A flurry of bills are being introduced in Congress to expand, revise or re-imagine the Paycheck Protection Program (PPP). The one we are betting on becoming law in the immediate future is the bipartisan Paycheck Protection Flexibility Act (undoubtedly to be nicknamed the PPFA). The PPFA, as it stands now (subject to change without notice) proposes expanding the current eight-week forgiveness period, continuing employer deferral of Social Security taxes after forgiveness, and extending the re-hiring deadline.
Our optimism that Congress will return to bipartisan agreement about the PPP derives from recent testimony to Congress by Fed Chairman Powell saying that the outlook for the COVID-19 devastated American economy remains “highly uncertain and subject to significant downside risks.” We believe this sent the message that all stimulus efforts to today could be squandered if Congress doesn’t do more soon to help the economy. Plus, upcoming elections this November helps ensure that virtually all of Congress (and the White House) is more focused on helping than limiting deficits.
There are several proposed bills floating around, including those contained in the HEROES Act, which we discussed here. Some of the proposals offer altered versions of the PPP, though most iterations contemplate continuation of the current PPP with some enhancements for borrowers, albeit without much additional funding. Although there are many versions of the proposals for a new and improved PPP, there are five thematic variations in the PPFA that seem to be included in legislative proposals coming from both sides of the aisle, and thus that are likely to actually become law. We examine those five themes after a quick refresher of the relevant PPP law (and lore).
The legislative proposals that seem to have the most bipartisan support alter some or all of the program themes discussed above. The PPFA in the House contains the broadest modifications. Dueling bills introduced in the Senate, the PPP DEALS Act and RESTART Act, offer higher-quality acronyms but more moderate changes.2
The next two legislative proposals may seem unnecessary given the bipartisan and White House support because they can be changed by the SBA itself. However, because the SBA has not reversed course yet, it appears that the SBA is waiting for a push from Congress:
It is unclear if Congress will be able to reach a consensus on revisions to the PPP. After all, the party-line vote in the House on the HEROES Act may demonstrate a return to partisanship. Further, the Senate just adjourned for its Memorial Day recess without taking action on this. We will have to see if any of these bills become a law, and what it looks like when it does.
1 The benefits to our country from reducing furloughs and layoffs were obvious, including reducing pressures on already overwhelmed state unemployment departments, keeping more Americans covered by their employer-sponsored health insurance during a pandemic, making it easier to restart the economy when the virus subsides and minimizing the impact of the virus on tens of millions of workers who might otherwise have been laid off. Borrowers that spent their PPP on qualified expenses could count on loan forgiveness, effectively turning their PPP loans into grants.
2 At the time of publishing, the full text of RESTART was unavailable.
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