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Update: President Trump Signs Paycheck Protection Program Flexibility Act of 2020

Update: Today President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 ("FA"). The House passed the law on May 27 and the Senate approved on June 3. The legislation provides more flexibility to small businesses who received loans under the Paycheck Protection Program (“PPP”).

Maturity of PPP Loans

To start, the FA establishes that all PPP loans granted after the enactment of the FA will carry a 5-year minimum maturity term. For already existing loans, the FA allows for lenders and borrowers to mutually agree to modify the 2-year maturity term of the existing loan and implement the new 5-year minimum.

Extended Covered Period

Further, the FA extends the deadline to apply for a PPP loan to December 31, 2020. The covered period for which PPP loan recipients may spend the loan is also extended. Originally, small businesses had 8 weeks to spend the PPP loan money. Under the FA, small businesses may spend the PPP loan money during a 24-week period or until December 31, 2020, whichever occurs first. A business that has received a loan prior to the enactment of the FA may elect to spend their loan within the 8-week spending period that coincides with origination of their loan or extend it through the new 24-week covered period.

Payroll vs Nonpayroll Uses

Prior to the FA, recipients of a PPP loan were required to use 75% or more of the loan on payroll expenses in order to be eligible for loan forgiveness. The FA reduces that amount and requires recipients to spend at least 60% of the loan amount on payroll expenses in order to be eligible for loan forgiveness. This allows a recipient of a PPP loan to use up to 40% of the loan amount on non-payroll expenses like mortgage, rent, and utility payments.

Full-Time Equivalent Safe Harbor

The PPP requires loan recipients to restore its full-time employee count or employee wages to its February 15, 2020 level by June 30, 2020 in order to receive the full amount of loan forgiveness. Because many businesses are still facing difficulties in restoring operations to their February 15, 2020 levels, the FA extended the date to restore the loan recipient’s full-time employee count or employee wages to December 31, 2020.

Further, the FA provides a new exemption from a proportional reduction of loan forgiveness due to a reduction in full-time employees. This exemption is conditioned on the PPP loan recipient documenting, in good faith, one of the following two findings. First, a loan recipient can document an inability to rehire individuals who were employees on February 15, 2020 and document an inability to hire similarly qualified employees for unfilled positions by December 31, 2020. Second, a loan recipient can document:

“an inability to return to the same level of business activity as such business was operating at 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.”

Extended Deferral Period

Under the initial CARES Act, a deferral period of not less than six months and no more than one year was allowed for loan payments of principal and interest. Under the FA, the deferral of payments of principle and interest extends until the lender receives the total forgiveness amount of the loan, which is determined by the CARES Act. Additionally, if a PPP loan recipient fails to apply for forgiveness of the loan, then the recipient must begin payments of interest and principle within 10 months of the end of the newly established 24-week covered period.

It is anticipated that President Trump will sign the FA into law but, until then, the CARES Act and the PPP remain in effect leaving the above-mentioned changes unimplemented.

For questions regarding the Paycheck Protection Program Flexibility Act of 2020, please contact your primary BMD attorney.

Vaccination Considerations for Employers

Today, three Covid-19 vaccines have tested as highly effective (90%+ efficacy) and are advancing in the process for emergency use. This is especially welcome news in Ohio, which has skyrocketing cases and our strategic response has been to turn the entire state into the small town of Bomont with strict curfews and bans on social gatherings.

Did You Receive More than $750,000 in Provider Relief Funds?

The Provider Relief Funds (“PRF”) - authorized under the CARES Act - has been a vital tool for health care providers during the COVID-19 public health emergency. These funds have allowed providers to stay open and continue to offer care during these pressing times. While helpful, these funds do come with several important obligations. First, fund recipients are required to comply with certain record-keeping requirements as well as comply with certain balance billing prohibitions. See our Client Alert. Second, fund recipients are required to report their intent, use of funds, and other data elements, which helps promote transparency to the federal government. Please see our Client Alert on provider relief fund reporting requirements. Third, and perhaps a new concept for many providers, fund recipients of more than $750,000 must undergo a “single audit” to ensure program compliance and appropriate use of funds.

Important Updates Every Provider Should Know: Information Blocking

In December 2016, Congress passed the 21st Century Cures Act (“Cures Act”) which: (1) authorized funding for the National Institutes of Health to promote medical research and drug development, (2) implemented provisions aimed at addressing the prevention and treatment of mental illness and substance abuse, and (3) reformed certain standards of the Medicare program and federal tax laws to foster healthcare access and quality improvement.

PPP Update: Loan Necessity Questionnaires

On October 26, 2020, the Small Business Administration (“SBA”) published a notice in the Federal Register which foreshadowed the release of two new forms seeking information from for-profit and nonprofit organizations that received Paycheck Protection Program (“PPP”) loans of $2 million or more. If approved, the SBA would use information from these forms to evaluate and determine whether economic uncertainty made a PPP loan request necessary.

Exposure to COVID-19 Flow Chart

Exposure to COVID-19 Flow Chart