SBA Fraud Enforcement Extension Act
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Sen. Ernst, Joni [R-IA]
ID: E000295
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Bill Summary
Another masterpiece of legislative theater, brought to you by the esteemed members of Congress. Let's dissect this farce and uncover the real disease beneath.
**Main Purpose & Objectives:** The SBA Fraud Enforcement Extension Act (S 1199) claims to extend the statute of limitations for fraud under certain pandemic programs. How noble. In reality, it's a desperate attempt to retroactively cover up the massive waste, abuse, and corruption that occurred during the COVID-19 pandemic.
**Key Provisions & Changes to Existing Law:** The bill amends various sections of existing laws to extend the statute of limitations for fraud related to:
1. Shuttered Venue Operators 2. Restaurant Revitalization grants 3. Certain Economic Injury Disaster Loans 4. Paycheck Protection Program (PPP) loans
In each case, the bill extends the statute of limitations from 5-7 years to 10 years. Because, you know, it takes a decade to investigate and prosecute fraud. Give me a break.
**Affected Parties & Stakeholders:** The usual suspects:
1. Small business owners who received pandemic-related loans and grants 2. The Small Business Administration (SBA) 3. Federal agencies responsible for investigating and prosecuting fraud 4. Taxpayers, who will foot the bill for this bureaucratic boondoggle
**Potential Impact & Implications:** This bill is a Band-Aid on a bullet wound. It's a weak attempt to address the rampant waste and corruption that occurred during the pandemic. By extending the statute of limitations, Congress hopes to:
1. Avoid accountability for their own failures in overseeing pandemic relief programs 2. Give federal agencies more time to investigate and prosecute fraud, which they've been too incompetent or corrupt to do so far 3. Provide a false sense of security to small business owners who may have engaged in questionable activities
In reality, this bill will:
1. Encourage more waste and abuse by creating a culture of impunity 2. Waste taxpayer dollars on prolonged investigations and prosecutions 3. Fail to address the root causes of corruption and incompetence within government agencies
Diagnosis: This bill is a symptom of a deeper disease – a toxic mix of bureaucratic inefficiency, congressional cowardice, and special interest manipulation. The real cure would involve radical reforms to prevent waste and abuse in the first place, rather than just treating the symptoms with more regulations and extensions.
Prognosis: Bleak. This bill will likely pass, and we'll be left with a system that rewards corruption and incompetence, while punishing honest taxpayers and small business owners who played by the rules.
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Project 2025 Policy Matches
This bill shows semantic similarity to the following sections of the Project 2025 policy document. Higher similarity scores indicate stronger thematic connections.
Introduction
— 753 — Small Business Administration COVID-19 Lending Program Accountability and Cleanup. A major immediate priority for the next Administration should be a final accounting and accelerated cleanup of fraudulent COVID-19 loan and grant activity. As noted by the SBA IG, “managing COVID-19 stimulus lending is the greatest overall challenge facing SBA, and it may likely continue to be for many years as the agency grapples with fraud in the programs….”40 The next Administration should: l Consider bringing in private-sector support and expertise to close out these programs. Forgiveness and fraud must be dealt with as swiftly as possible, and law enforcement officials must pursue fraud vigorously. Entities receiving PPP loans that did not meet eligibility for forgiveness must be required to pay back the money. For example, under the CARES Act,41 PPP loan applicants generally were eligible only if, together with all their affiliates, they had no more than 500 employees. Numerous Planned Parenthood affiliates self-certified eligibility for PPP loans during the initial wave of loans that were governed by the CARES Act’s size requirement. Many Senators and Representatives asserted that these Planned Parenthood organizations were ineligible because— considered together with their affiliates—they exceeded the maximum eligible size.42 The Trump Administration SBA notified several Planned Parenthood PPP recipients of its preliminary determination of their ineligibility and of SBA’s authority to take various actions against applicants that falsely certified their eligibility.43 To date, despite continued oversight attempts by Members of Congress,44 the SBA has taken no action on the Planned Parenthood loans other than to forgive them, and in 2021, it approved new PPP loans to Planned Parenthood affiliates.45 l Cooperate with ongoing congressional oversight efforts and determine whether SBA has authority to reverse the forgiveness decisions. If it does have that authority, the SBA should reverse the forgiveness decisions for the subject loans, reiterate its preliminary determinations of ineligibility, investigate the matter more thoroughly, and take all appropriate action when its investigation concludes. Regardless of whether it reverses its forgiveness, if its investigation uncovers evidence that Planned Parenthood affiliates or any other loan recipients knowingly misrepresented their eligibility in their applications, the SBA should make appropriate referrals to the Department of Justice.
