Category: Paycheck Protection Program (PPP)

House Passes Bill to Relax Restrictions on Small Business PPP Loans

Posted on by Trey Jackson

The House of Representatives yesterday overwhelmingly passed legislation (417-1) intended to ease restrictions on Paycheck Protection Program (PPP) loans to help small businesses keep workers on payroll with benefits during the coronavirus outbreak.  (The Hill, May 28) 

  • The House’s Paycheck Protection Program Flexibility Act (H.R. 7010) would allow small businesses to apply for loans and rehire laid-off or furloughed workers through December 31, 2020 – a six month extension to the original June 30 “covered period” deadline enacted as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act in March. (Roundtable Weekly, March 27). 
  • H.R. 7010 would make other changes that offer greater flexibility for PPP-eligible businesses, including:
    • Extending the loan forgiveness period from eight weeks to 24 weeks after origination;
    • Extending the PPP re-payment period to five years, for small businesses that do not receive loan forgiveness;
    • Allowing PPP loan recipients to take full advantage of deferral of employment taxes through the end of 2020; and
    • Allowing small businesses to receive forgiveness for up to 40% of PPP loan amounts used for rent and other non-payroll expenses.
  • The Roundtable joined a broad coalition of organizations supporting the flexibility bill – as originally introduced – that would have given small businesses greater discretion to decide how to best apportion PPP proceeds to help pay rent obligations and other ordinary operating expenses.  (Roundtable Weekly, May 22)
  • The original bill would have completely eliminated the so-called “75-25 Rule.”  The rule’s name derives from a Small Business Administration (SBA) regulation that currently requires a qualifying business to use at least 75% of PPP proceeds for payroll and benefits, and no more than 25% for rent, mortgage interest, and utility payments.  (See RER’s “8-Point Plan to Reform the PPP”)
  •  H.R. 7010 as passed by the House yesterday defaulted instead to a “60-40 Rule.”  According to Politico, “Democrats scaled back [the] initial version of the bill to address complaints from labor leaders that it would have given businesses less incentive to hire back workers.”  (POLITICO, May 28)
  • With the Senate scheduled to come back in session on Monday, it could vote next week on its own bipartisan legislation to modify the PPP, the Paycheck Protection Program Extension Act (S. 3833).  Like H.R. 7010, the Senate version would increase the PPP forgiveness period – but only by 16 weeks.  The Senate bill would not address changes to the “75-25 Rule” at all.  (Journal of Accountancy, May 25)
  • A bipartisan group of Senators led by John Cornyn (R-TX), meanwhile, is on record to move the “75-25 Rule” to a “50-50 Rule” where up to half of PPP loan proceeds could be used by a business to pay rent and other non-payroll fixed expenses.  (Cornyn press release, May 6)
  • Treasury Secretary Steven Mnuchin has expressed the Administration’s opposition to changing the “75-25 Rule.”  “Let me just remind people it’s called the Paycheck Protection Program, it’s not called the overhead protection program,” Mnuchin said in a May 21 interview for The Hill. “It was designed that you got eight weeks of payroll plus 25 percent for overhead, which we thought was a reasonable amount.”

House Majority Leader Steny Hoyer (D-MD) claimed earlier this week that House and Senate negotiators are nearing agreement on PPP reforms. (Bloomberg, May 26).  A recent â€śtracker tool” released by the American Action Forum charts the allocation of PPP loans since the program’s inception in March.   

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Senate, House Signal Openness to PPP Reforms as Business Coalitions Urge Policymakers to Strike “75/25 Rule,” Extend Loan Forgiveness Period

Posted on by Trey Jackson

SBA image for PPP

Congressional lawmakers are taking steps to improve key terms of the Paycheck Protection Program (PPP) to help small business borrowers deal with the economic impact of the global pandemic.  (Washington Post, May 20 and Wall Street Journal, May 21) 

  • Under the CARES Act, a portion of PPP loans can be forgiven for the eight week period after origination.  (See “CARES Act and Implications for Real Estate”)
  • Implementing rules and guidance from the U.S. Treasury and Small Business Administration further establish a “75/25 Rule,” whereby 75% of PPP loan proceeds and forgiven amounts must be for payroll.  No more than 25% can be devoted to non-payroll business expenses like rent, mortgage interest, and utility bills.
  • Business coalitions (including the The Real Estate Roundtable) sent letters yesterday urging policymakers to take immediate action to modify these requirements by extending the PPP loan forgiveness period and striking the “75/25 Rule.”
  1. A broad business coalition initiated by the U.S. Chamber of Commerce also recommends extension of the PPP’s June 30 safe harbor date for rehiring and restoration of pay.   
  2. A separate letter focuses support for specific legislation, the Paycheck Protection Flexibility Act (H.R. 6886).  This bipartisan bill is a stand-alone “spin-off” of PPP reform provisions passed by House Democrats last week in the HEROES Act.  (Roundtable Weekly, May 15, 2020)  H.R. 6886 would likewise strike the “75/25 Rule” and extend the PPP forgiveness period to 24 weeks after loan origination.
  • A sponsor of the PP Flexibility Act, Rep. Dean Phillips (D-MN), informed in a press release that House leadership has committed to bring up H.R. 6886 for its own vote possibly as early as next week.  House Speaker Nancy Pelosi (D-CA) reportedly called the 75/25 limitation on small businesses “debilitating.”  (Roll Call, May 20)
  • Over in the Senate, Marco Rubio (R-FL), Chairman of the Senate Small Business Committee and author of the PPP provisions in the CARES Act, predicted in a tweet yesterday that the Senate would pass reforms (S. 3833) to extend the time period beyond the current June 30 deadline by which qualifying small businesses can apply for and use PPP loans.
  • Senator John Cornyn (R-TX), meanwhile, has spearheaded a bipartisan effort to amend the “75/25 Rule” to a “50/50 Rule” – where up to 50% of PPP loan and forgiveness amounts could be used for rent and other ordinary business expenses.  (Cornyn letter, May 5) (Roundtable Weekly, May 8, 2020)
  • Since passage of the CARES Act on March 27, The Roundtable has recommended elimination of the “75/25 Rule” as an inappropriate “one-size-fits-all” restriction that unduly limits businesses in meeting their rent obligations and paying for other ordinary operating expenses.  (RER’s “8-Point Plan to Reform the PPP”) 
  • Treasury Secretary Steven Mnuchin yesterday endorsed congressional efforts regarding extension of the PPP loan forgiveness period.  “One of the things we’re working with Congress on, and there is bipartisan support, is lengthening the eight-week period.  [T]hat’s something we definitely want to fix,” he said. (Advancing America’s Economy forum, May 21)
  • At The Hill’s Advancing America’s Economy forum, Mnuchin also stated he did not support reforming the “75/25 Rule.” “We want most of this money to go to workers and that we believe the 75 percent was exactly consistent with the way the program was designed,” he said.
  • A recent “tracker tool” released by the American Action Forum charts the allocation of PPP loans since the program’s inception in the CARES Act.   

The Paycheck Protection Program will be discussed at The Roundtable’s Remote Annual Business and Committee Meetings from June 11-12. 

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