Management

Lawmakers Introduce PPP Flexibility Act

Nicole Schlosser
Posted on May 19, 2020
The Paycheck Protection Program Flexibility Act includes measures such as eliminating restrictions on non-payroll expenses and extending the rehiring deadline. File photo
The Paycheck Protection Program Flexibility Act includes measures such as eliminating restrictions on non-payroll expenses and extending the rehiring deadline. File photo

WASHINGTON, D.C. — Federal lawmakers introduced last week legislation designed to bring more support to small businesses through the Paycheck Protection Program (PPP) during the COVID-19 pandemic.

The Paycheck Protection Program Flexibility Act, sponsored by Rep. Dean Phillips (D-MN) and Rep. Chip Roy (R-TX) aims to make changes to the PPP such as eliminating restrictions on non-payroll expenses and extending the rehiring deadline., according to a news release from Phillips’s office.
Much of the proposed legislation was included in the HEROES Act, Congress’s latest COVID-19-spurred stimulus bill, which passed the House of Representatives on Friday.

“We must redesign the [PPP] to make it accessible to everyone, from food trucks to four-star restaurants to your favorite music venue,” Phillips said. “While the PPP has helped millions of small businesses keep their lights on, millions more remain on the outside looking in. It won’t matter how much money we appropriate if the system by which it’s distributed is inaccessible to those who need it the most.”

Phillips added that as an entrepreneur and small business owner he is aware of the challenges facing businesses struggling during the crisis, and that the legislation intends to “provide the flexibility necessary to weather the storm and prepare for uncertain times ahead.”

“The [PPP] is providing essential capital to millions of small businesses across the country,” Roy said. “Unfortunately, for many of these business owners, particularly local restaurants, hotels, and those in the hospitality industry, the terms are too inflexible to provide the help they need to weather the economic storm. PPP cannot protect jobs if workers have no job to return to after state and local lockdowns are lifted.”

Roy added that since many businesses are already four weeks into the loan, they need immediate flexibility before the forgiveness timeline runs out.

The legislation is designed to:

• Allow forgiveness for expenses beyond the eight-week coverage period. The eight-week timeline does not work for local businesses that are prohibited from opening their doors, or those that will only be allowed to open with restrictions. Businesses need the flexibility to spread the loan proceeds over the full course of the crisis until demand returns. Otherwise, employees will be furloughed at the expiration of the eight weeks.

• Eliminate restrictions limiting non-payroll expenses to 25% of loan proceeds. The PPP loans require that 75% of the loan go to payroll. For many businesses, payroll does not represent 75% of their monthly expenses and 25% does not leave enough to cover mortgage, rent, and utilities, according to Phillips’s office.

• Eliminate restrictions that limit loan terms to two years.

• Ensure full access to payroll tax deferment for businesses that take PPP loans. The purpose of PPP and the payroll tax deferment was to provide businesses with capital to weather the crisis. Businesses need access to both sources of cash flow to survive, according to Phillips’s office.

• Extend the rehiring deadline to offset the effect of enhanced unemployment insurance. To receive loan forgiveness under PPP, a business must rehire employees by a deadline of June 30, 2020. However, the enhanced unemployment insurance created through the Coronavirus Aid, Relief, and Economic Security (CARES) Act is higher than the median wage in 44 states, according to Phillips’s office.

“Many businesses have reported an inability to rehire employees because they are making more on unemployment than they made working,” Phillips’s office said. “To mitigate this unintended consequence, the deadline to rehire employees under PPP should be extended to align with the expiration of enhanced unemployment insurance.”

Curt Macysyn, the executive director of the National School Transportation Association, which represents private school bus contractors throughout the U.S., told School Bus Fleet that it supports the intent of the legislation, and in particular wants the removal of restrictions limiting non-payroll expenses to 25% of loan proceeds.

“School bus contractors have struggled to meet their fixed costs during the COVID-19 health crisis, and this new provision would be helpful in keeping contractors viable during the pandemic,” Macysyn added. “In addition, due to the unprecedented level of unemployment benefits extended through the CARES Act, the original rehire date was problematic, so we applaud Congress revisiting that issue as well.”

Related Topics: COVID-19, driver recruitment/retention, funding, legal issues, NSTA

Nicole Schlosser Executive Editor
Comments ( 1 )
  • Edna D. Fleming

     | about 15 days ago

    When a school bus transportation provider receives funding from the Payroll Protection Program, the monies is suppose to be utilized within 56 days after receipt of the funding. If the PPP Loan is received in the Spring and the school system doesn't start back until the Fall, the company will forfeit the forgivable portion of the loan and will be forced to payback the majority of the PPP Loan.

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