Court filing — United States v. Eric Shibley (Doc. 120)

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U.S. District Court for the Western District of Washington · No. 2:20-cr-00174-JCC · Doc. 120 · 2021-11-17 · Docket on CourtListener

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Honorable  John Coughenour 
UNITED STATES DISTRICT COURT 
WESTERN DISTRICT OF WASHINGTON, SEATTLE 
UNITED STATES OF AMERICA, 
) 
) No.  CR20-174 JCC 
    Plaintiff,       ) 
) Defense Request for Judicial Notice  
v. 
) 
) 
ERIC SHIBLEY
) 
) 
     Defendant.  )     
)  
Defendant Eric Shibley, through counsel, asks that the court take judicial notice of 
the following : 
1
During the initial funding period for the PPP, beginning in April 2020, the SBA 
paid lenders fees for processing PPP loans in the following amounts: 
i. Five (5) percent for loans of not more than $350,000;
ii. Three (3) percent for loans of more than $350,000 and less than $2,000,000;
and 
iii. One (1) percent for loans of at least $2,000,000.
Respectfully submitted this 17th day November, 2021. 
/s/ Michael Nance 
Attorney for defendant Eric Shibley 
 Source:  SMALL BUSINESS ADMINISTRATION 13 CFR Part 120 Docket No. SBA–2020–0015 
1
- See attached highlighted portion on page 6
Michael Nance  
 Attorney at Law 
P.O. Box 11276 
Bainbridge Island, WA 98110 
(206) 624-3211
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This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
Rules and Regulations
Federal Register
20811 
Vol. 85, No. 73 
Wednesday, April 15, 2020 
SMALL BUSINESS ADMINISTRATION 
13 CFR Part 120 
[Docket No. SBA–2020–0015] 
RIN 3245–AH34 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program 
AGENCY: U.S. Small Business 
Administration. 
ACTION: Interim final rule. 
SUMMARY: This interim final rule 
announces the implementation of 
sections 1102 and 1106 of the 
Coronavirus Aid, Relief, and Economic 
Security Act (CARES Act or the Act). 
Section 1102 of the Act temporarily 
adds a new product, titled the 
‘‘Paycheck Protection Program,’’ to the 
U.S. Small Business Administration’s 
(SBA’s) 7(a) Loan Program. Section 1106 
of the Act provides for forgiveness of up 
to the full principal amount of 
qualifying loans guaranteed under the 
Paycheck Protection Program. The 
Paycheck Protection Program and loan 
forgiveness are intended to provide 
economic relief to small businesses 
nationwide adversely impacted under 
the Coronavirus Disease 2019 (COVID– 
19) Emergency Declaration (COVID–19
Emergency Declaration) issued by
President Trump on March 13, 2020.
This interim final rule outlines the key
provisions of SBA’s implementation of
sections 1102 and 1106 of the Act in
formal guidance and requests public
comment.
DATES: 
Effective date: This interim final rule 
is effective April 15, 2020. 
Applicability date: This interim final 
rule applies to applications submitted 
under the Paycheck Protection Program 
through June 30, 2020, or until funds 
made available for this purpose are 
exhausted. 
Comment Date: Comments must be 
received on or before May 15, 2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0015 
through the Federal eRulemaking Portal: 
http://www.regulations.gov. Follow the 
instructions for submitting comments. 
SBA will post all comments on 
www.regulations.gov. If you wish to 
submit confidential business 
information (CBI) as defined in the User 
Notice at www.regulations.gov, please 
send an email to ppp-ifr@sba.gov. 
Highlight the information that you 
consider to be CBI and explain why you 
believe SBA should hold this 
information as confidential. SBA will 
review the information and make the 
final determination whether it will 
publish the information. 
FOR FURTHER INFORMATION CONTACT: Call 
Center Representative at 833–572–0502, 
or the local SBA Field Office; the list of 
offices can be found at https://
www.sba.gov/tools/local-assistance/ 
districtoffices. 
SUPPLEMENTARY INFORMATION: 
I. Background Information
On March 13, 2020, President Trump
declared the ongoing Coronavirus 
Disease 2019 (COVID–19) pandemic of 
sufficient severity and magnitude to 
warrant an emergency declaration for all 
states, territories, and the District of 
Columbia. With the COVID–19 
emergency, many small businesses 
nationwide are experiencing economic 
hardship as a direct result of the 
Federal, State, and local public health 
measures that are being taken to 
minimize the public’s exposure to the 
virus. These measures, some of which 
are government-mandated, are being 
implemented nationwide and include 
the closures of restaurants, bars, and 
gyms. In addition, based on the advice 
of public health officials, other 
measures, such as keeping a safe 
distance from others or even stay-at- 
home orders, are being implemented, 
resulting in a dramatic decrease in 
economic activity as the public avoids 
malls, retail stores, and other 
businesses. 
On March 27, 2020, the President 
signed the Coronavirus Aid, Relief, and 
Economic Security Act (the CARES Act 
or the Act) (Pub. L. 116–136) to provide 
emergency assistance and health care 
response for individuals, families, and 
businesses affected by the coronavirus 
pandemic. The Small Business 
Administration (SBA) received funding 
and authority through the Act to modify 
existing loan programs and establish a 
new loan program to assist small 
businesses nationwide adversely 
impacted by the COVID–19 emergency. 
Section 1102 of the Act temporarily 
permits SBA to guarantee 100 percent of 
7(a) loans under a new program titled 
the ‘‘Paycheck Protection Program.’’ 
Section 1106 of the Act provides for 
forgiveness of up to the full principal 
amount of qualifying loans guaranteed 
under the Paycheck Protection Program. 
A more detailed discussion of sections 
1102 and 1106 of the Act is found in 
section III below. 
