House passes PPP deadline extension in 415-3 vote
A bill to move the Paycheck Protection Program application deadline from March 31 to May 31 sailed through the U.S. House of Representatives on Tuesday night, passing in a 415-3 vote that sends the legislation to the Senate for consideration.
The nearly unanimous vote came after several dozen business groups, including the AICPA, endorsed the PPP Extension Act of 2021, H.R. 1799, which extends the filing deadline for PPP applications by 60 days and provides an additional 30 days for the U.S. Small Business Administration (SBA) to finish processing applications received by May 31.
The bill was introduced March 11 in the U.S. House of Representatives by four members of the chamber’s Committee on Small Business: Reps. Nydia Velázquez, D-N.Y., the committee’s chair; Blaine Luetkemeyer, R-Mo., the committee’s ranking member; Carolyn Bourdeaux, D-Ga.; and Young Kim, R-Calif. Companion legislation was announced for the Senate by Ben Cardin, D-Md.; Susan Collins, R-Maine; and Jeanne Shaheen, D-N.H.
The AICPA sent a letter Tuesday thanking those sponsors for introducing the legislation. The letter, signed by AICPA President and CEO Barry Melancon, CPA, CGMA, said that a 60-day deadline extension would give the SBA much needed time to address processing delays and technical challenges with its PPP platform and produce needed guidance for PPP and other COVID-19 business relief programs. The letter also emphasized the benefit of giving CPAs a longer period to assist as many clients as possible with the PPP and other COVID-19 business relief programs.
“CPA practitioners, who play a substantial role in assisting small businesses and not-for-profit entities navigate the PPP, are working with clients to evaluate which programs are best, given the unique circumstances of the client,” Melancon said in the letter. “Navigating the interplay of programs such as the employee retention tax credit, Shuttered Venue Operators Grant, and the Restaurant Revitalization Fund is challenging, as guidance for these programs is incomplete, complicating the efforts of CPAs to assist their small business and not-for-profit clients.”
The bills were announced the day after an expert panel including the AICPA’s vice president for Firm Services, Lisa Simpson, CPA, CGMA, testified before the House Small Business Committee that a 60-day delay would give the SBA time to resolve processing problems with its PPP platform and to issue needed guidance on lingering questions regarding the program.
Coalition provides comments
On Monday, a coalition of nearly 100 trade associations and chambers of commerce sent their own letter expressing concerns about unresolved PPP processing issues and thanking the PPP Extension Act sponsors.
The AICPA issued a statement that echoed the main themes of the letter but also included CPA testimonials that speak to a major PPP point of contention not addressed in the PPP Extension Act — the decision to not make retroactive the changes to the formula used to calculate the maximum loan amounts for some of the smallest PPP applicants: sole proprietors, independent contractors, and self-employed individuals who report their business income for tax purposes on Schedule C, Profit or Loss From Business, of Form 1040, U.S. Individual Income Tax Return.
The revised formula, introduced in an interim final rule March 3, allows Schedule C filers to use gross income instead of net profit in calculating the maximum amount they can receive in a PPP loan. Because many Schedule C filers report little, if any, net profit, they can qualify for significantly larger PPP loans using gross income in the formula.
The formula change received praise, but the SBA drew heavy criticism when it said it could not make the change retroactive and allow Schedule C filers who received PPP loans based on the old formula to apply for the difference between what they received and what they could have received using gross income instead of net profit.
Those sentiments are captured in the AICPA statement in a series of CPA testimonials, including one by Andrea Parness, CPA, of A. Parness Company CPA in Rockaway, N.Y. Parness said that her clients appreciate the more generous loan calculation formula for Schedule C filers but that they also are stressed and worried.
“One client, as an example, is an independent videographer who had to take money from his IRA this year to pay his bills,” she said in the statement. “He is eligible for a $7K PPP loan, which might not seem like a lot, but this $7K will help him get through the next several months. Other clients were so desperate for the money that they rushed to get their applications in as soon as PPP2 opened in January, and now these clients are missing out on additional funding because the guidance changed.”
Recent PPP reports and FAQs issued
One of the biggest causes of processing delays and outright rejections with PPP loan applications are the dozens of automated validation checks the SBA instituted to help prevent fraud during the $284.5 billion round of PPP that opened Jan. 11. While the letter from the business group coalition expressed a high level of concern with the lack of progress on resolving major PPP processing issues, a report published Monday by the SBA’s inspector general showed what can happen when the controls in place to detect and prevent duplicate PPP loans are not sufficient.
The inspector general’s report found that lenders made more than one PPP loan disbursement to 4,260 borrowers with the same tax identification number and borrowers with the same business name and address. These disbursements totaled about $692 million for PPP loans approved from April 3 through Aug. 9, 2020.
The SBA late on March 12 added a frequently asked question to its FAQ file for PPP lenders and borrowers. The new question, No. 66, asks, “What options do lenders have to assist Schedule C filers who already submitted a PPP loan application to use gross income to calculate their PPP loan amount?”
The SBA also added four items to each of its FAQs on documentation requirements and how to calculate revenue reduction and maximum loan amounts for first-draw and second-draw PPP loans. The new items, Nos. 15–18 in the first-draw FAQs and Nos. 17–20 in the second-draw FAQs, provide examples based on previously released guidance on the maximum loan calculation changes for Schedule C filers.
Also on March 12, the SBA said in a report that it approved 2.5 million PPP loans totaling $168.5 billion from the opening of the current PPP round on Jan. 11 through March 11. Adding in loan guarantee applications submitted but not yet approved brings the total to 2.8 million loans for $192.3 billion.
The report also provided updated loan forgiveness statistics for PPP loans made in 2020. Of the 5.2 million loans made, 2 million have been forgiven. The forgiven loans total $178.7 billion, which is about 34% of the $521.1 billion in PPP loans approved last year.
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Jeff Drew, “House passes PPP deadline extension in 415-3 vote,” JofA (Internet), March 16, 2021