CARES Act: What Just Happened? Week of August 17, 2020

Kranz receives updates on the CARES Act and how businesses are responding to impacts of the coronavirus through communications with our consultants, valued clients, partner firms, and legal and tax service providers. In our commitment to keeping you informed, we hope that our sharing this information regularly is of value to you.

New Interim Final Rule on Appeals of SBA PPP Loan Review Decisions

On August 11 the Treasury released IFR 23 to inform PPP borrowers and lenders of the process by which a borrower may appeal loan review decisions to the SBA’s Office of Hearings and Appeals (OHA). Because the SBA can review a PPP loan and make determinations as to a borrower’s eligibility at any time the supplements in this IFR to previous regulation become effective immediately. The SBA may review a borrower’s eligibility for a PPP loan, the loan amount received the use of loan proceeds, and/or the loan forgiveness amount claimed by the borrower. This interim final rule establishes a new subpart L for 13 CFR part 134 establishing rules of practice for appeals of SBA loan review decisions.

Subpart L defines the term “SBA loan review decision” as an official written decision by the SBA following their review that finds a borrower (1) was ineligible for a PPP loan; (2) was ineligible for the PPP loan amount received or used the PPP loan proceeds for unauthorized uses; (3) is ineligible for PPP loan forgiveness in the amount determined by the lender in its full or partial approval decision issued to SBA; and/or (4) is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to SBA. Other key stipulations include:

  • Only final SBA loan review decisions can be appealed to OHA.
  • A 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 decision to deny the borrower’s loan forgiveness application in full but that request is for a review by SBA, not an OHA appeal.
  • A borrower may exercise any other rights it has under applicable law against a PPP lender regarding a lender decision.
  • Makes clear that subpart C of this part, Rules of Practice for Appeals from Size Determinations and NAICS Code Designations, is not applicable to appeals from SBA loan review decisions.
  • Because a PPP borrower must begin making payments of principal and interest on the remaining balance of its PPP loan at the end of the loan payment deferral period, or when SBA remits the loan forgiveness amount to the lender (or notifies the lender that no loan forgiveness is allowed), an appeal by a borrower of any SBA loan review decision does not extend the deferral period of the PPP loan.
  • If the SBA remits to the lender the loan forgiveness amount set forth in the decision issued by the lender to SBA (except for the deduction of any Economic Injury Disaster Loan advance), the borrower may not file an appeal with OHA, and the borrower must begin repayment of any remaining balance of its PPP loan.

Section 134.1202 provides that an appeal petition must include the following information:

  • The basis for OHA’s jurisdiction, including, but not limited to, evidence that the appeal has been filed timely
  • A copy of the SBA loan review decision that is being appealed, or a description of that decision if a copy is unavailable
  • A full and specific statement as to why the SBA loan review decision is alleged to be erroneous, together with all factual information and legal arguments supporting the allegations
  • The relief being sought
  • Signed copies of payroll tax filings actually reported to the Internal Revenue Service (IRS), and State quarterly business and individual employee wage reporting and unemployment insurance tax filings actually reported to the relevant State, for the relevant periods of time, if not provided with the PPP Loan Forgiveness Application or an explanation as to why they are not relevant.
  • The name, address, telephone number, email address, and signature of the appellant or its attorney.
  • The appellant must serve a copy of the appeal petition with attachments on the Associate General Counsel for Litigation, U.S. Small Business Administration, 409 Third Street SW, Washington, DC
  • This section further provides that an appeal petition which does not include the above may be dismissed

Section 134.1203 provides that only the borrower on a loan for which SBA has issued a final SBA loan review decision has the standing to appeal the SBA loan review decision to OHA.  Individual owners of a borrower and lenders do not have the standing to appeal an SBA loan review decision.

Section 134.1204 prescribes that an appeal petition must be filed within 30 calendar days after (i) the appellant’s receipt of the final SBA loan review decision, or (ii) notification by the lender of the final SBA loan review decision, whichever is earlier.

Section 134.1205 provides that the Judge must dismiss the appeal if:

  • The appeal is beyond OHA’s jurisdiction as set forth under Section 134.1201
  • The appellant lacks standing to appeal under Section 134.1203; or
  • The appeal is untimely under Section 134.1204, or is premature because SBA has not yet made a final SBA loan review decision
  • This section also provides that the Judge may dismiss the appeal if, among other things, the appeal does not, on its face, allege specific facts that if proven to be true, warrant reversal or remand of the SBA loan review decision

Section 134.1206 provides that upon receipt of an appeal challenging a final SBA loan review decision, OHA will assign the matter to either an Administrative Law Judge or an Administrative Judge. Unless the appeal will be dismissed under Section 134.1205, the Judge will issue a notice and order establishing a deadline for production of the administrative record and specifying a date for the close of record.  Typically, the administrative record will be due 20 calendar days after issuance of the notice and order unless additional time is requested and granted, and the record will close 45 calendar days from the date of OHA’s receipt of the appeal unless additional time is requested and granted.