II. Comments and Immediate Effective
Date
The intent of the Act is that SBA 
provide relief to America’s small 
businesses expeditiously. This intent, 
along with the dramatic decrease in 
economic activity nationwide, provides 
good cause for SBA to dispense with the 
30-day delayed effective date provided
in the Administrative Procedure Act.
Specifically, small businesses need to be
informed on how to apply for a loan and
the terms of the loan under section 1102
of the Act as soon as possible because
the last day to apply for and receive a
loan is June 30, 2020. The immediate
effective date of this interim final rule
will benefit small businesses so that
they can immediately apply for the loan
with a full understanding of loan terms
and conditions. This interim final rule
is effective without advance notice and
public comment because section 1114 of
the Act authorizes SBA to issue
regulations to implement Title 1 of the
Act without regard to notice
requirements. This rule is being issued
to allow for immediate implementation
of this program. Although this interim
final rule is effective immediately,
comments are solicited from interested
members of the public on all aspects of
the interim final rule, including section
III below. These comments must be
submitted on or before May 15, 2020.
The SBA will consider these comments
and the need for making any revisions
as a result of these comments.
III. Temporary New Business Loan
Program: Paycheck Protection Program
Overview 
The CARES Act was enacted to 
provide immediate assistance to 
individuals, families, and businesses 
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affected by the COVID–19 emergency. 
Among the provisions contained in the 
CARES Act are provisions authorizing 
SBA to temporarily guarantee loans 
under a new 7(a) loan program titled the 
‘‘Paycheck Protection Program.’’ Loans 
guaranteed under the Paycheck 
Protection Program (PPP) will be 100 
percent guaranteed by SBA, and the full 
principal amount of the loans may 
qualify for loan forgiveness. The 
following outlines the key provisions of 
the PPP. 
1. General 
SBA is authorized to guarantee loans 
under the PPP through June 30, 2020. 
Congress authorized a program level of 
$349,000,000,000 to provide guaranteed 
loans under this new 7(a) program. The 
intent of the Act is that SBA provide 
relief to America’s small businesses 
expeditiously, which is expressed in the 
Act by giving all lenders delegated 
authority and streamlining the 
requirements of the regular 7(a) loan 
program. For example, for loans made 
under the PPP, SBA will not require the 
lenders to comply with section 120.150 
‘‘What are SBA’s lending criteria?.’’ SBA 
will allow lenders to rely on 
certifications of the borrower in order to 
determine eligibility of the borrower 
and use of loan proceeds and to rely on 
specified documents provided by the 
borrower to determine qualifying loan 
amount and eligibility for loan 
forgiveness. Lenders must comply with 
the applicable lender obligations set 
forth in this interim final rule, but will 
be held harmless for borrowers’ failure 
to comply with program criteria; 
remedies for borrower violations or 
fraud are separately addressed in this 
interim final rule. The program 
requirements of the PPP identified in 
this rule temporarily supersede any 
conflicting Loan Program Requirement 
(as defined in 13 CFR 120.10). 
2. What do borrowers need to know and 
do? 
a. Am I eligible? 
You are eligible for a PPP loan if you 
have 500 or fewer employees whose 
principal place of residence is in the 
United States, or are a business that 
operates in a certain industry and meet 
the applicable SBA employee-based size 
standards for that industry, and: 
i. You are: 
A. A small business concern as 
defined in section 3 of the Small 
Business Act (15 U.S.C. 632), and 
subject to SBA’s affiliation rules under 
13 CFR 121.301(f) unless specifically 
waived in the Act; or 
B. A tax-exempt nonprofit 
organization described in section 
501(c)(3) of the Internal Revenue Code 
(IRC), a tax-exempt veterans 
organization described in section 
501(c)(19) of the IRC, Tribal business 
concern described in section 31(b)(2)(C) 
of the Small Business Act, or any other 
business; and 
ii. You were in operation on February 
15, 2020 and either had employees for 
whom you paid salaries and payroll 
taxes or paid independent contractors, 
as reported on a Form 1099–MISC. 
You are also eligible for a PPP loan if 
you are an individual who operates 
under a sole proprietorship or as an 
independent contractor or eligible self- 
employed individual, and you were in 
operation on February 15, 2020. 
You must also submit such 
documentation as is necessary to 
establish eligibility such as payroll 
processor records, payroll tax filings, or 
Form 1099–MISC, or income and 
expenses from a sole proprietorship. For 
borrowers that do not have any such 
documentation, the borrower must 
provide other supporting 
documentation, such as bank records, 
sufficient to demonstrate the qualifying 
payroll amount. 
SBA intends to promptly issue 
additional guidance with regard to the 
applicability of affiliation rules at 13 
CFR 121.103 and 121.301 to PPP loans. 
b. Could I be ineligible even if I meet the 
eligibility requirements in (a) above? 
You are ineligible for a PPP loan if, for 
example: 
i. You are engaged in any activity that 
is illegal under Federal, state, or local 
law; 
ii. You are a household employer 
(individuals who employ household 
employees such as nannies or 
housekeepers); 
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; or 
iv. You, or any business owned or 
controlled by you or any of your 
owners, has ever obtained a direct or 
guaranteed loan from SBA or any other 
Federal agency that is currently 
delinquent or has defaulted within the 
last seven years and caused a loss to the 
government. 
The Administrator, in consultation 
with the Secretary of the Treasury (the 
Secretary), determined that household 
employers are ineligible because they 
are not businesses. 13 CFR 120.100. 
c. How do I determine if I am ineligible? 
Businesses that are not eligible for 
PPP loans are identified in 13 CFR 
120.110 and described further in SBA’s 
Standard Operating Procedure (SOP) 50 
10, Subpart B, Chapter 2, except that 
nonprofit organizations authorized 
under the Act are eligible. (SOP 50 10 
can be found at https://www.sba.gov/ 
document/sop-50-10-5-lender- 
development-company-loan-programs.) 
d. I have determined that I am eligible. 
