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New Law Modifies Elements of Paycheck Protection Program

President Trump on Friday signed the Paycheck Protection Program (PPP) Flexibility Act of 2020, which updates provisions of the original law for small businesses. While the law does not add funds to the program, it does lower a Small Business Administration threshold originally requiring businesses to spend 75% of their funds on payroll; that figure is now 60%. Those that do not spend 60% of the funds on payroll will not be eligible for any loan forgiveness. In addition, the law allows businesses taking a PPP loan to also qualify for a new, separate tax credit to defer payroll taxes; extends the loan term for any unforgiven portions of the loan for up five years, at 1% interest; and extends the period for businesses to apply for forgiveness, from six months to within 10 months of the last day of the covered period.