Road so Far

PPP Loan Forgiveness



The Wall Street Journal reports the U.S. Small Business Administration (SBA) will begin forgiving Paycheck Protection Program (PPP) loans sometime this week according to a statement made by the U.S. Treasury Department last Tuesday1. The declaration comes following complaints from banks and borrowers alike that the process for application has been tenuous at best since the portal launch in August which has subsequently logged some 96,000 applications. Even so, that number only represents approximately 2% of the 5.2 million loans granted under the program.  

For the millions of borrowers that have not applied, the complexity of the forgiveness application itself could be the ultimate hurdle. According to the CPA Practice Advisor2, during a House Small Business Subcommittee on Economic Growth, Tax and Capital Access meeting, Lynn Ozer, President of SBA Lending at the Fulton Bank in Pottstown, PA stated, “Borrowers and lenders simply have been unable to complete the application process because they do not fully understand the requirements for forgiveness, and are reluctant to submit incorrect applications that could cause them to lose the forgiveness to which they are entitled, or worse, get into trouble with the federal government.” 

The lack of guidance issued alongside the launch of the PPP has been a component of heavy criticism from leading financial experts and organizations since its inception. While critical to stymying the economical impact of the pandemic in its early stages, emphasis was placed on distribution with guidance and regulation featuring as something of an afterthought. In fact, the U.S. Government Accountability Office recently admonished the SBA for its streamlined distribution of program funds compared to its slow implementation of oversight which left the PPP vulnerable to fraud, as evidenced by recent reports.  

However, the greatest areas of uncertainty for CPAs regarding the PPP revolve around two specific facets of loan forgiveness: deductibility of expenses and blanket forgiveness, according to the Journal of Accountancy3. Since forgiven PPP loans are not considered taxable income, the concern over expenses revolves around the potential for double-dipping scenarios if the expenses paid result in forgiven PPP loans. To the second point, because most PPP loans were issued in amounts under $150,000, blanket forgiveness for those loans is currently being discussed by Congress as a way to streamline forgiveness even as a second draw for struggling businesses floats for consideration, CNBC reports4.    

With so many details surrounding PPP forgiveness still uncertain, how should CPAs advise their clients? “As CPAs we are best positioned to assist our clients in applying for forgiveness,” advises Jamie LoPiccolo, CPA, CGMA, MICPA Board Member and Managing Member at Capocore Professional Advisors. “Without any interaction by congress, the forgiveness process is going to add some challenges to our workload over the next few months. It is best to get ahead of this earlier than later to make sure you are doing the right thing for your clients.” 

The MICPA urges its members to keep detailed records regarding PPP-related transactions and conclusions, including all the guidance points utilized in between. Keep a finger on the pulse of PPP guidance, policy and procedure in the coming weeks and exercise your best judgement when applying for PPP loan forgiveness, including when and how best to do so. As we continue to follow this issue closely, subscribe to our weekly e-newsletter for updates and related content.


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Source: MICPA

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