How much can I borrow? 
Under the PPP, the maximum loan 
amount is the lesser of $10 million or 
an amount that you will calculate using 
a payroll-based formula specified in the 
Act, as explained below. 
e. How do I calculate the maximum 
amount I can borrow? 
The following methodology, which is 
one of the methodologies contained in 
the Act, will be most useful for many 
applicants. 
i. Step 1: Aggregate payroll costs 
(defined in detail below in f.) from the 
last twelve months for employees whose 
principal place of residence is the 
United States. 
ii. Step 2: Subtract any compensation 
paid to an employee in excess of an 
annual salary of $100,000 and/or any 
amounts paid to an independent 
contractor or sole proprietor in excess of 
$100,000 per year. 
iii. Step 3: Calculate average monthly 
payroll costs (divide the amount from 
Step 2 by 12). 
iv. Step 4: Multiply the average 
monthly payroll costs from Step 3 by 
2.5. 
v. Step 5: Add the outstanding 
amount of an Economic Injury Disaster 
Loan (EIDL) made between January 31, 
2020 and April 3, 2020, less the amount 
of any ‘‘advance’’ under an EIDL 
COVID–19 loan (because it does not 
have to be repaid). 
The examples below illustrate this 
methodology. 
i. Example 1—No employees make more 
than $100,000 
Annual payroll: $120,000 
Average monthly payroll: $10,000 
Multiply by 2.5 = $25,000 
Maximum loan amount is $25,000 
ii. Example 2—Some employees make 
more than $100,000 
Annual payroll: $1,500,000 
Subtract compensation amounts in 
excess of an annual salary of 
$100,000: $1,200,000 
Average monthly qualifying payroll: 
$100,000 
Multiply by 2.5 = $250,000 
Maximim loan amount is $250,000 
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iii. Example 3—No employees make 
more than $100,000, outstanding 
EIDL loan of $10,000. 
Annual payroll: $120,000 
Average monthly payroll: $10,000 
Multiply by 2.5 = $25,000 
Add EIDL loan of $10,000 = $35,000 
Maximum loan amount is $35,000 
iv. Example 4—Some employees make 
more than $100,000, outstanding 
EIDL loan of $10,000 
Annual payroll: $1,500,000 
Subtract compensation amounts in 
excess of an annual salary of 
$100,000: $1,200,000 
Average monthly qualifying payroll: 
$100,000 
Multiply by 2.5 = $250,000 
Add EIDL loan of $10,000 = $260,000 
Maximum loan amount is $260,000 
f. What qualifies as ‘‘payroll costs?’’ 
Payroll costs consist of compensation 
to employees (whose principal place of 
residence is the United States) in the 
form of salary, wages, commissions, or 
similar compensation; cash tips or the 
equivalent (based on employer records 
of past tips or, in the absence of such 
records, a reasonable, good-faith 
employer estimate of such tips); 
payment for vacation, parental, family, 
medical, or sick leave; allowance for 
separation or dismissal; payment for the 
provision of employee benefits 
consisting of group health care coverage, 
including insurance premiums, and 
retirement; payment of state and local 
taxes assessed on compensation of 
employees; and for an independent 
contractor or sole proprietor, wages, 
commissions, income, or net earnings 
from self-employment, or similar 
compensation. 
g. Is there anything that is expressly 
excluded from the definition of payroll 
costs? 
Yes. The Act expressly excludes the 
following: 
i. Any compensation of an employee 
whose principal place of residence is 
outside of the United States; 
ii. The compensation of an individual 
employee in excess of an annual salary 
of $100,000, prorated as necessary; 
iii. Federal employment taxes 
imposed or withheld between February 
15, 2020 and June 30, 2020, including 
the employee’s and employer’s share of 
FICA (Federal Insurance Contributions 
Act) and Railroad Retirement Act taxes, 
and income taxes required to be 
withheld from employees; and 
iv. Qualified sick and family leave 
wages for which a credit is allowed 
under sections 7001 and 7003 of the 
Families First Coronavirus Response 
Act (Pub. L. 116–127). 
h. Do independent contractors count as 
employees for purposes of PPP loan 
calculations? 
No, independent contractors have the 
ability to apply for a PPP loan on their 
own so they do not count for purposes 
of a borrower’s PPP loan calculation. 
i. What is the interest rate on a PPP 
loan? 
The interest rate will be 100 basis 
points or one percent. 
The Administrator, in consultation 
with the Secretary, determined that a 
one percent interest rate is appropriate. 
First, it provides low cost funds to 
borrowers to meet eligible payroll costs 
and other eligible expenses during this 
temporary period of economic 
dislocation caused by the coronavirus. 
Second, for lenders, the 100 basis points 
offers an attractive interest rate relative 
to the cost of funding for comparable 
maturities. For example, the FDIC’s 
weekly national average rate for a 24- 
month CD deposit product for the week 
of March 30, 2020 is 42 basis points for 
non-jumbo and 44 basis points for 
jumbo (https://www.fdic.gov/ 
regulations/resources/rates/). Third, the 
interest rate is higher than the yield on 
Treasury securities of comparable 
maturity. For example, the yield on the 
Treasury two-year note is approximately 
23 basis points. This higher yield 
combined with the fact that the loans 
are 100 percent guaranteed by the SBA 
and the fact that lenders will receive a 
substantial processing fee from the SBA 
provide ample inducement for lenders 
to participate in the PPP. 
j. What will be the maturity date on a 
PPP loan? 
The maturity is two years. While the 
Act provides that a loan will have a 
maximum maturity of up to ten years 
from the date the borrower applies for 
loan forgiveness (described below), the 
Administrator, in consultation with the 
Secretary, determined that a two year 
loan term is sufficient in light of the 
temporary economic dislocations 
caused by the coronavirus. Specifically, 
the considerable economic disruption 
caused by the coronavirus is expected to 
abate well before the two year maturity 
date such that borrowers will be able to 
re-commence business operations and 
pay off any outstanding balances on 
their PPP loans. 
k. Can I apply for more than one PPP 
loan? 
