Business Loan Program Temporary Changes; Paycheck Protection Program — Certain Eligible Payroll Costs

Record facts

Summary

An interim final rule issued by the U.S. Small Business Administration on certain eligible payroll costs under the Paycheck Protection Program, published in the Federal Register of June 30, 2020 (Vol. 85, No. 126) under Docket Number SBA-2020-0040. The rule provides that a fishing boat owner may include compensation reported on Box 5 of Form 1099-MISC and paid to a crewmember described in Section 3121(b)(20) of the Internal Revenue Code as a payroll cost in its loan application, and addresses that owner's eligibility for forgiveness of payroll costs paid to a crewmember who has obtained a loan of his or her own. It states that the Administrator has treated the owner-crewmember relationship as analogous to a joint venture or partnership. The provisions are effective June 26, 2020 and comments are invited on or before July 30, 2020.

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39066 
Federal Register / Vol. 85, No. 126 / Tuesday, June 30, 2020 / Rules and Regulations 
1 Guidance describing how to calculate 
partnership PPP loan amounts and defining the self- 
employment income of partners was posted on 
April 24, 2020 (see How to Calculate Maximum 
Loan Amounts, Question 4, at https://www.sba.gov/ 
sites/default/files/2020-06/How-to-Calculate-Loan- 
Amounts-508_0.pdf). 
SMALL BUSINESS ADMINISTRATION 
13 CFR Part 120 
[Docket Number SBA–2020–0040] 
RIN 3245–AH54 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program—Certain Eligible Payroll 
Costs 
AGENCY: U.S. Small Business 
Administration. 
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 U.S. Small Business 
Administration’s (SBA’s) 7(a) Loan 
Program. Subsequently, SBA issued a 
number of interim final rules 
implementing the Paycheck Protection 
Program. This interim final rule 
supplements the previously posted 
interim final rules by providing 
additional guidance on certain eligible 
payroll costs. 
DATES: 
Effective Date: The provisions in this 
interim final rule are effective June 26, 
2020. 
Comment Date: Comments must be 
received on or before July 30, 2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0040 
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, 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) 
(Pub. L. 116–136) to provide emergency 
assistance and health care response for 
individuals, families, and businesses 
affected by the coronavirus pandemic. 
The Small Business Administration 
(SBA) received funding and authority 
through the CARES Act to modify 
existing loan programs and establish a 
new loan program to assist small 
businesses nationwide adversely 
impacted by the COVID–19 emergency. 
Section 1102 of the CARES Act 
temporarily permits SBA to guarantee 
100 percent of 7(a) loans under a new 
program titled the ‘‘Paycheck Protection 
Program.’’ Section 1106 of the CARES 
Act provides for forgiveness of up to the 
full principal amount of qualifying 
loans guaranteed under the Paycheck 
Protection Program (PPP). 
On April 24, 2020, the President 
signed the Paycheck Protection Program 
and Health Care Enhancement Act (Pub. 
L. 116–139), which provided additional 
funding and authority for the PPP. On 
June 5, 2020, the President signed the 
Paycheck Protection Program Flexibility 
Act of 2020 (Flexibility Act) (Pub. L. 
116–142), which changed provisions of 
the PPP relating to the maturity of PPP 
loans, the deferral of PPP loan 
payments, and the forgiveness of PPP 
loans. 
This interim final rule addresses 
payroll costs that may be included on a 
PPP loan application submitted by 
certain boat owners or operators that are 
engaged in catching fish or other forms 
of aquatic animal life (fishing boat 
owners) and that have hired one or more 
crewmembers who are regarded as 
independent contractors or otherwise 
self-employed for certain federal tax 
purposes under 26 U.S.C. 3121(b)(20) of 
the Internal Revenue Code (the Code). A 
crewmember may be described in 
Section 3121(b)(20) of the Code if the 
fishing boat on which he or she works 
has an operating crew that is normally 
made up of fewer than 10 individuals 
and the crewmember receives as 
compensation for his or her work a 
share of the boat’s catch or of the 
proceeds from the sale of the catch, in 
an amount that depends on the amount 
of the catch. Such a crewmember 
generally may not receive additional 
cash remuneration or other 
compensation for his or her services 
with respect to the fishing boat. A 
fishing boat owner must report 
compensation paid to such a 
crewmember on Box 5 of IRS Form 
1099–MISC. The First Interim Final 
Rule, posted on April 2, 2020, provided 
that because independent contractors 
have the ability to apply for a PPP loan 
on their own, they do not count for 
purposes of another applicant’s PPP 
loan calculation. 85 FR 20811, 20813 
(April 15, 2020). Because crewmembers 
described in Section 3121(b)(20) of the 
Code are treated as independent 
contractors or otherwise self-employed 
for certain federal tax purposes, fishing 
boat owners have faced uncertainty 
about whether to report payments to 
such crewmembers as a payroll cost on 
their PPP loan applications. 
