The Paycheck Protection Program Flexibility Act was passed in the Senate by unanimous consent on Wednesday, June 3 and signed by the president earlier today. The bill, which was introduced by Dean Phillips (D-MN-3) and Chip Roy (R-TX-21), passed the house last week with a bipartisan vote of 417-1.
The legislation addresses many concerns that the Brewers Association and our members have with the Payroll Protection Program (PPP) loan forgiveness requirements. The legislation is intended to provide flexibility for small businesses by:
- Reducing the 75% payroll requirement to 60% for forgiveness purposes. Borrowers would be able to use up to 40% of loan funds for: payment of interest on covered mortgage obligations; payment of covered rent obligations; and covered utility payments, and have those expenses forgiven. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
- Extending the PPP covered period from the current June 30, 2020 to December 31, 2020.
- Extending the forgiveness period (currently 8 weeks) to the earlier of: (1) 24 weeks after the origination of the loan; or (2) December 31, 2020.
- Extending the safe harbor deadline to rehire employees and restore pay to avoid reductions in forgiveness from the current June 30, 2020 to December 31, 2020.
- The bill also stipulates that during the period beginning February 15, 2020 and ending December 31, 2020, loan forgiveness amounts would be determined without regard to reductions in FTEs if a borrower, in good faith is able to document an inability to:
- Rehire individuals who were employees of the borrower on or before February 15, 2020; and
- Hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
- Return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by Health and Human Services, CDC, or OSHA during the period beginning March 1, 2020 and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
- Allowing PPP borrowers to take advantage of loan forgiveness and the payroll tax deferment provision of the CARES Act.
- The bill would strike the provision of the CARES Act that prohibits borrowers receiving loan forgiveness from also taking advantage of the law’s payroll tax deferral.
- This provision would apply retroactively as if it was included in the CARES Act.
- Extending the loan repayment deferment period from the current 6 months to “the date on which the amount of forgiveness determined under section 1106 of the CARES Act is remitted to the lender.”
- Requiring borrowers to apply for forgiveness within 10 months after the last day of the forgiveness period or else the borrower would be required to begin making payments on principal, interest, and fees.
- Extending the minimum maturity period of new PPP loans made after the enactment of the legislation to 5 years from the current 2 years. The bill would not prohibit borrowers and lenders from mutually agreeing to modify the maturity terms of existing loans.
- Allowing borrowers who received loans before the enactment of the legislation to elect to have their forgiveness period end on the date that is 8 weeks after the origination of the loan.
The breweries and other small businesses that received the first round PPP loans are already more than halfway through the 8-week covered period during which they are required to spend the funds to qualify for loan forgiveness and should find that these changes will offer more clarity and flexibility to small and independent breweries that are working to qualify for PPP loan forgiveness.
According to the Brewers Association recent impact survey, more than 80% of brewers who responded indicate having received a PPP loan. It is important that all breweries with existing PPP loans review these changes with an accountant or attorney to ensure that your brewery is in compliance when you apply for loan forgiveness. The Brewers Association will continue to update the COVID-19 Resource Center with new guidance from the SBA as it is made available.
The Brewers Association is committed to helping our membership as they deal with the impacts of the coronavirus. We will continue to work with Congress on legislation to protect and promote the interests of small and independent brewers and provide you with the resources your brewery needs.