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June 3, 2020; Politico

Yesterday, the US Senate unanimously voted to change the Paycheck Protection Program (PPP) to make it a more flexible support instrument for businesses and nonprofits, accepting without amendment the Paycheck Protection Program Flexibility Act of 2020 (HR 7010), passed by the House last Thursday by a vote of 417–1.

NPQ wrote about these proposed changes a week ago, just before the House voted. The bill was originally introduced into the House on May 15, 2020, and it represents one piece of the much larger $3 trillion HEROES bill, passed three weeks ago, which Republican leaders in the Senate have refused to take up.

The Paycheck Protection Program to date has made $510 billion in loans through banks and other lenders who, themselves have remained in the dark on the terms of the final deal all this time. $149 billion remains in the fund and there is some expectation that this relaxation of the rules will help ensure that the rest of the money is deployed.

As we noted last week, these changes help strengthen nonprofits and small business, but do so in part by weakening the employment provisions of the bill, leaving the country without a national employment strategy at a time of record unemployment. The most critical changes that will be made by the bill’s passage are:

  • Extending the PPP and the rehiring deadline to December 31, 2020
  • Expanding the covered period for loan use from eight weeks to 24 weeks
  • Maturity for new loans grows from two years to five years—and borrower and lender may mutually agree to later maturity
  • Forgiveness provisions:
    • Ease rehire requirement based on inability to rehire former or similarly qualified employees, or inability to return to operations levels
    • Reduce how much of loans must be spent on payroll costs from 75 percent to 60 percent
  • Deferring payments of principal, interest, and fees until either the date the lender receives payment for forgiven amount of loan or 10 months after the end of the covered period
  • Making PPP participants eligible for employer payroll tax deferral (CARES Act Sec. 2302)

Tim Delaney of the National Council on Nonprofits tells NPQ that the approved change will increase nonprofits’ “flexibility of action” for those nonprofits “fortunate enough to have secured PPP loans.” However, Delaney notes that nothing in the bill helps the many nonprofits that, as Tiffany Gourley Carter covered last month, continue to have “enormous unemployment bills immediately due and payable.”

It is also worth recalling the many, many items remaining on Congress’s plate that were addressed at least in some form in the HEROES bill but which have not been passed into law. Here are but a few:

  • Aid to state and localities: Many states have budgets that need to be passed July 1st and face balanced budget requirements amid declining revenues and increased costs. Without substantial federal support, these states will be pushed to either raise taxes on decrease spending—the latter “solution” would greatly increase already record unemployment, while starving nonprofits of state contracts.
  • Unemployment insurance: Right now, the CARES Act $600-a-week boost to unemployment insurance payments is set to expire July 31st, the loss of which would seriously harm the tens of millions of Americans currently relying on federal payments to make ends meet.
  • Homeowner and rental assistance to keep homeowners and renters in their homes and stave off potential waves of foreclosures and evictions.
  • Support for the US Postal Service, an essential infrastructure for ensuring that essential democratic processes such as the US Census and the November general elections can occur.

Meanwhile, even with regard to PPP, as we know from past experience, those with loans should brace themselves for more rounds of clarifying “guidance” especially since the bill was passed despite some worries about “technical” errors in its drafting.

Watch these pages for further updates.—Ruth McCambridge and Steve Dubb

Correction: This article has been altered from its initial form to correct the amount remaining in the fund at the time.