Business Loan Program Temporary Changes; Paycheck Protection Program — Revisions to Loan Forgiveness and Loan Review Procedures Interim Final Rules

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Summary

An interim final rule of the U.S. Small Business Administration and the Department of the Treasury, Docket No. SBA–2020–0038, published in the Federal Register, Vol. 85, No. 124, on June 26, 2020. It revises the interim final rules on PPP loan forgiveness and SBA loan review procedures posted May 22, 2020 to conform to the Paycheck Protection Program Flexibility Act of 2020, signed June 5, 2020. The rule is effective March 27, 2020, except that the maturity-date provision takes effect June 5, 2020 and the forgiveness cap for owner-employees and self-employed individuals takes effect June 24, 2020. It relies on section 1114 of the CARES Act to act without advance notice and comment, noting that SBA's authority to guarantee PPP loans expires on June 30, 2020. Comments must be received on or before July 27, 2020.

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38304 
Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 
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 and the Flexibility 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 effect but does have 
a limited retroactive effect consistent 
with section 3(d) of the Flexibility Act. 
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 require modification to the existing 
PPP information collection that is 
approved under OMB Control Number 
3245–0407 as an emergency request 
until October 31, 2020. As discussed 
above, this rule amends the PPP 
eligibility requirements regarding 
certain criminal activity. As a result of 
these amendments, conforming changes 
will be made to Questions 5 and 6 of 
Form 2483, Borrower Application Form, 
and Section H of Form 2484, Lender 
Application Form. SBA will submit the 
revisions to these forms to the Office of 
Management and Budget for approval. 
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 Act, 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, Pub. L. 116–136, Section 1114. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–13942 Filed 6–24–20; 4:15 pm] 
BILLING CODE 8026–03–P 
SMALL BUSINESS ADMINISTRATION 
13 CFR Part 120 
[Docket No. SBA–2020–0038] 
RIN 3245–AH52 
DEPARTMENT OF THE TREASURY 
RIN 1505–AC70 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program—Revisions to Loan 
Forgiveness and Loan Review 
Procedures Interim Final Rules 
AGENCY: U.S. Small Business 
Administration; Department of the 
Treasury. 
ACTION: Interim final rule. 
SUMMARY: On April 2, 2020, the U.S. 
Small Business Administration (SBA) 
posted on its website an interim final 
rule relating to the implementation of 
sections 1102 and 1106 of the 
Coronavirus Aid, Relief, and Economic 
Security Act (CARES Act or the Act) 
(published in the Federal Register on 
April 15, 2020). Section 1102 of the Act 
temporarily adds a new product, titled 
the ‘‘Paycheck Protection Program,’’ to 
the SBA’s 7(a) Loan Program. 
Subsequently, SBA and Treasury issued 
additional interim final rules 
implementing the Paycheck Protection 
Program. On June 5, 2020, the Paycheck 
Protection Program Flexibility Act of 
2020 (Flexibility Act) was signed into 
law, amending the CARES Act. This 
interim final rule revises interim final 
rules posted on SBA’s and the 
Department of the Treasury’s websites 
on May 22, 2020 (published on June 1, 
2020, in the Federal Register), by 
changing key provisions to conform to 
the Flexibility Act. Several of these 
amendments are retroactive to the date 
of enactment of the CARES Act, as 
required by section 3(d) of the 
Flexibility Act. 
DATES:
Effective Date: This interim final rule 
is effective March 27, 2020, except for 
the provision relating to the maturity 
date of PPP loans, which is effective 
June 5, 2020, and the provision relating 
to the cap on the amount of loan 
forgiveness for owner-employees and 
self-employed individuals, which is 
effective on June 24, 2020. 
Comment Date: Comments must be 
received on or before July 27, 2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0038, 
through the Federal eRulemaking Portal: 
http://www.regulations.gov. Follow the 
instructions for submitting comments. 
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SBA and Treasury 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 and Treasury should hold 
this information as confidential. SBA 
and Treasury 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, 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, have been 
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, have been 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. 
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. On 
June 5, 2020, the President signed the 
Paycheck Protection Program Flexibility 
Act of 2020 (Flexibility Act) (Pub. L. 
116–142), which changes key provisions 
of the Paycheck Protection Program, 
including provisions relating to the 
maturity of PPP loans, the deferral of 
PPP loan payments, and the forgiveness 
of PPP loans. Section 3(d) of the 
Flexibility Act provides that the 
amendments relating to PPP loan 
forgiveness and extension of the deferral 
period for PPP loans shall be effective 
as if included in the CARES Act, which 
means that they are retroactive to March 
27, 2020. Section 2 of the Flexibility Act 
provides that the amendment relating to 
the extension of the maturity date for 
PPP loans shall take effect on the date 
of enactment (June 5, 2020). Under the 
Flexibility Act, the extension of the 
maturity date for PPP loans is applicable 
to PPP loans made on or after that date, 
and lenders and borrowers may 
mutually agree to modify PPP loans 
made before such date to reflect the 
longer maturity. 
II. Comments and Retroactive/ 
Immediate Effective Date 
This interim final rule is effective 
without advance notice and public 
comment because section 1114 of the 
CARES Act authorizes SBA to issue 
regulations to implement Title I of the 
Act without regard to notice 
requirements. In addition, SBA has 
determined that there is good cause for 
dispensing with advance public notice 
and comment on the grounds that it 
would be contrary to the public interest. 
Specifically, advance public notice and 
comment would defeat the purpose of 
this interim final rule given that SBA’s 
authority to guarantee PPP loans expires 
on June 30, 2020, and that many PPP 
borrowers can now apply for loan 
forgiveness following the end of their 
eight-week covered period. Providing 
borrowers and lenders with certainty on 
both loan requirements and loan 
forgiveness requirements following the 
enactment of the Flexibility Act will 
enhance the ability of lenders to make 
loans and process loan forgiveness 
applications, particularly in light of the 
fact that most of the Flexibility Act’s 
provisions are retroactive to March 27, 
2020. Specifically, small businesses that 
have yet to apply for and receive a PPP 
loan need to be informed of the terms 
of PPP loans as soon as possible, 
because the last day on which a lender 
can obtain an SBA loan number for a 
PPP loan is June 30, 2020. Borrowers 
that have already applied for and 
received a PPP loan need certainty 
regarding how loan proceeds must be 
used during the covered period, as 
amended by the Flexibility Act, so that 
they can maximize the amount of loan 
forgiveness. Additionally, because some 
borrowers can apply for loan forgiveness 
now, those borrowers need updated 
direction on how to do so. These same 
reasons provide good cause for SBA to 
dispense with the 30-day delayed 
effective date provided in the 
Administrative Procedure Act. Although 
this interim final rule is effective on or 
before date of filing, 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 July 27, 2020. The SBA and 
Treasury will consider these comments, 
comments received on the two interim 
final rules amended by this interim final 
rule, which were posted on SBA’s 
website May 22, 2020 and published on 
June 1, 2020, in the Federal Register, 
and the need for making any revisions 
as a result of these comments. 
