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Update – PPP Loan Forgiveness

4 August 2021

To Our Valued Clients and Friends:

Isabel Guzman, Administrator of the U.S. Small Business Administration (SBA), recently announced plans to streamline the forgiveness process for Paycheck Protection Program (PPP) loans between $150,000 and $2 million.

While initially, no details were forthcoming, it now appears that the SBA is planning to create its own online portal for small businesses to apply directly to the agency for loan forgiveness, rather than applying through their lenders. 

In addition, the SBA has announced that plans are being made to eliminate for certain businesses with PPP Round II loans of $150,000 or less the current requirement that recipients demonstrate a 25% revenue reduction in 2020 compared with 2019 (a single quarter of such reduction is sufficient). No details have been provided as to what businesses this easement of the process will apply to.

Further, in April of this year, the Internal Revenue Service (IRS) issued Revenue Proposal 2021-20, which provides a safe harbor for PPP Round I loan recipients who, relying on IRS guidance prior to the late 2020 enactment of the Consolidated Appropriations Act (CAA), filed 2020 tax returns on which they did not claim deductions for normally deductible expenses which were paid for with PPP Round I loan proceeds.

Under the safe harbor, such taxpayers may elect to deduct these expenses on the taxpayer’s timely filed original Federal income tax return or information return, as applicable, for the taxpayer’s first taxable year following the taxpayer’s 2020 taxable year rather than filing an amended return or administrative adjustment request for the taxpayer’s 2020 taxable year.  Note that the safe harbor does not extend to the expanded list of deductible expenses included in the CAA. Nor does it apply to expenses paid for via PPP Round II loans (see here, here, and here for more detail).

In addition, a lawsuit was filed by the American General Contractors (ACG) in December of 2020 against the SBA in connection with the “loan necessity questionnaire,” Form 3509, implemented by the SBA in November of 2020 for PPP loans previously granted in amounts greater than $2 million.  

The ACG questioned both the form itself and the process by which it was developed. 

With regard to the form, “Most notably, the questionnaire does not ask borrowers to describe the states of their operations and the attendant business anxieties that they were experiencing at that time. Instead, the Questionnaire probes deeply into what came after, over the ensuing months of 2020 . . . For the most part, the Questionnaire (and SBA’s online portal; for submitting the answers) is a “Yes/No” exercise that does not grant borrowers an opportunity to present the totality of their circumstances. Borrowers are not afforded a meaningful opportunity to provide any broader, and objectively helpful, context for their answers.”

As for the process, “On October 26, 2020, as required by the PRA (Paperwork Reduction Act), SBA published in the Federal Register and invited a 30-day public comment on, an information request that included among its topics the Questionnaire here at issue. Although the whole point of the PRA is to give the affected public an opportunity to comment on the burden an agency estimates any given information collection will have, the Questionnaire itself was not attached to SBA’s notice. On the contrary, SBA told OMB (Office of Management and Budget) that it did not want to make the Questionnaire available for public review because it feared borrowers would change their business practices to suit what they thought SBA wanted to see from them if they knew in advance the questions SBA intended to ask.”

During recent settlement negotiations, the U.S. Department of Justice (DOJ) informed the ACG that Form 3508  was being withdrawn, and on July 2, 2021, the SBA notified PPP lenders that the forms are no longer required. Note that this withdrawal does not impact the SBA’s PPP Loan review procedures.

Ms. Guzman has also spoken publicly to warn PPP borrowers not to miss their deadlines to apply for forgiveness of their loans – with the modified 24-week “covered period” for expenditures, and ten months from that period’s end to apply for forgiveness, the deadline may have been far enough down the road to have dropped “off the radar” for some small business owners.

In addition, some PPP borrowers may be waiting until the last minute in order to take the fullest advantage of the fact that they were made eligible for the Employee Retention Credit (ERC) via changes to Internal Revenue Code Section 206 enacted in the CAA. Previously, PPP borrowers had been ineligible to take advantage of the credit – the two relief programs having initially been mutually exclusive. See our blog post of January 6, 2021, for more details. 

According to SBA data as of late May of this year, almost 2 million PPP borrowers had not submitted applications for forgiveness of their loans. 

Miss the deadline by one day, and there is no forgiveness available. 

Check with your RFG CPA, and make sure you don’t miss your deadline. Your CPA can assist you with expense calculations and preparation of your PPP loan forgiveness application, to ensure you have all your ducks in a row beforehand. 

If you received a PPP loan, and have applied for forgiveness, what was your outcome? 

Please click here to email me directly – I’d be very interested to know your thoughts and experiences.

Until next Wednesday – 



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