Bill gives businesses 24 weeks to use PPP loans; allows 40% of loan to be used for non-payroll costs and qualify for forgiveness; creates exemptions to program's rehiring rule; allows recipients to defer payment of payroll taxes

The House on May 28 overwhelmingly passed a bill (HR 7010) that would make a number of changes to the CARES Act's $670 billion Paycheck Protection Program (PPP), an initiative managed by the U.S. Small Business Administration that provides forgivable emergency loans to smaller businesses. The vote was 417-1. Among other changes, the bill would give businesses 24 weeks to use the funds while still qualifying for forgiveness (an increase from the program's current eight-week limit); increase to 40% (up from 25%) the amount of the loan that can be used for non-payroll costs; and allow businesses to defer payroll tax payments if they receive a PPP loan.

The PPP Flexibility Act, sponsored by Reps. Dean Phillips (D-MN) and Chip Roy (R-TX), was considered under an expedited procedure called suspension of the rules that requires bills to be passed by a two-thirds supermajority. A PDF of the text of HR 7010 is attached with this alert, along with a short summary from Rep. Phillips' office.

HR 6782 defeated

Earlier May 28, the House failed to muster the two-thirds supermajority necessary to pass another bill related to the PPP under suspension of the rules, after Republicans urged their members to oppose the measure. The vote was 269-147. HR 6782, also sponsored by Rep. Phillips, would have required the Small Business Administration to identify borrowers with loans above $2 million and "explain the decision-making process, including for both PPP and [Economic Injury Disaster Loans] above this amount," according to a summary from Rep. Phillips' office. HR 6782 also would have required disclosure of assistance to socially and economically disadvantaged small business owners and women- and veteran-owned businesses. House Republicans argued that the bill's reporting requirements would be too burdensome for small businesses.

Senate PPP bill

The Senate last week "hotlined" its own bill (S. 3833) to modify the PPP's loan terms, a process often used to flush out any member objections before bringing a bill up under unanimous consent, though the Senate adjourned for its Memorial Day recess without considering the bill. That legislation, sponsored by Sen. Marco Rubio (R-FL), Susan Collins (R-ME), Jeanne Shaheen (D-NH) and others, includes some similar provisions to HR 7010, though it would only extend to 16 weeks the period in which PPP recipients could use the money while qualifying for forgiveness. That bill still could be considered by the Senate, or the Senate could bring up HR 7010 under unanimous consent, a scenario that House Majority Leader Steny Hoyer (D-MD) said was possible earlier this week. "What we think is there is a general consensus — both House and the Senate — that the time frame that was set [for PPP loans] was too short, unfortunately," Hoyer told reporters on May 26. "There's not much difference [between the two bills] in terms of the weeks — eight weeks."

Provisions of HR 7010

ThePPP Flexibility Act would:

• Extend the period within which a company's incurred costs qualify for loan forgiveness under PPP to 24 weeks after the loan is issued, or through December 31, 2020, whichever comes first. Loans issued before the bill's enactment could retain the program's current eight-week period if the borrower chooses.
• Extend from June 30 until December 1 the period in which businesses can restore their previous staffing or salary levels and still qualify for loan forgiveness under PPP. Under the bill, the time period in which a company's staffing and salary cuts would apply as the baseline is from February 15 through 30 days after enactment of the CARES Act (which was signed March 27).
• Lower to 60% the program's current requirement that 75% of a business's forgivable expenses come from payroll costs. The original version of HR 7010 eliminated the payroll-expenses requirement altogether, but that language was dropped after objections from labor unions earlier this week.
• Create an "Exemption Based on Employee Availability" from the PPP's requirement that any loan forgiveness be reduced in proportion to the number of full-time equivalent employees the company does not restore. A company would be exempt from this requirement if it is able to document: (1) that it was unable to rehire people who were employees on February 15; (2) that it was unable to hire similarly qualified employees for unfilled positions on or before December 31; or (3) that it was unable to return to the same level of business activity it was operating at before February 15, 2020, because it complied with certain federal guidance or requirements "for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19."
• Repeal a CARES Act provision that prohibited companies with forgiven PPP loans from deferring their payroll tax payments.
• Extend the deadline to apply for a PPP loan from June 30 to December 31, 2020.
• Allow PPP borrowers to defer their principal and interest payments until the Small Business Administration compensates lenders for any forgiven amounts. The program currently has a six-month deferral period. Borrowers would have at least 10 months after the PPP expires to start making payments if they don't seek loan forgiveness.
• Extend the minimum maturity period for PPP loans from two years to five years following an application for loan forgiveness. This new term would apply to PPP loans issued after enactment of HR 7010, though the bill says nothing in it (or the CARES Act or subsequent PPP legislation) "shall be construed to prohibit lenders and borrowers from mutually agreeing to modify the maturity terms" of loans that were issued before then.

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ATTACHMENTS

H.R. 7010

Rep. Phillips Summary of H.R. 7010