Article written by:
Rebekah Smith, CPA, CVA, MAFF, CFF
Director of Forensic & Dispute Advisory Services
Article originally published May 6, 2020
Last updated May 14, 2020
Note: After the publication of this article, on May 13, 2020, the Small Business Administration issued FAQ #47 which extended the safe harbor deadline to May 18, 2020. We have updated this article accordingly.
The SBA announced, via newly released response to question #43 in its Frequently Asked Questions (“FAQ”) document, that it would be extending the safe harbor date to return Paycheck Protection Program (“PPP”) loan funds from May 7, 2020 to May 18, 2020. To take advantage of the PPP loan program, borrowers confirm that due to “economic uncertainty” the PPP loan is “necessary to support the ongoing operations of the business.” For borrowers who have since determined they misunderstood the certification, the SBA is now allowing those funds to be returned without consequences by May 14, 2020 (FAQ #31, FAQ #37 and FAQ #47). To view our previous article describing the certification and surrounding issue, click here. FAQ #46 provided guidance on how the SBA will review the good faith certification. Click here to learn more.
Further, a recipient of the PPP loan that receives forgiveness is not eligible for the Employee Retention Credit as set forth in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. However, the Internal Revenue Service (“IRS”) issued FAQ #80 on Monday, May 4, 2020, that indicates that if an employer repays the PPP loan by May 7, 2020, that the employer would now be eligible for the Employee Retention Credit. The IRS FAQ was issued prior to the SBA FAQ and it would follow logically that the May 7th date in the IRS FAQ may also be updated to May 14th. However, the IRS has issued guidance that indicates that if an employer repays the PPP loan, the employer would now be eligible for the Employee Retention Credit.