Less than 24 hours after the Paycheck Protection Program (PPP) was discontinued, Congress has breathed new life into the loan program. On Tuesday evening, the Senate unanimously approved a bill that allows applications to be included in the program by August 8th. By unanimously passing the bill, the Senate was able to repeal procedural rules in order to speed up the process.
On Wednesday evening, the House of Representatives also unanimously decided to extend it. The measure will now be presented to President Trump for signature.
Under the program, the SBA approved nearly 4.9 million loans totaling $ 520.6 billion. Despite the popularity of the program, it had approximately $ 130 billion in unallocated funds when it was discontinued. With so much remaining in the program, some advisors question the point of extending it.
“I really don’t think there’s an urgent need to renew,” said Brian Streig, CPA and tax director at Calhoun, Thomson + Matza, LLP in Austin, TX. “It would be a better change to get a second loan or have some other type of money.” He added, “My clients who need money now have already received and spent their PPP loan.” The fact that some places may be re-quarantined makes this problem even more pressing.
On the flip side, renewing can save time for business owners who previously struggled to summarize their information. “We’re forgetting that there are DIY taxpayers who have been severely affected and had no relationship with an accountant or tax professional prior to the Covid-19 outbreak,” said Nayo Carter-Gray, Enrolled Agent and Owner of 1st Step Accounting in Baltimore, Maryland. “They had to find someone to help them apply and by the time they did the accountants were already overwhelmed and had to ‘fit in’ them.”
The extension also does not solve the problems caused by interactions with other loan programs. “Those who first received the Economic Injury Disaster Loans (EDIL) and are planning to apply for PPP must now ensure that those funds are not being used for the same purposes,” said Nicole Davis, CPA and principal at Butler-Davis, one Accounting firm in Conyers, Georgia. Even with the extension, further impulses are likely to be on the table.
Automatic forgiveness on the table too
Yesterday evening US Senators Kevin Cramer (R-ND), Bob Menendez (D-NJ), Thom Tillis (R-NC) and Krysten Sinema (D-AZ) from the Senate Banking Committee presented the Paycheck Protection Small Business Forgiveness Act . Specifically, the ACT PPP loan would award $ 150,000 or less if the borrower presented a unilateral confirmation form to the lender. It also ensures that the lender is held harmless from any enforcement action if the borrower’s certificate contains falsehood.
According to Senator Cramer, there are 3.7 million PPP loans up to a maximum of $ 150.00 for 85 percent of all PPP-approved loans. However, these loans only make up 26 percent of the PPP funding provided. “The cost of applying for a PPP loan off this size is $ 2,000 for the small business and $ 500 for the lender,” he said on his website. He adds that the legislation could save small businesses $ 7.4 billion and banks nearly $ 2 billion.
This would be a welcome change not only for small businesses but also for tax professionals. “The PPP and EIDL programs have cost my company a lot of time and resources,” said Eric Pierre, CPA and director of Pierre Accounting in San Diego, California. “We spent hours and hours helping customers and we weren’t getting paid because the banks didn’t obey the law.”
Adam Markowitz, enrolled agent and vice president at Howard L. Markowitz PA in Orlando, Fla. Agrees, “The automatic forgiveness of PPP is something everyone has been screaming about for months.” He added, “As long as it is like any other tax document potential fraud checks are good enough to move the program forward and get it out of the minds of Congress, banks, small businesses, and those who assisted in creating these PPP forms. “