Business Loan Program Temporary Changes; Paycheck Protection Program — Eligibility of Businesses with Foreign Affiliates

Record facts

Summary

An interim final rule issued by the U.S. Small Business Administration on the treatment of entities with foreign affiliates under the Paycheck Protection Program, published in the Federal Register of May 21, 2020 (Vol. 85, No. 99) under Docket Number SBA-2020-0030. The rule states that, to determine whether a borrower has more than 500 employees, an entity must include all employees of its domestic and foreign affiliates, citing the affiliation regulations at 13 CFR 121.301(f). As an exercise of enforcement discretion, it states that SBA will not find ineligible a borrower that applied before May 5, 2020 and excluded non-U.S. employees, if that borrower and its affiliates had no more than 500 U.S.-resident employees. The rule is issued under 13 CFR Parts 120 and 121, is effective May 21, 2020, applies to applications submitted through June 30, 2020, and invites comments by June 22, 2020.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

30835 
Federal Register / Vol. 85, No. 99 / Thursday, May 21, 2020 / Rules and Regulations 
restriction on receipt of funds under 
CFAP but only as to beneficiaries who, 
as a condition of the waiver, agree to 
apply the CFAP payments to reduce the 
amount of the judgment lien. 
(g) In addition to any other Federal 
laws that apply to CFAP, the following 
laws apply: 15 U.S.C. 714; 18 U.S.C. 
286, 287, 371, 1001; and 31 U.S.C. 1001. 
(h) This part applies to applications 
submitted under CFAP through August 
28, 2020, or until funds made available 
for CFAP are exhausted. 
§ 9.8
Perjury. 
In either applying for or participating 
in CFAP, or both, the producer is 
subject to laws against perjury and any 
penalties and prosecution resulting 
therefrom, with such laws including but 
not limited to 18 U.S.C. 1621. If the 
producer willfully makes and represents 
as true any verbal or written declaration, 
certification, statement, or verification 
that the producer knows or believes not 
to be true, in the course of either 
applying for or participating in CFAP, or 
both, then the producer is guilty of 
perjury and, except as otherwise 
provided by law, may be fined, 
imprisoned for not more than 5 years, or 
both, regardless of whether the producer 
makes such verbal or written 
declaration, certification, statement, or 
verification within or without the 
United States. 
Stephen L. Censky, 
Vice Chairman, Commodity Credit 
Corporation, and Deputy Secretary, U.S. 
Department of Agriculture. 
[FR Doc. 2020–11025 Filed 5–20–20; 8:45 am] 
BILLING CODE 3410–05–P 
DEPARTMENT OF AGRICULTURE 
Rural Housing Service 
7 CFR Part 1951 
[Docket No. RHS–20–CF–0011] 
Notification of Direct Loan Payment 
Deferrals for the Community Facilities 
Direct Loan Program 
Correction 
In rule document 2020–08429 
beginning on page 22009 in the issue of 
Tuesday, April 21, 2020, make the 
following correction: 
On page 22009, in the DATES section, 
‘‘May 12, 2020’’ should read ‘‘April 21, 
2020’’. 
[FR Doc. C1–2020–08429 Filed 5–20–20; 8:45 am] 
BILLING CODE 1301–00–D 
SMALL BUSINESS ADMINISTRATION 
13 CFR Parts 120 and 121 
[Docket Number SBA–2020–0030] 
RIN 3245–AH44 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program—Treatment of Entities With 
Foreign Affiliates 
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, May 8, 2020, May 13, 2020, and 
May 14, 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 related to 
entities with foreign affiliates, and 
requests public comment. 
DATES:
Effective date: This rule is effective 
May 21, 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 22, 2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0030 
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 
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), 
VerDate Sep<11>2014 
16:00 May 20, 2020
Jkt 250001
PO 00000
Frm 00011
Fmt 4700
Sfmt 4700
E:\FR\FM\21MYR1.SGM
21MYR1

