PPP & PUA: **8 weeks worth** not 8 weeks of payments. Sole Props

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iamasinkingship

New member
Please tell me why you can’t claim the week you received PPP and continue to file. No where does it state it needs to be stretched out as 8 week payments. The owner compensation law states 75% is automatically forgiven according to your schedule c. No where does it say you can’t pay yourself all at once and then continue to claim income for the other 7 weeks when there is none.

This is even more relevant for people who made more than $100k on line 31 and would typically pay themselves the capped amount within a 1-4 week period.

Unless your State adopts a law that says you have to claim/pay yourself 8 weeks within the 8 week period there is nothing illegal about it.

Please don’t twist your opinions as facts. I want compelling arguments not opinions.

Treasury Website

ii. owner compensation replacement, calculated based on 2019 net profit as described in Paragraph 1.b. above, with forgiveness of such amounts limited to eight weeks’ worth (8/52) of 2019 net profit,

https://home.treasury.gov/system/fi...Requirements-for-Certain-Pledges-of-Loans.pdf

(UI, UC, PUA, PUE, UNEMPLOYMENT)
 
@iamasinkingship I see your point that you could theoretically try to pay all the 8 weeks worth in a single week and claim unemployment for the others. However, you have just admitted, in a public forum, that your intent in doing so would purely be to evade the unemployment laws. What you say on the internet can and will be used against you in court. I would strongly suggest consulting with an attorney regarding the civil and criminal law implications.
 
@jesuslovesyou69
However, you have just admitted, in a public forum, that your intent in doing so would purely be to evade the unemployment laws.
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IANAL. What he's suggesting isn't technically breaking the law, its simply structuring the payments in such a way as to maximize his benefits. Its similar to way accountants structure expenses and payments to minimize tax liability. As long as you stay within the bounds of the law, you're fine.

In this case, what he's suggesting is currently within the bounds of the law. Its certainly ethically dubious, but completely legal. He does run the risk of having the SBA issue guidance requiring the payment to be in 8 separate weeks, which would require him to pay back the other 7 weeks of unemployment benefits.

This is similar to the way that the Treasury Department issued guidance restricting public companies from obtaining PPP loans, even after they had applied and received the loans.
 
@travelingfarmgal If you have never had the displeasure of going through a state unemployment investigation, then I can understand your position which is well-founded in the substance of the law.

Regrettably, unemployment is an administrative proceeding that often has nothing whatsoever to do with the law. And trying to challenge the massive fines they can impose upon you in court is expensive, and often futile due to the difference paid by the courts to administrative proceedings.

In short, I think there may be a legal basis for paying out “eight weeks worth” of payroll during any one week of the eight week period in which one has to spend the money in order to have it be forgivable, and then claim unemployment for the remaining seven weeks (of course disclosing the total amount of compensation received during the one week and making any other disclosures required by state law)– But that such a plan may nevertheless run afoul of administrative laws governing unemployment in a particular state and could result in devastating legal consequences.

So, to put it even more simply: fucked if you do fucked if you don’t.
 
@jesuslovesyou69 It's my understanding that most states count your income when its earned, rather than when you receive the money. With this not being earned income, its hard to say where they would come in on this. The other factor is that unemployment rules were written with employees in mind. None of the rules had self-employed or small business owners in mind.

At the very least, you have a reasonable argument that the loan proceeds could be paid in one week. If anyone does this, they should be fully prepared to give the money back if guidance is issued later, or, as you said, be willing to hire an attorney to fight the case in an administrative hearing.

I'm really just looking at this argument as an intellectual exercise. I don't think it makes any sense to do this in practice. It's clearly double-dipping and violates the intent of PPP, which was to keep people off of unemployment rolls.
 
@godtrust Not yet. But there’s nothing to stop them from doing it retroactively on a non-criminal basis. Ex Post Facto is only for criminal law. I am truly terrified of the impact of the SBA forgiveness regulations (that were due a week ago but haven’t come out yet) as it would allow them to deem non-forgivable the money that the business has already spent to fit within the eight weeks based on rules that the business could not have known about because they did not exist yet.
 
@jesuslovesyou69 Thanks for the response. And apologies if my questions are redundant since I am not an attorney or an accountant.

In leiu of any current guidance how should a small business proceed with distributing their funds? Spend nothing and wait? Or do what the business thinks is best at this point in time?

I have personally asked my bank multiple times and they have said they have no clue.
 
@godtrust This is the question that is causing many an attorney many a sleepless night. There simply is not a good answer. The best one can say is that a business should stick as closely to the statute as written as humanly possible. But ultimately the money has to be spent with an eight weeks of dispersement (as the law is currently written) in order to get forgiveness so waiting is not really a viable option as the law currently stands.

Some companies are waiting and betting that Congress will change that so that they can spend the money later with the benefit of the regulations laying out the requirements for forgiveness. But that is a gamble and if it does not pay off the result will be a loan repayable in equal installments over 18 months starting six months after disbursement (due to the six month deferment) which would likely be devastating to many small businesses relying on these funds as a grant. Thus, many small businesses are simply spending the money in accordance with the law as it is currently written and hoping that the government will not come screw them after the fact.

While I don’t see any other options, I also tend to assume that if the government can screw you, they will screw you – whether through incompetence, or malice. So it’s not a fun position for anybody to be in, and I wish I had better advice than make sure you have enough money in the till to pay the retainer for a good attorney.
 
@jesuslovesyou69 Here is someone who knows what he is talking about and uses logic and facts. Are you an attorney, by the way?

That's what I have been telling to others that it's scary that we still dont know the details of the SBA forgiveness regulations.
 
@ericameeran It’s bloody terrifying. I get paid a substantial amount of money by the hour to tell a client what the law is. Lawyers are, at our core, translators from the obscure language called “the law“ to whatever language our client normally speaks. Accordingly, “I don’t know” is a phrase that lawyers really don’t like to use unless they have to.

Here, I can make an educated guess that there will be conflicting administrative priorities between the political priority of maximizing forgiveness, and the administrative priority of not letting money walk out the door unless you drag it from their cold dead fingers while their souls still try to hold onto it whilst kicking and screaming. But how that fight will ultimately end, is nothing more than a (arguably educated) guess.

But for businesses facing imminent financial ruin, what other choice do they have other than to spend the money and hope for the best?
 
@jesuslovesyou69 I agree 100%. And that's what I have been trying to explain to others. There is one law firm who is suing the SBA already due to them changing rules after the loan is given.

And many aspects of the PPP rules are so vague and not clear.
 
@ericameeran Our firm sued the SBA the day the original regulations on loan eligibility came down. The judge dismissed that very afternoon. I know at least one of the lawsuits against the banks has already been dismissed on the basis of there being no private right of action under the statute.

I think the courts are going to stay as far away from this as they possibly can until they have no other choice.
 
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