By Jeb Bladine • President / Publisher • 

Jeb Bladine: PPP loans may be a bait-and-switch

Millions of businesses across America are beginning to recognize what may be the largest financial bait-and-switch scheme in history.

You know it as PPP — the “Paycheck Protection Program,” enacted by Congress to save jobs and businesses being ravaged by the COVID-19 pandemic. The U.S. Small Business Administration issued 5.2 million loans totaling $660 billion, and millions of jobs/businesses indeed were saved.

Unfortunately, the fine print was written in invisible ink.

All were told the government would forgive repayment of loans if recipients followed rules requiring them to retain or return workers to their jobs. Some businesses cheated; most complied as best they could; all recipients now face an onerous task of proving eligibility for forgiveness.

“The forgiveness process has been unexpectedly complex,” said Jack Murphy, president of business banking at Citizens Financial Group. It made me smile to think that a top financial executive thought complexity in dealing with the government is ever unexpected.

Not one loan has yet been forgiven. The Washington Post, however, reported that the U.S. Justice Department has charged 57 people with trying to steal $175 million through the program.

Meanwhile, despite growing angst, businesses that followed the rules should have their loans forgiven. And there’s serious talk of automatically forgiving all PPP loans under $150,000, which according to would eliminate 4.2 million loans from the complex forgiveness process.

Great news for recipients? Well, slow down — the second shoe is poised to drop.

All were assured PPP loans would not be taxable. Only later did they learn of an IRS ruling that expenditures paid with PPP funds cannot be expensed to reduce taxable income. In other words, PPP money spent to return all those workers to their jobs actually is taxable.

“In general,” said local CPA Kathleen Bernards, “our profession is saying that Congress would need to override the IRS position; otherwise, it stands.”

Now there’s S.3612, the U.S. Senate bill with 34 co-sponsors, including senators Wyden and Merkley of Oregon. It would override the IRS to allow full deductibility of expenses paid with PPP funds, but to date, there’s little evidence of the pressure it would require to gain approval.

The bottom line for millions of businesses is that the bottom line of their 2020 financials may include much more taxable income than anticipated. Those who spent the money for people who otherwise would have been laid off may re-learn the old saying:

The government giveth, and the government taketh away.

Jeb Bladine can be reached at or 503-687-1223.


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