New PPP Loan Forgiveness Rules

June 9, 2020

On Friday, June 5, the President signed into law the Paycheck Protection Program Flexibility Act of 2020 (“PPPF”), H.R. 7010.  The Act makes major modifications to the CARES Act and the Paycheck Protection Program (“PPP”) loan program.

Modification of PPP Loan Terms

  • The loan term is extended to five years.
  • Repayment is deferred. Payments of interest and principal payments on the loans are deferred until the date the lender receives forgiveness from the SBA (previously six months from the loan date).

While these modified terms are only available for PPP loans signed after June 4, 2020, lenders and borrowers are free to renegotiate the terms on existing PPP loans to match the new terms provided above – Contact your PPP Lender if you want this relief!!  In all events, no new PPP loans will be approved after June 30, 2020.

Revised PPP Loan Forgiveness Rules

The PPPF gives employers 24 weeks after loan disbursement (ending on December 31, 2020) to meet all the tests for loan forgiveness (previously it was eight weeks after loan disbursement.  For PPP loans issued before June 5, the employer can elect to use the old eight-week test.

Under the new PPPF rules, an employer must spend at least 60 percent of the loan forgiveness amount (previously it was 75%) on payroll costs by the end of the new December 31, test period.  If the employer fails to meet this 60% test, it loses all loan forgiveness!  An employer may now spend up 40% of the loan proceeds on loan interest, rent and utilities. (release 06/08/2020)

Employers now have until December 31, 2020 to restore full time headcount (FTE) and wages to February 15 levels.  Previously the deadline was June 30.

Revised Set of Excuses for Failing to Meet Headcount Target

Along with a delaying the Headcount target hire-back date from June 30, to December 31, 2020, the PPPF statute allows employers to use the following excuses for failing to hit the target:

  1. For any employee who was working on February 15, 2020, the worker rejected a written hire-back offer. The SBA regulations require the employer to keep a written copy of the hire-back offer, keep a note of the date the worker rejected the hire-back offer, and inform PA unemployment that the worker rejected the hire-back offer.
  2. The employer tried, but was unable to hire a similarly qualified employee by December 31, 2020; or
  3. For the period ending December 31, 2020, the employer documented that HHS, Centers for Disease Control, or OSHA rules or guidance for social distancing, sanitation, or safety meant that the employer is unable to return level of business activity as was the case before February 15, 2020.

Social Security Tax Deferral – Employer’s Share of FICA

Because of the PPPF, employers now may defer depositing the employer’s share of social security taxes (the 6.2% tax) through December 31, 2020, even if the employer received loan forgiveness under the PPP program.  One half of the deferred tax has to be repaid by the end of 2021, with the remaining balance due by the end of 2022.

Need an Excel Worksheet to help with this?

The AICPA organization has prepared an Excel worksheet to help with the calculations.  It has not been updated yet to reflect the PPPF.

(This is being revised, the version was current as of June 2, 2020)

Text of Statute

Expect more changes to the PPP loan forgiveness in future

House and Senate leaders want to make more changes later on this summer. The SBA and Treasury are expected to update their guidance too to reflect the PPPF law changes.

Please contact Attorney S. John Kelly at for questions on this and other tax law questions.