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By Joseph A. Mastriani, CPA/PFS, CFP, Shareholder- Buckno Lisicky & Company

With about two weeks until the July 4th holiday, most individuals’ thoughts are focused on spending time with their families on vacation.  But for some small business owners, these next two weeks may be also focused on the last opportunity to take advantage of an unprecedented federal government loan program that was created with the intention that loan proceeds used to pay employees’ paychecks, rent and utilities would be forgiven.  

The federal CARES Act, signed into law on March 27th of this year, has provided much needed small business relief by creating the “Paycheck Protection Program” loan program.  And as of the Treasury Department’s last update thru June 6, over 4.5 million small business loans had been approved totaling over $500 million.  Unfortunately, the PPP loan program expires on June 30, which means there is limited time to apply for and receive any of the remaining $130 billion in government funds still available.

After a somewhat rocky start, the PPP loan program now offers the most favorable terms and requirements since its inception due to the recent passing of the PPP Flexibility Act on June 6. Among some of the key aspects of the Act are:

  • Borrowers now have 24 weeks instead of 8 weeks to spend their approved loan proceeds and be eligible for 100% loan forgiveness.
  • The 75% payroll expenditure requirement has been reduced to 60%, which provides additional flexibility for borrowers 
  • Borrowers now have a longer period of time for which to rehire their workforce, with the previous deadline to restore their pre-pandemic employee headcount extended from June 30 to December 31
  • New exceptions to avoid potential reduction in loan forgiveness based on borrowers’ good faith effort to document inability to rehire employees
  • Loan repayment period extended to five years from two years if agreed to by lender and borrower
  • PPP loan borrowers can now also qualify for the deferral of the employer’s share of payroll taxes also made available under the CARES Act.

PPP loan forgiveness, by virtue of the CARES Act exception, is treated as non-taxable income but the IRS has set forth their interpretation that qualified payroll and other expenses incurred related to use of the PPP loan are non-deductible.  In response, Senator Marco Rubio from Florida has stated that Congress’ intent when they crafted the original PPP loan forgiveness legislation was that small businesses would be able to write-off these expenses.  Currently, various bills in Congress have been introduced to allow tax-deductions for PPP related business payments.

Also, many PPP loan borrowers have complained of the complex calculations in completing the loan forgiveness application and this has again spurred Congress, recently, to call for Treasury to simplify the PPP loan forgiveness paperwork filing requirements.  In addition, some banking associations have proposed that PPP loans under a certain amount, $150,000 e.g., receive blanket loan forgiveness.

So, if as a small business owner you have been unsure whether to apply for a PPP loan thru a bank or other qualified lending institution, there is no better time than now to reconsider applying but the clock is ticking.