The Paycheck Protection Program, authorized by Congress under the CARES Act of late March, and managed by the SBA, continues to evolve. In this missive, we cover changes made by the Paycheck Protection Flexibility Act (PPFA), which was passed by the House in late May and by the Senate on Wednesday evening June 3. We also review the forgiveness application and discuss the IRS’ opinion of the deductibility of forgiven expenses.


Under the PPFA, PPP borrowers can choose to use a 24-week period instead of eight weeks, to restore workforce levels and wages to pre-pandemic levels required for full forgiveness. This 24-week period expires December 31 instead of June 30.

The payroll expenditure requirement drops to 60% from 75%. However, forgiveness is now a cliff instead of a gradient. Using the 60% payroll rule means that at least 60% of the loan amount must be used for qualifying payroll, or none of the loan is forgiven. Under the 75% rule, if less than 75% of loan proceeds were used for qualifying payroll, then there was partial forgiveness on a pro-rata basis.

The new bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.

Pre-PPFA guidance allowed borrowers to exclude from payroll calculations those employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. PPFA allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to February 15, 2020 levels due to C-19 related operating restrictions.

Borrowers now have five years, instead of two years, to repay any unforgiven loan amounts.

Forgiveness Application

The application for loan forgiveness is 11 pages long, which isn’t much for a federally issued document. It is SBA Form 3508 updated 5/20 and has an OMB control number of 3245-0407. We are certain that your lender will work with you to complete the form, though you may want to be familiar with it.

The four components of the application are a) the PPP Loan Forgiveness Calculation Form, b) PPP Schedule A, c) the PPP Schedule A Worksheet, and d) the optional PPP Borrower Demographic Information Form. Per the form itself, all borrowers must submit the first two items to their lender.

We will be glad to send you a pdf of the loan application. Simply send an email to either, or We chose not to include a link for security reasons.


On April 30, the IRS issued Notice 2020-32, which says that expenses paid for with forgiven, tax-free PPP dollars are not deductible business expenses under Section 162 of the Internal Revenue Code (IRC). This got the attention of taxpayers, tax professionals, and most of Congress. Within a week, Senate Bill S. 3612 was introduced, the Small Business Expense Protection Act, which would assure the deductibility of business expenses.

The House-sponsored HEROES Act, passed by the House on May 12, also addresses the deductibility issue. However, the HEROES Act included a number of other provisions which will require some discussion between House and Senate before final legislation is sent to the President for signature.

We fully expect legislation to confirm deductibility of business expenses, regardless of the source of funds used to pay those expenses. We also believe it is prudent of us to be aware of the various forces at work regarding these various issues, as we are called upon to make decisions regarding the stewardship of our resources.

If you have questions about how to plan for uncertainty, or to think through how to reduce taxes, please don’t hesitate to reach out.