The Paycheck Protection Program Flexibility Act of 2020

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Matthew L. Roberts

Matthew L. Roberts

Principal

469.998.8482
mroberts@freemanlaw.com

Mr. Roberts is a Principal of the firm. He devotes a substantial portion of his legal practice to helping his clients successfully navigate and resolve their federal tax disputes, either administratively, or, if necessary, through litigation. As a trusted advisor he has provided legal advice and counsel to hundreds of clients, including individuals and entrepreneurs, non-profits, trusts and estates, partnerships, and corporations.

Having served nearly three years as an attorney-advisor to the Chief Judge of the United States Tax Court in Washington, D.C., Mr. Roberts leverages his unique insight into government processes to offer his clients creative, innovative, and cost-effective solutions to their tax problems. In private practice, he has successfully represented clients in all phases of a federal tax dispute, including IRS audits, appeals, litigation, and collection matters. He also has significant experience representing clients in employment tax audits, voluntary disclosures, FBAR penalties and litigation, trust fund penalties, penalty abatement and waiver requests, and criminal tax matters.

Often times, Mr. Roberts has been engaged to utilize his extensive knowledge of tax controversy matters to assist clients in their transactional matters. For example, he has provided tax advice to businesses on complex tax matters related to domestic and international transactions, formations, acquisitions, dispositions, mergers, spin-offs, liquidations, and partnership divisions.

In addition to federal tax disputes, Mr. Roberts has represented clients in matters relating to white-collar crimes, estate and probate disputes, fiduciary disputes, complex contractual and settlement disputes, business disparagement and defamation claims, and other complex civil litigation matters.

The Paycheck Protection Program Flexibility Act of 2020

On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”). The PPPFA provides significant borrower-friendly changes to the CARES Act and the Paycheck Protection Program (“PPP”).  Some of these changes are discussed more fully below.

Loan Maturity. 

The maximum loan maturity for a PPP loan was 10 years under the CARES Act.  However, under Interim Final Rules, the SBA had made loan maturities for PPP loans 3 years.  Under the PPPFA, the minimum maturity for PPP loans is 5 years.

Extension of Loan Covered Period.

Generally, the CARES Act provided that the covered period for a PPP loan was February 15, 2020, through June 30, 2020.  The PPPFA has extended the covered period to December 31, 2020.

In addition, the PPPFA now provides the borrower with additional time to pay or incur eligible expenses for loan forgiveness.  Under the CARES Act, this period was 8 weeks from the date of the first loan disbursement.  Under the PPPFA, this period has been extended to 24 weeks (up until December 31, 2020).

Reduction of Forgivable Loan Amount for Employee Headcount Reduction.

The primary goal of the PPP loan program was to ensure borrowers maintained employees.  Thus, the CARES Act had several provisions which would reduce the forgivable amount if, for example, employee headcount was reduced during specified periods.

Under the PPPFA, a reduction in employee headcount will not reduce the loan forgiveness amount if the borrower, in good faith, can document an inability to:  (1) rehire individuals who were employees of the borrower on February 15, 2020, and (2) hire similarly qualified employees for unfilled positions on or before December 31, 2020.

Moreover, the PPPFA similar provides that a reduction in employee headcount will not reduce the loan forgiveness amount if the borrower, in good faith, is able to document an inability to return to the same level of business activity as the business was operating before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.

Payroll Loan Forgiveness Requirement.

Under Interim Final Rules, a borrower was required to pay or incur at least 75% of his eligible expenses on payroll costs to qualify for full loan forgiveness.  The PPPFA reduces this threshold to 60%.  Accordingly, a borrower may use 40% of the PPP loan proceeds for payment of interest on a covered mortgage obligation, payment on a covered rent obligation, or payment on a covered utility payment.

Delay of Employer Payroll Taxes.

Under the CARES Act, certain employers and self-employed individuals could defer payment of the employer portion of payroll taxes and self-employment taxes, respectively, to December 31, 2021, and December 31, 2022.  However, the CARES Act also provided that any taxpayer who had debt forgiven under the PPP loan program did not qualify.  The PPPFA now permits these taxpayers to qualify for payment deferral.

 

Business Tax Planning Lawyer

Need assistance in managing the business planning processes? Freeman Law advises clients with corporate and other entity formations and reorganizations. Restructuring entities—through conversions, mergers, and liquidations—can involve particularly complex tax and regulatory considerations. Freeman Law provides experienced tax and business counsel, helping our clients achieve their organizational goals in a tax-efficient manner. Schedule a consultation or call (214) 984-3410 to discuss your corporate structuring or business and tax planning concerns.

 

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