The PPP Shell Company Discovery Act aims to combat Paycheck Protection Program (PPP) fraud by mandating the creation of lists of loan recipients and sharing that data with the IRS and Department of Justice to identify potential criminal activity. This will be done by identifying recipients who did not withhold FICA taxes or whose loan amount greatly exceeded their wage payments in 2019.
William Timmons
Representative
SC-4
The PPP Shell Company Discovery Act aims to combat Paycheck Protection Program (PPP) loan fraud by requiring the Treasury Secretary to compile and share a list of PPP loan recipients with the IRS and the Department of Justice. The IRS Commissioner must then create additional lists of recipients who may have committed fraud based on FICA tax withholding and loan amount compared to wage payments. These lists will be used for criminal investigations related to PPP loan fraud.
PPP Shell Company Discovery Act Mandates New Loan Recipient Lists for Fraud Investigations
The "PPP Shell Company Discovery Act" is all about tracking down potential fraud in the Paycheck Protection Program (PPP). The law orders the creation of several lists of PPP loan recipients and mandates information sharing between the Treasury, IRS, and Department of Justice (DOJ) to flag potential criminal activity.
Digging into the PPP Data
The core of the bill revolves around creating and sharing lists of PPP loan recipients. Here's how it breaks down:
- Treasury's Master List: The Treasury Department is tasked with compiling a comprehensive list of everyone who received a forgiven PPP loan. This includes names, addresses, taxpayer IDs, and the total loan amount (SEC. 2).
- IRS's Targeted Lists: The IRS gets more specific, creating two additional lists:
- Recipients who didn't withhold any FICA (Federal Insurance Contributions Act) taxes in 2019. This could indicate businesses that weren't actually paying employees, despite receiving PPP loans meant for payroll.
- Recipients whose total PPP loan amount was four times or more their highest monthly wage payment subject to employer-side Social Security tax in 2019. This could flag situations where the loan amount far exceeded what their typical payroll would justify.
- Information Sharing: The Treasury and IRS are required to share these lists with the DOJ (SEC. 2). This information can only be used for criminal investigations, following specific procedures outlined in the Internal Revenue Code (section 6103(i)(1)).
Real-World Checks and Balances
Let's say a small business owner, "Bob's Burgers," received a PPP loan. If Bob's Burgers didn't withhold any FICA taxes in 2019, they'll end up on one of the IRS lists. Similarly, if their PPP loan was significantly higher than their typical monthly payroll expenses, they'll be flagged on another list. These lists are then sent to the DOJ, which can use them only to pursue criminal investigations, following established legal procedures.
Potential Pitfalls
While the goal is to catch fraudsters, there's always the chance of someone getting mistakenly flagged. Imagine a newly formed business that legitimately received a PPP loan but hadn't yet established a full payroll history in 2019. They might end up on a list, even if they followed all the rules. The bill doesn't offer specifics on recourse in such situations.
The Big Picture
This bill is essentially setting up a system for government agencies to cross-reference data and identify potential PPP loan abuse. It fits into a broader context of government accountability and oversight of COVID-19 relief funds. It's important to remember that being on one of these lists doesn't automatically mean someone committed a crime – it just means they meet the criteria for potential further investigation. The bill's definitions are also pretty straightforward: a "PPP loan" is a forgiven loan under specific sections of the Small Business Act, and a "PPP loan recipient" is anyone on the Treasury's list (SEC. 2).