House Approves Paycheck Protection Fix Providing Additional Flexibility

The House of Representatives has approved stand-alone legislation that seeks to alleviate complications small business owners encountered under the Paycheck Protection Program (PPP). 

 

Introduced by Reps. Dean Phillips (D-MN) and Chip Roy (R-TX), the Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010) was approved May 28 by a vote of 417-1. H.R. 7010 now moves to the Senate, where similar legislation has also been introduced.

 

The PPP was enacted under the CARES Act and was later expanded under Paycheck Protection Program and Health Care Enhancement Act to help small businesses affected by the COVID-19 crisis by covering their near-term operating expenses and providing incentives to retain employees. And while funds disbursed under the PPP loan program are primarily intended to help businesses stay afloat, they can also be used to help pay for retirement benefits. The program has faced intense criticism that the rules are too rigid, however, and many business owners have been unable to meet the requirements of spending the funds within the existing eight-week forgiveness period.

“Congress now has an opportunity to fix what’s broken and make this important relief program more accessible and useable to the small businesses that need it the most,” Phillips said in a statement. “I am encouraged by the bipartisan cooperation of my colleagues in the House and Senate, and look forward to working with them to push these reforms over the finish line without delay.”

 

H.R. 7010 modifies the PPP by:

 

Rep. Roy noted previously that the purpose of PPP and the payroll tax deferment was to provide businesses with capital to weather the crisis, and that “receiving both should not be considered double-dipping.” 

 

This bill, however, does not address the IRS’ recent interpretation denying deductions for otherwise deductible expenses under the loan forgiveness of the PPP, which faced pushback by the congressional tax-writing committee chairmen.

 

 

Sen. Marco Rubio (R-FL) on May 21 introduced similar legislation (S. 3833) to provide flexibility to the PPP, but it would only extend the loan forgiveness period to 16 weeks from 8 weeks. Sens. Angus King (I-ME) and Steve Daines (R-MT) have also introduced legislation (S. 3805) to extend the time period businesses have to use funds from the PPP, as well as to ease the limit on using funds for non-payroll expenses.

 

Before the Memorial Day break, the Senate was unable to approve Rubio’s legislation under an expedited unanimous consent agreement, but it is anticipated that the Senate will revisit this issue when the chamber returns next week.

 

 

Action on another, broader stimulus bill in the Senate still appears to be weeks away, however. After the House approved its $3 trillion HEROES Act on May 15, it was declared “dead on arrival” by the Senate leadership.

In addition to including retirement provisions supported by the American Retirement Association, the HEROES Act also includes provisions to expand the employee retention tax credit enacted under the CARES Act. This credit, which is designed to encourage businesses to keep employees on their payroll, is being touted as an alternative relief mechanism for those businesses that have been unable to take advantage of the PPP. As noted in an earlier post, Sen. Mark Warner (D-VA) has introduced legislation to expand the tax credit.

 

But before a fifth COVID-19 stimulus bill can be enacted, House and Senate lawmakers have quite of bit of negotiating to do. One line in the sand will be the Senate’s insistence on liability protection from the pandemic, although many moderate Democrats have expressed an open mind to considering such protections.

 

Senate Majority Leader Mitch McConnell (R-KY) and Sen. John Cornyn (R-TX) have been working on legislation to address liability reforms specifically related to the pandemic by providing a pathway for businesses to reopen. “Our legislation is going to create a legal safe harbor for businesses, nonprofits, governments, workers, and schools who are following public health guidelines to the best of their ability,” McConnell stated May 12 on the Senate floor. “To be clear: We are not talking about immunity from lawsuits. There will be accountability for actual gross negligence and intentional misconduct. We aren’t going to provide immunity. But we are going to provide some certainty,” he stated.