Letter to The Honorable Steven Mnuchin and The Honorable Jovita Carranza (April 30, 2020)

Summary

Letter dated April 30, 2020 to Secretary Steven Mnuchin of the U.S. Department of the Treasury and Administrator Jovita Carranza of the Small Business Administration from Senator Rob Portman and Senator Benjamin L. Cardin. It requests that the Small Business Administration (SBA) revise its Interim Final Rule for the Paycheck Protection Program (PPP) so that the rule does not deny assistance to people with criminal records who have turned their lives around. The letter objects to the restriction in 13 CFR Part 120 section III(2)(b)(iii) on an owner of 20 percent or more of the equity of the applicant, and describes the language as overly broad. It asks that the rule be revised so more businesses are eligible for emergency relief, including EIDL.

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                                         April 30, 2020


The Honorable Steven Mnuchin                        The Honorable Jovita Carranza
Secretary                                           Administrator
U.S. Department of the Treasury                     Small Business Administration
1500 Pennsylvania Avenue NW                         409 3rd Street SW
Washington, D.C. 20220                              Washington, D.C. 20416


Dear Secretary Mnuchin and Administrator Carranza:

We write to request that the Small Business Administration (SBA) revise its Interim Final Rule
for the Paycheck Protection Program (PPP) so that it properly reflects Congress and the
Administration’s support for second chances following a record of bipartisan criminal justice
reforms in Congress dating back more than a decade. The rule should not deny assistance to
people with criminal records who have turned their lives around, started a small business, created
jobs and contribute to their communities.

During the month of April, we celebrate Second Chance Month, which exists to raise awareness
of the collateral consequences of a criminal conviction, and unlock second-chance opportunities
for people who have paid their debt to society to become contributing citizens. The President and
Congress have worked together in the past to support individuals who have paid their debt to
society and are re-entering their communities.

We believe that policies should support second chances. This was most recently evident in the
enactment of the Fair Chance Act in 2019, which opened federal government work to people
with criminal records, and the overwhelming bipartisan vote in 2018 for the First Step Act,
which provided for important correctional and sentencing reforms. Importantly, this legislation
reauthorized the Second Chance Act, which provides funding to state and local reentry
programs.

We applaud the SBA’s efforts to quickly provide small business owners across the country with
relief so they can continue to pay their employees and combat the adverse economic effects of
this pandemic. However, the new restrictions placed upon small businesses with partial owners
who have been involved in the criminal justice system will only hurt the economy, and further
diminish the workforce and the tax base they generate.

Specifically, we are concerned about the following restriction contained within 13 CFR Part 120
section III(2)(b)(iii):

“An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on
parole; presently subject to an indictment, criminal information, arraignment, or other means by
which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony
within the last five years.”

This rule departs from the SBA’s own pre-existing eligibility standards for loans, including its
Economic Injury Disaster Loans (EIDLs), and deviates from the Administration’s support for
second chances. It also deviates from Administrator Carranza’s prior expression of interest
during her nomination process to widen SBA’s footprint in the returning citizen community. The
language is overly broad, excluding millions of business owners and their employees from much-
deserved and much-needed emergency relief. Due to longstanding inequalities in the justice
system, the restrictions will also have a disparate impact on communities of color, just as those
communities are among the hardest hit by this health and economic crisis.

Through the CARES Act, and specifically the PPP, Congress sought to ensure that emergency
relief is made available to small businesses that have been negatively impacted by this pandemic.
This relief was not intended to exclude business owner who have made mistakes, paid their debt,
and turned their lives around. Rather, it was intended to provide a bridge to hard-working
American small business owners who are keeping people employed and supporting the essential
services that benefit all of us during this unprecedented crisis.

We ask that you revise this harmful, exclusionary Interim Final Rule so that more businesses are
eligible for emergency relief, and ensure that SBA rules support second chances, a stronger
economy, and safer communities across all of its programs, including EIDL.

                                          Sincerely,




Senator Rob Portman                                         Senator Benjamin L. Cardin


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