New Paycheck Protection Plan (PPP) Filing Requirement for Business Interests Held by Certain Government Officials and Their SpousesFriday, January 29, 2021
New PPP Filing Requiremen
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, also known as the Consolidated Appropriations Act of 2021 (“CAA”), was signed into law on December 27, 2020. Among other provisions, the CAA extends the Paycheck Protection Program (“PPP”) through March 31, 2021, increases the program’s authorization amount from $659 billion to $806.45 billion, and permits certain smaller businesses who received a PPP loan and experienced a 25% reduction in gross receipts to take a second-draw PPP loan of up to $2 million.
Importantly, the CAA also banned entities from receiving a PPP loan after December 27, 2020 if a certain “Controlling Interest” in that entity is held by certain government officials or their spouses. This ban does not retroactively apply to an entity who received a PPP loan made before December 27, 2020.
In the interests of transparency, the CAA also imposed a new requirement on borrowers who received a first-draw PPP loan before December 27, 2020, to disclose additional information with their loan forgiveness application. In January, the Small Business Administration (“SBA”) released a new form, SBA Form 3508D, and guidance to clarify these new disclosure requirements.
What information must be disclosed on SBA Form 3508D?
A borrower must disclose whether a “Covered Individual” directly or indirectly held a “Controlling Interest” in the borrower at the time the borrower’s loan application was submitted to its lender. The borrower is not required to submit this form if a Covered Individual does not hold a Controlling Interest.
Who is considered a “Covered Individual” under the CAA?
The CAA defines “Covered Individual” to include the President of the United States, the Vice President of the United States, the head of certain U.S. Executive departments, a Member of Congress, or a spouse thereof.
What is considered a “Controlling Interest” under the CAA?
The CAA defines “Controlling Interest” to mean owning, controlling, or holding not less than 20 percent, by vote or value, of the outstanding amount of any class of equity interest in a borrower. Additionally, for purposes of this certification, the securities owned, controlled, or held by an individual and their spouse shall be aggregated.
The term “equity interest” means:
- a share in a borrower, without regard to whether the share is transferable or classified as stock or anything similar;
- a capital or profit interest in a limited liability company or partnership; or
- a warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share of interest described in either category above.
When must a borrower submit the SBA Form 3508D?
The SBA’s guidance detailed the below deadlines.
- If a borrower already submitted a loan forgiveness application to its lender before December 27, 2020, the principal executive officer of the borrower was required to submit an SBA Form 3508D disclosing such Controlling Interests by January 26, 2020.
- If the lender has already submitted its decision to the SBA, however, the lender must promptly submit this form to the SBA.
- If a borrower has not submitted a loan forgiveness application, the principal executive officer of the borrower must submit this form to its lender within 30 days after submitting its forgiveness application. The lender will then become responsible for submitting the form to the SBA.
Will this information be made available to the public?
At this time, we cannot answer this question with certainty. While this information may not be disclosed in the PPP public database, it may be subject to a FOIA request.
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