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S. 3805 (116th): Paycheck Protection Program Flexibility Act of 2020

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The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on May 21, 2020.

Paycheck Protection Program Flexibility Act of 2020

This bill modifies provisions related to the forgiveness of loans made to small businesses under the Paycheck Protection Program implemented in response to COVID-19 (i.e., coronavirus disease 2019).

Specifically, the bill establishes a minimum maturity of five years for a paycheck protection loan that has a remaining balance after the application of forgiveness. The bill also extends the covered period during which the recipient of a paycheck protection loan may use such funds for certain expenses while remaining eligible for forgiveness of the loan.

Further, the bill prohibits the Small Business Administration from limiting the non-payroll portion of a forgivable covered loan amount. Currently, only 25% of a paycheck protection loan may be allocated to non-payroll expenses such as rent and utilities.

The bill extends the period of time in which an employer may rehire or eliminate a reduction in employment, salary, or wages that would otherwise reduce the forgivable amount of a paycheck protection loan. However, the forgivable amount must be determined without regard to a reduction in the number of employees if the recipient is (1) unable to rehire an employee, (2) able to demonstrate an inability to hire a similarly qualified employee, or (3) able to demonstrate an inability to return to the same level of business activity.

Lastly, the bill eliminates a provision that makes a paycheck protection loan recipient who has such indebtedness forgiven ineligible to defer payroll tax payments.