My Authors
Read all threads

Alrighty then... Kids are asleep, and dinner is done. So time to breakdown Congress's latest 'gift' to small business owners, and the tax and financial planning community.

It's called the Paycheck Protection Program Flexibility Act (Full Text:…)...

Now unless you've been sleeping under a rock for the past 68 days (yes, that's the exact number of days it's been since the CARES Act was passed... though it feels more like 84 years to many of us), you've heard about the #PPP program and probably know the basics. But...

...if in fact you have been hiding under that rock, you can get the basics here:…
and, of course, here:…

But a word of warning, thanks to the new PPP Flex Act, a lot of that info is now outdated!

Now, about that new bill (it's not law yet, as @POTUS has yet to sign it)...

The bill clears up a number of issues and clarifies Congress's position on a number of vaguely worded provisions in the original CARES Act statute.

Let's start w/ PPP maturity...

CARES Act set a max maturity for PPP loans of 10 years, but no minimum. @USTreasury later, via rulemaking authority, decided to require that ALL PPP loans have a 2-year maturity.

But not so fast! PPP Flex Act changes the 2-year rule by creating a min maturity of 5 years...

But the max maturity of 10 years as provided in CARES Act remains unchanged. Interestingly, Section 2(b) of PPP Flex Act notes that lenders and borrowers can mutually agree to modify maturities.

So maybe we'll see PPP loans w/ maturities varying from 5-10 years. TBD...

Now onto the juicier stuff... modifications to the forgiveness elements of the PPP.

First, Section 3(a) extends the covered period from June 30, 2020 to December 31, 2020. This is the period of time that a biz has to use PPP fund to pay for expenses eligible forgiveness...

That, alone, is huge for some small biz owners, but I think the bigger news for many will be the actual covered period is extended from max of 8 weeks to max of 24 weeks!

I THINK this has MASSIVE ramifications and is potentially a BIG DEAL. Here's why...

The loan forgiveness is only applicable to expenses paid during the covered period. So now, it would seem that up to 24 weeks of an employee's payroll costs (along w/ other qualifying expenses) will be eligible for forgiveness.

Quick math = $100,000 ÷ 52 x 24 = $46,153.85

Could be REALLY good news for SE persons. Under current rules, they can get PPP loan based on own comp of 10/52 of 2019 eanings (up to 100k) but were only forgiven for 8/52 of 2019 earnings.

Now seems they'll get the loan on 10/52, but be forgiven on 24/52 of 2019 earnings?

Don't necessarily want to oversell this either though. Note that we're NOT talking about increasing the size of the loan a biz owner can get. Rather...

🎼I think it's about forgiveness, forgiveness, even if, even if you don't love me anymore🎶

Sorry... lost my train of thought there. What were we talking about again?

Oh yeah... that whole 24 weeks thing. It means the amounts you pay an employee during the 24 weeks after you receive a loan can be forgiven.

But you CANNOT get a loan for 24 weeks of their salary...

"But Jeff! Who cares then?

Why does it matter if I can get forgiveness for paying an employee 24 weeks' worth of salary when I can only get a loan for 2.5 months (~10 weeks) of their salary?

What gives!?"


Wow! That's a great question. I'm really glad you asked...

In short, the maximum amount of the loan you receive is based on (in general) 2.5X your avg monthly payroll from the past year.

But what if your monthly payroll is less now then it was, on average, during the past year!?

As you're no doubt aware, the COVID-19 pandemic...

has led to unprecedented numbers of Americans being laid off in record time.

And I know what you're thinking... "But Jeff, if we laid people off doesn't that mean that we'd see the amount of our loan that's eligible for forgiveness reduced anyway?"

As Lee Corso would say:

There's lots of reasons a biz could have lower payroll now w/out being 'dinged' on forgiveness.

CARES allowed employers to cut salaries of EEs making more than $100k w/out impacting the forgiveness formula.

Cuts to EEs making <$100k of <25% also OK. That hasn't changed...

But wait, there's more!

