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August 15, 2020

SBA Extends PPP Borrower Certification "Safe Harbor" to May 14th and other PPP Updates

Yesterday, SBA extended the deadline for its PPP borrower certification “safe harbor” from May 7, 2020 to May 14, 2020. See SBA Frequently Asked Questions (Question 43). NADA has asked SBA to provide further guidance on the certification “reconsideration” issue. 

NADA also recently requested that the IRS confirm that businesses that received a PPP loan and later repay it within the safe harbor period established by SBA remain eligible for the Employee Retention Tax Credit (ERTC) notwithstanding the fact that such businesses technically “received” a PPP loan.  (Section 2301(j) of the CARES Act provides that the ERTC is not available to businesses that receive a PPP loan.)  Among other arguments, NADA explained that the purpose of this limitation was to ensure that businesses do not avail themselves of both benefits (the ERTC and the PPP) and those that returned PPP loans did not receive PPP benefits. This IRS agreed by issuing the following FAQ:

80. Is an employer that repays its Paycheck Protection Program (PPP) loan by May 7, 2020, eligible for the Employee Retention Credit? (updated May 4, 2020)

Yes. An employer that applied for a PPP loan, received payment, and repays the loan by May 7, 2020 (in accordance with the Limited Safe Harbor With Respect to Certification Concerning Need for PPP Loan Request in the Interim Final Rules issued by the Small Business Administration effective on April 28, 2020) will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit. Therefore, the employer will be eligible for the credit if the employer is otherwise an Eligible Employer.  For more information, see Business Loan Program Temporary Changes; Paycheck Protection Program—Requirements—Promissory Notes, Authorizations, Affiliation, and Eligibility (PDF)

Additional information on the ERTC is available from the IRS FAQs at https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

Also yesterday, NADA issued an updated version of its CARES ACT FAQs (FAQ 40) which addresses SBA’s Question 40 on laid off employees who refuse a written offer to be rehired.