected to sign the act into law.
The bill faced a measure of criticism in the Senate over imprecisely drafted language that can be read to require that 60% of loan proceeds be spent on payroll costs in order for any portion of the loan to be forgiven. There appears to be general agreement, however, that the true intent of the language was to exclude only a proportionate share of loan proceeds from forgiveness to the extent that the 60% payroll-cost requirement is not met. SBA guidance is likely to confirm this interpretation, which would be consistent with prior guidance implementing the existing 75% payroll-cost requirement which the act reduces.
As described in our previous alert, the act contains provisions to broaden the circumstances under which an employer may count its good-faith inability to restore or maintain headcount as equivalent to actual employment. The practical application of these provisions is likely to be largely determined by SBA rulemaking.