September 10, 2020
The interim final rule from the SBA and the Treasury Department describes the appeal procedures for PPP loan forgiveness applications that have been turned down. The appeals process is open only to borrowers whose loans were reviewed by the SBA. A business may not use the appeals process to contest a lender’s decision. The process is not open to borrowers if a lender grants only partial forgiveness, and the SBA agrees. PPP borrowers can however ask the SBA to review a lender’s decision to deny a forgiveness application in full in a separate process.
For a PPP loan of any size, SBA may undertake a loan review at any time at SBA’s discretion. The SBA claims that it will review all PPP loans worth more than $2 million.
This applies to loan review decisions made by SBA after it completes a review of a PPP loan. Only final SBA loan review decisions as described in the interim final rule can be appealed to the Office of Hearings and Appeals (OHA).
A PPP borrower cannot file an OHA appeal of any decision made by a lender concerning a PPP loan. A PPP borrower can request an SBA review of a lender’s decision to deny the borrower’s loan forgiveness application in full. A borrower may exercise any other rights it has under applicable law against a PPP lender regarding a lender’s decision.
Businesses that want to appeal a finding by the SBA must meet a high standard for burden of proof. When an administrative judge or administrative law judge reviews the appeal petition, the standard of review is “whether the SBA loan review decision was based on clear error of fact or law,” the rule states. The burden of proof falls to the borrower “by a preponderance of the evidence.” A judge may not substitute his or her own judgment for that of the SBA.
The deadline to file an appeal is 30 calendar days after receipt of that decision or notification by the lender of the decision, whichever comes first.
After a judge issues a notice and order, an administrative record will typically be due 20 calendar days later. The record will close 45 calendar days from when OHA receives the appeal. The record will include the documents the SBA considered to reach its final decision. The SBA can also use this time to respond to the appeal.
An oral hearing will be held only if the judge determines a dispute of material fact exists and cannot be resolved another way. The judge will issue a decision 45 calendar days after the record closes. The initial decision will be deemed final after 30 calendar days unless a request for a review or reconsideration is filed.
A borrower that disagrees with the judge’s findings can ask for a review by the SBA administrator.
PPP borrowers should carefully document how they spent the money in case they find themselves in the review or appeal process. Include documentation on why the loan was necessary to support ongoing operations at the time of their application.
Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at [email protected]. I can be reached at [email protected]. As always, we are happy to help.
Stay safe,
Marty McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company
Source: Navigating the PPP appeals process: What businesses need to know. Sari Lesk. Philadelphia Business Journal. August 13, 2020.
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
