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Possible easing of PPP terms in the works


jklcpa

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For those that may not have seen this yet, both the Senate and House each have a bill in the works that would modify the 8-week term in which PPP must be used, the forgiveness, and possibly an extending the number of months for repayment of amount not forgiven.  Article from yesterday's Journal of Accountancy:

https://www.journalofaccountancy.com/news/2020/may/house-bill-relaxes-ppp-loan-forgiveness-requirements.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=29May2020

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If they make some of these changes, are they going to be retroactive, because my largest client's 8 week window ends on June 10th.

Conversely, my second largest client just received their funds today and under current law, their window begins today and ends on June 30th.

It's impossible to plan when the goalposts keep moving, not one, not twice, not three times, I'm sure I have lost count. 😯

This is the most insanity I have ever seen in my 44 years of accountancy !

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Below is what I finally found, and if I'm reading the House's version correctly, it appears to be NOT retroactive and wouldn't help your clients.  In its current form:

Quote

(b) Effective date; applicability.—The amendment made by this section shall take effect on the date of the enactment of this Act and shall apply to any loan made pursuant to section 7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)) on or after such date. Nothing in this Act, the CARES Act (Public Law 116–136), or the Paycheck Protection Program and Health Care Enhancement Act (Public Law 116–139) shall be construed to prohibit lenders and borrowers from mutually agreeing to modify the maturity terms of a covered loan described in subparagraph (K) of such section to conform with requirements of this section

H.R. 7010 is here: https://www.congress.gov/bill/116th-congress/house-bill/7010/text

I'll see if I can find the Senate's bill next.

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In addition, neither of these bills addresses the issue of the non deductibility of expenses paid with the proceeds of a forgiven loan,

which was not the intent of Congress. This whole PPP loan situation reminds me of when I was kid watching "The Three Stooges"!

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I know!  It's so incredibly frustrating trying to answer questions. Yesterday I had a call from a client whose banker, the head of commercial lending, told my client that he could use PPP funds to pay his business line of credit including principal repayments.  I didn't hear it directly, and this client doesn't listen well and hears what he wants to hear, so I have no idea what was really said in that convo.

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21 minutes ago, jklcpa said:

I know!  It's so incredibly frustrating trying to answer questions. Yesterday I had a call from a client whose banker, the head of commercial lending, told my client that he could use PPP funds to pay his business line of credit including principal repayments.  I didn't hear it directly, and this client doesn't listen well and hears what he wants to hear, so I have no idea what was really said in that convo.

There has been some stuff floating around the internet that "any business debt interest" for a loan in place on 2/15/20 can be used for the non-payroll portion of the forgiveness, not just mortgage interest.   I read an article after the new rules were published around May 22nd that said basically that.   It may be an optimistic reading of the third iteration of the interim final rules.   That may be the point the banker was trying to convey to your client?  And if his banker for his line of credit also wrote the PPP loan, he may be trying to get your client to tap the PPP to get his loan balance down?

Tom
Modesto, CA 

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cbslee is correct and I'd posted about this last week on here.  Sec 1102 of the CARES Act, item VII is where the other interest is stated to be allowed, but if we look at sec 1106, the only interest that is allowed in calculating the forgiveness is mortgage interest.

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