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New deadline of May 14 to repay Paycheck Protection Program (PPP) loans for SBA “good faith” certification

New deadline of of May 14 to repay PPP loans

The U.S. Treasury Department updated a list of “frequently asked questions” (FAQs) concerning the Paycheck Protection Program (PPP) that is administered by the Small Business Administration (SBA).

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The FAQs [PDF 120 KB] (updated May 6, 2020) now include:

  • FAQ #43 that provides the SBA is extending the repayment date for PPP loans to May 14, 2020, for “good faith” or safe harbor certification by the SBA
  • FAQ #45 that provides an employer that applied for a PPP loan, received payment, and repays the loan by the safe harbor deadline (May 14, 2020) will be eligible for the employee retention credit if the employer is otherwise an eligible employer for purposes of the credit

Background

FAQ #31 was added April 23, 2020, to address whether businesses owned by large companies with adequate sources of liquidity to support their ongoing operations qualify for PPP loans.

In the answer to FAQ #31, borrowers are reminded that they must certify in good faith that their PPP loan request is necessary to support their ongoing operations, taking into consideration their current business activity and their ability to access other sources of liquidity. By example, the FAQ states that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.

FAQ #31 concludes: “Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.” Read TaxNewsFlash

May 14 deadline

FAQ #43 provides SBA is extending the repayment date for PPP loans, referenced in FAQ #31, to May 14, 2020.

43. Question: FAQ #31 reminded borrowers to review carefully the required certification on the Borrower Application Form that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date?

Answer: SBA is extending the repayment date for this safe harbor to May 14, 2020. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.

KPMG observation

There is a separate set of FAQs from the IRS concerning the employee retention credit and the credit’s interaction with the PPP. An employer cannot claim the employee retention credit if the employer receives a PPP loan. According to FAQ #80 from the IRS, employers that received a loan under the PPP, but opt to repay the loan by the SBA’s May 7, 2020 deadline may claim the employee retention credit after repaying the PPP loan. Read TaxNewsFlash

As of May 6, 2020, at 4:15 EDT, the IRS has not updated FAQ #80.

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