III. Paycheck Protection Program— 
Revisions to Loan Forgiveness Interim 
Final Rule and SBA Loan Review 
Procedures and Related Borrower and 
Lender Responsibilities Interim Final 
Rule 
Overview 
The CARES Act was enacted to 
provide immediate assistance to 
individuals, families, and businesses 
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. 
SBA and Treasury have posted several 
documents on the loan forgiveness 
provisions in the CARES Act on their 
websites. On April 2, 2020, SBA posted 
its first PPP interim final rule (85 FR 
20811) covering in part loan forgiveness. 
On April 8, 2020 and April 26, 2020, 
SBA also posted Frequently Asked 
Questions relating to loan forgiveness. 
On April 14, 2020, SBA posted an 
interim final rule covering in part loan 
forgiveness for individuals with self- 
employment income. On May 22, 2020, 
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1 See https://www.sba.gov/document/support-- 
faq-lenders-borrowers. 
2 See https://www.sba.gov/funding-programs/ 
loans/coronavirus-relief-options/paycheck- 
protection-program. 
SBA and Treasury jointly posted an 
additional interim final rule on loan 
forgiveness (85 FR 33004) (First Loan 
Forgiveness Rule). The SBA also posted 
an interim final rule on May 22, 2020 
on SBA loan review procedures and 
related borrower and lender 
responsibilities (85 FR 33010) (First 
Loan Review Rule). On June 11, 2020, 
SBA posted an interim final rule 
revising the first PPP interim final rule 
to incorporate Flexibility Act 
amendments, including those relating to 
loan forgiveness. On June 17, 2020, SBA 
posted an interim final rule revising the 
interim final rule covering individuals 
with self-employment income to 
incorporate Flexibility Act amendments, 
including those relating to loan 
forgiveness. 
The Flexibility Act amends the 
CARES Act, including its provisions 
relating to loan terms and loan 
forgiveness. The purpose of this interim 
final rule is to update the First Loan 
Forgiveness Rule and the First Loan 
Review Rule in light of the amendments 
under the Flexibility Act. The First Loan 
Forgiveness Rule and First Loan Review 
Rule, as amended by this interim final 
rule, should be interpreted consistent 
with the frequently asked questions 
(FAQs) regarding the PPP that are 
posted on SBA’s website 1 and the other 
interim final rules issued regarding the 
PPP.2 
1. Changes to the First Loan Forgiveness 
Rule 
a. General 
Section 3(b) of the Flexibility Act 
amended the requirements regarding 
forgiveness of PPP loans to reduce, from 
75 percent to 60 percent, the portion of 
PPP loan proceeds that must be used for 
payroll costs for the full amount of the 
PPP loan to be eligible for forgiveness. 
Therefore, Part III.1 of the First Loan 
Forgiveness Rule (85 FR 33004, 33005) 
is revised by striking ‘‘25 percent’’ in 
the last sentence and replacing it with 
‘‘40 percent’’. 
b. Maturity 
Section 2(a) of the Flexibility Act 
provides a minimum maturity of five 
years for all PPP loans made on or after 
the date of enactment of the Flexibility 
Act (June 5, 2020), and permits lenders 
and borrowers to extend the maturity 
date of earlier PPP loans by mutual 
agreement. Section 3(c) of the Flexibility 
Act extended the deferral period for PPP 
loans to the date that SBA remits the 
forgiveness amount to the lender. 
Further, SBA has issued an alternative 
Loan Forgiveness Application Form, 
SBA Form 3508EZ. Therefore, in Part 
III.2 of the First Loan Forgiveness Rule 
(85 FR 33004, 33005), the introductory 
question is redesignated as paragraph a. 
and revised to read as follows: 
2. Loan Forgiveness Process 
a. What is the general process to obtain 
loan forgiveness? 
To receive loan forgiveness, a borrower 
must complete and submit the Loan 
Forgiveness Application (SBA Form 3508, 
3508EZ, or lender equivalent) to its lender (or 
the lender servicing its loan). As a general 
matter, the lender will review the application 
and make a decision regarding loan 
forgiveness. The lender has 60 days from 
receipt of a complete application to issue a 
decision to SBA. If the lender determines that 
the borrower is entitled to forgiveness of 
some or all of the amount applied for under 
the statute and applicable regulations, the 
lender must request payment from SBA at the 
time the lender issues its decision to SBA. 
SBA will, subject to any SBA review of the 
loan or loan application, remit the 
appropriate forgiveness amount to the lender, 
plus any interest accrued through the date of 
payment, not later than 90 days after the 
lender issues its decision to SBA. If 
applicable, SBA will deduct EIDL Advance 
Amounts from the forgiveness amount 
remitted to the Lender as required by section 
1110(e)(6) of the CARES Act. If SBA 
determines in the course of its review that 
the borrower was ineligible for the PPP loan 
based on the provisions of the CARES Act, 
SBA rules or guidance available at the time 
of the borrower’s loan application, or the 
terms of the borrower’s PPP loan application 
(for example, because the borrower lacked an 
adequate basis for the certifications that it 
made in its PPP loan application), the loan 
will not be eligible for loan forgiveness. The 
lender is responsible for notifying the 
borrower of the forgiveness amount. If only 
a portion of the loan is forgiven, or if the 
forgiveness request is denied, any remaining 
balance due on the loan must be repaid by 
the borrower on or before the maturity date 
of the loan. The lender is responsible for 
notifying the borrower of remittance by SBA 
of the loan forgiveness amount (or that SBA 
determined that no amount of the loan is 
eligible for forgiveness) and the date on 
which the borrower’s first payment is due, if 
applicable. If SBA determines that the full 
amount of the loan is eligible for forgiveness 
and remits the full amount of the loan to the 
lender, the lender must mark the PPP loan 
note as ‘‘paid in full’’ and report the status 
of the loan as ‘‘paid in full’’ on the next 
monthly 1502 report filed by the lender. 
The general loan forgiveness process 
described above applies only to loan 
forgiveness applications that are not 
reviewed by SBA prior to the lender’s 
decision on the forgiveness application. A 
separate interim final rule on SBA Loan 
Review Procedures and Related Borrower 
and Lender Responsibilities describes SBA’s 
procedures for reviewing PPP loan 
applications and loan forgiveness 
applications. 
c. Deferral Period and Forgiveness 
Section 3(c) of the Flexibility Act 
provides that if the borrower does not 
apply for forgiveness of a loan within 10 
months after the last day of the covered 
period, the PPP loan is no longer 
deferred and the borrower must begin 
paying principal and interest. Therefore, 
the following text is added as a new 
paragraph b. at the end of Part III.2: 
b. When must a borrower apply for loan 
forgiveness or start making payments on a 
loan? 
A borrower may submit a loan forgiveness 
application any time on or before the 
maturity date of the loan—including before 
the end of the covered period—if the 
borrower has used all of the loan proceeds for 
which the borrower is requesting forgiveness. 
