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Some MAJOR #PPP news to pass along. Earlier today @USTreasury updated the FAQs on its site (AGAIN!), by creating new Q&A #46.

In short, Q&A #46 creates a safe harbor for PPP loans of $2 million or less when it comes to the good-faith certification...…

Just to be clear, we're talking about the certification that a borrower must make that says:

"current economic uncertainty makes this loan request necessary to support the ongoing operations"

In short, Q&A #46 the safe harbor says that if you received a loan of...

...$2 million or less (including loans made to affiliated companies), the certification will be deemed valid. Period. End of story.

The logic behind this, per Q&A #46, is to "promote economic certainty" for borrowers and to...

"enable SBA to conserve its finite audit resources and focus its reviews on larger loans..."

While its great to finally have some certainty on how the certification requirement will be interpreted, Q&A #46 creates a significant moral hazard with respect to the PPP program...

Notably, the @USTreasury just gave businesses that made outrageously aggressive certifications what essentially amounts to a license to steal from the American taxpayer... as long as they 'only' stole $2 million or less.

To be clear, many, if not most PPP loan recipients...

...are likely well deserving of such funds. But I can share w/ you that I have personally spoken w/ several biz owners (both w/in and outside of the financial planning community), who absolutely, unequivocally, 100% pushed the boundaries (putting it lightly)...

of what ANY reasonable person would deem an appropriate certification, as required under the #CARESAct.

Not to mention the fact that there are plenty of small biz owners who would have applied, but for the fact that they were at least somewhat concerned about...

...making the certification in good faith. In retrospect, their decision to take seriously (or at least more seriously than others) the good-faith certification may have cost them valuable funds, as it may now be too late to apply.

Separately, while I completely get...

...the @SBAgov's line of reasoning - that they have limited resources and need to focus on the biggest potential 'prizes' when it comes to audits - they could have just done that in practice, but left open the door to audit smaller PPP loans that were clearly non-compliant...

In other words, there's a HUGE difference between saying "We're going to FOCUS on the bigger loans" and "We're going to completely IGNORE smaller loans and ONLY look at the larger ones."

Imagine if the IRS came out and said we're not going to audit anyone with less than...

...$150,000 of income b/c we need to focus on the highest income taxpayers. Do you think there might be a little bit more 'liberties' taken on returns of people w/ less than $150,000?

If add'l funding ends up going into PPP at some point in the future, look for small...

... biz owners to be a LOT more aggressive in terms of applying for such loans.

On the flip side of the coin, those small biz owner's who took PPP loans of $2 million or less, but were worried about how their application would hold up under audit can now rest easy.

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Keep Current with Jeff "The Buckinghammer" Levine, CPA/PFS, CFP®

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