Tax Monitor

Safe Harbor Extended; Questions Still Unanswered

May 6, 2020

By: Mark A. Mangano

On May 5th, the Department of the Treasury updated the Paycheck Protection Program Frequently Asked Questions to add questions 43 and 44.

In answer to question 43, the Treasury extends the “safe harbor” for repayment of PPP loans from May 7, 2020 to May 14, 2020. The “safe harbor” provides that the SBA will deem a borrower to have made in good faith the certification “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” if the borrower repays the loan in full within the “safe harbor” time limit.

The extension applies only to loans that were applied for before April 24, 2020. The Treasury promises to provide additional guidance on how it will review the “necessity” certification prior to May 14, 2020. 

Interestingly, the FAQ indicates that further guidance is forthcoming on the review standards for the “necessity” certification but does not appear to provide any safe harbor for PPP loans applied for after April 24, 2020. We would expect further definition of the Safe Harbor to include applications after April 24, 2020 given the continued lack of guidance on interpreting the “necessity” certification.