Paycheck Protection Program – Biden-Harris Administration Announces PPP Reforms

Jackson Walker
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Jackson Walker

On Monday, February 22, 2021, the Biden-Harris administration announced several reforms to the Paycheck Protection Program (“PPP“), including:

  • Starting at 9 a.m. EST on Wednesday, February 24, 2021, through Tuesday, March 9, 2021 (the “Exclusivity Period”), only eligible businesses with fewer than 20 employees can apply for relief through the PPP. During the Exclusivity Period, SBA will reject new applications for applicants with 20 or more employees unless such applications were submitted by lenders to SBA before the start of the Exclusivity Period. However, lenders may accept applications during the Exclusivity Period and hold them for submission following the expiration of the Exclusivity Period. For purposes of calculating employee headcount, the rules remain the same, and each employee counts as one, regardless if full-time, part-time, or seasonal.
  • Helping sole proprietors, independent contractors, and self-employed individuals receive more financial support by (a) revising the loan calculation formula for these applicants so that the PPP offers more relief and (b) establishing a $1 billion set aside for the businesses in this categories located in low- and moderate-income (LMI) areas.
  • Schedule C filers will be able to calculate their PPP loan amount using the gross income on line 7 of IRS Form 1040 Schedule C. SBA is expected to publish an Interim Final Rule and a new PPP loan application for Schedule C filers the first week of March.
  • Elimination of the exclusionary restrictions that prevents small business owners (i.e., 20% or more owners) with prior non-fraud felony convictions or delinquency on student loan debt from obtaining PPP loans.
  • Ensuring access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use Individual Taxpayer Identification Numbers (ITINs) to apply for relief. SBA intends to issue additional guidance on this topic.

In addition, the Biden-Harris administration has taken, and will continue to take, the following steps to ensure the equitable distribution of PPP funds:

  • SBA loan guaranty approval is now contingent on passing SBA fraud checks, Treasury’s “Do Not Pay” database, and public records searches. In addition, SBA now also conducts loan reviews of large PPP loans and a random sampling of other PPP loans.
  • SBA has released PPP loan applications. The updated applications may be found at Borrower Application Form and Second Draw Borrower Application Form. These applications will be further updated to implement the changes announced on February, 22, 2021.
  • Improving the “Emergency Relief Digital Front Door,” which includes updating SBA websites to make PPP resources and applications easier to understand and complete.
  • Continuing to engage with small businesses, especially those in LMI communities, to ensure that the design and delivery of governmental relief programs, including the PPP, actually serve the business and communities that need the assistance.
  • Enhancing the SBA’s relationship with its lenders in a manner that encourages lenders to provide recommendations and ask questions about the PPP in order to ensure issues are handled in a more efficient and streamlined manner.

These reforms are in addition to changes that are contained in the American Rescue Plan that is currently winding its way through Congress. As was the case in 2020, matters in this area remain very fluid and will remain so for the foreseeable future as businesses struggle with the effects of the COVID-19 pandemic and the economic crisis. In addition, the SBA has indicated additional Interim Final Rules, updated PPP forms and PPP FAQs will be forthcoming. The target date for the release of these items is the first week of March. As a reminder, eligible small businesses may apply for First Draw PPP Loans and Second Draw PPP loans until March 31, 2021.

The Biden-Harris administration’s White House Fact Sheet on the PPP may be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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