Introduction
— 753 — Small Business Administration COVID-19 Lending Program Accountability and Cleanup. A major immediate priority for the next Administration should be a final accounting and accelerated cleanup of fraudulent COVID-19 loan and grant activity. As noted by the SBA IG, “managing COVID-19 stimulus lending is the greatest overall challenge facing SBA, and it may likely continue to be for many years as the agency grapples with fraud in the programs….”40 The next Administration should: l Consider bringing in private-sector support and expertise to close out these programs. Forgiveness and fraud must be dealt with as swiftly as possible, and law enforcement officials must pursue fraud vigorously. Entities receiving PPP loans that did not meet eligibility for forgiveness must be required to pay back the money. For example, under the CARES Act,41 PPP loan applicants generally were eligible only if, together with all their affiliates, they had no more than 500 employees. Numerous Planned Parenthood affiliates self-certified eligibility for PPP loans during the initial wave of loans that were governed by the CARES Act’s size requirement. Many Senators and Representatives asserted that these Planned Parenthood organizations were ineligible because— considered together with their affiliates—they exceeded the maximum eligible size.42 The Trump Administration SBA notified several Planned Parenthood PPP recipients of its preliminary determination of their ineligibility and of SBA’s authority to take various actions against applicants that falsely certified their eligibility.43 To date, despite continued oversight attempts by Members of Congress,44 the SBA has taken no action on the Planned Parenthood loans other than to forgive them, and in 2021, it approved new PPP loans to Planned Parenthood affiliates.45 l Cooperate with ongoing congressional oversight efforts and determine whether SBA has authority to reverse the forgiveness decisions. If it does have that authority, the SBA should reverse the forgiveness decisions for the subject loans, reiterate its preliminary determinations of ineligibility, investigate the matter more thoroughly, and take all appropriate action when its investigation concludes. Regardless of whether it reverses its forgiveness, if its investigation uncovers evidence that Planned Parenthood affiliates or any other loan recipients knowingly misrepresented their eligibility in their applications, the SBA should make appropriate referrals to the Department of Justice. — 754 — Mandate for Leadership: The Conservative Promise Disaster Loan Program and Direct Lending. The SBA’s disaster loan pro- gram provides low-interest loans to personal, business, and nonprofit borrowers following a federally declared disaster. The program suffers from problems of coordination with Federal Emergency Management Administration (FEMA) disas- ter assistance. For example, disaster relief applicants have an incentive to avoid being approved for SBA disaster loans in order to increase the amount of FEMA assistance for which they are eligible. Moreover, the availability of disaster loans reduces individuals’ incentives to purchase disaster-related insurance. More than 90 percent of SBA disaster loans are loans to individuals such as homeowners, not to small businesses. In view of the challenges the SBA has experienced in its administration of this program, as well as the fraud and abuse in the EIDL COVID-19–related program and the IG’s concern that the systemic problems within this lending program undermine the SBA’s work, the next Administration should: l Work with Congress to assess the extent to which disaster loans should be offered by another agency rather than the SBA and explore private-sector channels for administering the loans. l Specify clearly that no new direct lending programs will be developed at the SBA. Eligibility of Religious Entities for SBA Loans. Current SBA regulations46 and SBA Form 197147 make certain religious entities ineligible to participate in several SBA loan programs. The Trump Administration proposed a rule that would remove the provisions on the ground that they violate the First Amendment.48 Subsequent Supreme Court decisions have made their unconstitutionality clearer.49 In an April 3, 2020, letter to Congress pursuant to 28 U.S. Code § 530D,50 the Trump Administration SBA advised that two such provisions violate the Free Exer- cise Clause of the First Amendment and that it therefore would not enforce them. On January 19, 2021, the Trump Administration SBA proposed a rule to remove all of the unconstitutional religious exclusions from its regulations.51 The SBA has not acted on the proposed rule. A similar religious exclusion once appeared in the regulation governing eligibil- ity for SBA Business Loan Programs,52 but it was removed in a June 2022 final rule that noted tension with the First Amendment and Supreme Court precedent.53 That final rule announced that the SBA would nonetheless continue to make religious eligibility determinations for business loan applicants to comply with putative Establishment Clause requirements,54 but Supreme Court precedent and Office of Legal Counsel memoranda refute the notion that large government-backed loan programs raise any Establishment Clause concerns.55
Introduction
