PPP Safe Harbor Extended For All Applications But Still No Guidance On “Necessity” Certification.
May 11, 2020
By: Mark A. Mangano
On May 8, 2020, the Treasury Department issued its Ninth Interim Final Rule (Ninth IFR) related to the Paycheck Protection Program. The Ninth IFR revises the language in Part III. 5. of the Fourth Interim Final Rule1 issued April 25, 2020 providing a “Limited Safe Harbor with Respect to Certification Concerning Need for PPP Loan Request.”
Significantly, this revision to the Fourth Interim Final Rule guidance extends the limited safe harbor time period to May 14, 2020 as suggested in Question 43 of Paycheck Protection Program Loans Frequently Asked Questions. Of greater significance, the IFR applies the safe harbor to all PPP loan applications. Previously, the safe harbor only appeared to apply to applications for PPP loans made before April 25, 2020.
The safe harbor provides that the SBA will deem a borrower to have made in good faith the certification “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” if the borrower repays the loan in full within the “safe harbor” time limit. The safe harbor affords PPP applicants the opportunity to reevaluate their certifications and be presumed to have acted in good faith if further guidance suggests misunderstanding of the certification standard.
The Treasury has yet to provide further guidance on the “necessity” certification standard. Borrowers with any liquidity resources beyond a PPP loan are left to struggle with what constitutes a good faith certification. The safe harbor appears to afford borrowers the ability to obtain PPP loans and retain the option to give the money back without fear of sanctions if they later change their decision considering more detailed guidance.
The Fourth Interim Final Rule provided:
Any borrower that applied for a PPP loan prior to the issuance of this regulation and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.
The Ninth IFR replaces the provision with:
Any borrower that applied for a PPP loan and repays the loan in full by May 14, 2020 will be deemed by SBA to have made the required certification in good faith.
1 85 FR 23450, 23451-23452); https://www.sba.gov/sites/default/files/2020-04/Interim-Final-Rule-04%2024%2020.pdf