If the borrower applies for forgiveness before 
the end of the covered period and has 
reduced any employee’s salaries or wages in 
excess of 25 percent, the borrower must 
account for the excess salary reduction for 
the full 8-week or 24-week covered period, as 
described in Part III.5. If the borrower does 
not apply for loan forgiveness within 10 
months after the last day of the covered 
period, or if SBA determines that the loan is 
not eligible for forgiveness (in whole or in 
part), the PPP loan is no longer deferred and 
the borrower must begin paying principal 
and interest. If this occurs, the lender must 
notify the borrower of the date the first 
payment is due. The lender must report that 
the loan is no longer deferred to SBA on the 
next monthly SBA Form 1502 report filed by 
the lender. 
d. Payroll Costs Eligible for Loan 
Forgiveness 
Under section 1106 of the CARES Act, 
certain provisions regarding the 
forgiveness of PPP loans are limited to 
the ‘‘covered period.’’ ‘‘Covered 
period,’’ as that term is used in section 
1106 of the CARES Act, was originally 
defined as the eight-week period 
beginning on the date of the origination 
of a covered loan. However, section 3(b) 
of the Flexibility Act extended the 
length of the covered period as defined 
in section 1106 of the CARES Act from 
eight to 24 weeks, while allowing 
borrowers that received PPP loans 
before June 5, 2020 to elect to use the 
original eight-week covered period. As 
set forth below, several provisions in 
Part III.3 of the First Loan Forgiveness 
Rule require revisions to conform to 
these amendments under Flexibility 
Act. 
Part III.3.a of the First Loan 
Forgiveness Rule (85 FR 33004, 33006) 
is revised to read as follows: 
a. When must payroll costs be incurred 
and/or paid to be eligible for forgiveness? 
In general, payroll costs paid or incurred 
during the covered period are eligible for 
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3 Under section 3(b)(1) of the Paycheck Protection 
Program Flexibility Act of 2020, the loan 
forgiveness covered period of any borrower will end 
no later than December 31, 2020. 
4 See 85 FR 21747, 21749 (April 20, 2020). 
forgiveness. For purposes of loan forgiveness, 
the covered period is the 24-week period 
beginning on the date the lender disburses 
the PPP loan.3 Alternatively, a borrower that 
received a PPP loan before June 5, 2020 may 
elect for the covered period to end eight 
weeks after the date of disbursement of the 
PPP loan. Borrowers may seek forgiveness for 
payroll costs for the applicable covered 
period beginning on either: 
i. the date of disbursement of the 
borrower’s PPP loan proceeds from the 
Lender (i.e., the start of the covered period); 
or 
ii. the first day of the first payroll cycle in 
the covered period (the ‘‘alternative payroll 
covered period’’). 
Payroll costs are considered paid on the 
day that paychecks are distributed or the 
borrower originates an ACH credit 
transaction. Payroll costs incurred during the 
borrower’s last pay period of the covered 
period or the alternative payroll covered 
period are eligible for forgiveness if paid on 
or before the next regular payroll date; 
otherwise, payroll costs must be paid during 
the covered period (or alternative payroll 
covered period) to be eligible for forgiveness. 
Payroll costs are generally incurred on the 
day the employee’s pay is earned (i.e., on the 
day the employee worked). For employees 
who are not performing work but are still on 
the borrower’s payroll, payroll costs are 
incurred based on the schedule established 
by the borrower (typically, each day that the 
employee would have performed work). 
The Administrator of the Small Business 
Administration (Administrator), in 
consultation with the Secretary of the 
Treasury (Secretary), recognizes that the 
covered period will not always align with a 
borrower’s payroll cycle. For administrative 
convenience of the borrower, a borrower with 
a bi-weekly (or more frequent) payroll cycle 
may elect to use an alternative payroll 
covered period that begins on the first day of 
the first payroll cycle in the covered period 
and continues for either (a) eight weeks, in 
the case of a borrower that received its PPP 
loan before June 5, 2020 and elects to use an 
eight-week covered period, or (b) 24 weeks, 
in the case of all other borrowers. If payroll 
costs are incurred during this alternative 
payroll covered period, but paid after the end 
of the alternative payroll covered period, 
such payroll costs will be eligible for 
forgiveness if they are paid no later than the 
first regular payroll date thereafter. 
The Administrator, in consultation with 
the Secretary, determined that this 
alternative computational method for payroll 
costs is justified by considerations of 
administrative feasibility for borrowers, as it 
will reduce burdens on borrowers and their 
payroll agents while achieving the paycheck 
protection purposes manifest throughout the 
CARES Act, including section 1102. Because 
this alternative computational method is 
limited to payroll cycles that are bi-weekly or 
more frequent, this computational method 
will yield a calculation that the 
Administrator does not expect to materially 
differ from the actual covered period, while 
avoiding unnecessary administrative burdens 
and enhancing auditability. 
Example: A borrower that received a PPP 
loan before June 5, 2020 and elects to use an 
eight-week covered period has a bi-weekly 
payroll schedule (with payments made every 
other week). The borrower’s eight-week 
covered period begins on June 1 and ends on 
July 26. The first day of the borrower’s first 
payroll cycle that starts in the covered period 
is June 7. The borrower may elect an 
alternative payroll covered period for payroll 
cost purposes that starts on June 7 and ends 
55 days later (for a total of 56 days), on 
August 1. Payroll costs paid during this 
alternative payroll covered period are eligible 
for forgiveness. In addition, payroll costs 
incurred during this alternative payroll 
covered period are eligible for forgiveness if 
they are paid on or before the first regular 
payroll date occurring after August 1. Payroll 
costs that were both paid and incurred 
during the covered period (or alternative 
payroll covered period) may only be counted 
once. 
Part III.3.c of the First Loan 
Forgiveness Rule (85 FR 33004, 33006) 
is revised to read as follows: 
c. Are there caps on the amount of loan 
forgiveness available for owner-employees 
and self-employed individuals’ own payroll 
compensation? 
Yes. For borrowers that received a PPP 
loan before June 5, 2020 and elect to use an 
eight-week covered period, the amount of 
loan forgiveness requested for owner- 
employees and self-employed individuals’ 
payroll compensation is capped at eight 
weeks’ worth (8/52) of 2019 compensation 
(i.e., approximately 15.38 percent of 2019 
compensation) or $15,385 per individual, 
whichever is less, in total across all 
businesses. For all other borrowers, the 
amount of loan forgiveness requested for 
owner-employees and self-employed 
individuals’ payroll compensation is capped 
at 2.5 months’ worth (2.5/12) of 2019 
compensation (i.e., approximately 20.83 
percent of 2019 compensation) or $20,833 
per individual, whichever is less, in total 
across all businesses. 
In particular, C-corporation owner- 
employees are capped by the amount of their 
2019 employee cash compensation and 
employer retirement and health insurance 
contributions made on their behalf. S- 
corporation owner-employees are capped by 
the amount of their 2019 employee cash 
compensation and employer retirement 
contributions made on their behalf, but 
employer health insurance contributions 
made on their behalf cannot be separately 
added because those payments are already 
included in their employee cash 
compensation. Schedule C or F filers are 
capped by the amount of their owner 
compensation replacement, calculated based 
on 2019 net profit.4 General partners are 
capped by the amount of their 2019 net 
earnings from self-employment (reduced by 
claimed section 179 expense deduction, 
unreimbursed partnership expenses, and 
depletion from oil and gas properties) 
multiplied by 0.9235. For self-employed 
individuals, including Schedule C or F filers 
and general partners, retirement and health 
insurance contributions are included in their 
net self-employment income and therefore 
cannot be separately added to their payroll 
calculation. 