No. The Administrator, in 
consultation with the Secretary, 
determined that no eligible borrower 
may receive more than one PPP loan. 
This means that if you apply for a PPP 
loan you should consider applying for 
the maximum amount. While the Act 
does not expressly provide that each 
eligible borrower may only receive one 
PPP loan, the Administrator has 
determined, in consultation with the 
Secretary, that because all PPP loans 
must be made on or before June 30, 
2020, a one loan per borrower limitation 
is necessary to help ensure that as many 
eligible borrowers as possible may 
obtain a PPP loan. This limitation will 
also help advance Congress’ goal of 
keeping workers paid and employed 
across the United States. 
l. Can I use e-signatures or e-consents if 
a borrower has multiple owners? 
Yes, e-signature or e-consents can be 
used regardless of the number of 
owners. 
m. Is the PPP ‘‘first-come, first-served?’’ 
Yes. 
n. When will I have to begin paying 
principal and interest on my PPP loan? 
You will not have to make any 
payments for six months following the 
date of disbursement of the loan. 
However, interest will continue to 
accrue on PPP loans during this six- 
month deferment. The Act authorizes 
the Administrator to defer loan 
payments for up to one year. The 
Administrator determined, in 
consultation with the Secretary, that a 
six-month deferment period is 
appropriate in light of the modest 
interest rate (one percent) on PPP loans 
and the loan forgiveness provisions 
contained in the Act. 
o. Can my PPP loan be forgiven in 
whole or in part? 
Yes. The amount of loan forgiveness 
can be up to the full principal amount 
of the loan and any accrued interest. 
That is, the borrower will not be 
responsible for any loan payment if the 
borrower uses all of the loan proceeds 
for forgiveable purposes described 
below and employee and compensation 
levels are maintained. The actual 
amount of loan forgiveness will depend, 
in part, on the total amount of payroll 
costs, payments of interest on mortgage 
obligations incurred before February 15, 
2020, rent payments on leases dated 
before February 15, 2020, and utility 
payments under service agreements 
dated before February 15, 2020, over the 
eight-week period following the date of 
the loan. However, not more than 25 
percent of the loan forgiveness amount 
may be attributable to non-payroll costs. 
While the Act provides that borrowers 
are eligible for forgiveness in an amount 
equal to the sum of payroll costs and 
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1 A representative of the applicant can certify for 
the business as a whole if the representative is 
legally authorized to do so. 
any payments of mortgage interest, rent, 
and utilities, the Administrator has 
determined that the non-payroll portion 
of the forgivable loan amount should be 
limited to effectuate the core purpose of 
the statute and ensure finite program 
resources are devoted primarily to 
payroll. The Administrator has 
determined in consultation with the 
Secretary that 75 percent is an 
appropriate percentage in light of the 
Act’s overarching focus on keeping 
workers paid and employed. Further, 
the Administrator and the Secretary 
believe that applying this threshold to 
loan forgiveness is consistent with the 
structure of the Act, which provides a 
loan amount 75 percent of which is 
equivalent to eight weeks of payroll (8 
weeks/2.5 months = 56 days/76 days = 
74 percent rounded up to 75 percent). 
Limiting non-payroll costs to 25 percent 
of the forgiveness amount will align 
these elements of the program, and will 
also help to ensure that the finite 
appropriations available for PPP loan 
forgiveness are directed toward payroll 
protection. SBA will issue additional 
guidance on loan forgiveness. 
p. Do independent contractors count as 
employees for purposes of PPP loan 
forgiveness? 
No, independent contractors have the 
ability to apply for a PPP loan on their 
own so they do not count for purposes 
of a borrower’s PPP loan forgiveness. 
q. What forms do I need and how do I 
submit an application? 
The applicant must submit SBA Form 
2483 (Paycheck Protection Program 
Application Form) and payroll 
documentation, as described above. The 
lender must submit SBA Form 2484 
(Paycheck Protection Program Lender’s 
Application for 7(a) Loan Guaranty) 
electronically in accordance with 
program requirements and maintain the 
forms and supporting documentation in 
its files. 
r. How can PPP loans be used? 
The proceeds of a PPP loan are to be 
used for: 
i. payroll costs (as defined in the Act 
and in 2.f.); 
ii. costs related to the continuation of 
group health care benefits during 
periods of paid sick, medical, or family 
leave, and insurance premiums; 
iii. mortgage interest payments (but 
not mortgage prepayments or principal 
payments); 
iv. rent payments; 
v. utility payments; 
vi. interest payments on any other 
debt obligations that were incurred 
before February 15, 2020; and/or 
vii. refinancing an SBA EIDL loan 
made between January 31, 2020 and 
April 3, 2020. If you received an SBA 
EIDL loan from January 31, 2020 
through April 3, 2020, you can apply for 
a PPP loan. If your EIDL loan was not 
used for payroll costs, it does not affect 
your eligibility for a PPP loan. If your 
EIDL loan was used for payroll costs, 
your PPP loan must be used to refinance 
your EIDL loan. Proceeds from any 
advance up to $10,000 on the EIDL loan 
will be deducted from the loan 
forgiveness amount on the PPP loan. 
However, at least 75 percent of the 
PPP loan proceeds shall be used for 
payroll costs. For purposes of 
determining the percentage of use of 
proceeds for payroll costs, the amount 
of any EIDL refinanced will be included. 
For purposes of loan forgiveness, 
however, the borrower will have to 
document the proceeds used for payroll 
costs in order to determine the amount 
of forgiveness. While the Act provides 
that PPP loan proceeds may be used for 
the purposes listed above and for other 
allowable uses described in section 7(a) 
of the Small Business Act (15 U.S.C. 
