By Jay L. Morse
Kemp Klein has provided general information regarding the development of the CARES ACT as related regulations roll out, especially as they pertain to small businesses. In the past, we’ve provided general information respecting various parts of the Paycheck Protection Program (PPP) and this article is intended to supplement that information. Specifically, this article addresses changes to the “covered period” to which the PPP applies.
Regarding changes to the “covered period” to which the PPP applies, previously borrowers were only entitled to forgiveness for PPP loan funds used appropriately within the eight-week period beginning on the date the borrower received the funds (for purposes of this article, this is the “original covered period”). However, updated PPP regulation establishes that the borrower may choose either the “original covered period” or the eight-week period beginning on the first day of the first payroll cycle following the borrower’s receipt of the PPP loan funds (for purposes of this article, this is the “alternative covered period”). Note that the “alternative covered period” must begin within eight weeks of the date that the borrower received the funds – in other words – the “alternative covered period” would still have to begin within the “original covered period.” Thus, for example, a borrower with a bi-weekly payroll cycle may elect to use the “alternative covered period” being eight weeks beginning on the first day of the first payroll cycle, as long as that first day is within eight weeks of the day the borrower received the PPP funds originally. Moreover, if payroll costs incurred during the eight-week “alternative covered period,” but paid after the end of the “alternative covered period,” such payroll costs are eligible for forgiveness if paid no later than the first regular payroll date thereafter.
Please be aware that the articles we provide are non-comprehensive due to the extensive and complicated nature of the newly drafted legislation. As a result of the rapid pace at which this bill took form, government entities continue to make made changes to this program and there are still many unanswered questions. One cannot express the importance of having a legal professional perform a fact-specific analysis of a business’s situation in light of this evolving program.
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