The Administrator, in consultation with 
the Secretary, determined that it is 
appropriate to limit the forgiveness of owner 
compensation to either eight weeks’ worth 
(8/52) of their 2019 compensation (up to 
$15,385) for an eight-week covered period or 
2.5 months’ worth (2.5/12) of their 2019 
compensation (up to $20,833) for a 24-week 
covered period per owner in total across all 
businesses. This approach is consistent with 
the structure of the CARES Act and its 
overarching focus on keeping workers paid, 
and will prevent windfalls that Congress did 
not intend. Specifically, Congress determined 
that the maximum loan amount is generally 
based on 2.5 months of a borrower’s average 
monthly payroll costs during the one-year 
period preceding the loan. 15 U.S.C. 
636(a)(36)(E). For example, a borrower with 
one other employee would receive a 
maximum loan amount equal to 5 months of 
payroll (2.5 months of payroll for the owner 
plus 2.5 months of payroll for the employee). 
If the owner laid off the employee and 
availed itself of the exemption in the 
Paycheck Protection Program Flexibility Act 
of 2020 (Flexibility Act) related to reductions 
in business activity described in e. below, the 
owner could treat the entire amount of the 
PPP loan as payroll, with the entire loan 
being forgiven. This would not only result in 
a windfall for the owner, by providing the 
owner with five months of payroll instead of 
2.5 months, but also defeat the purpose of the 
CARES Act of protecting the paycheck of the 
employee. For owners with no employees, 
this limitation will have no effect, because 
the maximum loan amount for such 
borrowers already includes only 2.5 months 
of their payroll. 
e. Nonpayroll Costs Eligible for Loan 
Forgiveness 
Part III.4.a of the First Loan 
Forgiveness Rule (85 FR 33004, 33007) 
is revised to read as follows: 
a. When must nonpayroll costs be incurred 
and/or paid to be eligible for forgiveness? 
A nonpayroll cost is eligible for forgiveness 
if it was: 
i. Paid during the covered period; or 
ii. incurred during the covered period and 
paid on or before the next regular billing 
date, even if the billing date is after the 
covered period. 
Example: A borrower that received a loan 
before June 5, 2020 uses a 24-week covered 
period that begins on June 1 and ends on 
November 15. The borrower pays its 
electricity bills for June through October 
during the covered period and pays its 
November electricity bill on December 10, 
which is the next regular billing date. The 
borrower may seek loan forgiveness for its 
June through October electricity bills, 
because they were paid during the covered 
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period. In addition, the borrower may seek 
loan forgiveness for the portion of its 
November electricity bill through November 
15 (the end of the covered period), because 
it was incurred during the covered period 
and paid on the next regular billing date. The 
Administrator, in consultation with the 
Secretary, has determined that this 
interpretation provides an appropriate degree 
of borrower flexibility while remaining 
consistent with the text of section 1106(b). 
The Administrator believes that this 
simplified approach to calculation of 
forgivable nonpayroll costs is also supported 
by considerations of administrative 
convenience for borrowers, and the 
Administrator notes that the 40 percent cap 
on nonpayroll costs as a portion of the total 
loan forgiveness amount will avoid excessive 
inclusion of nonpayroll costs. 
f. Reductions to Loan Forgiveness 
Amount 
As described above, section 3(b) of the 
Flexibility Act amended provisions of 
the CARES Act regarding the covered 
period and the portion of PPP loan 
proceeds that must be used for payroll 
costs for the full amount of the PPP loan 
to be eligible for forgiveness. As set 
forth below, these amendments 
necessitate several revisions to Part III.5 
of the First Loan Forgiveness Rule. First, 
the introductory paragraph in Part III.5 
of the First Loan Forgiveness Rule (85 
FR 33004, 33007) is revised to read as 
follows: 
5. Reductions to Loan Forgiveness 
Amount 
Section 1106 of the CARES Act, as 
amended by Section 3(b)(2) of the 
Flexibility Act, specifically requires 
certain reductions in a borrower’s loan 
forgiveness amount based on reductions 
in full-time equivalent employees or in 
employee salary and wages, subject to 
an important statutory exemption for 
borrowers that have eliminated the 
reduction on or before December 31, 
2020. Section 3(b)(2) of the Flexibility 
Act also adds exemptions from 
reductions in loan forgiveness amounts 
based on employee availability and 
business activity. In addition, SBA and 
Treasury have adopted a regulatory 
exemption to the reduction rules for 
borrowers that have offered to restore 
employee hours at the same salary or 
wages, even if the employees have not 
accepted. The instructions to the loan 
forgiveness applications and the 
guidance below explains how the 
statutory forgiveness reduction formulas 
work. 
Section 1106(d)(2) of the CARES Act 
reduces the amount of the PPP loan that 
may be forgiven if the borrower reduces 
full-time equivalent employees during 
the covered period as compared to a 
base period selected by the borrower. 
Section 1106(d)(5) of the CARES Act 
originally waived this reduction in the 
forgiveness amount if the borrower 
eliminates the reduction in full-time 
equivalent employees occurring during 
a different statutory reference period by 
not later than June 30, 2020. Section 
3(b)(2) of the Flexibility Act amended 
this provision to replace ‘‘June 30’’ with 
‘‘December 31.’’ To conform the First 
Loan Forgiveness Rule to this 
amendment under the Flexibility Act, 
Part III.5.a of the First Loan Forgiveness 
Rule (85 FR 33004, 33007) is revised by 
striking ‘‘June 30, 2020’’ and replacing 
it with ‘‘December 31, 2020.’’ Section 
3(d) of the Flexibility Act provides that 
this amendment shall be effective as if 
included in the CARES Act, which was 
enacted on March 27, 2020. 
As described above, section 3(b) of the 
Flexibility Act extended the length of 
the covered period as defined in section 
1106 of the CARES Act from eight to 24 
weeks, while allowing borrowers that 
received PPP loans before June 5, 2020 
to elect to use the original eight-week 
covered period. For consistency with 
this amendment, the paragraph 
consisting of the example in Part III.5.e 
of the First Loan Forgiveness Rule (85 
FR 33004, 33008) is revised to provide 
two examples that read as follows: 
Example: A borrower is using a 24-week 
covered period. This borrower reduced a full- 
time employee’s weekly salary from $1,000 
per week during the reference period to $700 
per week during the covered period. The 
employee continued to work on a full-time 
basis during the covered period, with an FTE 
of 1.0. In this case, the first $250 (25 percent 
of $1,000) is exempted from the loan 
forgiveness reduction. The borrower seeking 
forgiveness would list $1,200 as the salary/ 
hourly wage reduction for that employee (the 
extra $50 weekly reduction multiplied by 24 
weeks). If the borrower applies for 
forgiveness before the end of the covered 
period, it must account for the salary 
reduction for the full 24-week covered period 
(totaling $1,200). 
