In recent days, the United States Congress has taken up modifying the Payroll Protection Program (PPP).  Last week, the House of Representatives passed a bill that made significant changes to the Program. The Senate has yet to pass the House bill or its own bill to modify the PPP.

The House bill broadens the length of time for an employer to use its PPP loan as well as how the employer may allocate the loan funds. In particular, the bill modifies the following provisions of the PPP.

1. 1. Increases the time limit in which the loan funds can be used from 8 weeks to 24 weeks so that businesses can take advantage of the process of partial re-opening;
   2. Revises the allocation for which the loans can be used from 75% payroll and 25% for specified expenses, such as rent and utilities, to 60% for payroll and 40 % for other specified expenses; and
   3. Allows employers to defer payroll taxes.

The rationale behind the House’s bill is that businesses need more flexibility in using the funds as they reopen.  While the increased flexibility seemingly undermines the primary purpose of the PPP, employee retention, it also more accurately reflects the realities of the current economy.  Some employers have laid off employees, reducing their overall labor burden, but still maintaining many fixed, non-labor fixed costs.  In addition, the economy appears to be recovering more slowly in some regions of the country than others, making it difficult or impossible for employers to use the funds in the short 8-week period.  

The House bill has been sent to the Senate for consideration.  There was a narrower Senate version of the bill which also sought to make revisions to the PPP, but did not pass.  The Senate bill retained the 75%/25% ratio for loan forgiveness and only extended the time for which the loan funds could be used from 8 to 16 weeks. 

As the House bill is now in the Senate, we will have to see whether the Senate changes any provisions of the House bill which would then require the House to re-vote on the bill.  The Senate is expected to take the House bill up this week.  As of the date of this article, several Republican senators have stated they will support passage of the House bill in the Senate.

In determining how to the protections available under the PPP or other COVID-19 statutes, it is always advisable to consult with legal counsel.  The attorneys in our Austin and Dallas offices are available to answer any questions you may have.

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