Risk & Compliance

House Passes Bill to Ease Rules for Payroll Protection

The bill would allow small businesses seeking loan forgiveness to use a smaller share of the money on payroll.
House Passes Bill to Ease Rules for Payroll Protection

The U.S. House of Representatives voted 417-1 to pass a bill that would give small business owners more flexibility in how they use the Paycheck Protection Program (PPP).

The House bill, called the Paycheck Protection Flexibility Act, would reduce the proportion of the pandemic-response funds that small businesses have to spend on payroll, and it would delay requirements to rehire workers and repay loans.

A similar bill has been put forward in the Senate, which is out of session until next week.

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The PPP began in early April with $349 billion in funding, but the rollout was criticized as chaotic and ineffective and the funds were exhausted within two weeks. Another $310 billion was approved by Congress on April 21.

“This bill significantly increases small businesses’ ability to have their PPP loan fully forgiven and will change forgiveness compliance,” the chief executive officer of CPA.com, Erik Asgeirsson, said in a statement. “The current lack of flexibility in some PPP provisions has created unnecessary challenges. We welcome Congress’s attention to this important issue as it will allow more businesses to apply for and use PPP relief.”

Under the amended rules, businesses would be required to spend only 60% of funds they receive on payroll instead of the 75% required previously. An earlier version of this new bill would have eliminated the payroll spending requirement completely, but labor unions objected to that provision, saying it would give employers less incentive to rehire workers.

Treasury Secretary Steven Mnuchin has said he supports the 75% threshold.

The bill comes as another 2.1 million workers filed new unemploymentclaims in the United States. The Department of Labor now says 40.8 million Americans, or about one-quarter of the U.S. workforce, have been pushed into unemployment in the last 10 weeks.

Paul Chinn/The San Francisco Chronicle via Getty Images