Charity State Registration COVID-19 Related ChangesMay 20, 2020
inc5000 charitable registration companyAugust 12, 2020
Paycheck Protection Program Flexibility Act For Nonprofits
After weeks of debate and negotiation, the US Senate and the House finally came to an agreement on amendments to the Paycheck Protection Program (PPP) giving borrows more freedom on how and when loan funds can be spent without losing eligibility for full loan forgiveness.
The Paycheck Protection Program (PPP) loan had previously given borrowers just eight weeks to spend the funds received. For borrowers to be eligible for full loan forgiveness they had to spend 75% of the PPP loan on payroll costs. Consequently, most businesses whose payroll costs went down emanating from layoffs, found themselves in situations where they could not spend funds without risking their eligibility for full loan forgiveness.
Provisions of the Paycheck Protection Program Flexibility Act (PPPFA)
- The Paycheck Protection Program Flexibility Act extends the time for loans to be spent from eight weeks to 24 weeks. The 24 weeks cannot go beyond December 31st, 2020.
- Whereas the PPP mandated that 75% of any forgiven amount had to go towards payroll costs, in order to be eligible for full loan forgiveness, the PPP Flexibility Act reduces that to 60% of the loan amount. The remaining 40% must go towards fixed costs such as rent, utilities, etc.
- Borrowers who saw their payroll costs go down as a result of layoffs, now have the option of restoring their workforce to pre-coronavirus levels within the 24-week period. The new deadline is now December 31, 2020, instead of June 30, 2020.
- In cases where borrowers are unable to restore their workforce to pre-coronavirus levels, either based on the difficulties finding qualified employees or re-employing laid-off employees, they can still qualify for full loan forgiveness.
- The deadline for application was also extended to August 8, 2020.
- The PPPFA extends the loan repayment period from 2 years to 5 years while retaining the 1% interest rate for borrowers who did not receive full loan forgiveness.
- Businesses and nonprofits can now delay paying payroll taxes even if they were received the original PPP loan.
No doubt this added flexibility will benefit many nonprofit organizations. Please visit the Small Business Administration website for detailed information as to how your nonprofit organization can benefit from the PPP Flexibility Act.