30836 
Federal Register / Vol. 85, No. 99 / Thursday, May 21, 2020 / Rules and Regulations 
1 Section 7(a)(36)(D)(iv) of the Small Business Act 
(15 U.S.C. 636(a)(36)(D)(iv), as added by the CARES 
Act, waives SBA’s affiliation rules for (1) any 
business concern with not more than 500 
employees that, as of the date on which the loan 
which provided additional funding and 
authority for the PPP. 
Under the CARES Act, an entity is 
eligible for a PPP loan if it is (1) a small 
business concern, or (2) a business 
concern, nonprofit organization 
described in section 501(c)(3) of the 
Internal Revenue Code, veterans 
organization described in section 
501(c)(19) of the Internal Revenue Code, 
or Tribal business concern described in 
section 31(b)(2)(C) of the Small Business 
Act that employs not more than the 
greater of 500 employees, or, if 
applicable, SBA’s employee-based size 
standard for the industry in which the 
entity operates. Under existing SBA 
regulations, an entity is generally 
considered together with its affiliates for 
purposes of determining the entity’s 
eligibility for SBA loans. See 13 CFR 
121.301. SBA issued an interim final 
rule on affiliation (posted April 4, 2020) 
stating that PPP applicants are subject to 
the affiliation rules set forth in 13 CFR 
121.301. See 85 FR 20817 (April 15, 
2020). Those rules deem entities to be 
affiliates based on factors including 
stock ownership, overlapping 
management, and identity of interest. Of 
relevance here, SBA’s affiliation rules 
provide that in determining an entity’s 
number of employees, employees of the 
entity ‘‘and all of its domestic and 
foreign affiliates’’ are included. As a 
result, in most cases, a borrower is 
considered together with its U.S. and 
foreign affiliates for purposes of 
determining eligibility for the PPP. 
Based on that methodology, the 
borrower application form (SBA Form 
2483), which all applicants must 
complete and submit, includes a 
certification that the applicant ‘‘employs 
no more than the greater of 500 or 
employees or, if applicable, the size 
standard in number of employees 
established by the SBA in 13 CFR 
121.201 for the Applicant’s industry.’’ 
To provide further clarification of this 
methodology, SBA issued guidance on 
May 5, 2020 (FAQ 44) stating that an 
applicant must count all of its 
employees and the employees of its U.S. 
and foreign affiliates, absent a waiver of 
or an exception to the affiliation rules. 
Some market participants have 
indicated that there may be uncertainty 
regarding whether PPP applicants must 
include employees of foreign affiliates 
in their employee counts, because SBA 
has previously issued guidance stating 
that an entity is eligible for a PPP loan 
if it has 500 or fewer employees whose 
principal place of residence is in the 
United States. See 85 FR 20811, 20812 
(April 15, 2020). As described above, 
the generally applicable 500-employee 
size standard is subject to the 
application of SBA’s affiliation rules, as 
well as numerous other eligibility 
requirements. See, e.g., 13 CFR 120.110 
(listing 18 types of ineligible 
businesses); SBA Form 2483 (including 
mandatory applicant representations 
regarding defaults on previous 
government loans or guarantees, Federal 
suspension or debarment, and criminal 
backgrounds). The reference in SBA 
guidance to employees whose principal 
place of residence is in the United 
States is relevant to a PPP applicant’s 
calculation of payroll for purposes of 
determining the PPP loan amount and to 
the calculation of loan forgiveness. The 
fact that an applicant might be eligible 
for a PPP loan if it has 500 or fewer U.S. 
employees does not mean that the 
applicant is not also subject to the other 
requirements applicable to the PPP. 
Instead, an applicant is eligible for a 
PPP loan only if it meets all applicable 
eligibility criteria. If an applicant, 
together with its domestic and foreign 
affiliates, does not meet the 500- 
employee or other applicable PPP size 
standard, it is not eligible for a PPP 
loan. 
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 22, 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 posted on May 8, 
2020, May 13, 2020, and May 14, 2020 
(85 FR 29845, 85 FR 29842, and 85 FR 
29847) (collectively, the PPP Interim 
Final Rules). 
1. Treatment of Foreign Affiliates 
Are employees of foreign affiliates 
included for purposes of determining 
whether a PPP borrower has more than 
500 employees? 
Yes. The CARES Act specifies that an 
entity is eligible for a PPP loan only if 
it is (1) a small business concern, or (2) 
a business concern, nonprofit 
organization described in section 
501(c)(3) of the Internal Revenue Code, 
veterans organization described in 
section 501(c)(19) of the Internal 
Revenue Code, or Tribal business 
concern described in section 31(b)(2)(C) 
of the Small Business Act that employs 
not more than the greater of 500 
employees, or, if applicable, SBA’s 
employee-based size standard for the 
industry in which the entity operates. 
SBA’s affiliation regulations provide 
that to determine a concern’s size, 
employees of the concern ‘‘and all of its 
domestic and foreign affiliates’’ are 
included. 13 CFR 121.301(f). Therefore, 
to calculate the number of employees of 
an entity for purposes of determining 
eligibility for the PPP, an entity must 
include all employees of its domestic 
and foreign affiliates, except in those 
limited circumstances where the 
affiliation rules expressly do not apply 
to the entity.1 Any entity that, together 
VerDate Sep<11>2014 
16:00 May 20, 2020
Jkt 250001
PO 00000
Frm 00012
Fmt 4700
Sfmt 4700
E:\FR\FM\21MYR1.SGM
21MYR1