636(a)), the Administrator believes that 
finite appropriations and the structure 
of the Act warrant a requirement that 
borrowers use a substantial portion of 
the loan proceeds for payroll costs, 
consistent with Congress’ overarching 
goal of keeping workers paid and 
employed. As with the similar 
limitation on the forgiveness amount 
explained earlier, the Administrator, in 
consultation with the Secretary, has 
determined that 75 percent is an 
appropriate percentage that will align 
this element of the program with the 
loan amount, 75 percent of which is 
equivalent to eight weeks of payroll. 
This limitation on use of the loan funds 
will help to ensure that the finite 
appropriations available for these loans 
are directed toward payroll protection, 
as each loan that is issued depletes the 
appropriation, regardless of whether 
portions of the loan are later forgiven. 
s. What happens if PPP loan funds are 
misused? 
If you use PPP funds for unauthorized 
purposes, SBA will direct you to repay 
those amounts. If you knowingly use the 
funds for unauthorized purposes, you 
will be subject to additional liability 
such as charges for fraud. If one of your 
shareholders, members, or partners uses 
PPP funds for unauthorized purposes, 
SBA will have recourse against the 
shareholder, member, or partner for the 
unauthorized use. 
t. What certifications need to be made? 
On the Paycheck Protection Program 
application, an authorized 
representative of the applicant must 
certify in good faith to all of the below: 1 
i. The applicant was in operation on 
February 15, 2020 and had employees 
for whom it paid salaries and payroll 
taxes or paid independent contractors, 
as reported on a Form 1099–MISC. 
ii. Current economic uncertainty 
makes this loan request necessary to 
support the ongoing operations of the 
applicant. 
iii. The funds will be used to retain 
workers and maintain payroll or make 
mortgage interest payments, lease 
payments, and utility payments; I 
understand that if the funds are 
knowingly used for unauthorized 
purposes, the Federal Government may 
hold me legally liable such as for 
charges of fraud. As explained above, 
not more than 25 percent of loan 
proceeds may be used for non-payroll 
costs. 
iv. Documentation verifying the 
number of full-time equivalent 
employees on payroll as well as the 
dollar amounts of payroll costs, covered 
mortgage interest payments, covered 
rent payments, and covered utilities for 
the eight week period following this 
loan will be provided to the lender. 
v. Loan forgiveness will be provided 
for the sum of documented payroll 
costs, covered mortgage interest 
payments, covered rent payments, and 
covered utilities. As explained above, 
not more than 25 percent of the forgiven 
amount may be for non-payroll costs. 
vi. During the period beginning on 
February 15, 2020 and ending on 
December 31, 2020, the applicant has 
not and will not receive another loan 
under this program. 
vii. I further certify that the 
information provided in this application 
and the information provided in all 
supporting documents and forms is true 
and accurate in all material respects. I 
understand that knowingly making a 
false statement to obtain a guaranteed 
loan from SBA is punishable under the 
law, including under 18 U.S.C. 1001 
and 3571 by imprisonment of not more 
than five years and/or a fine of up to 
$250,000; under 15 U.S.C. 645 by 
imprisonment of not more than two 
years and/or a fine of not more than 
$5,000; and, if submitted to a federally 
insured institution, under 18 U.S.C. 
1014 by imprisonment of not more than 
thirty years and/or a fine of not more 
than $1,000,000. 
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viii. I acknowledge that the lender 
will confirm the eligible loan amount 
using tax documents I have submitted. 
I affirm that these tax documents are 
identical to those submitted to the 
Internal Revenue Service. I also 
understand, acknowledge, and agree 
that the Lender can share the tax 
information with SBA’s authorized 
representatives, including authorized 
representatives of the SBA Office of 
Inspector General, for the purpose of 
compliance with SBA Loan Program 
Requirements and all SBA reviews. 
3. What do lenders need to know and 
do? 
a. Who is eligible to make PPP loans? 
i. All SBA 7(a) lenders are 
automatically approved to make PPP 
loans on a delegated basis. 
ii. The Act provides that the authority 
to make PPP loans can be extended to 
additional lenders determined by the 
Administrator and the Secretary to have 
the necessary qualifications to process, 
close, disburse, and service loans made 
with the SBA guarantee. Since SBA is 
authorized to make PPP loans up to 
$349 billion by June 30, 2020, the 
Adminstrator and the Secretary have 
jointly determined that authorizing 
additional lenders is necessary to 
achieve the purpose of allowing as 
many eligible borrowers as possible to 
receive loans by the June 30, 2020 
deadline. 
iii. The following types of lenders 
have been determined to meet the 
criteria and are eligible to make PPP 
loans unless they currently are 
designated in Troubled Condition by 
their primary Federal regulator or are 
subject to a formal enforcement action 
with their primary Federal regulator that 
addresses unsafe or unsound lending 
practices: 
I. Any federally insured depository 
institution or any federally insured 
credit union; 
II. Any Farm Credit System institution 
(other than the Federal Agricultural 
Mortgage Corporation) as defined in 12 
U.S.C. 2002(a) that applies the 
requirements under the Bank Secrecy 
Act and its implementing regulations 
(collectively, BSA) as a federally 
regulated financial institution, or 
functionally equivalent requirements 
that are not altered by this rule; and 
III. Any depository or non-depository 
financing provider that originates, 
maintains, and services business loans 
or other commercial financial 
receivables and participation interests; 
has a formalized compliance program; 
applies the requirements under the BSA 
as a federally regulated financial 
institution, or the BSA requirements of 
an equivalent federally regulated 
financial institution; has been operating 
since at least February 15, 2019, and has 
originated, maintained, and serviced 
more than $50 million in business loans 
or other commercial financial 
receivables during a consecutive 12 
month period in the past 36 months, or 
is a service provider to any insured 
depository institution that has a contract 
to support such institution’s lending 
activities in accordance with 12 U.S.C. 
