Paycheck Safety Plan or PPP loan debtors are respiratory an enormous sigh of aid. Within the afternoon hours of June 3rd, the Senate unanimously handed by voice vote the Paycheck Safety Plan Flexibility Act. This invoice had been accepted by the Home final week on May 28th. The Home’s vote was 417-1 with the lone dissent by Consultant Thomas Massie (R-Ky).
Because the invoice heads to President Donald Trump’s desk for signature, throughout the nation, tax professionals are beginning to get larger steering to assist their shoppers who took PPP loans.
“The bill doesn’t include everything, but it’s a good start,” says Brian Streig, CPA and Tax Director of Calhoun, Thomson + Matza, LLP in Austin, Texas. “I do think this bill is good for small business owners who have taken out Paycheck Protection Program loans.”
The PPP loan program has weathered intense criticism for the reason that passage of the CARES Act. From early confusion concerning the loan utility course of to the gradual tempo through which the Small Enterprise Administration (SBA) has launched steering, it has not been a straightforward path for debtors. However this new invoice gives hope that larger flexibility to the PPP loan forgiveness course of will assist many small enterprise house owners survive the Covid-19 disaster.
Longer Interval To Spend
One of many key provisions within the new invoice is that PPP debtors will now have an extended time interval to make use of the funds. Within the authentic CARES Act, employers had been restricted to an 8-week interval to make use of the funds. The brand new invoice extends this era to 24 weeks.
This variation addresses one of many challenges within the PPP loan program. When the preliminary legislation was enacted, Congress was targeted on offering varied forms of liquidity. One of many unintended penalties is that the rise in federal unemployment protection of $600 per week was in battle straight with the aim of PPP loans. Some staff had been making extra on unemployment than once they had been employed.
Because of this, this triggered issues for employers searching for to rehire their staff with PPP cash.
“Some small businesses are finding it hard to get some of their employees to come back to work,” explains Streig. “This could be for a number of reasons but under the original bill, the amount of the loan eligible for forgiveness would be reduced because the employee didn’t come back to work.”
Thus, PPP debtors had been in a tricky place. Some struggled with the truth that they felt dangerous asking staff to return again and earn much less. Others had been annoyed that forgiveness was conditioned in a fashion the place they lacked management.
“The House bill that the Senate passed makes it so the employer won’t be penalized when they calculate the forgiveness amount because an employee doesn’t return to work,” says Streig.
Better Flexibility in Spending
The opposite problem the PPP loan debtors had been fighting was that they felt pressured to make use of the loan predominately on payroll when there have been different urgent issues to maintain their companies afloat.
“The Treasury and Small Business Administration set a level of 75% of the loan proceeds that needed to be spent on payroll in order to be eligible for forgiveness,” explains Streig. “Congress used this bill to lower the amount to 60%, so now businesses have some more options on how they spend the funds and still get their loan forgiven.”
This opens the door for a lot of enterprise house owners who’re making an attempt to pay lease and utilities. Additional the flexibleness will enable these small companies to have an extended lifeline to maintain their month-to-month bills going.
The legislation additionally will enable the loan interval to be prolonged. Underneath the preliminary plan, the loan would have been a 2-year loan at 1% rate of interest. This has been prolonged to as much as 5 years. Once more, this can alleviate a few of the pressures felt by small companies.
However regardless of the advantages this new invoice will present, it doesn’t deal with all the problems that tax professionals had been searching for.
Streig is kind of pragmatic on what he hopes the SBA does subsequent in its steering on PPP loans.
“I would also like to see a blanket forgiveness for the smaller PPP loans,” he says. “For example, loans under $100,000 or $150,000 would only have a minimal amount of paperwork to get forgiveness. The effort to gather the information and prepare the application for forgiveness can be very burdensome for small businesses.”
As we look ahead to the President to signal the Paycheck Safety Program Flexibility Act, we are able to solely hope that further steering is on its method to proceed to assist small enterprise house owners.
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