June 5, 2020

Paycheck Protection Flexibility Act: Congress Cuts PPP Borrowers Some Slack

Late Wednesday, the Senate unanimously passed the House version of the Paycheck Protection Flexibility Act, which President Trump is expected to sign into law. Among other things, the legislation extends the period during which PPP loans may be spent from eight to 24 weeks, and decreases the percentage of the loan that must be spent on payroll from 75% to 60%. This excerpt from a Journal of Accountancy article highlights some of the law’s key provisions:

– Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.

– Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met. Rep. Chip Roy (Texas), who co-sponsored the bill in the House, said in a House speech that the bill intended the sliding scale to remain in effect at 60%. Senators Marco Rubio and Susan Collins indicated that technical tweaks could be made to the bill to restore the sliding scale.

– Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.

– The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.

In addition, existing PPP loans – which originally had two year terms – may be extended to five years if the lender & borrower agree, and new PPP borrowers will have five years to repay their loans. The interest rate on PPP loans remains at 1%. PPP borrowers may also delay payment of their payroll taxes, which the CARES Act prohibited. The deadline to apply for PPP loans remains June 30th.

“Cha-Ching!” Whistleblower Hits for $50 Million

You know who isn’t going to need a PPP loan? The lucky individual who just hit the SEC’s whistleblower jackpot to the tune of nearly $50 million.  This excerpt from the SEC’s press release announcing the award points out that it’s the largest in the whistleblower program’s history:

The Securities and Exchange Commission today announced a nearly $50 million whistleblower award to an individual who provided detailed, firsthand observations of misconduct by a company, which resulted in a successful enforcement action that returned a significant amount of money to harmed investors. This is the largest amount ever awarded to one individual under the SEC’s whistleblower program. The next largest is a $39 million award to an individual in 2018. Two individuals also shared a nearly $50 million whistleblower award that same year.

Here’s the SEC’s award order. As usual, all the good parts have been redacted, but this WSJ article has the details. The order indicates that another claimant sought a cut of the award, but the SEC shot that person’s claim down. Well, I guess we can’t all be winners. Personally, I think somebody like this should at least get some lovely parting gifts – you know, like Rice-a-Roni or a case of Turtle Wax – for playing the whistleblower game.

“What Then Must We Do?”

There’s a great scene in “The Year of Living Dangerously” in which photographer Billy Kwan takes journalist Guy Hamilton to witness the suffering of the poor in the slums of Jakarta. As they survey the scene, Kwan asks the question raised in St. Luke’s Gospel, “what then must we do?”  Echoing John the Baptist’s response, Kwan’s answer is, “Don’t think about the major issues. You do what you can about the misery in front of you. You add your light to the sum of all light.”

As we end this week, I think many of us are asking Billy Kwan’s question. I thought about that when I read this article that a member passed along from the Yale School of Management about how white managers can respond to anti-black violence. It provides some suggestions about actions we can take in our own businesses to help make them places that aren’t just “non-racist,” but actively “anti-racist.” You may not agree with everything the author has to say, but engaging with these issues on our own turf is the first step in following Billy Kwan’s advice.

John Jenkins