The Internal Revenue Service (IRS) today announced it is granting extra time for companies to repay loans mistakenly received under the Paycheck Protection Program (PPP).

Enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-36), the PPP provides certain small businesses (500 or fewer employees) with forgivable loans to pay up to 8 weeks of payroll costs and certain other expenses.

The IRS announced the repayment deadline extension from May 7, 2020 to May 14, 2020 in a new FAQ posted today. The agency notes that the Small Business Administration (SBA) plans to issue "additional guidance on how it will review the certification prior to May 14, 2020."  

The new FAQ explains:

43. Question: FAQ #31 reminded borrowers to review carefully the required certification on the Borrower Application Form that "[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date?

Answer: SBA is extending the repayment date for this safe harbor to May 14, 2020.

Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA's interim final rule providing the safe harbor. SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.

In a separate move today on the PPP, the Chairmen of the House and Senate tax-writing committees urged Treasury Secretary Steve Mnuchin to rethink the Department's statutory interpretation of the program that prevents businesses from deducting certain routinely deductible expenses. This position is outlined in Notice 2020-32, which was issued by the IRS on April 30, 2020.

"We believe the position taken in the Notice ignores the overarching intent of the PPP, as well as the specific intent of Congress to allow deductions in the case of PPP loan recipients," the lawmakers state in their letter to Sec. Mnuchin.

"[A]s was expressed to Treasury during the development of the PPP, we did not intend to deny the deductibility of ordinary and necessary business expenses, nor did these small businesses expect to lose deductions for their business expenses when they applied for a PPP loan." The letter was signed by House Ways and Means Committee Chairman Richard Neal (D-MA), Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Member Ron Wyden (D-OR).

The text of the letter is posted here.

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