Daily Tax Report ®

Businesses Fighting PPP Restrictions Win More Time to Apply (1)

June 30, 2020, 4:30 PMUpdated: June 30, 2020, 9:21 PM

Several small businesses will get more time to apply for Paycheck Protection Program loans after a Maryland district court partially granted a preliminary injunction against the Small Business Administration.

The businesses were originally restricted from applying for government-backed, forgivable PPP loans due to an SBA policy on loan applicants with criminal records. The SBA reined in those restrictions last week but the U.S. District Court for the District of Maryland recognized the trouble the business owners were still facing ahead of Tuesday’s deadline to apply for a loan.

“The court notes that the late revision of the rule on June 24, 2020, has put the plaintiffs in a difficult situation and based on the record before the court, is likely to cause the individual plaintiffs irreparable harm since they may not be able to obtain PPP funding,” Judge Catherine C. Blake wrote in a memorandum issued Monday.

The court addressed two motions together, siding with Altimont Mark Wilks, owner of Carmen’s Corner Store and Retail4Real, as well as several other small businesses in a separate case, including Defy Ventures Inc., an organization that provides support to formerly incarcerated individuals.

The court granted the plaintiffs until July 21 to apply for Paycheck Protection Program loans. They “meet the substantive criteria for PPP funds, and were only unable to apply earlier because of an SBA rule that the court has found to be arbitrary and capricious,” the court said.

“We are, of course, pleased with the Court’s extraordinary and quick action in this matter, as are our clients, but will press for a declaration that the SBA has acted unlawfully and in contravention of Congressional intent under the statute in its administration of this important statute.” said John Vecchione, senior litigation counsel at the New Civil Liberties Alliance, which assisted Wilks in his lawsuit.

The court declined to extend the application deadline to any individuals other than the individual plaintiffs.

“Although the court’s decision provided relief for our individual clients to apply for and access this financial relief, we are still troubled that the SBA’s rule still excludes some small business owners with criminal records,” Kali Bracey, a partner at Jenner & Block who represents Defy Ventures, told Bloomberg Tax.

The SBA declined to comment.

The cases are Carmen’s Corner Store v. Small Bus. Admin, D. Md., No. 1:20-cv-01736, 6/29/20 and Defy Ventures v. Small Bus. Admin., D. Md., No. 1:20-cv-01838, 6/29/20.

(Updates with additional reaction starting in eighth paragraph.)

To contact the reporter on this story: Jeffery Leon in Washington at jleon@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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