A publicly-traded pharmaceutical company in New Jersey returned a $4.8 million coronavirus-relief loan it had planned to use to retain its 219 employees. Executives decided that guidance from federal officials suggested no public company would qualify for the aid.

But in Oregon, a publicly-traded technology firm with 200 employees decided to keep its $5 million loan, despite similar concerns.

Same guidance, different decisions. Attempting to clarify Congress’s hastily-written Paycheck Protection Program, the Trump administration issued rules and guidance that stirred new confusion, whipsawed borrowers and led dozens of firms to return loans.

Tough talk from Treasury Secretary Steven Mnuchin about potential criminal penalties for rule-breakers has also contributed to a climate of caution around a $669 billion program meant to help small businesses outlast the Covid-19 pandemic.

Now, with a deadline to return PPP loans without penalties just days away, firms and their advisers have had to grapple with rules that seem to run counter to the law they’re based on.

“The guidances and interim rules are really changing the underlying law,” said James P. Joseph, a partner at the law firm Arnold & Porter. “I have been a tax lawyer for 31 years, and I’ve never seen anything like it. They are building the plane while it’s in the air.”

Payrolls Focus
One example: As enacted on March 27, the law that created PPP allowed borrowers to use its low-interest, forgivable loans of as much as $10 million for a range of expenses beyond just paying workers, such as refinancing debt. But since then, the Treasury Department and Small Business Administration have issued rules that limit spending mostly to payroll.

Also, the law itself contained no restrictions on public companies seeking relief. But after public outrage over loans to public firms like the burger chain Shake Shack Inc., Treasury and SBA issued new guidance on April 23. It said public companies with “with substantial market value and access to capital markets” would be unlikely to qualify for PPP.

Such changes, coupled with an absence of guidance on how the Small Business Association will administer the forgiveness of loans, have prompted some to say thanks, but no thanks.

New Guidance
Aquestive Therapeutics Inc. of Warren, New Jersey, makes treatments for epileptic seizures, addiction recovery, and to manage nausea from chemotherapy. The company interpreted some of the new guidance to mean no publicly traded companies qualify -- even though the firm believed it was eligible as the program “was originally written and intended.”

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