Section 134.1207 requires that the administrative record shall include relevant documents that SBA considered in making its final decision or that were before SBA at the time of the final decision. The administrative record need not contain all documents pertaining to the appellant. The SBA may claim privilege as to certain materials. The administrative record must be certified and authenticated that it is, to the best of the signatory’s knowledge, complete and correct. SBA will file the administrative record with OHA and serve it on appellant. This section permits the appellant to object to the absence of any document from the administrative record that the appellant believes should have been included in the administrative record. An appellant also may object to any claim that documents in the administrative record are privileged. Such objections must be filed with OHA and served on SBA no later than 10 calendar days after appellant’s receipt of the administrative record. The Judge will rule upon such objections and may direct or permit that the administrative record be supplemented.

Section 134.1208 prescribes that only SBA may respond to an appeal and the response should set forth the relevant facts and legal arguments to the issues presented on appeal.  Except for good cause shown, a response filed after the close of record established by the Judge will not be considered.  SBA must file its response with OHA, and serve a copy of the response upon the appellant and upon each of the persons identified in the certificate of service attached to the appellant’s appeal petition.

Section 134.1209 provides clarification and new information regarding the admission of evidence, the evidentiary discovery process, oral hearings, and the bases upon which a decision is rendered.

Section 134.1210 provides that either party may file an interlocutory appeal of a Judge’s ruling which decides an issue of privilege. Interlocutory appeals will be decided by the Administrator or a designee. An interlocutory appeal must be filed and served no later than 20 calendar days after issuance of the ruling to which the interlocutory appeal applies.  A response to the interlocutory appeal must be filed 10 calendar days after the interlocutory appeal is served

Section 134.1211 provides that at any time during the pending of an appeal, the parties may submit a joint motion requesting that the Judge permit the use of alternative dispute resolution to assist in resolving the matter.

Section 134.1212 provides that the standard of review is whether the SBA loan review decision was based on clear error of fact or law. The appellant has the burden of proof, by a preponderance of the evidence.

Section 134.1213, Decision on appeal, provides:

  • That the Judge will issue his or her decision within 45 calendar days after the close of record.
  • The decision will contain findings of fact and conclusions of law, the reasons for such findings and conclusions, and any relief ordered.
  • The decision will be served on each party.
  • The Judge’s decision on the appeal is an initial decision.  However, unless a request for review or reconsideration is filed an initial decision shall become the final decision of SBA 30 calendar days after its service.
  • Allows for a request for reconsideration by either party or by the Judge on his or her own initiative.
  • Provides for the right to request review by the Administrator and that the Administrator’s decision is appealable to federal district court.
  • Provides that the final OHA decision creates precedent only for appeals involving the PPP.
  • Provides that OHA decisions are normally published without redactions on OHA’s website.

Section 134.1214 provides that OHA may affirm, reverse, or remand an SBA loan review decision. If remanded, OHA no longer has jurisdiction over the matter unless a new appeal is filed as a result of a new SBA loan review decision.

Section 134.1215 provides that a prevailing appellant is not entitled to recover attorney’s fees.

Section 134.1216 provides that an appeal to OHA and request for review by the Administrator of a disputed initial decision or reconsidered initial decision are administrative remedies that must be exhausted before judicial review of an SBA loan review decision may be sought in a federal district court.

PPP Loan Update

  • Through August 8 a total of 5,212,128 loans have been made (an increase of 128,543 in the last two weeks) totaling $525.0B, an increase of $3.6B since July 31.
  • The average loan amount has dropped an additional $1,900 and now stands at $100,700.
  • California small businesses have received 623,360 loans, an increase of 14,390, and 2.4% in the last two weeks. California’s loans as a percent of total loans have remained constant at 12.0%. Their $68.6B of loan value continues to be 13.1% of the total.
  • Loans less than $150,000 represent 87.4% of all loans made and 28.2% of total dollars loaned.
  • Loans between $350K and $1M account for 3.8% of loans made and 21.6% of total dollars loaned.
  • 68.6% of the loans made were for no more than $50,000.
  • The following three industry sectors received the greatest share of loan funds – health care and social assistance (12.9%), technical and professional services (12.7%), and construction (12.4%).
  • $134B of approved PPP funding remains.
  • For additional detail on PPP loans by amount, state, lender size, and activity click here.

PPP FAQ Update: New Question Added

The latest FAQ update was the addition of two Questions and Answers, #50 and #51 added August 11 by the Treasury at PPP Program FAQ.

Q: What effect does the payment or non-payment of fees of an agent or other third party have on SBA’s guarantee of a PPP loan or SBA’s payment of fees to lenders?

A:  The payment or non-payment of fees of an agent or other third party is not material to SBA’s guarantee of a PPP loan or of SBA’s payment of fees to lenders.

Q: Do payments required for the provision of group health care benefits, including insurance premiums, include vision and dental benefits.

A: Yes

Additional Resources

Aside from this blog we recommend the following websites for additional information and guidance:

National Venture Capital Associations (

U.S. Treasury (

Small Business Administration:

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