Coronavirus Aid, Relief, & Economic Security Act (CARES Act); The Paycheck Protection Program; 15 USC §§ 636(a) & 636m; Loan forgiveness; Whether payments to independent contractors qualified as “payroll costs” under the statute; § 636(a)(36)(A)(viii)(I)(aa) & (bb)

[This appeal was from the ED-MI.] The court held that plaintiff-Veltor Underground was not entitled to have its Paycheck Protection Program loan forgiven because its “payments to independent contractors do not qualify as ‘payroll costs’ under the statute.” During the pandemic, Veltor sought a loan under the CARES Act’s Paycheck Protection Program, applying on a form prepared by defendant-Small Business Administration (SBA). It requested a loan for six employees from a participating private lender, and received $125,000—2.5 times its alleged average monthly payroll—at a 1% interest rate. Veltor accepted the conditions along with the loan. The terms provided that the loan would only be forgiven “if it spent at least 75% of the funds on ‘payroll costs.’” It sought forgiveness in 2021, claiming that the money had been spent on payroll for now five employees. However, upon review, the lender learned that the money had been paid to independent contractors, not employees. Veltor unsuccessfully appealed to the SBA, and then filed this suit. The issue was whether subsection (bb) of the statute defining “payroll costs” only permits “self-employed individuals—sole proprietors and independent contractors—to apply for a loan based on what they pay themselves? Or does it also allow businesses that pay them to count those payments as part of their ‘payroll’ when they apply for a loan?” The court found that the text, context, and structure supported the conclusion “that subsection (bb) allows sole proprietors and independent contractors to get a loan based on their own earnings, the closest thing to a ‘payroll’ they have, and does not allow other businesses to bolster their own loans based on how much they happen to pay self-employed individuals.” Because Veltor had no employees, it had “no expenses to claim under subsection (aa).” And as it was not a sole proprietorship and did not assert that it was an independent contractor, “it had no expenses to claim under subsection (bb). Without paychecks to protect, Veltor was not entitled to have its loan forgiven. It must repay the loan.” Affirmed.