The PPP Flex Act gives employers some additional relief. Notably, if any of the following can be documented, there will be no reduction in the forgivable amount:

1) Can't rehire employees as of February 15, 2020, or similarly qualified persons...

2) Unable to return to 2/15/20 level of biz activity due to compliance w/ rules/guidance issued by @HHSGov, @CDCgov, @OSHA_DOL during period starting 3/1/20 and ending 12/31/20, related to standards for sanitation, social distancing, or other safety related to COVID-19...

Here's another significant change...

CARES Act said that amounts spent on payroll expenses, rent, utilities, etc. during the covered period could be forgiven. It didn't require a specific amount to be spent on any of those expense types.

But as you probably know...

in guidance released by @SBAgov/@USTreasury, a rule was created whereby at least 75% of the forgivable amount of PPP loan had to be spent on payroll expenses.

Put differently, no more than 25% of amount forgiven could be for amounts spend on eligible expenses NOT payroll...

The PPP Flex Act changes this and creates a statutory requirement (that's, like, a REAL rule) that at least 60% of the forgivable amount be for payroll expenses.

Which now means up to 40% of the amount forgiven can be spent on things like rent, utiltities, etc.

Also notable is a change to when non-forgiven PPP loan proceeds must begin to be paid. PPP Flex Act changes the rules so that payments will begin once the lender has determined how much of the PPP loan should be forgiven.

And if, by chance, the borrower doesn't apply...

for forgiveness by the end of the 10th month following the end of the covered period (HIGHLY unlikely but possible), then payments can begin at that time.

Time to switch gears for a moment and talk about PPP Flex Act's changes to the payroll tax deferral created by CARES...

CARES Act allows biz to delay 50% of the rest of 2020 payroll taxes to 12/31/21, w/ other 50% to 12/31/22.

But it prevented biz w/ forgiven PPP loan amounts from using that benefit.

PPP Flex Act reverses that, and allows such biz to benefit from payroll tax deferral too

That's about it. If you're tuning in for just the highlights of the bill, you have them now. But for the really nerdy tweeps out there, I've got a little left in the tank for you...

Let's start w/ page count. The PDF on the gov't website is 10 pages (I linked in Tweet 1/?, but here it is again…), but it's really only about 6 pages of text.

Compare that to CARES Act... which was 883!

So tonight was just a little light reading...

Also worth noting is that the PPP Flex Act fails to address one critical PPP issue that was ripe for 'fixing'.

More specifically, under @SBAgov/@USTreasury guidance, expenses paid w/ forgiven PPP loan proceeds are NOT deductible by biz.

I think this is totally erroneous...

Notably, the CARES Act explicitly provides that forgivable amounts are NOT subject to income tax.

Well, if you make the expenses paid w/ those funds nondeductible, you're essentially turning those amounts into taxable dollars!

So it seems to be in direct conflict w/...

w/ the clear Congressional intent!

BTW, I'm not the only one who feels this way. Legislators on both sides of the aisle have told @USTreasury they have it wrong.

'Word on the street' is Treasury knows it, but wants Congress to clarify via law anyway for reasons too...

complicated to get into after midnight.

Bottom line, that's something that really could have/should have been resolved in this bill. But it wasn't.

Keep your eyes peeled though, as it's a likely change to come in some future 2020 legislation...

Alright, I think that about does it for tonight.

Which is good timing, b/c my glass is empty!

Of course, still many unanswered Qs, so don’t think “PPP guidance season” will end anytime soon.

Now go spread the word. small biz owners need your help and guidance.

Missing some Tweet in this thread? You can try to force a refresh.

Keep Current with Jeff "The Buckinghammer" Levine, CPA/PFS, CFP®

Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

Twitter may remove this content at anytime, convert it as a PDF, save and print for later use!

Try unrolling a thread yourself!

how to unroll video

1) Follow Thread Reader App on Twitter so you can easily mention us!

2) Go to a Twitter thread (series of Tweets by the same owner) and mention us with a keyword "unroll" @threadreaderapp unroll

You can practice here first or read more on our help page!

Follow Us on Twitter!

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3.00/month or $30.00/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!