Update June 4, 2040: The Senate, by voice vote, has passed the Paycheck Protection Program Flexibility Act and now will move to President Trump's desk for signature. The bill would have passed unanimously the first time except Senator Ron Johnson of Wisconsin wanted a letter on record about the authorization period. Johnson's letter clarified that June 30, 2020 remains the deadline for applying to receive a PPP loan which means Dec 31, 2020 would be the last day to spend the funds using the new 24-week period.
Senator Chuck Schumer was reported by CNBC to say there was "too much delay" if the Senate attempted to amend the bill and it was passed with no major changes. Since the Senate is not in session, the only way for the bill to pass is unanimously.
This new legislation will extend the time to use the PPP loans to 24-weeks and provide more flexibility on how the funds can be used. Rent and utilities can now be up to 40% of the loan and the remaining 60% can be spent on payroll costs, an update of the previous 25/75 ratio. The 60% that is spent on payroll is now set as a 'cliff' and a full 60% of the loan has to be spent on payroll in order for the loan to be forgivable. This is different than the sliding scale that was established for the original bill but technical tweaks may be issued to restore the sliding scale that is currently in place as reported by the Journal of Accountancy.
Furthermore, payroll taxes may now be deferred even if a business has taken a PPP loan.
As Texas continues to reopen and we look forward to a full economic reopening, I’m excited for President Donald Trump to sign this legislation to get small businesses the relief they so badly need. Let’s get it done.— Rep. Chip Roy (@RepChipRoy) June 4, 2020
Congressmen Chip Roy and Dean Phillips were the two to initially propose the bill in the House of Representatives. Roy tweeted out yesterday, "I knew that Congress had to act quickly to provide flexibility to account for different business structures and operating expenses to make the program work. We were already watching our communities lose some of our favorite restaurants, shops, hotels, and Central Texas haunts."
Update May 28, 2020 2:00 PM: The House has passed the Paycheck Protection Program Flexibility Act, also known as H.R. 6886.
With a 417-1 vote, the PPPP Flexibility Act is a proven winner and the Senate should pass it without delay. Good policy and good representation begin with listening - this is what small businesses are telling us they need to survive. #teamwork #SaveSmalBiz #SaveRestaurants https://t.co/TBct5VoeRG— Rep. Dean Phillips (@RepDeanPhillips) May 28, 2020
A number of legislators referenced the hospitality industry specifically for this bill including Dean Phillips, Chip Roy, Joe Neguse, Nydia M. Valazquez. The key highlights from the currently released bill include:
- extending the 'covered period' to 24 weeks or December 31st, whichever comes first
- More exemptions for forgiveness amounts regarding rehiring employees. During the period beginning on February 15, 2020, and ending on December 31, 2020, the amount of loan forgiveness under this section shall be determined without regard to a reduction in the number of full-time equivalent employees if an employee cannot be hired back or a business can demonstrate an inability to hire similarly qualified employees on or before December 31, 2020
- loan repayment moved to five years from two years at a 1% interest loan.
- Up to 40% of funds may be used for rents and utilities, up from a previous 25%. The remaining is to be used for payroll.
We are still waiting for a copy of the final text of the passed bill which has been reported to be several pages longer than the current one listed on Congress' website. The Senate will have to pass the bill next which is expected but it is not known what changes may be added or edited.
Original Post: The House of Representatives may pass a bill tomorrow to update the Paycheck Protection Program that will allow businesses more flexibility in how and when the funds can be used. House Majority Leader Steny Hoyer has said "the House and Senate should able to quickly agree on changes” according to Bloomberg.
A top Democrat says the U.S. House and Senate are close on PPP loan extension https://t.co/VSc2vAZw4x— Bloomberg Economics (@economics) May 26, 2020
The changes that have been proposed including extending the eight-week period to 24 weeks, which is in line with what restaurant executives asked for at an industry roundtable held at the White House last week. The executives proposed October 31st and pointed out to President Trump and Secretary of the Treasury Mnuchin that this would not require any additional funding which seemed to have executive support. However, this bill's language says the final date to use the funds would be Dec. 31st or 24 weeks, whichever comes sooner.
Danny Meyer, CEO of Union Hospitality Group, reiterated the need for an extension to 24 weeks in a recent interview with CNN as the hospitality business won't be fully up and running in the next coming weeks. Shake Shack received criticism after it was able to secure a $10 million loan from the initial round of PPP funding and returned the money in mid-April.
A plea from the restaurant industry to Congress. @dhmeyer tells me the PPP program “is actually something that will backfire on the hospitality industry unless we extend the forgivable date to at least 24 weeks.” @ushgnyc pic.twitter.com/q2FQgSdyuj— Poppy Harlow (@PoppyHarlowCNN) May 26, 2020
Additionally, the repayment period would extend to five years from two years and reconfigure the ratio of spending that must be spent on payroll versus rent and utilities.
There is a sense of urgency as businesses that were able to secure funding the first week the paycheck protection program was available, have their eight-week deadline coming up next week. A few operators that spoke with Bar & Restaurant said they had no plans to spend any of their PPP money until they could reopen at a capacity level where profit was possible. There is still roughly $100 billion in funds available from the $669 billion total that was provided over two rounds for those that have not applied yet. This figure was around 20% from Bar & Restaurant surveys that asked if they had received any PPP loans.
The House is in session today and tomorrow, the first two consecutive days since mid-March. If the proxy voting rules are allowed to continue, (there have been legal challenges), the vote should happen tomorrow on May 28th.
The Senate returns to session next week and will decide on voting for the House bill if it passes or picking up a failed bill before they recessed. The failed Senate bill only extended the program to 16 weeks.