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Small Business Loan Funding Stalls in Senate

Posted on Apr. 10, 2020

Senate Democrats blocked a proposal to increase the funding of the Paycheck Protection Program (PPP) over disparity concerns and lack of state funding as practitioners and accountants call for more guidance on the existing program.

Senate Finance Committee member Benjamin L. Cardin, D-Md., objected to a $250 billion increase in the loan program for small businesses set up by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) on the Senate floor April 9. The move thwarted an attempt by Senate Majority Leader Mitch McConnell, R-Ky., to quickly approve the increase without having to call members back to Washington.

“I’m afraid that this unanimous consent is basically a political stunt because it will not address the immediate need of small businesses,” Cardin said.

The CARES Act gave employers options for how to keep paying workers during the COVID-19 pandemic. Along with the PPP, those options include an employee retention credit that provides a fully refundable credit against the employer’s portion of payroll taxes, but only $10,000 in wages per employee can be counted for all calendar quarters, and the credit is capped at $5,000 per employee.

But the PPP has run into a host of problems, such as funds not being released by banks. Cardin, however, disputed claims by McConnell that the program already has run out of the initial $349 billion earmarked for the PPP in the CARES Act, saying that “30 percent has been committed, but the funds have not been released.”

Democrats offered their own proposal that would boost loan funding by $250 billion but dedicate a portion of it to community-based lenders, such as minority depository institutions and credit unions with less than $10 billion in consolidated assets.

The proposal would also dedicate another $150 billion to states, tribes, and localities. Democrats have made state funding a key aspect of their negotiations with Republicans, and it is likely to play a role in the fourth relief package being contemplated by Congress, dubbed CARES Act 2.

Even without the objection lodged by Cardin, Democrats were unlikely to approve McConnell’s funding attempt. House Speaker Nancy Pelosi, D-Calif., said during a press call that the measure would have never been approved by unanimous consent in the House. “There is a disparity in access to capital in our country,” she said, explaining that Democrats’ attempt at carving out community lenders would attempt to fix that.

Questions Remain

Lawmakers continue to urge Treasury and the Small Business Administration to provide more guidance for accountants and practitioners as they advise their clients on how to navigate the new rules.

An April 7 bipartisan letter, whose signatories included House Ways and Means Committee members Thomas R. Suozzi, D-N.Y., and Tom Rice, R-S.C., said CPAs are raising concerns that lenders lack a consistent and standardized list of required documents, such as tax forms and payroll reports, that need to be submitted with the PPP loan application.

“We urge you to promptly release additional guidance to lenders, which will assist small businesses seeking assistance,” the letter said.

Erik Asgeirsson, head of CPA.com, the business and technology arm of the American Institute of CPAs, said in a release that the organization’s members continue to hear from clients about receiving confusing and conflicting information when applying for PPP relief. Some practitioners want further clarification on whether proceeds used to fund payroll costs and other items such as rent and mortgage interest expenses are deductible.

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