May 7 Deadline to Return "Unnecessary" PPP Funds
The chaos surrounding the shuttering of businesses across the United States caused companies large and small to panic. To address the chaos, Congress passed the Payroll Protection Program to provide immediate funding to companies who were impacted by the COVID-19 crisis. Reflexively, businesses applied for the loan, and it seems businesses with immense resources applied without examining the details, including one of the certifications in the application that the loan is “necessary to support the on-going operations of the applicant.”
The Treasury recently announced that it would audit any loan over $2,000,000 for compliance with the PPP rules and regulations. One of the issues business must consider whether or not the Treasury will make a referral to the Department of Justice for prosecution for the loan not being “necessary.” If Treasury believes the business did not need the loan, then the criminal liability is up to 30 years in federal prison and civil liability up to $1,000,000.
What should businesses do if the funds are not “necessary?” Return the funds immediately. The Treasury issued an FAQ on April 23 that instructs businesses to return the funds on or before May 7, 2020, to avoid criminal and civil liability. You have 48 hours to avoid severe criminal and civil liability. If you are one of those businesses, contact your banker and use these 48 hours wisely.
For more information about the Paycheck Protection Program rules and regulations beyond the provisions in the CARES Act, please see the Treasury’s FAQ on the Paycheck Protection Program.