Business Loan Program Temporary Changes; Paycheck Protection Program — Eligibility of Certain Electric Cooperatives

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Summary

An interim final rule issued by the U.S. Small Business Administration on the eligibility of certain electric cooperatives under the Paycheck Protection Program, published in the Federal Register of May 19, 2020 (Vol. 85, No. 97) under Docket Number SBA-2020-0029. The rule states that, for purposes of the program, an electric cooperative exempt from federal income taxation under section 501(c)(12) of the Internal Revenue Code will be considered a business entity organized for profit under 13 CFR 121.105(a)(1), and is therefore an eligible borrower if other requirements are met. It notes the annual test under which such a cooperative must receive at least 85 percent of its income from its members. The rule is issued under 13 CFR Parts 120 and 121, is effective May 19, 2020, applies to applications submitted through June 30, 2020, and invites comments by June 18, 2020.

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29847 
Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 
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. 
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 not impose new or modify existing 
recordkeeping or reporting requirements 
under the Paperwork Reduction Act. 
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. SBA Office of 
Advocacy guide: How to Comply with 
the Regulatory Flexibility Act, Ch.1. p.9. 
Accordingly, SBA is not required to 
conduct a regulatory flexibility analysis. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–10649 Filed 5–18–20; 8:45 am] 
BILLING CODE P 
SMALL BUSINESS ADMINISTRATION 
13 CFR Parts 120 and 121 
[Docket Number SBA–2020–0029] 
RIN 3245–AH43 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program—Eligibility of Certain Electric 
Cooperatives 
AGENCY: U.S. Small Business 
Administration. 
ACTION: Interim final rule. 
SUMMARY: On April 2, 2020, the U.S. 
Small Business Administration (SBA) 
posted an interim final rule announcing 
the implementation of the Coronavirus 
Aid, Relief, and Economic Security Act 
(CARES Act). The CARES Act 
temporarily adds a new program, titled 
the ‘‘Paycheck Protection Program,’’ to 
the SBA’s 7(a) Loan Program. The 
CARES Act also provides for forgiveness 
of up to the full principal amount of 
qualifying loans guaranteed under the 
Paycheck Protection Program (PPP). The 
PPP is intended to provide economic 
relief to small businesses nationwide 
adversely impacted by the Coronavirus 
Disease 2019 (COVID–19). SBA posted 
additional interim final rules on April 3, 
2020, April 14, 2020, April 24, 2020, 
April 28, 2020, April 30, 2020, May 5, 
2020, and May 8, 2020, and the 
Department of the Treasury posted an 
additional interim final rule on April 
28, 2020. This interim final rule 
supplements the previously posted 
interim final rules by providing 
guidance on additional eligibility 
requirements for certain electric 
cooperatives, and requests public 
comment. 
DATES: 
Effective date: This rule is effective 
May 19, 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 June 18, 2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0029 
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: A 
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, tribal, and local public 
health measures that are being taken to 
minimize the public’s exposure to the 
virus. These measures, some of which 
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Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 
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) 
(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 CARES 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 CARES 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 CARES 
Act provides for forgiveness of up to the 
full principal amount of qualifying 
loans guaranteed under the Paycheck 
Protection Program (PPP). On April 24, 
2020, the President signed the Paycheck 
Protection Program and Health Care 
Enhancement Act (Pub. L. 116–139), 
which provided additional funding and 
authority for the PPP. 
Among the categories of entities that 
are eligible PPP borrowers are business 
concerns and certain nonprofit 
organizations described in section 
501(c)(3) of the Internal Revenue Code 
(the Code). This interim final rule 
addresses the eligibility of electric 
cooperatives as PPP borrowers. Existing 
SBA regulations define a ‘‘business 
concern’’ as ‘‘a business entity 
organized for profit,’’ subject to certain 
limitations. 13 CFR 121.105(a)(1). 
