The recently passed Paycheck Protection Program (PPP) Flexibility Act of 2020 provides employers with more flexibility and time to use PPP funds and qualify for loan forgiveness. The program’s lending terms are particularly beneficial to the restaurants and retailers that were forced to either delay their reopening or resume operations at a reduced level. To educate Georgia restauranteurs and franchisors about these changes, Bennett Thrasher hosted a webinar in collaboration with the Georgia Restaurant Association on the PPP Flexibility Act.
During the webinar, Tim Watt, Tax Partner in the firm’s Hospitality practice, and Stephen Klein, Managing Director of the firm’s Bankruptcy & Restructuring practice, shared insight on how to maximize loans and meet the new forgiveness guidelines. Highlights of the Act that Watt and Klein discussed during the webinar included:
- Borrowers can spend more proceeds on non-payroll. While the 25 percent cap for non-payroll costs is raised to 40 percent, business owners must be cautious about this change. If a borrower uses 59 percent of its PPP loan for payroll costs, he or she will not receive the full amount of loan forgiveness.
- The covered period is extended. Borrowers now have 24 weeks from the date of the loan’s origination to use their loan. Note that the maximum amount paid to any one employee that will be forgiven is capped at an annualized salary of $100,000. As a result, for a 24-week covered period, this limit will be reached once non-owners receive $46,153 in cash compensation, except for owners’ compensation where the compensation is limited to $20,833 for the 24-week covered period.
- Borrowers no longer must replace full-time employees. If full-time employees or salary/hourly wages are restored by December 31, 2020, no deduction in forgiveness will be required, except if other program requirements are unmet.
- Businesses that remain partially or fully closed through the end of the year will get new relief. From February 15, 2020 through December 31, 2020, the amount of loan forgiveness will not be reduced when a borrower experiences a loss of full-time employees, provided that the borrower can provide proper documentation.
- The 8-week covered period is still an option. Borrowers are not required to adopt a 24-week covered period.
- Borrowers can defer certain payroll taxes even if they received a PPP loan. Loan borrowers may now also defer all Social Security tax burden for 2020 into 2021 and 2022 even if their loan is forgiven prior to December 31, 2020.
- Forgiveness may be applied for during the 24-week period. There is not a requirement to wait for the conclusion, but this requires proper planning. Cautiously use this option.
To view a recording of the webinar, click here.