30837 
Federal Register / Vol. 85, No. 99 / Thursday, May 21, 2020 / Rules and Regulations 
is disbursed, is assigned a North American Industry 
Classification System code beginning with 72; (2) 
any business concern operating as a franchise that 
is assigned a franchise identifier code by the 
Administration; and (3) any business concern that 
receives financial assistance from a company 
licensed under section 301 of the Small Business 
Investment Act of 1958 (15 U.S.C. 681). SBA also 
applies affiliation exceptions to certain categories of 
entities. 13 CFR 121.103(b). 
2 For purposes of this safe harbor, a borrower 
must include its affiliates to the extent required 
under the interim final rule on affiliates, 85 FR 
20817 (April 15, 2020). SBA’s affiliation exceptions 
in 13 CFR 121.103(b) apply to the PPP. 
with its domestic and foreign affiliates, 
does not meet the 500-employee or 
other applicable PPP size standard is 
therefore ineligible for a PPP loan. 
However, as an exercise of 
enforcement discretion due to 
reasonable borrower confusion based on 
SBA guidance (which was later resolved 
through a clarifying FAQ on May 5, 
2020), SBA will not find any borrower 
that applied for a PPP loan prior to May 
5, 2020 to be ineligible based on the 
borrower’s exclusion of non-U.S 
employees from the borrower’s 
calculation of its employee headcount if 
the borrower (together with its 
affiliates) 2 had no more than 500 
employees whose principal place of 
residence is in the United States. Such 
borrowers shall not be deemed to have 
made an inaccurate certification of 
eligibility solely on that basis. Under no 
circumstances may PPP funds be used 
to support non-U.S. workers or 
operations. 
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. 2020–10967 Filed 5–19–20; 11:15 am] 
BILLING CODE P 
DEPARTMENT OF TRANSPORTATION 
Federal Aviation Administration 
14 CFR Part 39 
[Docket No. FAA–2019–0204; Project 
Identifier 2018–CE–042–AD; Amendment 
39–21129; AD 2020–11–04] 
RIN 2120–AA64 
Airworthiness Directives; Learjet Inc. 
Airplanes 
AGENCY: Federal Aviation 
Administration (FAA), DOT. 
ACTION: Final rule. 
SUMMARY: The FAA is adopting a new 
airworthiness directive (AD) for certain 
Learjet Inc. Model 60 airplanes. This AD 
was prompted by a report of a reverse 
thrust command accelerating the 
airplane instead of decelerating the 
airplane. The acceleration with reverse 
thrust commanded occurred when the 
thrust reverser doors were in the stowed 
position instead of the deployed 
position. This AD requires installing a 
thrust reverser (T/R) Voice Command 
Warning System (VCWS) to alert the 
crew of a T/R malfunction. The FAA is 
VerDate Sep<11>2014 
16:00 May 20, 2020
Jkt 250001
PO 00000
Frm 00013
Fmt 4700
Sfmt 4700
E:\FR\FM\21MYR1.SGM
21MYR1

File and source

File

2020-05-21_2020-10967.pdf

Size

184,458 bytes

SHA-256

7c342a04f8cc7cd6ef43df53b7fdbb44f38ec04cc9536003ee42ebc81569c2f9

Our copy

2020-05-21_2020-10967.pdf

Original

www.federalregister.gov