Example: A borrower that received a PPP 
loan before June 5, 2020 has elected to use 
an eight-week covered period. This borrower 
reduced a full-time employee’s weekly salary 
from $1,000 per week during the reference 
period to $700 per week during the covered 
period. The employee continued to work on 
a full-time basis during the covered period, 
with an FTE of 1.0. In this case, the first $250 
(25 percent of $1,000) is exempted from the 
loan forgiveness reduction. The borrower 
seeking forgiveness would list $400 as the 
salary/hourly wage reduction for that 
employee (the extra $50 weekly reduction 
multiplied by eight weeks). 
In light of the amendments under the 
Flexibility Act described above, Part 
III.5.g of the First Loan Forgiveness Rule 
(85 FR 33004, 33009) is revised by 
striking ‘‘June 30, 2020’’ each place that 
it appears and replacing it with 
‘‘December 31, 2020,’’ and by striking 
‘‘75 percent’’ and replacing it with ‘‘60 
percent.’’ Section 3(d) of the Flexibility 
Act provides that these amendments 
shall be effective as if included in the 
CARES Act, which was enacted on 
March 27, 2020. 
Lastly, section 3(b)(2)(B) of the 
Flexibility Act established two new 
exemptions based on employee 
availability and business activity, 
respectively, that would eliminate a 
reduction in the loan forgiveness 
amount that would otherwise be 
required due to a reduction in full-time 
equivalent (FTE) employees. 
Specifically, that section of the 
Flexibility Act states that the amount of 
loan forgiveness ‘‘shall be determined 
without regard to a proportional 
reduction in the number of full-time 
equivalent employees’’ if an eligible 
recipient, in good faith, (A) is able to 
document (i) an inability to rehire 
individuals who were employees of the 
eligible recipient on February 15, 2020; 
and (ii) an inability to hire similarly 
qualified employees for unfilled 
positions on or before December 31, 
2020; or (B) is able to document an 
inability to return to the same level of 
business activity as such business was 
operating at before February 15, 2020, 
due to compliance with requirements 
established or guidance issued by the 
Secretary of Health and Human 
Services, the Director of the Centers for 
Disease Control and Prevention, or the 
Occupational Safety and Health 
Administration during the period 
beginning on March 1, 2020, and ending 
December 31, 2020, related to the 
maintenance of standards for sanitation, 
social distancing, or any other worker or 
customer safety requirement related to 
COVID–19. The new exemption 
pertaining to individuals who refuse an 
offer to be rehired is very similar, but 
not identical, to a de minimis exemption 
that was provided in the First Loan 
Forgiveness Rule; therefore, the 
Administrator and the Secretary have 
determined that this new statutory 
exemption should supersede the 
previous de minimis exemption relating 
to reductions in FTE employees. 
However, a related de minimis 
exemption in the First Loan Forgiveness 
Rule for borrowers that have reduced 
the hours of an employee and offered to 
restore the reduction in hours, but the 
employee declined the offer, is not 
addressed in the Flexibility Act and is 
therefore being retained. 
In order to implement these 
exemptions, Part III.5.a of the First Loan 
Forgiveness Rule (85 FR 33004, 33007) 
is revised to read: 
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5 Section 1106(d)(6) is the sole joint rulemaking 
authority exercised in this interim final rule. All 
other provisions of this interim final rule are an 
exercise of rulemaking authority by SBA, except as 
expressly noted otherwise. 
6 Section 1106(d)(5) specifies that this reference 
period is between February 15, 2020 and 30 days 
after the date of enactment of the CARES Act or 
April 26, 2020 (the safe harbor period). 
7 Further information regarding how borrowers 
will report information concerning rejected rehire 
offers to state unemployment insurance offices will 
be provided on SBA’s website. 
a. Will a borrower’s loan forgiveness 
amount be reduced if the borrower reduced 
the hours of an employee, then offered to 
restore the reduction in hours, but the 
employee declined the offer? 
No. In calculating the loan forgiveness 
amount, a borrower may exclude any 
reduction in full-time equivalent employee 
headcount that is attributable to an 
individual employee if: 
i. The borrower made a good faith, written 
offer to restore the reduced hours of such 
employee; 
ii. the offer was for the same salary or 
wages and same number of hours as earned 
by such employee in the last pay period prior 
to the reduction in hours; 
iii. the offer was rejected by such 
employee; and 
iv. the borrower has maintained records 
documenting the offer and its rejection. 
The Administrator and the Secretary 
determined that this exemption is an 
appropriate exercise of their joint rulemaking 
authority to grant a de minimis exemption 
under section 1106(d)(6).5 Section 1106(d)(2) 
of the CARES Act reduces the amount of the 
PPP loan that may be forgiven if the borrower 
reduces full-time equivalent employees 
during the covered period as compared to a 
base period selected by the borrower. Section 
1106(d)(5) of the CARES Act waives this 
reduction in the forgiveness amount if the 
borrower eliminates the reduction in full- 
time equivalent employees occurring during 
a different statutory reference period 6 by not 
later than December 31, 2020. The 
Administrator and the Secretary believe that 
the additional exemption set forth above is 
consistent with the purposes of the CARES 
Act and provides borrowers appropriate 
flexibility in the current economic climate. 
The Administrator, in consultation with the 
Secretary, has determined that the exemption 
is de minimis for two reasons. First, it is 
reasonable to anticipate that most employees 
will accept the offer of restored hours in light 
of current labor market conditions. Second, 
to the extent this exemption allows 
employers to cure FTE reductions 
attributable to reductions in hours that 
occurred before February 15, 2020 (the start 
of the statutory FTE reduction safe harbor 
period), it is reasonable to anticipate those 
reductions will represent a relatively small 
portion of aggregate employees given the 
historically strong labor market conditions 
before the COVID–19 emergency. 
In addition, Part III.5.b of the First 
Loan Forgiveness Rule (85 FR 33004, 
33007–08) is revised by adding the 
following at the end thereof: 
Borrowers are exempted from the loan 
forgiveness reduction arising from a 
proportional reduction in FTE employees 
during the covered period if the borrower is 
able to document in good faith the following: 
(1) An inability to rehire individuals who 
were employees of the borrower on February 
15, 2020; and (2) an inability to hire similarly 
qualified individuals for unfilled positions 
on or before December 31, 2020. Borrowers 
are required to inform the applicable state 
unemployment insurance office of any 
employee’s rejected rehire offer within 30 
days of the employee’s rejection of the offer.7 
The documents that borrowers should 
maintain to show compliance with this 
exemption include, but are not limited to, the 
written offer to rehire an individual, a 
written record of the offer’s rejection, and a 
written record of efforts to hire a similarly 
qualified individual. 