1867(c) and is in good standing with the 
appropriate Federal banking agency. 
iv. Qualified institutions described in 
3.a.iii.I. and II. will be automatically 
qualified under delegated authority by 
the SBA upon transmission of CARES 
Act Section 1102 Lender Agreement 
(SBA Form 3506) unless they currently 
are designated in Troubled Condition by 
their primary Federal regulator or are 
subject to a formal enforcement action 
by their primary Federal regulator that 
addresses unsafe or unsound lending 
practices. 
b. What do lenders have to do in terms 
of loan underwriting? 
Each lender shall: 
i. Confirm receipt of borrower 
certifications contained in Paycheck 
Protection Program Application form 
issued by the Administration; 
ii. Confirm receipt of information 
demonstrating that a borrower had 
employees for whom the borrower paid 
salaries and payroll taxes on or around 
February 15, 2020; 
iii. Confirm the dollar amount of 
average monthly payroll costs for the 
preceding calendar year by reviewing 
the payroll documentation submitted 
with the borrower’s application; and 
iv. Follow applicable BSA 
requirements: 
I. Federally insured depository 
institutions and federally insured credit 
unions should continue to follow their 
existing BSA protocols when making 
PPP loans to either new or existing 
customers who are eligible borrowers 
under the PPP. PPP loans for existing 
customers will not require re- 
verification under applicable BSA 
requirements, unless otherwise 
indicated by the institution’s risk-based 
approach to BSA compliance. 
II. Entities that are not presently 
subject to the requirements of the BSA, 
should, prior to engaging in PPP lending 
activities, including making PPP loans 
to either new or existing customers who 
are eligible borrowers under the PPP, 
establish an anti-money laundering 
(AML) compliance program equivalent 
to that of a comparable federally 
regulated institution. Depending upon 
the comparable federally regulated 
institution, such a program may include 
a customer identification program (CIP), 
which includes identifying and 
verifying their PPP borrowers’ identities 
(including e.g., date of birth, address, 
and taxpayer identification number), 
and, if that PPP borrower is a company, 
following any applicable beneficial 
ownership information collection 
requirements. Alternatively, if available, 
entities may rely on the CIP of a 
federally insured depository institution 
or federally insured credit union with 
an established CIP as part of its AML 
program. In either instance, entities 
should also understand the nature and 
purpose of their PPP customer 
relationships to develop customer risk 
profiles. Such entities will also 
generally have to identify and report 
certain suspicious activity to the U.S. 
Department of the Treasury’s Financial 
Crimes Enforcement Network (FinCEN). 
If such entities have questions with 
regard to meeting these requirements, 
they should contact the FinCEN 
Regulatory Support Section at FRC@
fincen.gov. In addition, FinCEN has 
created a COVID–19-specific contact 
channel, via a specific drop-down 
category, for entities to communicate to 
FinCEN COVID–19-related concerns 
while adhering to their BSA obligations. 
Entities that wish to communicate such 
COVID–19-related concerns to FinCEN 
should go to www.FinCEN.gov, click on 
‘‘Need Assistance,’’ and select 
‘‘COVID19’’ in the subject drop-down 
list. 
Each lender’s underwriting obligation 
under the PPP is limited to the items 
above and reviewing the ‘‘Paycheck 
Protection Application Form.’’ 
Borrowers must submit such 
documentation as is necessary to 
establish eligibility such as payroll 
processor records, payroll tax filings, or 
Form 1099–MISC, or income and 
expenses from a sole proprietorship. For 
borrowers that do not have any such 
documentation, the borrower must 
provide other supporting 
documentation, such as bank records, 
sufficient to demonstrate the qualifying 
payroll amount. 
c. Can lenders rely on borrower 
documentation for loan forgiveness? 
Yes. The lender does not need to 
conduct any verification if the borrower 
submits documentation supporting its 
request for loan forgiveness and attests 
that it has accurately verified the 
payments for eligible costs. The 
Administrator will hold harmless any 
lender that relies on such borrower 
documents and attestation from a 
borrower. The Administrator, in 
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20816 
Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 
consultation with the Secretary, has 
determined that lender reliance on a 
borrower’s required documents and 
attestation is necessary and appropriate 
in light of section 1106(h) of the Act, 
which prohibits the Administrator from 
taking an enforcement action or 
imposing penalties if the lender has 
received a borrower attestation. 
d. What fees will lenders be paid? 
SBA will pay lenders fees for 
processing PPP loans in the following 
amounts: 
i. Five (5) percent for loans of not 
more than $350,000; 
ii. Three (3) percent for loans of more 
than $350,000 and less than $2,000,000; 
and 
iii. One (1) percent for loans of at least 
$2,000,000. 
e. Do lenders have to apply the ‘‘credit 
elsewhere test’’? 
No. When evaluating an applicant’s 
eligibility lenders will not be required to 
apply the ‘‘credit elsewhere test’’ (as set 
forth in section 7(a)(1)(A) of the Small 
Business Act (15 U.S.C. 636) and SBA 
regulations at 13 CFR 120.101)). 
4. What do both borrowers and lenders 
need to know and do? 
a. What are the loan terms and 
conditions? 
Loans will be guaranteed under the 
PPP under the same terms, conditions 
and processes as other 7(a) loans, with 
certain changes including but not 
limited to: 
i. The guarantee percentage is 100 
percent. 
ii. No collateral will be required. 
iii. No personal guarantees will be 
required. 
iv. The interest rate will be 100 basis 
points or one percent. 
v. All loans will be processed by all 
lenders under delegated authority and 
lenders will be permitted to rely on 
certifications of the borrower in order to 
determine eligibility of the borrower 
and the use of loan proceeds. 
b. Are there any fee waivers? 
i. There will be no up-front guarantee 
fee payable to SBA by the Borrower; 
ii. There will be no lender’s annual 
service fee (‘‘on-going guaranty fee’’) 
payable to SBA; 
iii. There will be no subsidy 
recoupment fee; and 
iv. There will be no fee payable to 
SBA for any guarantee sold into the 
secondary market. 
c. Who pays the fee to an agent who 
assists a borrower? 
