Over its 200-year history, the federal False Claims Act (“FCA”) has saved the federal government billions of dollars in false claims for payment. But one type of false claim remains off limits in federal courts. A provision of the federal FCA known as the “tax bar” prohibits suits based on failure to pay federal taxes. See 31 U.S.C. § 3729(d). Whistleblowers who uncover federal tax fraud are limited to the Internal Revenue Service’s whistleblower program.
When the Coronavirus Aid, Relief, and Economic Security Act (CARES) was adopted on March 27, 2020, businesses welcomed the prospect of receiving COVID-19 financial relief through the Paycheck Protection Program (PPP). The PPP was layered atop the SBA’s existing Section 7(a) loan program, through which the federal government guarantees loans issued by qualified lenders to eligible business borrowers. The PPP program temporarily relaxed several criteria for obtaining an SBA loan, greatly expanding the availability of the lending program to a wider range of businesses. While clearly broader, the criteria for eligibility and the implications of the “necessity” certification weren’t quite so clearly defined, and left open many unanswered questions. But the prospect of “free money” by way of loan “forgiveness” induced countless businesses to submit loan applications at the earliest opportunity, beginning in early April 2020, despite the uncertainties.