Generally, electric cooperatives are 
organizations that are owned and 
controlled by members who receive 
services from the cooperative. Electric 
cooperatives periodically return any 
excess of net operating revenues over 
their cost of operations—generally 
referred to as ‘‘savings’’—to their 
member-owners. In addition, electric 
cooperatives meeting the description of 
section 501(c)(12) of the Code may be 
exempt from Federal income taxation 
under section 501(a) of the Code. To 
qualify for the exemption, an electric 
cooperative must receive at least 85 
percent of its income each year from its 
members. The 85 percent member 
income test is computed annually. An 
electric cooperative may be exempt in 
one year, lose exemption in another year 
if it does not derive at least 85 percent 
of its income from members, and 
become exempt in a third year. Because 
of their potential tax exemption under 
section 501(c)(12) of the Code, electric 
cooperatives have faced uncertainty 
about their eligibility to receive PPP 
loans. 
The Administrator, in consultation 
with the Secretary, understands that 
electric cooperatives are unusual in that 
they may be exempt from taxation or 
organized under state nonprofit statutes 
in certain jurisdictions, while they 
operate as businesses. For example, 
electric cooperatives provide utility 
services and distribute savings to their 
member-owners. Accordingly, as 
described below, to provide certainty to 
potential PPP loan applicants, this 
interim final rule provides that, for 
purposes of the PPP, an electric 
cooperative that is exempt from Federal 
income taxation under section 
501(c)(12) of the Code will be 
considered to be ‘‘a business entity 
organized for profit’’ under 13 CFR 
121.105(a)(1). As a result, such electric 
cooperatives are eligible PPP borrowers, 
as long as other eligibility requirements 
are met. 
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, it is critical to meet 
lenders’ and borrowers’ need for clarity 
concerning program requirements as 
rapidly as possible because the last day 
eligible borrowers can apply for and 
receive a loan is June 30, 2020. 
This interim final rule supplements 
previous regulations and guidance on an 
important, discrete issue. The 
immediate effective date of this interim 
final rule will benefit lenders so that 
they can swiftly close and disburse 
loans to small businesses. 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 
I 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 June 18, 2020. 
SBA will consider these comments and 
the need for making any revisions as a 
result of these comments. 
III. Paycheck Protection Program 
Additional Eligibility Criteria 
Overview 
The CARES Act was enacted to 
provide immediate assistance to 
individuals, families, and organizations 
affected by the COVID–19 emergency. 
Among the provisions contained in the 
CARES Act are provisions authorizing 
SBA to temporarily guarantee loans 
under the PPP. Loans under the PPP 
will be 100 percent guaranteed by SBA, 
and the full principal amount of the 
loans and any accrued interest may 
qualify for loan forgiveness. Additional 
information about the PPP is available 
in interim final rules published by SBA 
and the Department of the Treasury in 
the Federal Register (85 FR 20811, 85 
FR 20817, 85 FR 21747, 85 FR 23450, 
85 FR 23917, 85 FR 26321, 85 FR 26324, 
and 85 FR 27287) and the interim rule 
entitled ‘‘Business Loan Program 
Temporary Changes; Paycheck 
Protection Program—Requirements— 
Extension of Limited Safe Harbor with 
Respect to Certification Concerning 
Need for PPP Loan Request,’’ which 
SBA posted on May 8, 2020, and is 
published elsewhere in this issue of the 
Federal Register (collectively, the PPP 
Interim Final Rules). 
1. Eligibility of Certain Electric 
Cooperatives 
Are electric cooperatives that are 
exempt from Federal income taxation 
under section 501(c)(12) of the Internal 
Revenue Code eligible for a PPP loan? 
