Trump Signs Legislation to Relax PPP Restrictions After Congress Passes Measure Overwhelmingly

Trump Signs Legislation to Relax PPP Restrictions After Congress Passes Measure Overwhelmingly

Updated June 5, 2020


Several restrictions on companies that borrow money through the Paycheck Protection Program have been relaxed under legislation approved unanimously in a Senate voice vote and by a 417-1 vote in the House.  Rep. Dean Phillips (D-Minn.) introduced the bill, called the “Paycheck Protection Program Flexibility Act,” on May 26 with 35 cosponsors, including 17 Republicans. President Trump signed the bill into law on June 5.

Among other provisions, the measure gives businesses more time and flexibility to make qualifying expenditures for loan forgiveness and allows businesses with forgiven loans to defer payroll taxes.

The legislation also:

  • Requires businesses seeking loan forgiveness to spend at least 60 percent of covered funds on payroll expenses, instead of 75 percent under a PPP regulation. 
  • Gives some borrowers additional time to start making loan repayments.
  • Designates the legislation as an emergency requirement for budgetary purposes.

Rep. Dean Phillips

The Paycheck Protection Program offers low-interest loans guaranteed by the Small Business Administration for small businesses and other entities to keep workers on the payroll. Its lending authority was set at $349 billion under the CARES Act and was subsequently increased to $659 billion. The program is open to businesses with 500 or fewer employees.

PPP loans can be forgiven for borrowers that pay eligible payroll expenses or make other covered payments for mortgage interest, rent, or utility costs incurred over eight weeks. 

Some restaurants and other small businesses affected by coronavirus shutdown orders said they won’t be open or fully functional within eight weeks. They also said they need more flexibility to cover nonpayroll expenses such as rent and utility payments, especially while employees are laid off.

The SBA inspector general found that tens of thousands of borrowers wouldn’t meet the agency’s required threshold for payroll costs. “It may be important to consider that many small businesses have more operational expenses than employee expenses,” the inspector general wrote.

The new law:

  • Extends the PPP loan forgiveness period to include costs incurred over 24 weeks after a loan is issued or through December 31, whichever comes first. Businesses that received a loan before the measure was enacted could keep the current eight-week period.
  • Extends to December 31 from June 30 a period in which loans can be forgiven if businesses restore staffing or salary levels that were previously reduced. The provision applies to worker and wage reductions made from February 15 through 30 days after enactment of the CARES Act, which was signed into law on March 27.
  • Maintains forgiveness amounts for companies that document their inability to rehire workers employed as of February 15, and their inability to find similarly qualified workers by the end of the year. Under the modified measure, companies are covered separately if they show that they couldn’t resume business levels from before February 15 because they were following federal requirements for sanitization or social distancing.
  • Requires at least 60 percent of forgiven loan amounts to come from payroll expenses.
  • Repeals a provision from the CARES Act that barred companies with forgiven PPP loans from deferring their payroll tax payments.
  • Allows borrowers to defer principal and interest payments on PPP loans until the SBA compensates lenders for any forgiven amounts, instead of the current six-month deferral period. Borrowers that don’t apply for forgiveness now have at least 10 months after the program expires to start making payments.
  • Establishes a minimum loan maturity period of five years following an application for loan forgiveness, instead of the original two-year deadline set by the SBA. That provision applies to PPP loans issued after the measure is enacted, though borrowers and lenders could agree to extend current loans.

Most other changes apply retroactively to the enactment of the CARES Act.

In a related development, the U.S. House rejected a bill (H.R. 6782) that would require the Small Business Administration to issue a public report on assistance provided to small businesses under coronavirus relief laws. The vote on H.R. 6782 was 269-147, with two-thirds required for passage.

Contact IAA Vice President for Government Relations Neil Simon at to share your views on this or other government relations matters.


TAGS: PPP, Congress, Inside the BeltwayCoronavirus,  COVID-19  

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