U.S. Congress Near-Unanimously Approve PPP Changes for Small Businesses
Thursday, June 4, 2020
Posted by: Mike Davin
Last night, the U.S. Senate unanimously passed legislation that would give Paycheck Protection Program borrowers more freedom in how to use funds and still have loans forgiven. The same legislation, dubbed the Paycheck Protection Flexibility Act, was passed in a near-unanimous vote in the U.S. House of Representatives.
The legislation introduced by Reps. Dean Phillips (D-MN) and Chip Roy (R-TX) makes changes to PPP that include:
- Extending the period to use loans to 24 weeks, up from eight weeks;
- Give borrowers more flexibility with their funds, allowing businesses to use 60% rather than 75% of loan proceeds on payroll costs and still be eligible for loan forgiveness;
- Allows borrowers to receive loan forgiveness and defer payroll taxes, which was not previously allowed;
- Provides exemptions for businesses to claim if they cannot rehire and individual due to business contraction, decline in business activity, or inability to hire a similarly qualified individual.
The bill faced an uphill battle in the Senate, with initial attempts to block the bill due to concerns about disincentivizing bringing back employees. Ultimately though, the bill received endorsements from key Senate republicans like Majority Leader Mitch McConnell and Sen. Marco Rubio who is Chairman of the Senate Committee on Small Business and Entrepreneurship. The Senate tried to pass their own version of the bill by unanimous consent before Memorial Day weekend, but were unable to get the 100 Senators to sign off on the legislation in one day.
Senator McConnell threw his support behind the bill in a speech on the Senate floor this week saying “I hope and anticipate the Senate will soon take up and pass legislation that just passed the House by an overwhelming vote of 417-1 to further strengthen the Paycheck Protection Program so it continues working for small businesses that need our help.”
The same day Senator Rubio released a statement cautiously supporting the bill saying that “it’s better than not doing anything” but stipulating that a key factor will be how the Treasury department interprets the legislation. “if you don’t spend 60% of your money on payroll, if you only spend 59.9%, you will get zero forgiveness.”
This is not the first time the Congress and the Treasury have disagreed on PPP implementation. In an interview with The Hill on May 21, Treasury Secretary Steven Mnuchin said that he supported an extension of the program beyond eight weeks, but opposed reducing the requirement that borrowers use 75% of loan funds to cover payroll costs. “Let me just remind people — it’s called the Paycheck Protection Program. It’s not called the Overhead Protection Program,” Mnuchin said. “We believe that the 75% was exactly consistent with the way the program was designed.”
The bill will now go to President Trump’s desk for signature.