Yes. Electric cooperatives provide 
utility services and distribute savings to 
their member-owners. Accordingly, for 
purposes of the PPP, the Administrator, 
in consultation with the Secretary, has 
determined that an electric cooperative 
that is exempt from Federal income 
taxation under section 501(c)(12) of the 
Internal Revenue Code will be 
considered to be ‘‘a business entity 
organized for profit’’ for purposes of 13 
CFR 121.105(a)(1). As a result, such 
entities are eligible PPP borrowers, as 
long as other eligibility requirements are 
met. To be eligible, an electric 
cooperative must satisfy the employee- 
based size standard established in the 
CARES Act, SBA’s employee-based size 
standard corresponding to its primary 
industry, if higher, or both tests in 
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29849 
Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 
1 Under the alternative size standard, a business 
concern, including an electric cooperative, can 
qualify for the PPP as a small business concern if, 
as of March 27, 2020: (1) The maximum tangible net 
worth of the business was not more than $15 
million; and (2) the average net income after 
Federal income taxes (excluding any carry-over 
losses) of the business for the two full fiscal years 
before the date of the application is not more than 
$5 million. For an electric cooperative that does not 
have net income, the cooperative’s savings 
distributed to its owner-members will be 
considered its net income. 
SBA’s ‘‘alternative size standard.’’ 1 The 
Administrator, in consultation with the 
Secretary, has determined that this 
treatment is appropriate to effectuate the 
purposes of the CARES Act to provide 
assistance to eligible PPP borrowers, 
including business concerns, affected by 
the COVID–19 emergency. 
2. Additional Information 
SBA may provide further guidance, if 
needed, through SBA notices that will 
be posted on SBA’s website at 
www.sba.gov. Questions on the 
Paycheck Protection Program 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. 
Compliance With Executive Orders 
12866, 12988, 13132, 13563, and 13771, 
the Paperwork Reduction Act (44 U.S.C. 
Ch. 35), and the Regulatory Flexibility 
Act (5 U.S.C. 601–612) 
Executive Orders 12866, 13563, and 
13771 
This interim final rule is 
economically significant for the 
purposes of Executive Orders 12866 and 
13563, and is considered a major rule 
under the Congressional Review Act. 
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. 
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 not impose new or modify existing 
recordkeeping or reporting requirements 
under the Paperwork Reduction Act. 
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. SBA Office of 
Advocacy guide: How to Comply with 
the Regulatory Flexibility Act, Ch.1. p.9. 
Accordingly, SBA is not required to 
conduct a regulatory flexibility analysis. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–10674 Filed 5–18–20; 8:45 am] 
BILLING CODE P 
DEPARTMENT OF COMMERCE 
Bureau of Industry and Security 
15 CFR Parts 730, 732, 736, and 744 
[Docket No. 200514–0100] 
RIN 0694–AH99 
Export Administration Regulations: 
Amendments to General Prohibition 
Three (Foreign-Produced Direct 
Product Rule) and the Entity List 
AGENCY: Bureau of Industry and 
Security, Commerce. 
ACTION: Interim final rule; request for 
comments. 
SUMMARY: This rule amends General 
Prohibition Three, also known as the 
foreign-produced direct product rule, by 
exercising existing authority under the 
Export Control Reform Act of 2018 
(ECRA), to impose a new control over 
certain foreign-produced items, when 
there is knowledge that such items are 
destined to a designated entity on the 
Entity List. A foreign-produced item is 
subject to the new control if the entity 
for which the item is destined has a 
footnote 1 designation in the Entity List. 
This rule also applies this new control 
to Huawei Technologies Co., Ltd. 
(Huawei) and its non-U.S. affiliates 
listed as entities. The Bureau of Industry 
and Security (BIS) is requesting 
comments on the impact of this rule. 
DATES: 
Effective date: This rule is effective 
May 15, 2020. 
Comment date: Submit comments on 
or before July 14, 2020. 
ADDRESSES: You may submit comments, 
identified by docket number BIS 2020– 
0011 or RIN 0694–AH99, through the 
Federal eRulemaking Portal: http://
www.regulations.gov. Follow the 
instructions for submitting comments. 
All filers using the portal should use 
the name of the person or entity 
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