PracticeCFO Update on PPP: House Passes Bill Easing Forgiveness Requirements

Dear client, We’re happy to say that virtually 100% of clients that requested us to apply for their PPP, received the funds. They are now using these funds to operate the reopening of their practice. I’m proud of our team here at PracticeCFO and the way they mobilized to get the PPP money into your accounts. If you’ve been happy with how we’ve served you during this period or before, we would be exceptionally grateful if you would give your CFO advisor a quick online review with a few specifics about how our service has benefited your family and practice. It would really mean a lot to us as we grow by word of mouth. Google or Yelp As some of you know, the U.S. House recently passed the Paycheck Protection Program “Flexibility Act” of 2020 by a vote of 417-1. This Act has NOT yet become law. However, it is with the Senate now. We wanted to give you an update of the major provisions of this round of legislation and how it impacts you, should it be signed into law: 1.The Act extends the “covered period” for using the PPP funds from 8 to 24 weeks. If passed, this will be a huge sigh of relief. With 24 weeks, you should have no problem using the PPP funds for eligible expenses in the normal course of your operations. This means we won’t need to be as aggressive in accelerating certain qualifying expenses, such as retirement plan contributions and rent. 2.The Act would extend the June 30th 2020 deadline to rehire your employees until December 31st, 2020. This is to address the concern that many businesses won’t be able to fully rehire their staff by June 30th. 3.The “Flexibility Act” reverses out the original provision that employers could not cut an employee’s salary by greater than 25% during the covered period. 4.The Act would exempt you from receiving less forgiveness if your Full-Time Equivalent (FTE) ratio dropped during the covered period relative to pre-COVID levels. Under the original CARES act, if you only rehired 60% of your FTE, as an example, by the end of the covered period, you would only receive forgiveness of 60% of the loan related to payroll costs. Under the “Flexibility Act” pending, this would no longer be true if you can document in good faith that you were unable to:
  • Rehire your employees or find new employees in their place, or
  • Return to the same level of business activity that you had before 2/15/2020 due to compliance with federal/state requirements relating to COVID, such as social distancing and sanitation.
5.The Act would reduce from 75% to 60% the amount of PPP that must be used for payroll costs. The remaining 40% could be used for the same expenses as before; i.e. debt interest, rent, and utilities. 6.Deferral on any un-forgiven PPP loan balance would not start six month from the date the loan originated, but rather six months from the application for loan forgiveness. If this bill passes, loan forgiveness application won’t be due until after 12/31/2020. So you have quite some time before any payments are due on the un-forgiven portion of the loan. 7.The Act would extend the minimum loan term on any un-forgiven PPP from two years to five years. 8.The bill does not remove the reduction in forgiveness for any EID Grant money you received. This was the $1,000 per employee up to $10,000 maximum that most of you received. The very best scenario is that this is the only balance remaining on your PPP loan. The house bill did not override the IRS ruling that expenses paid with PPP will NOT be tax deductible. As it stands, therefore, the PPP would effectively still be taxable income. We’re hoping the Senate will address this and make those expenses tax deductible. We expect the Senate to pass the Act, with some alterations, in the coming days. We’ll keep you posted. Once we see how this plays out, we’ll revisit the prior PPP planning we did for you and make necessary changes. Stay tuned!
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