PPP Loan Eligibility Certification
Presumably as a result of the public outcry over large publicly-traded companies receiving PPP loan proceeds while many small businesses were locked out of the program, the Treasury Department tightened the eligibility rules on who qualifies for a loan.
Under the terms of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a borrower needs to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” Under new Treasury guidance released in the form of a frequently asked question, “borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”
The guidance went on to say that anyone who applied for a PPP loan prior to the issuance of this guidance (April 23, 2020) could repay the loan in full by May 7, 2020 and be deemed to have made the required certification in good faith. On May 5, 2020 the SBA updated its FAQ again and extended this safe harbor period to May 14, 2020. In addition, the SBA intends to provide guidance on how it plans to review these loan certifications before May 14.
While the current economic situation is fresh in your mind, we are recommending clients document the reasons why the loan request was made in good faith to support the ongoing operations of the business. Please reach out to your DunlapSLK team member if you would like some help getting started with this support.
Congressional Push-back on IRS Ruling Regarding Nondeductibility of PPP Loan Expenses
Late last week we advised you of the recent IRS ruling that took away the tax deductions for expenses related to PPP loan forgiveness. Congress has since acted in an attempt to rectify this problem. Legislation was recently introduced in the Senate which would override the IRS announcement and allow these expenses to be deductible. Stay tuned for more information.