On June 3, 2020, the new PPP Flexibility Act of 2020 was signed into law. Since its passage, there have been eight key SBA updates that PPP loan recipients need to be aware of and consider as part of their loan usage and forgiveness strategies.
Joe Park, CEO of Horizons Stewardship, and Stan Reiff, Partner and Consulting Professional Practice Leader at CapinCrouse, a national full-service CPA and consulting firm devoted to serving churches and other nonprofit organizations whose outcomes are measured in lives changed, recorded a conversation to help leaders better understand these updates and their implications.
Watch the Interview Now
Eight Key Updates to Review
- Extension of the Minimum Loan Maturity
Loans funded after June 3, 2020 have a five year repayment period for any unforgiven balance. For loans funded before June 3 the maturity may be extended from two years to five years by mutual agreement with your lender. - Extension of the PPP Loan Program
The PPP loan program is extended to December 31, 2020, but June 30, 2020 was the last date new applications will be accepted under the current law. On July 1, 2020 the Senate passed a five week extension for new loans, but to become law it would need both house approval and the President’s signature. - Expansion of the Loan Forgiveness Covered Period
The covered period for loan forgiveness has been expanded from eight weeks to twenty-four weeks. You can apply for forgiveness at any point after eight weeks once the funds are exhausted, but there are several possible pitfalls that are discussed more fully in the interview. - Extension of Time to Rehire Workers
The time to rehire workers has been extended from June 30, 2020 to December 31, 2020. There are new provisions available to you, if you are not able to employ everyone due to government restrictions or regulations. - New Exemption from Proportional Reduction in Loan Forgiveness Amount
If you can't hire or are unable to re-hire employees, this provision helps you offset that impact on your loan forgiveness. You'll need to work with a tax professional to ensure you comply with all appropriate documentation needed, especially within the specific realities of your context. - Reduction of the Payroll Costs Expenditure Threshold to 60 percent
The minimum amount of your PPP loan that you must spend on payroll to receive full forgiveness has been reduced to 60%. If you spend less than 60%, you may still qualify for partial forgiveness. - Extension of the Loan Deferral Period to Coincide with Date of Loan Forgiveness
The period of filing your loan forgiveness application has been extended to ten months. - Deferral of Payroll Tax
The Act now permits employers who qualify to defer employer payroll taxes whether you receive PPP loan forgiveness or not. If you choose to defer these taxes, 50% of the deferred taxes will be payable in 2021 and 50% in 2022.
Additional details are included in the article Unpacking the Paycheck Protection Program Flexibility Act.
One Additional Note: Your Data Will Be Made Public
The SBA announced on Friday, June 19, that they have agreed to make data regarding the PPP loan program public. The cited reasons are "transparency and protection" for small businesses.
Data on loans greater than $150,000 will be released with specific details by business entity. Loans less than $150,000 will be released in one aggregated total.
Currently, there is no special exemption for churches or faith-based nonprofits to this provision.
Professional Help in Completing Your PPP Loan Forgiveness Application
Each church should weigh the value of paid CPA counsel when completing your PPP loan forgiveness application. When you do, ensure the CPA has a thorough working knowledge of the special accounting rules for churches and/or non-profit organizations. If you don’t have a relationship with a CPA, CapinCrouse is providing this service to most churches for $500-$1,500 depending on the size of the church. If you would like to have them assist you, click to reach out to CapinCrouse.