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)
- 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)
- 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 “tracker tool” released by the American Action Forum charts the allocation of PPP loans since the program’s inception in March.
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