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Tax Monitor

SBA Refines Ineligibility Standards for Felonies

June 25, 2020

By: Mark A. Mangano

The Small Business Administration (SBA) has continued to refine the nature of a business owner’s criminal history that will make the business ineligible for a loan under the Paycheck Protection Program (PPP). On June 24, 2020, the SBA issued its 21st Interim Final Rule related to the PPP program: Business Loan Program Temporary Changes; Paycheck Protection Program-Additional Eligibility Revisions to First Interim Final Rule (IFR).1

The IFR further amends the first interim final rule.2  The first interim final rule included a provision that a business with an owner of 20 percent or more of the business who “is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years” would be ineligible for a PPP loan.
The SBA later limited application of the five-year limit to “a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance.” Convictions for other types of felonies would only be considered if within one year of application.

The IFR makes two further distinctions.

  1. A present indictment, criminal information, arraignment, or other means by which formal charges are brought in any jurisdiction must be for a felony.  The original provision suggested that being charged with any crime would be sufficient to create ineligibility.
  2. In addition to a conviction, pleading guilty or nolo contendere to or commencement of any form of parole or probation, including probation before judgment, would trigger either the five-year or one-year limitations depending upon the type of crime charged.

 


1  https://home.treasury.gov/system/files/136/PPP--IFR--Additional-Eligibility-Revisions-to-First-Interim-Final-Rule.pdf    
2  85 CFR 20811

 

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