— 748 — Mandate for Leadership: The Conservative Promise loan credit subsidy costs, and miscellaneous program “enhancements” to support small businesses through economic challenges or circumstances. As noted by the Congressional Research Service: Overall, the SBA’s appropriations have ranged from a high of over $761.9 billion in FY2020 to a low of $571.8 million in FY2007. Much of this volatility is due to significant variation in supplemental appropriations for disaster assistance to address economic damages caused by major hurricanes and for SBA lending program enhancements to help small businesses access capital during and immediately following recessions. For example, in FY2020, the SBA received over $760.9 billion in supplemental appropriations to assist small businesses adversely affected by the novel coronavirus (COVID- 19) pandemic.18 The CRS further notes that “[o]verall, since FY2000, appropriations for SBA’s other programs, excluding supplemental appropriations, have increased at a pace that exceeds inflation.”19 In terms of current loan volume, the SBA “reached nearly $43 billion in fund- ing to small businesses, providing more than 62,000 traditional loans through its 7(a), 504, and Microloan lending partners and over 1,200 investments through SBA licensed Small Business Investment Companies (SBICs) for Fiscal Year (FY) 2022.”20 The agency’s total budgetary resources for FY 2022 amount to $44.25 billion, which represents 0.4 percent of the FY 2022 U.S. federal budget.21 HISTORY OF MISMANAGEMENT Throughout its history, various SBA programs and practices have generated negative news headlines and scathing Government Accountability Office (GAO) and Inspector General (IG) reports that have centered on mismanagement, lack of competent personnel and/or systems, and waste, fraud and abuse.22 From the 8a program23 to Hurricane Katrina24 to the more current COVID-19 (EIDL) program and PPP lending program,25 the SBA has managed to maintain its lending role even when repeated system failures have affected its distribution of funds. Congress has been somewhat responsive, pressuring the SBA to clean up fraud-related matters within its COVID-19 lending and grant programs.26 Repub- licans in the U.S. House of Representatives have gone farther, specifying that the SBA needs to improve transparency and accountability and deal with mission creep, the expansion of unauthorized programs, and structural and reporting deficiencies that have allowed mismanagement and fraud to reoccur, largely through massive supplemental appropriations.27 The SBA is led by an Administrator (currently a member of the President’s Cabinet) and a Deputy Administrator. Senate-confirmed appointees include — 749 — Small Business Administration the Administrator, Deputy Administrator, Chief Counsel for Advocacy, and Inspector General. Entrepreneurs and small businesses require limited-government policies that do not impede their risk-taking and growth. A future Administration can leverage and strengthen core SBA functions that have been fairly effective at reining in and calling attention to costly regulations and policies that are harmful to small businesses. This core advocacy function is aided both by statutory authority and by a network of small-business organizations and allies that support limited-gov- ernment policies.28 Moreover, an effective SBA Administrator and leadership team can work and advocate across the federal government to ensure that extreme regulatory poli- cies—or anticompetitive rules and actions that may favor big businesses over small businesses or international competitors over American small businesses—are dismantled or do not progress when proposed. MISSION CREEP AND ENLARGEMENT As noted, Republicans in the U.S. House of Representatives have evidenced con- cern about SBA mission creep and the need to make a sprawling, unaccountable agency more focused and operationally sound. Moreover, there is unease that the agency has moved from being open to any eligible small business searching for sup- port to being hyperfocused on “disproportionately impacted,” politically favored, or geographically situated small businesses and entrepreneurs. Today, initiatives aimed at “inclusivity” are in fact creating exclusivity and stringent selectivity in deciding what types of small businesses and entities can use SBA programs. For example, even though the SBA under President Donald Trump proposed a rule to remove all of the unconstitutional religious exclusions from its regulations29 to conform with Supreme Court decisions that have made their unconstitutionality clear, the SBA has not acted on the proposed rule and still uses religious exclusions in determining eligibility for business loans. Several other specific concerns include but are not limited to: l The SBA’s request to become a “designated voter agency” in response to President Biden’s executive order on “Promoting Access to Voting.”30 l The creation of duplicative channels and “pilot programs” for the delivery of business training rather than working through existing counseling partners. The programs are largely duplicative of private, state and local government, and educational system offerings.31 l A push to expand direct government lending.32
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About These Correlations
Policy matches are calculated using semantic similarity between bill summaries and Project 2025 policy text. A score of 60% or higher indicates meaningful thematic overlap. This does not imply direct causation or intent, but highlights areas where legislation aligns with Project 2025 policy objectives.