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Blogging Beyond the Numbers

PPP Update
Posted by: Kate Serpe 4 months ago

SBA Releases Names of All PPP and EIDL Recipients

On Tuesday evening, the SBA released the names of the remaining recipients of the Paycheck Protection Program (PPP) along with the recipients of loans through the Economic Injury Disaster Loan (EIDL) program that were funded by the CARES Act.  In early July, the names, demographic information, and loan amount range of PPP recipients that had borrowed greater than $150,000 were released.  As of December 1st, loan amounts, names, and demographic information for all PPP loan recipients is now open to the public, along with information on 3.65 million EIDL loans issued totaling approximately $194 billion. 

Many sources cite the concern over fraud and abuse of the programs and the need for transparency related to taxpayer funds as reasons for the release of all data.

PPP Loan Necessity Forms – What are they and do they impact loan forgiveness?

On November 6, 2020, the SBA released Forms 3509 and 3510, Paycheck Protection Program Loan Necessity Questionnaire for for-profit (3509) and non-profit (3510) borrowers.  The questionnaires are currently being sent directly to lenders for distribution to borrowers who, alone or together with their affiliates, received PPP loans in excess of $2 million.  The purpose of the form is to gather supplemental information to be used by the SBA to evaluate the good-faith certification made on the original loan application.   On April 28, the Treasury and SBA jointly announced that all PPP loans in excess of $2 million would be reviewed.  These forms appear to be the start of that process. 

The questionnaires consist of approximately 8 pages of questions and are broken into the following sections:

  • Business/Non-Profit Activity Assessment – includes gross revenue/receipts, expenses, shut down orders, changes in operations, and capital improvement questions. 
  • Liquidity Assessment – includes cash/investment balance, distributions/dividends, restrictions, debt, employee compensation, endowment funds, equity, ownership, and additional CARES Act funding questions.

While the answers to the listed questions will have clear dollar value and yes/no answers, it is important to note that there are many opportunities to include narratives on the form to assist in painting a picture of the whole story to supplement answers.

Approximately 30,000 of the 5.2 million PPP loans were for $2 million or more.

PPP Review Period

It is important to remember that all PPP loans, regardless of the amount received, are subject to potential review by the SBA and the Department of the Treasury.  While loan recipients of $2 million or more are guaranteed to be reviewed, the remaining borrowers may still be selected for review.  As noted on the PPP application forms, borrowers must retain supporting documentation in their files for at least six years after the date the loan is forgiven or repaid in full. 

PPP Loans – The IRS doubles down on their position on the tax treatment of covered expenses

Generally, when loans are forgiven or canceled, the canceled amounts are includable as income. When the CARES Act established the Paycheck Protection Program (PPP), Congress specifically included language that PPP loan forgiveness would be excluded from gross income, thus creating an exemption for PPP loan forgiveness. Sounds good…so far. Continue reading this blog article.

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