On April 14, 2020, SBA, in 
consultation with Treasury, posted an 
interim final rule explaining that the 
self-employment income of the general 
active partners of a partnership could be 
reported as a payroll cost, up to 
$100,000 annualized, on a PPP loan 
application filed by or on behalf of the 
partnership.1 85 FR 21747, 21748 (April 
20, 2020). The Administrator, in 
consultation with the Secretary, has 
determined that the relationship of a 
fishing boat owner and a crewmember 
described in Section 3121(b)(20) of the 
Code is analogous to a joint venture or 
partnership. For example, the fishing 
boat owner and crewmembers each 
contribute labor or resources to a 
common commercial enterprise, and the 
owner and crewmembers share in the 
enterprise’s profits. In order to 
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39067 
Federal Register / Vol. 85, No. 126 / Tuesday, June 30, 2020 / Rules and Regulations 
harmonize SBA’s interim final rule 
regarding partnerships with SBA’s 
interim final rule described above 
regarding independent contactors, the 
Administrator, in consultation with the 
Secretary, has determined that in the 
event of a conflict (i.e., a case where one 
or more partners in a partnership are 
treated as independent contractors for 
tax purposes), the rules regarding 
partnership will govern. Accordingly, as 
described below, this interim final rule 
(1) provides that a fishing boat owner 
may include compensation reported on 
Box 5 of Form 1099–MISC and paid to 
a crewmember described in Section 
3121(b)(20) as a payroll cost in its PPP 
loan application, and (2) addresses a 
fishing boat owner’s eligibility to obtain 
loan forgiveness of payroll costs paid to 
a crewmember who has obtained his or 
her own PPP loan. 
II. Comments and 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 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. These 
same reasons provide good cause for 
SBA to dispense with the 30-day 
delayed effective date provided in the 
Administrative Procedure Act (APA). 
See 5 U.S.C. 553(b)(B). 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 30, 2020. The SBA will 
consider these comments and the need 
for making any revisions as a result of 
these comments. 
III. Paycheck Protection Program— 
Additional Guidance on Certain 
Eligible Payroll Costs 
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 a new 7(a) loan program titled the 
‘‘Paycheck Protection Program.’’ Loans 
guaranteed under the Paycheck 
Protection Program (PPP) will be 100 
percent guaranteed by SBA, and the full 
principal amount of the loans may 
qualify for loan forgiveness. The 
purpose of this interim final rule is to 
provide additional guidance concerning 
payroll costs that may be reported in 
connection with certain PPP loan and 
loan forgiveness applications. 
1. Calculation of Payroll Costs of Certain 
Fishing Boat Owners 
May fishing boat owners include 
payroll costs in their PPP loan 
applications that are attributable to 
crewmembers described in Section 
3121(b)(20) of the Internal Revenue 
Code? 
Yes. The Administrator, in 
consultation with the Secretary, has 
determined that the relationship of a 
crewmember described in Section 
3121(b)(20) of the Internal Revenue 
Code (Code) and a fishing boat owner or 
operator (fishing boat owner) is 
analogous to a joint venture or 
partnership for purposes of the PPP. As 
a result, a fishing boat owner may 
include compensation reported on Box 
5 of IRS Form 1099–MISC and paid to 
a crewmember described in Section 
3121(b)(20) of the Code, up to $100,000 
annualized, as a payroll cost in its PPP 
loan application. The Administrator, in 
consultation with the Secretary, has 
determined that this treatment is 
appropriate to effectuate the purposes of 
the CARES Act to provide assistance to 
eligible PPP borrowers, including 
business concerns that operate as 
partnerships, affected by the COVID–19 
emergency. 
2. Calculation of Certain Payroll Costs 
Eligible for Loan Forgiveness 
May a fishing boat owner include as 
payroll costs in its application for loan 
forgiveness any compensation paid to a 
crewmember who received his or her 
own PPP loan and is seeking forgiveness 
for amounts of compensation the 
crewmember received for performing 
services described in Section 
3121(b)(20) of the Code with respect to 
that owner’s fishing boat? 