Borrowers are also exempted from the loan 
forgiveness reduction arising from a 
reduction in the number of FTE employees 
during the covered period if the borrower is 
able to document in good faith an inability 
to return to the same level of business 
activity as the borrower was operating at 
before February 15, 2020, due to compliance 
with requirements established or guidance 
issued between March 1, 2020 and December 
31, 2020 by the Secretary of Health and 
Human Services, the Director of the Centers 
for Disease Control and Prevention (CDC), or 
the Occupational Safety and Health 
Administration related to the maintenance of 
standards for sanitation, social distancing, or 
any other worker or customer safety 
requirement related to COVID–19 (COVID 
Requirements or Guidance). Specifically, 
borrowers that can certify that they have 
documented in good faith that their 
reduction in business activity during the 
covered period stems directly or indirectly 
from compliance with such COVID 
Requirements or Guidance are exempt from 
any reduction in their forgiveness amount 
stemming from a reduction in FTE employees 
during the covered period. Such 
documentation must include copies of 
applicable COVID Requirements or Guidance 
for each business location and relevant 
borrower financial records. 
The Administrator, in consultation with 
the Secretary, is interpreting the above 
statutory exemption to include both direct 
and indirect compliance with COVID 
Requirements or Guidance, because a 
significant amount of the reduction in 
business activity stemming from COVID 
Requirements or Guidance is the result of 
state and local government shutdown orders 
that are based in part on guidance from the 
three federal agencies. 
Example: A PPP borrower is in the 
business of selling beauty products both 
online and at its physical store. During the 
covered period, the local government where 
the borrower’s store is located orders all non- 
essential businesses, including the 
borrower’s business, to shut down their 
stores, based in part on COVID–19 guidance 
issued by the CDC in March 2020. Because 
the borrower’s business activity during the 
covered period was reduced compared to its 
activity before February 15, 2020 due to 
compliance with COVID Requirements or 
Guidance, the borrower satisfies the 
Flexibility Act’s exemption and will not have 
its forgiveness amount reduced because of a 
reduction in FTEs during the covered period, 
if the borrower in good faith maintains 
records regarding the reduction in business 
activity and the local government’s shutdown 
orders that reference a COVID Requirement 
or Guidance as described above. 
g. Documentation Requirements 
Because SBA has issued an alternative 
loan forgiveness application, SBA Form 
3508EZ, the parenthetical in the first 
sentence of Part III.6 of the First Loan 
Forgiveness Rule (85 FR 33004, 33009) 
is revised to read as follows: ‘‘(SBA 
Form 3508 or SBA Form 3508EZ, as 
applicable, or lender equivalent)’’. 
2. Changes to the First Loan Review 
Rule 
a. Alternative Loan Forgiveness 
Application 
The First Loan Review Rule informs 
borrowers and lenders of SBA’s process 
for reviewing PPP loan applications and 
loan forgiveness applications. Because 
SBA has issued an alternative Loan 
Forgiveness Application, SBA Form 
3508EZ, the following changes are 
necessary. 
Parts III.1.b and III.1.e are revised by 
striking each reference in those sections 
to ‘‘SBA Form 3508 or lender’s 
equivalent form’’ and replacing it with 
‘‘SBA Form 3508, 3508EZ, or lender’s 
equivalent form’’. 
b. The Loan Forgiveness Process for 
Lenders 
As noted above, SBA has issued an 
alternative Loan Forgiveness 
Application Form, SBA Form 3508EZ. 
Further, Section 3(b)(2) of the Flexibility 
Act reduced, from 75 percent to 60 
percent, the portion of PPP loan 
proceeds that must be used for payroll 
costs for the full amount of the PPP loan 
to be eligible for forgiveness. As set 
forth below, these developments 
necessitate several revisions to Part III.2 
of the First Loan Review Rule. 
Part III.2.a. is revised to read as 
follows: 
a. What should a lender review? 
When a borrower submits SBA Form 
3508 or lender’s equivalent form, the 
lender shall: 
i. Confirm receipt of the borrower 
certifications contained in the SBA Form 
3508 or lender’s equivalent form. 
ii. Confirm receipt of the documentation 
the borrower must submit to aid in verifying 
payroll and nonpayroll costs, as specified in 
the instructions to the SBA Form 3508 or 
lender’s equivalent form. 
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8 85 FR 20811, 20815–20816 (April 15, 2020). 
iii. Confirm the borrower’s calculations on 
the borrower’s SBA Form 3508 or lender’s 
equivalent form, including the dollar amount 
of the (A) Cash Compensation, Non-Cash 
Compensation, and Compensation to Owners 
claimed on Lines 1, 4, 6, 7, 8, and 9 on PPP 
Schedule A and (B) Business Mortgage 
Interest Payments, Business Rent or Lease 
Payments, and Business Utility Payments 
claimed on Lines 2, 3, and 4 on the PPP Loan 
Forgiveness Calculation Form, by reviewing 
the documentation submitted with the SBA 
Form 3508 or lender’s equivalent form. 
iv. Confirm that the borrower made the 
calculation on Line 10 of the SBA Form 3508 
or lender’s equivalent form correctly, by 
dividing the borrower’s Eligible Payroll Costs 
claimed on Line 1 by 0.60. 
When the borrower submits SBA 
Form 3508EZ or lender’s equivalent 
form, the lender shall: 
i. Confirm receipt of the borrower 
certifications contained in the SBA Form 
3508EZ or lender’s equivalent form. 
ii. Confirm receipt of the documentation 
the borrower must submit to aid in verifying 
payroll and nonpayroll costs, as specified in 
the instructions to the SBA Form 3508EZ or 
lender’s equivalent form. 
iii. Confirm the borrower’s calculations on 
the borrower’s SBA Form 3508EZ or lender’s 
equivalent form, including the dollar amount 
of the Payroll Costs, Business Mortgage 
Interest Payments, Business Rent or Lease 
Payments, and Business Utility Payments 
claimed on Lines 1, 2, 3, and 4 of the SBA 
Form 3508EZ or lender’s equivalent form, by 
reviewing the documentation submitted with 
the SBA Form 3508EZ or lender’s equivalent 
form. 
iv. Confirm that the borrower made the 
calculation on Line 7 of the SBA Form 
3508EZ or lender’s equivalent form correctly, 
by dividing the borrower’s Eligible Payroll 
Costs claimed on Line 1 by 0.60. 
Providing an accurate calculation of 
the loan forgiveness amount is the 
responsibility of the borrower, and the 
borrower attests to the accuracy of its 
reported information and calculations 
on the Loan Forgiveness Application 
Form. Lenders are expected to perform 
a good-faith review, in a reasonable 
time, of the borrower’s calculations and 
supporting documents concerning 
amounts eligible for loan forgiveness. 
For example, minimal review of 
calculations based on a payroll report by 
a recognized third-party payroll 
processor would be reasonable. By 
contrast, if payroll costs are not 
documented with such recognized 
sources, more extensive review of 
calculations and data would be 
appropriate. The borrower shall not 
receive forgiveness without submitting 
all required documentation to the 
lender. 
As the First Interim Final Rule 8 
indicates, lenders may rely on borrower 
representations. If the lender identifies 
errors in the borrower’s calculation or 
material lack of substantiation in the 
borrower’s supporting documents, the 
lender should work with the borrower 
to remedy the issue. As stated in 
paragraph III.3.c of the First Interim 
Final Rule, the lender does not need to 
independently verify the borrower’s 
reported information if the borrower 
submits documentation supporting its 
request for loan forgiveness and attests 
that it accurately verified the payments 
for eligible costs. 
