The U.S. Small Business Administration (SBA) has extended the safe-harbor period for returning Paycheck Protection Program (PPP) funds by one week to May 14.
The SBA also explained how its affiliation rules apply to counting the employees of foreign and U.S. affiliates for purposes of the PPP’s 500-or-fewer-employee size standard. The new guidance on both topics was added Tuesday as Questions 43 and 44 in Treasury’s FAQs related to the PPP.
A May 7 deadline for returning funds was initially provided by the SBA for companies that received PPP funds but later found that they were unable to certify in good faith that their PPP loan was necessary.
Some larger companies have decided to return PPP loans after deciding they possessed sufficient liquidity to manage their businesses without those funds during the pandemic. And Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza announced last week that the SBA in consultation with Treasury plans to review all PPP loans in excess of $2 million — as well as other loans where appropriate — to ensure they are limited to eligible borrowers.
The guidance issued Tuesday stated that the extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. The SBA intends to provide additional guidance before May 14 on how it will review borrowers’ certifications.
Meanwhile, the SBA said that for purposes of the PPP’s 500-or-fewer-employee size standard, an applicant must count all its employees and the employees of its U.S. and foreign affiliates, absent a waiver of or an exception to the SBA’s affiliation rules.
The SBA said this procedure also must be followed by applicants seeking to qualify for PPP funds as a “small business concern” under Section 3 of the Small Business Act on the basis of the employee-based size standard.
The PPP was established to provide relief to small businesses during the coronavirus pandemic as part of the Coronavirus Aid, Relief, and Economic Security Act, P.L. 116-136, which was signed into law on March 27. PPP funds are available to small businesses that were in operation on Feb. 15 with 500 or fewer employees, including not-for-profits, veterans’ organizations, Tribal concerns, self-employed individuals, sole proprietorships, and independent contractors. Businesses with more than 500 employees in certain industries also can apply for loans, according to the SBA and Treasury.
After an initial round of $349 billion in PPP funding was exhausted after just 12 days, Congress approved an additional $370 billion in funding for small businesses, with $310 billion in fresh funds provided for the PPP. The application window for the second round of PPP funding opened April 27.
The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.