Agent fees will be paid by the lender 
out of the fees the lender receives from 
SBA. Agents may not collect fees from 
the borrower or be paid out of the PPP 
loan proceeds. The total amount that an 
agent may collect from the lender for 
assistance in preparing an application 
for a PPP loan (including referral to the 
lender) may not exceed: 
i. One (1) percent for loans of not 
more than $350,000; 
ii. 0.50 percent for loans of more than 
$350,000 and less than $2 million; and 
iii. 0.25 percent for loans of at least $2 
million. 
The Act authorizes the Administrator 
to establish limits on agent fees. The 
Administrator, in consultation with the 
Secretary, determined that the agent fee 
limits set forth above are reasonable 
based upon the application req 
uirements and the fees that lenders 
receive for making PPP loans. 
d. Can PPP loans be sold into the 
secondary market? 
Yes. A PPP loan may be sold on the 
secondary market after the loan is fully 
disbursed. A PPP loan may be sold on 
the secondary market at a premium or 
a discount to par value. SBA will issue 
guidance regarding any advance 
purchase for loans sold in the secondary 
market. 
e. Can SBA purchase some or all of the 
loan in advance? 
Yes. A lender may request that the 
SBA purchase the expected forgiveness 
amount of a PPP loan or pool of PPP 
loans at the end of week seven of the 
covered period. The expected 
forgiveness amount is the amount of 
loan principal the lender reasonably 
expects the borrower to expend on 
payroll costs, covered mortgage interest, 
covered rent, and covered utility 
payments during the eight week period 
after loan disbursement. At least 75 
percent of the expected forgiveness 
amount shall be for payroll costs, as 
provided in 2.o. To submit a PPP loan 
or pool of PPP loans for advance 
purchase, a lender shall submit a report 
requesting advance purchase with the 
expected forgiveness amount to the 
SBA. The report shall include: the 
Paycheck Protection Program 
Application Form (SBA Form 2483) and 
any supporting documentation 
submitted with such application; the 
Paycheck Protection Program Lender’s 
Application for 7(a) Loan Guaranty 
(SBA Form 2484) and any supporting 
documentation; a detailed narrative 
explaining the assumptions used in 
determining the expected forgiveness 
amount, the basis for those assumptions, 
alternative assumptions considered, and 
why alternative assumptions were not 
used; any information obtained from the 
borrower since the loan was disbursed 
that the lender used to determine the 
expected forgiveness amount, which 
should include the same documentation 
required to apply for loan forgiveness 
such as payroll tax filings, cancelled 
checks, and other payment 
documentation; and any additional 
information the Administrator may 
require to determine whether the 
expected forgiveness amount is 
reasonable. The Administrator, in 
consultation with the Secretary, 
determined that seven weeks is the 
minimum period of time necessary for 
a lender to reasonably determine the 
expected forgiveness amount for a PPP 
loan or pool of PPP loans, since the PPP 
is a new program and the likelihood that 
many borrowers will be new clients of 
the lender. The expected forgiveness 
amount may not exceed the total 
amount of principal on the PPP loan or 
pool of loans. The Administrator will 
purchase the expected forgiveness 
amount of the PPP loan(s) within 15 
days of the date on which the 
Administrator receives a complete 
report that demonstrates that the 
expected forgiveness amount is indeed 
reasonable. 
5. Additional Information 
All loans guaranteed by the SBA 
pursuant to the CARES Act will be 
made consistent with constitutional, 
statutory, and regulatory protections for 
religious liberty, including the First 
Amendment to the Constitution, the 
Religious Freedom Restoration Act, 42 
U.S.C. 2000bb–1 and bb–3, and SBA 
regulation at 13 CFR 113.3–1h, which 
provides that nothing in SBA 
nondiscrimination regulations shall 
apply to a religious corporation, 
association, educational institution or 
society with respect to the membership 
or the employment of individuals of a 
particular religion to perform work 
connected with the carrying on by such 
corporation, association, educational 
institution or society of its religious 
activities. SBA intends to promptly 
issue additional guidance with regard to 
religious liberty protections under this 
program. 
SBA may provide further guidance, if 
needed, through SBA notices and a 
program guide which will be posted on 
SBA’s website at www.sba.gov. 
Questions on the Paycheck Protection 
Program 7(a) Loans may be directed to 
the Lender Relations Specialist in the 
local SBA Field Office. The local SBA 
Field Office may be found at https://
www.sba.gov/tools/local-assistance/ 
districtoffices. 
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20817 
Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 
Compliance With Executive Orders 
12866, 12988, 13132, and 13771, the 
Paperwork Reduction Act (44 U.S.C. 
Ch. 35), and the Regulatory Flexibility 
Act (5 U.S.C. 601–612) 
E.O. 12866 and E.O. 13563 
This interim final rule is 
economically significant for the 
purposes of Executive Orders 12866 and 
13563. SBA, however, is proceeding 
under the emergency provision at 
Executive Order 12866 Section 
6(a)(3)(D) based on the need to move 
expeditiously to mitigate the current 
economic conditions arising from the 
COVID–19 emergency. This rule’s 
designation under Executive Order 
13771 will be informed by public 
comment. 
This rule is necessary to implement 
Sections 1102 and 1106 of the CARES 
Act in order to provide economic relief 
to small businesses nationwide 
adversely impacted under the COVID– 
19 Emergency Declaration. We 
anticipate that this rule will result in 
substantial benefits to small businesses, 
their employees, and the communities 
they serve. However, we lack data to 
estimate the effects of this rule. 