Part III.2.b. is revised to read as 
follows: 
b. What is the timeline for the lender’s 
decision on a loan forgiveness application? 
The lender must issue a decision to SBA 
on a loan forgiveness application not later 
than 60 days after receipt of a complete loan 
forgiveness application from the borrower. 
That decision may take the form of an 
approval (in whole or in part); denial; or (if 
directed by SBA) a denial without prejudice 
due to a pending SBA review of the loan for 
which forgiveness is sought. In the case of a 
denial without prejudice, the borrower may 
subsequently request that the lender 
reconsider its application for loan 
forgiveness, unless SBA has determined that 
the borrower is ineligible for a PPP loan. The 
Administrator has determined that this 
process appropriately balances the need for 
efficient processing of loan forgiveness 
applications with considerations of program 
integrity, including affording SBA the 
opportunity to ensure that borrower 
representations and certifications (including 
concerning eligibility for a PPP loan) were 
accurate. When the lender issues its decision 
to SBA approving the application (in whole 
or in part), it must include the following: 
i. For applications submitted using the 
SBA Form 3508 or lender’s equivalent form: 
(1) the PPP Loan Forgiveness Calculation 
Form; 
(2) PPP Schedule A; and 
(3) the (optional) PPP Borrower 
Demographic Information Form (if submitted 
to the lender). 
ii. For applications submitted using the 
SBA Form 3508EZ or lender’s equivalent 
form: 
(1) the SBA Form 3508EZ or lender’s 
equivalent form; and 
(2) the (optional) Borrower Demographic 
Information Form (if submitted to the 
lender). 
The lender must confirm that the 
information provided by the lender to 
SBA accurately reflects lender’s records 
for the loan, and that the lender has 
made its decision in accordance with 
the requirements set forth in 2.a. If the 
lender determines that the borrower is 
entitled to forgiveness of some or all of 
the amount applied for under the statute 
and applicable regulations, the lender 
must request payment from SBA at the 
time the lender issues its decision to 
SBA. SBA will, subject to any SBA 
review of the loan or loan application, 
remit the appropriate forgiveness 
amount to the lender, plus any interest 
accrued through the date of payment, 
not later than 90 days after the lender 
issues its decision to SBA. If applicable, 
SBA will deduct EIDL Advance 
Amounts from the forgiveness amount 
remitted to the Lender as required by 
section 1110(e)(6) of the CARES Act. 
The lender is responsible for notifying 
the borrower of remittance by SBA of 
the loan forgiveness amount (or that 
SBA determined that no amount of the 
loan is eligible for forgiveness) and the 
date on which the borrower’s first 
payment is due, if applicable. 
When the lender issues its decision to 
SBA determining that the borrower is 
not entitled to forgiveness in any 
amount, the lender must provide SBA 
with the reason for its denial, together 
with the following: 
i. For applications submitted using the 
SBA Form 3508 or lender’s equivalent form: 
(1) the PPP Loan Forgiveness Calculation 
Form; 
(2) PPP Schedule A; and 
(3) the (optional) PPP Borrower 
Demographic Information Form (if submitted 
to the lender). 
iii. For applications submitted using the 
SBA Form 3508EZ or lender’s equivalent 
form: 
(1) the SBA Form 3508EZ or lender’s 
equivalent form; and 
(2) the (optional) Borrower Demographic 
Information Form (if submitted to the 
lender). 
The lender must confirm that the 
information provided by the lender to 
SBA accurately reflects lender’s records 
for the loan, and that the lender has 
made its decision in accordance with 
the requirements set forth in 2.a. The 
lender must also notify the borrower in 
writing that the lender has issued a 
decision to SBA denying the loan 
forgiveness application. SBA reserves 
the right to review the lender’s decision 
in its sole discretion. Within 30 days of 
notice from the lender, a borrower may 
notify the lender that it is requesting 
that SBA review the lender’s decision 
by reviewing the loan in accordance 
with 2.c. below. Within 5 days of 
receipt, the lender must notify SBA of 
the borrower’s request for review. SBA 
will notify the lender if SBA declines a 
request for review. If the borrower does 
not request SBA review or SBA declines 
the request for review, the lender is 
responsible for notifying the borrower of 
the date on which the borrower’s first 
payment is due. If SBA accepts a 
borrower’s request for review, SBA will 
notify the borrower and the lender of 
the results of the review. If SBA denies 
forgiveness in whole or in part, the 
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lender is responsible for notifying the 
borrower of the date on which the 
borrower’s first payment is due. 
Enabling SBA to use the statutory 90- 
day period to review the PPP loan and 
forgiveness documentation is an 
appropriate procedural protection to 
prevent fraud or misuse of PPP funds, 
ensure that recipients of PPP loans are 
within the scope of entities that the 
CARES Act is intended to assist, and 
confirm compliance with the PPP 
requirements set forth in the statute, 
rules, and guidance. This protection is 
also important in light of the large 
number and diverse types of PPP 
lenders, many of which were not 
previously SBA participating lenders 
and which were approved rapidly in 
order to enable financial assistance to be 
provided as rapidly as feasible to 
millions of small businesses. SBA will 
use the 90-day period to help ensure 
that applicable legal requirements have 
been satisfied. 
Part III.2.c.ii. is revised to read as 
follows: 
ii. The Loan Forgiveness Application (SBA 
Form 3508, 3508EZ, or lender’s equivalent 
form), and all supporting documentation 
provided by the borrower (if the lender has 
received such application). If the lender 
receives such application after it receives 
notice that SBA has commenced a loan 
review, the lender shall transmit electronic 
copies of the application and all supporting 
documentation provided by the borrower to 
SBA within five business days of receipt. 
The lender must also request that the 
borrower provide the lender with the 
applicable documentation that the 
instructions to the Loan Forgiveness 
Application Form (SBA Form 3508, 3508EZ, 
or lender’s equivalent) instruct the borrower 
to maintain but not submit (documentation 
listed under ‘‘Documents that Each Borrower 
Must Maintain but is Not Required to 
Submit’’). The lender must submit 
documents received from the borrower to 
SBA within five business days of receipt 
from the borrower. 
3. Additional Information 
SBA may provide further guidance, if 
needed, through SBA notices which 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 and Treasury have 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 and Treasury have 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 and Treasury have determined 
that this rule modifies existing 
information collection. The 
amendments to the PPP made by the 
Flexibility Act and implemented in this 
interim final rule require conforming 
revisions to the Paycheck Protection 
Program—Loan Forgiveness Application 
(SBA Form 3508), for use in collecting 
the information required to determine 
whether a borrower is eligible for loan 
forgiveness. In addition, SBA has 
developed a streamlined Paycheck 
Protection Program—PPP Loan 
Forgiveness Application Form 3508EZ 
(SBA Form 3508 EZ), which is available 
for borrowers meeting criteria described 
in the instructions accompanying the 
form. SBA has obtained OMB approval 
of the modification to the existing 
information collection, which is 
currently approved as an emergency 
request under OMB Control Number 
3245–0407 until October 31, 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. SBA Office of 
Advocacy guide: How to Comply with 
the Regulatory Flexibility Act, Ch.1. p.9. 
