May 29, 2020


On May 28, the House voted 417-1 in passing the “Paycheck Protection Program Flexibility Act of 2020.” These changes help put the PPP program back in line with Congress’s original intent – that this is really supposed to be more of a grant program rather than an actual loan program.

The Senate will take this up, hopefully, next week, and a final law change should be coming soon after.

This House bill does the following:

1. Extends the time period for obtaining a PPP loan from June 30, 2020, to December 31, 2020 (or until the money runs out).

2. Extends the time period for using PPP loan proceeds from 8 to 24 weeks from the loan origination date (or December 31, 2020, if that would occur sooner than the 24-week duration).

3. Allows for any unforgiven loan amount to be repaid over 5 years rather than just 2 years.

4. Requires that only 60% of the PPP loan be used for payroll costs and up to 40% can be used for debt interest, rent, and utilities. This eases the earlier 75/25 rule that the SBA imposed after the CARES Act had passed. (The 75/25 rules wasn’t actually in the CARES Act). However, this section in the House bill was poorly drafted. If you read it literally, it implies that if under 60% of the PPP loan is used for payroll costs then there will be no loan forgiveness. That is definitely not the intent and will need to be fixed in the final version.

5. Provides major flexibility with the Safe Harbor rules to remedy employee pay cuts and FTE reductions. First, the June 30, 2020 date for reinstating the compensation for lower-paid employees who took greater than 25% pay cuts during the covered period, has been replaced with a December 31, 2020 date. Secondly, the June 30 date is replaced by December 31 for getting the FTE count back to where it was before the government shutdowns.

6. The FTE safe harbor gets a new “Safer Safe Harbor” component, which is so subjective that it guts the threat of reduced loan forgiveness due to a smaller office headcount. Regardless of the number of FTEs on December 31, 2020, there will be no reduction in loan forgiveness if the borrower documents in good faith either of the following very subjective criteria:

(A) that it was unable to rehire employees who were employed on February 15, 2020, or cannot hire similarly qualified employees for the unfilled positions by December 31, 2020, or

(B) it was unable to return to the same level of business activity as existed before February 15, 2020, due to compliance with HHS, CDC, or OSHA requirements dealing with sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.

7. Extends the time period for starting the repayment of the PPP loan from 6 months after the loan origination date to the date that the borrower actually applies to its lender for loan forgiveness. If this House bill becomes law, then loan forgiveness applications won’t be made until after the new safe harbor measuring date of December 31, 2020.

8. Permits PPP borrowers to defer its 6.2% share of Social Security taxes on employee compensation earned through December 31, 2020. The deferred taxes can be paid 50% by December 31, 2021, and 50% by December 31, 2022.

9. These changes are retroactive to the beginning of the CARES Act, so borrowers whose 8-week covered periods ended before the enactment of this updated bill will get the benefit of all of these changes, including the 24-week time period for using the money.

The Senate will likely pass a similar, but not identical, bill in the coming days. It will likely fix the mistake in the 60/40 rule described above. It may also tighten up the new and very subjective “Safer Safe Harbor” rule described above that basically eliminates the FTE pro-ration concept. And hopefully, it will address something that was totally ignored in the House bill – stating explicitly that expenses paid with PPP loan proceeds will indeed be tax-deductible. We’ll see!

Collier & Associates, Inc. will update our blog as the CARES Act progresses. We take pride in continuing to keep our subscribers and website visitors updated on current events during this extraordinary time.

We will work diligently to answer general inquiries via our website if time permits and in a little more detail within our Newsletters. However, if your questions are detailed in nature, please request to set up a conference call for a formal legal consultation. Thank you.


Collier & Associates, Inc. provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act on this information without seeking advice from professional advisors.

Talk to Collier & Associates Today

(216) 765-1199

Stay Connected


Rockport, ME – Aggressive Business, Tax & Practice Mgmt. Seminar
WHEN: Sept. 20-22, 2024
WHERE: Samoset Resort On The Ocean
Monterey, CA – Retired Doctors Seminar
WHEN: Nov. 8-9, 2024
WHERE: Monterey Plaza Hotel & Spa