ACEC Seeks Clarification on Treatment of Forgiven PPP Loans, Firm Overhead Rates

ACEC News / Advocacy

October 5, 2020

ACEC Seeks Clarification on Treatment of Forgiven PPP Loans, Firm Overhead Rates

ACEC President Linda Bauer Darr sent a letter to the Treasury Department, the Small Business Administration, and the White House Office of Management and Budget seeking clarification that engineering firms do not need to provide a credit on government contracts for forgiven Paycheck Protection Program loans.

A provision of the Federal Acquisition Regulations could require firms contracting with government agencies to calculate a credit to their indirect costs in the amount of a forgiven PPP loan.  This would impact not only federal contracts, but State DOT contracts and others that apply the FAR cost principles.

“Requiring a credit from a small business government contractor who has properly qualified for loan forgiveness essentially requires them to repay the loan through such credits,” Darr explained in the letter.  “The loan is thus not forgivable, contrary to the intent of the PPP program and harming small businesses at a time when they are attempting to recover from the economic downturn.”

When combined with the IRS ruling that covered costs are not tax deductible, the sum of the impact of the credit and the tax on the loan forgiveness could easily exceed the amount of the loan forgiveness.

ACEC is asking that PPP implementation guidance make clear that the FAR credits clause (FAR 31.201-5) will not apply to the proceeds of PPP loans for small business government contractors who have properly qualified for loan forgiveness.  The Council also shared the letter with key congressional committees and is seeking support from lawmakers.

Click here to view the letter.

ACEC also recently hosted an online seminar, Understanding the Potential Impact of PPP Loan Forgiveness and Other Business Practices on Your FAR Overhead Rate, which is available on-demand.

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