Accordingly, SBA and Treasury are not 
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38312 
Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 
required to conduct a regulatory 
flexibility analysis. 
Jovita Carranza, 
Administrator,Small Business 
Administration. 
Michael Faulkender, 
Assistant Secretary for Economic Policy 
Department of the Treasury. 
[FR Doc. 2020–13782 Filed 6–24–20; 8:45 am] 
BILLING CODE 8026–03–P 
DEPARTMENT OF TRANSPORTATION 
Federal Aviation Administration 
14 CFR Part 39 
[Docket No. FAA–2020–0612; Project 
Identifier MCAI–2020–00674–E; Amendment 
39–21152; AD 2020–13–07] 
RIN 2120–AA64 
Airworthiness Directives; Rolls-Royce 
Deutschland Ltd & Co KG (Type 
Certificate Previously Held by Rolls- 
Royce plc) Turbofan Engines 
AGENCY: Federal Aviation 
Administration (FAA), DOT. 
ACTION: Final rule; request for 
comments. 
SUMMARY: The FAA is adopting a new 
airworthiness directive (AD) for all 
Rolls-Royce Deutschland Ltd. & Co KG 
(RRD) Trent 1000–D2, Trent 1000–J2, 
and Trent 1000–K2 model turbofan 
engines with fuel pump, part number 
G5030FPU01, installed. This AD 
requires removal and replacement of the 
fuel pump with a part eligible for 
installation. This AD was prompted by 
the manufacturer’s investigation into an 
unexpected reduction in fuel pump 
performance in certain high life fuel 
pumps. The FAA is issuing this AD to 
address the unsafe condition on these 
products. 
DATES: This AD is effective July 13, 
2020. 
The FAA must receive comments on 
this AD by August 10, 2020. 
ADDRESSES: You may send comments, 
using the procedures found in 14 CFR 
11.43 and 11.45, by any of the following 
methods: 
• Federal eRulemaking Portal: Go to 
https://www.regulations.gov. Follow the 
instructions for submitting comments. 
• Fax: 202–493–2251. 
• Mail: U.S. Department of 
Transportation, Docket Operations, M– 
30, West Building Ground Floor, Room 
W12–140, 1200 New Jersey Avenue SE, 
Washington, DC 20590. 
• Hand Delivery: U.S. Department of 
Transportation, Docket Operations, M– 
30, West Building Ground Floor, Room 
W12–140, 1200 New Jersey Avenue SE, 
Washington, DC 20590, between 9 a.m. 
and 5 p.m., Monday through Friday, 
except Federal holidays. 
For service information identified in 
this final rule, contact Rolls-Royce 
Deutschland Ltd & Co KG, Eschenweg 
11, 15827 Blankenfelde-Mahlow, 
Germany; phone: +49 (0) 33 708 6 0; 
email: https://www.rolls-royce.com/ 
contact-us.aspx. You may view this 
service information at the FAA, 
Airworthiness Products Section, 
Operational Safety Branch, 1200 District 
Avenue, Burlington, MA 01803. For 
information on the availability of this 
material at the FAA, call 781–238–7759. 
It is also available on the internet at 
https://www.regulations.gov by 
searching for and locating Docket No. 
FAA–2020–0612. 
Examining the AD Docket 
You may examine the AD docket on 
the internet at https://
www.regulations.gov by searching for 
and locating Docket No. FAA–2020– 
0612; or in person at Docket Operations 
between 9 a.m. and 5 p.m., Monday 
through Friday, except Federal holidays. 
The AD docket contains this final rule, 
the mandatory continuing airworthiness 
information (MCAI), any comments 
received, and other information. The 
street address for Docket Operations is 
listed above. Comments will be 
available in the AD docket shortly after 
receipt. 
FOR FURTHER INFORMATION CONTACT: 
Stephen Elwin, Aerospace Engineer, 
ECO Branch, FAA, 1200 District 
Avenue, Burlington, MA 01803; phone: 
781–238–7236; fax: 781–238–7199; 
email: stephen.l.elwin@faa.gov. 
SUPPLEMENTARY INFORMATION: 
Discussion 
The European Union Aviation Safety 
Agency (EASA), which is the Technical 
Agent for the Member States of the 
European Community, has issued EASA 
AD 2020–0124, dated May 29, 2020 
(referred to after this as ‘‘the MCAI’’), to 
address an unsafe condition for the 
specified products. The MCAI states: 
An unexpected reduction in fuel pump 
performance has been seen during testing of 
high life units. Strip examination of these 
fuel pumps has identified that life related 
wear-out of the internal components is 
causing deterioration in pump efficiency. 
The effect of the loss of fuel pump efficiency 
is more pronounced on higher rated engines. 
This condition, if not corrected, could lead 
to reduced engine thrust, possibly resulting 
in reduced control of the aeroplane. 
To address this potential unsafe condition, 
Rolls-Royce published the NMSB to provide 
instructions for replacement of the affected 
parts before exceeding reduced life limits. 
For the reasons described above, this 
[EASA] AD requires removal from service of 
the affected parts. 
You may obtain further information 
by examining the MCAI in the AD 
docket on the internet at https://
www.regulations.gov by searching for 
and locating Docket No. FAA–2020– 
0612. 
Related Service Information 
The FAA reviewed Rolls-Royce plc 
(RR) Alert Non-Modification Service 
Bulletin (NMSB) Trent 1000 73–AK581, 
dated May 12, 2020. The Alert NMSB 
introduces a reduced life limit for fuel 
pumps installed on affected engines. 
FAA’s Determination 
This product has been approved by 
EASA and is approved for operation in 
the United States. Pursuant to our 
bilateral agreement with the European 
Community, EASA has notified us of 
the unsafe condition described in the 
MCAI. The FAA is issuing this AD 
because it evaluated all the relevant 
information provided by EASA and 
determined the unsafe condition 
described previously is likely to exist or 
develop in other products of the same 
type design. 
AD Requirements 
This AD requires removal of the 
affected fuel pump and its replacement 
with a part eligible for installation. 
Differences Between This AD and the 
Service Information 
RR Alert NMSB Trent 1000 73– 
AK581, dated May 12, 2020, 
recommends removal of D2-rated engine 
fuel pumps with more than 17,000 
hours (or 5,200 cycles) by May 31, 2020, 
and more than 16,000 hours (or 4,900 
cycles) by June 30, 2020, or within 3 
engine flight cycles, whichever is later. 
Since this AD will become effective 
after the RRD recommended compliance 
date of June 30, 2020, this AD requires 
removal of D2-rated engine fuel pumps 
before exceeding 16,000 hours time in 
service or 4,900 engine cycles since new 
or since last overhaul. This AD also 
provides a 30-day grace period for 
compliance. 
FAA’s Justification and Determination 
of the Effective Date 
Section 553(b)(3)(B) of the 
Administrative Procedure Act (APA) (5 
U.S.C.) authorizes agencies to dispense 
with notice and comment procedures 
for rules when the agency, for ‘‘good 
cause,’’ finds that those procedures are 
‘‘impracticable, unnecessary, or contrary 
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