HR 7010 Notes & Impacts to PPP program - first reading

Video: Notes & Discussion of HR 7010

 

After a first initial reading of HR 7010, we have put this article together highlighting our questions & concerns from our initial reading of the bill to help employers understand the impacts beyond just the headlines.

Changes to Covered Period:

Question: What are the impacts on the borrower's requirement to maintain Average FTE values equal to reference period FTE? Since the coverage period may now be 24 weeks in duration, would employers have to maintain Average FTE numbers throughout a 24-week period now instead of just 8 weeks? Borrowers were only given 8-weeks of payroll funds, so for employers that may have employees not operating at full productivity or with reduced revenues, maintaining FTE values across 24 weeks may not be sustainable.

Question: For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period. Now that the coverage period is extended to 24 weeks; does this increase the salary limitation to $46,153.85? Would this limitation also apply to Sole Proprietors amounts?

Changes providing More Exceptions to Reductions related to FTE Levels: (page 3 – 4)
- The changes at the top of this section under (A) seem minimal when balanced against the FTE Exception language on the 11-page Treasury forgiveness application. There likely is more room here for employers than we are seeing on a first read.
- Section (B) adding forgiveness reduction limits “if a business can document an inability to return to the same level of business activity as such business as operating at before February 15, 2020” seem more impactful.

Important Note: the reduction clause here is based on Federal rules like CDC Guidance and not State or County level rules.

Question: Does (B) mean for instance that CDC guidance would have to continue to impact a business’s ability to open up fully throughout 2020, throughout the 24 or 8-weeks, or just have had an impact at some point in time between March 1, 2020 and December 31, 2020?

Changes to 75/25 rule making use of Funds 60% Payroll Costs & 40% non-Payroll: (page 5)
Doesn’t appear to require a borrower shift to the 24-week period coverage period in order to take advantage.  However, one concern here is the language in Treasury guidance spoke to using 75% of forgiveness amount on payroll costs whereas this language speaks to 60% of covered loan amounts. Thus, could have impact on borrowers requesting less than full forgiveness. Another concern the language seems to require 60% in order to achieve any forgiveness whereas in the past you could seek proportional reduction in forgiveness if you were unable to achieve the payroll costs level requirement.

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