U.S. Reps Phillips, Roy Introduce Bipartisan Fix To Paycheck Protection Program

Washington, D.C. — Reps. Chip Roy (R-TX) and Dean Phillips (D-MN) announced the introduction of the bipartisan Paycheck Protection Flexibility Act, which will make urgently needed changes to the Paycheck Protection Program (PPP), a vital initiative for small businesses struggling in the wake of the coronavirus epidemic.

The legislation will…

1. Allow forgiveness for expenses beyond the 8-week covered period

The 8-week timeline does not work for local businesses that are prohibited from opening their doors, or those that will only be allowed to open with restrictions. Businesses need the flexibility to spread the loan proceeds over the full course of the crisis until demand returns.

Otherwise, employees will simply be furloughed at the expiration of the 8 weeks. We want employers to be able to keep their employees on the payroll, not furlough them without pay or terminate them entirely. 

2. Eliminate restrictions limiting non-payroll expenses to 25% of loan proceeds

In order to survive, businesses must pay fixed costs. The PPP loans require that 75% of the loan go to payroll. For many businesses, payroll simply does not represent 75% of their monthly expenses and 25% does not leave enough to cover the mortgage, rent, and utilities.

Retaining employees is not possible if a business cannot retain their physical location

3. Eliminate restrictions that limit loan terms to 2 years

According to the American Hotel and Lodging Association, full recovery for that industry following both the September 11, 2001, terrorist attacks and the 2008 recession took more than two full years.

This is the same for many other industries. If the past is any indication of the future, it will take many businesses more than two years to achieve sufficient revenue to pay back the loan.

4. Ensure full access to payroll tax deferment for businesses that take PPP loans

The purpose of PPP and the payroll tax deferment was to provide businesses with capital to weather the crisis.  Receiving both should not be considered double-dipping.  Businesses need access to both sources of cash flow to survive.

5. Extend the rehiring deadline to offset the effect of enhanced Unemployment Insurance

To receive loan forgiveness under PPP, a business must rehire employees by a deadline of June 30, 2020.  However, the enhanced Unemployment Insurance created through the CARES Act is higher than the median wage in 44 states.

Many businesses have reported an inability to rehire employees because they are making more on Unemployment than they made working.  To mitigate this unintended consequence, the deadline to rehire employees under PPP should be extended to align with the expiration of enhanced Unemployment Insurance.