Executive Order 12988 
SBA has drafted this rule, to the 
extent practicable, in accordance with 
the standards set forth in section 3(a) 
and 3(b)(2) of Executive Order 12988, to 
minimize litigation, eliminate 
ambiguity, and reduce burden. The rule 
has no preemptive or retroactive effect. 
Executive Order 13132 
SBA has determined that this rule 
will not have substantial direct effects 
on the States, on the relationship 
between the National Government and 
the States, or on the distribution of 
power and responsibilities among the 
various layers of government. Therefore, 
SBA has determined that this rule has 
no federalism implications warranting 
preparation of a federalism assessment. 
Paperwork Reduction Act, 44 U.S.C. 
Chapter 35 
SBA has determined that this rule 
will impose recordkeeping or reporting 
requirements under the Paperwork 
Reduction Act (‘‘PRA’’). SBA has 
obtained emergency approval under 
OMB Control Number 3245–0407 for the 
information collection (IC) required to 
implement the program described 
above. This IC consists of Form 2483 
(Paycheck Protection Program 
Application Form), SBA Form 2484 
(Paycheck Protection Program Lender’s 
Application for 7(a) Loan Guaranty), 
and SBA Form 3506 (CARES Act 
Section 1102 Lender Agreement), and 
SBA Form 3507 (CARES Act Section 
1102 Lender Agreement—Non-Bank and 
Non-Insured Depository Institution 
Lender). The collection is approved for 
use until September 30, 2020. 
Regulatory Flexibility Act (RFA) 
The Regulatory Flexibility Act (RFA) 
generally requires that when an agency 
issues a proposed rule, or a final rule 
pursuant to section 553(b) of the APA or 
another law, the agency must prepare a 
regulatory flexibility analysis that meets 
the requirements of the RFA and 
publish such analysis in the Federal 
Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to 
describe the impact of a rulemaking on 
small entities by providing a regulatory 
impact analysis. Such analysis must 
address the consideration of regulatory 
options that would lessen the economic 
effect of the rule on small entities. The 
RFA defines a ‘‘small entity’’ as (1) a 
proprietary firm meeting the size 
standards of the Small Business 
Administration (SBA); (2) a nonprofit 
organization that is not dominant in its 
field; or (3) a small government 
jurisdiction with a population of less 
than 50,000. 5 U.S.C. 601(3)–(6). Except 
for such small government jurisdictions, 
neither State nor local governments are 
‘‘small entities.’’ Similarly, for purposes 
of the RFA, individual persons are not 
small entities. 
The requirement to conduct a 
regulatory impact analysis does not 
apply if the head of the agency ‘‘certifies 
that the rule will not, if promulgated, 
have a significant economic impact on 
a substantial number of small entities.’’ 
5 U.S.C. 605(b). The agency must, 
however, publish the certification in the 
Federal Register at the time of 
publication of the rule, ‘‘along with a 
statement providing the factual basis for 
such certification.’’ If the agency head 
has not waived the requirements for a 
regulatory flexibility analysis in 
accordance with the RFA’s waiver 
provision, and no other RFA exception 
applies, the agency must prepare the 
regulatory flexibility analysis and 
publish it in the Federal Register at the 
time of promulgation or, if the rule is 
promulgated in response to an 
emergency that makes timely 
compliance impracticable, within 180 
days of publication of the final rule. 5 
U.S.C. 604(a), 608(b). 
Rules that are exempt from notice and 
comment are also exempt from the RFA 
requirements, including conducting a 
regulatory flexibility analysis, when 
among other things the agency for good 
cause finds that notice and public 
procedure are impracticable, 
unnecessary, or contrary to the public 
interest. Small Business 
Administration’s Office of Advocacy 
guide: How to Comply with the 
Regulatory Flexibility Ac. Ch.1. p.9. 
Accordingly, SBA is not required to 
conduct a regulatory flexibility analysis. 
Authority: 15 U.S.C. 636(a)(36); 
Coronavirus Aid, Relief, and Economic 
Security Act, Public Law 116–136, 
Section 1114. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–07672 Filed 4–10–20; 4:15 pm] 
BILLING CODE P 
SMALL BUSINESS ADMINISTRATION 
13 CFR Part 121 
[Docket No. SBA–2020–0019] 
RIN 3245–AH35 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program 
AGENCY: U.S. Small Business 
Administration. 
ACTION: Interim final rule. 
SUMMARY: Elsewhere in this issue of the 
Federal Register, the U.S. Small 
Business Administration (SBA) is 
publishing an interim final rule (the 
Initial Rule) announcing the 
implementation of sections 1102 and 
1106 of the Coronavirus Aid, Relief, and 
Economic Security Act (CARES Act or 
the Act). Section 1102 of the Act 
temporarily adds a new program, titled 
the ‘‘Paycheck Protection Program,’’ to 
the SBA’s 7(a) Loan Program. Section 
1106 of the Act provides for forgiveness 
of up to the full principal amount of 
qualifying loans guaranteed under the 
Paycheck Protection Program. The 
Paycheck Protection Program and loan 
forgiveness are intended to provide 
economic relief to small businesses 
nationwide adversely impacted by the 
Coronavirus Disease 2019 (COVID–19). 
This interim final rule supplements the 
Initial Rule with additional guidance 
regarding the application of certain 
affiliate rules applicable to SBA’s 
implementation of sections 1102 and 
1106 of the Act and requests public 
comment. 
DATES: 
Effective date: This interim final rule 
is effective April 15, 2020. 
Applicability date: This interim final 
rule applies to applications submitted 
under the Paycheck Protection Program 
through June 30, 2020, or until funds 
made available for this purpose are 
exhausted. 
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