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AICPA Criticizes PPP Questionnaires for High-Dollar Borrowers

Posted on Dec. 3, 2020

Businesses that took millions in pandemic relief loans are now being asked thorny questions to justify receiving them, but one group says the questionnaires focus on the wrong time frame.

Borrowers of more than $2 million in Paycheck Protection Program loans are being asked to compare their gross revenue during the second quarter of 2020 with revenue from that same quarter in 2019, but that metric was irrelevant when businesses applied for the loans, the American Institute of CPAs said in a November 25 letter to the Small Business Administration.

At the time the businesses took PPP loans, they were required only to certify in good faith that they needed them, the group pointed out.

The forms for for-profit and nonprofit borrowers were circulating among practitioners in early November. The SBA indicated in a notice published October 26 in the Federal Register that it is seeking input on the forms that ask for borrower information to determine whether the borrower actually needed a loan.

The PPP, created by the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136), generally allows businesses with fewer than 500 employees to borrow up to $10 million in some cases. If a specified portion of the loan is used for payroll costs, the loan is forgivable tax free. The program’s time frame was expanded in June.

Problems have plagued the loans since their enactment. Guidance on the program has been haphazard and often leads to more questions, according to practitioners. And Treasury has now twice released guidance saying that expenses funded with forgiven PPP loans cannot be deducted.

Now, with the questionnaires, some practitioners have said the SBA and Treasury are changing the rules late in the game.

According to the AICPA, rather than asking for data on the borrower’s business operations after the date of the loan application, the SBA and Treasury should ask the company to provide a narrative and documentation to support its basis for its good-faith certification.

“This approach is consistent with the CARES Act, which required that the borrower self-assess to the best of its ability with the information it had at the time,” the group said (emphasis in original).

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