By Andrew Kragie

Law360 (May 20, 2020, 3:14 PM EDT ) The House is expected to vote next week on a narrow bipartisan bill that would give more flexibility to small businesses that receive forgivable loans from the Paycheck Protection Program, removing certain requirements and extending several deadlines.

The Paycheck Protection Program Flexibility Act would nix a requirement that at least 75% of funds go to payroll and allow businesses more time to use the loans and rehire workers. Such flexibility has support in both parties and both chambers of Congress. House Speaker Nancy Pelosi spoke positively about the bill Wednesday and confirmed that it is slated for a vote in the chamber next week.

"What it does is extend the time [during] which you can rehire people, extend the time [during] which you pay back, and also undo the 75/25, which was debilitating," the California Democrat said at a news conference Wednesday. "We saw a quick fix on how we could make this work better. We couldn't ignore that."

The bill's sponsors are Reps. Chip Roy, R-Texas, and Dean Phillips, D-Minn. Phillips has said Democratic leaders promised a vote on their bill when he agreed to vote for the sweeping $3 trillion Heroes Act last week. Pelosi and other leaders had to minimize defections among centrist Democrats, winning passage with a narrow 208-199 vote.

The sponsors say their bill would give employers up to 24 weeks to use funds eligible for forgiveness, rather than the current eight-week limit, which businesses have called too short. They would allow more time to rehire workers, extending the deadline to match up with the end of beefed-up unemployment benefits that give some lower-wage workers more than their salaries.

"Many businesses are already four weeks into the loan and need this flexibility immediately before the forgiveness timeline runs out," Roy said in a statement.

The bill would also eliminate a rule limiting loan terms to two years and make sure PPP recipients can also take advantage of pandemic-related payroll tax deferment.

The Cares Act provided a refundable payroll tax credit for 50% of employee wages for companies that were fully or partly prohibited from operating during the crisis, allowing employers to pay half their payroll taxes between March 27 and Jan. 1, with the remaining portion due by Dec. 31, 2021.

The new bill would allow cash-starved companies to receive both the PPP loan forgiveness and the payroll tax credit.

"Receiving both should not be considered double-dipping," lawmakers said in a summary of the bill.

A Boies Schiller Flexner LLP partner who has written about the lending program said the changes would benefit more businesses.

"The requirement that loan recipients spend 75% of the funds received on payroll has prevented a number of small businesses with high rents and low labor costs, such as many retail establishments, from seeking PPP loans," Jesse Panuccio told Law360 in an email. "Similarly, the eight-week period for which PPP funds were intended to last has convinced many small businesses that face extended periods of mandatory closure — such as restaurants — that a PPP loan would merely delay the inevitable while leaving the business owner in debt to the government."

The proposal carries endorsements from groups representing restaurants, the travel industry and small businesses.

The plan's other four co-sponsors are all Republicans: Tom Emmer of Minnesota, Fred Upton of Michigan, Brian Fitzpatrick of Pennsylvania and Andy Harris of Maryland. Upton and Fitzpatrick are both vice chairs of the Problem Solvers Caucus, a bipartisan group of centrists that also includes Phillips. The lead sponsor, Roy, is a first-term representative who previously worked as chief of staff to the conservative Sen. Ted Cruz, R-Texas.

If their proposal makes it out of the House, there could be appetite in the Senate to adjust the Paycheck Protection Program.

"There's a large consensus around ... extending the time they can use on payroll," Sen. Marco Rubio, the Florida Republican who chairs the Senate Small Business Committee, told reporters Tuesday. A bipartisan Senate bill introduced last week would give 16 weeks for PPP recipients to rehire workers and use the funds.

Rubio said a narrow measure could easily pass the Senate, unless members seek to attach something more controversial. That happened last month when Senate Republicans proposed adding $250 billion to the program while Democrats sought additional elements, including dedicated money for small lenders. After a two-week impasse during which the initial funding ran out, Congress approved a bipartisan deal that added $100 billion for health care and testing.

Passage also seems possible to Panuccio, who previously held top positions at the U.S. Department of Justice and advised GOP Sen. Rick Scott when he was Florida's governor.

"There appears to be bipartisan momentum behind an effort to revamp the PPP, so it does seem like there's a path to pass this bill separate and apart from a larger spending package," Panuccio said.

Any Senate vote would not come until June, after senators return from their weeklong Memorial Day recess.

The Paycheck Protection Program has guaranteed 4.3 million private loans worth $513.3 billion as of Saturday, according to the Small Business Administration. Despite fears that the second round of funding would run out within days, about $150 billion remained available out of the approximately $660 billion Congress has authorized. It remains a broadly popular program on both sides of the aisle, with the average loan size dropping after public outrage over larger or publicly traded companies receiving loans.

--Additional reporting by Stephen Cooper. Editing by Marygrace Murphy.

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