Good news for nonprofit organizations that received funds under the Paycheck Protection Program (PPP). Additional changes have been made to the PPP after the adoption of the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act). The Flexibility Act made the following changes when it was signed into law on June 5, 2020:
- Extended the coverage period for forgiveness from 8 weeks to 24 weeks from the loan disbursement date or December 31, 2020, whichever is earlier. Organizations that received a PPP loan prior to June 5, 2020, may elect to keep the original 8-week forgiveness period.
- Updated the employee headcount provision stating that the forgiveness amount won’t be reduced based on a reduction in full-time equivalent employee headcount for organizations that can document:
An inability to rehire individuals who were employees on February 15, 2020;
An inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
An inability to return to the same level of business activity that the organization was operating at prior to February 15, 2020, due to compliance with certain COVID-19 measures related to social distancing, sanitation, or other worker or customer safety requirements.
- Revised the loan use requirements to require at least 60% of the loan to be used for payroll costs as opposed to the previous threshold of 75%. Organizations may now spend no more than 40% on non-payroll costs as opposed to the previous limit of 25%. However, the 60% is now a "cliff". Organizations must meet the 60% requirement for payroll costs or non of the loan may be forgiven.