No. If a fishing boat crewmember 
obtains his or her own PPP loan and 
seeks forgiveness of that loan based in 
part on compensation from a particular 
fishing boat owner, the fishing boat 
owner cannot also obtain PPP loan 
forgiveness based on compensation paid 
to that same crewmember. This 
restriction applies only if the 
crewmember is performing services 
described in Section 3121(b)(20) of the 
Code for the particular fishing boat 
owner. The Administrator, in 
consultation with the Secretary, has 
determined that this restriction is 
necessary to prevent fishing boat owners 
and crewmembers from claiming 
forgiveness for the same payroll costs 
(for the owner’s PPP loan, the 
compensation to a specific 
crewmember; for the crewmember’s PPP 
loan, the compensation from the owner 
to that crewmember). As a result, only 
the crewmember’s PPP loan is eligible 
for forgiveness, and the owner may not 
obtain forgiveness for any payroll costs 
paid to the crewmember. The fishing 
boat owner is responsible for 
determining whether any of its 
crewmembers during the covered period 
for loan forgiveness received their own 
PPP loans. Due to the increased risk of 
duplicate payroll costs, PPP loans to 
fishing boat owners are more likely to be 
subject to an SBA loan review. 
3. 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. 
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39068 
Federal Register / Vol. 85, No. 126 / Tuesday, June 30, 2020 / Rules and Regulations 
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. 2020–14128 Filed 6–26–20; 11:15 am] 
BILLING CODE 8026–03–P 
DEPARTMENT OF TRANSPORTATION 
Federal Aviation Administration 
14 CFR Part 71 
[Docket No. FAA–2020–0164; Airspace 
Docket No. 20–ASO–3] 
RIN 2120–AA66 
Amendment of Class D Airspace and 
Revocation of Class E Airspace; 
Bogue, NC 
AGENCY: Federal Aviation 
Administration (FAA), DOT. 
ACTION: Final rule. 
SUMMARY: This action amends Class D 
airspace by updating the geographic 
coordinates, and removes Class E 
airspace extending upward from 700 
feet above the surface at Bogue Field 
Marine Corps Auxiliary Field, Bogue, 
NC, at the request of the US Marine 
Corps. Class E airspace is no longer 
required, as there are no instrument 
approaches into Bogue Field MCALF. 
This action also replaces the outdated 
term Airport/Facility Directory with the 
term Chart Supplement in the legal 
description of associated Class D 
airspace. This action enhances the 
safety and management of controlled 
airspace within the national airspace 
system. 
DATES: Effective 0901 UTC, September 
10, 2020. The Director of the Federal 
Register approves this incorporation by 
reference action under Title 1 Code of 
Federal Regulations part 51, subject to 
the annual revision of FAA Order 
7400.11 and publication of conforming 
amendments. 
ADDRESSES: FAA Order 7400.11D, 
Airspace Designations and Reporting 
Points, and subsequent amendments can 
be viewed on line at http://
www.faa.gov/air_traffic/publications/. 
For further information, you can contact 
the Airspace Policy Group, Federal 
Aviation Administration, 800 
Independence Avenue SW, Washington, 
DC 20591; telephone: (202) 267–8783. 
The Order is also available for 
inspection at the National Archives and 
Records Administration (NARA). For 
information on the availability of FAA 
Order 7400.11D at NARA, email 
fedreg.legal@nara.gov or go to https://
www.archives.gov/federal-register/cfr/ 
ibr-locations.html. 
FOR FURTHER INFORMATION, CONTACT: 
John Fornito, Operations Support 
Group, Eastern Service Center, Federal 
Aviation Administration, 1701 
Columbia Avenue, College Park, GA 
30337; telephone (404) 305–6364. 
SUPPLEMENTARY INFORMATION: 
Authority for This Rulemaking 
The FAA’s authority to issue rules 
regarding aviation safety is found in 
Title 49 of the United States Code. 
Subtitle I, Section 106 describes the 
authority of the FAA Administrator. 
Subtitle VII, Aviation Programs, 
describes in more detail the scope of the 
agency’s authority. This rulemaking is 
promulgated under the authority 
described in Subtitle VII, Part A, 
Subpart I, Section 40103. Under that 
section, the FAA is charged with 
prescribing regulations to assign the use 
of airspace necessary to ensure the 
safety of aircraft and the efficient use of 
airspace. This regulation is within the 
scope of that authority as it amends 
Class D airspace and removes Class E 
airspace extending upward from 700 
feet above the surface at Bogue Field 
MCALF, Bogue, NC, due to the airspace 
no longer being necessary. 
History 
The FAA published a notice of 
proposed rulemaking in the Federal 
Register (85 FR 14809, March 16, 2020) 
for Docket No. FAA–2020–0164 to 
amend Class D airspace by updating the 
geographic coordinates, and remove 
Class E airspace extending upward from 
700 feet above the surface at Bogue 
Field Marine Corps Auxiliary Field, 
Bogue, NC as the airport has no 
instrument approaches. Therefore, the 
Class E airspace is no longer necessary. 
This action enhances the safety and 
management of controlled airspace 
within the national airspace system. 
Interested parties were invited to 
participate in this rulemaking effort by 
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