A letter from the Highway Materials Group expressed concerns about specific terms associated with loans under the CARES Act passed by Congress at the end of March.
Addressed to House Speaker Nancy Pelosi (D-CA), House Minority Leader Kevin McCarthy (R-CA), Senate Majority Leader Mitch McConnell (R-KY), and Senate Minority Leader Charles Schumer (D-NY), the letter details three concerns:
- There is no clarity on how a firm demonstrates necessity in seeking a loan. Businesses applying for Paycheck Protection program (PPP) loans were required to certify in good faith that the uncertainty of economic conditions made the loan necessary for their business at the time they applied for it. Comments by public officials in the wake of revelations of publicly held companies receiving loans have left small businesses concerned that they may face penalties, despite acting in good faith. The letter says further assurances are needed for small businesses with loans above $2 million.
- The tax deductibility of expenses paid with PPP funds. PPP loans were intended to cover payroll and limited business expenses like rent and mortgage obligations. Guidance issued by Treasury more than three weeks after SBA began accepting PPP loans indicated that business expenses previously considered tax deductible would not be so considered if paid for with PPP funds. The letter urges Congress to ensure this issue is resolved in future relief legislation.
- Many small businesses are now uncertain how to use their PPP funds because of the ambiguities and complexities of the guidance. The level of guidance does not provide sufficient detail necessary for small businesses to proceed with any degree of certainty, and our members now fear SBA audits, fraud charges and bad publicity, despite acting in good faith from the start.
- The HMG urges Congress to provide additional assurances that companies utilizing PPP loans, in the spirit in which they were intended, will not face penalties for failure to comply with retroactively imposed requirements.
Click here to see the complete letter.
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