Business Loan Program Temporary Changes; Paycheck Protection Program — Loan Forgiveness Requirements and Loan Review Procedures as Amended by Economic Aid Act

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Summary

An interim final rule issued by the U.S. Small Business Administration and the Department of the Treasury, published in the Federal Register of Friday, February 5, 2021, Vol. 86, No. 23, beginning at page 8283, under 13 CFR Part 120 and Docket Number SBA-2021-0006. The rule implements changes to the forgiveness and review of Paycheck Protection Program loans and consolidates the earlier interim final rules on loan forgiveness and SBA loan review procedures, incorporating the amendments made by the Economic Aid Act enacted December 27, 2020. It is effective February 3, 2021, with comments due on or before March 8, 2021, and applies to loans for which a forgiveness payment had not been remitted as of December 27, 2020. The rule identifies six provisions exercised by Treasury, including de minimis exemptions for PPP loans of $50,000 or less.

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This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
Rules and Regulations
Federal Register
8283 
Vol. 86, No. 23 
Friday, February 5, 2021 
BUREAU OF CONSUMER FINANCIAL 
PROTECTION 
12 CFR Part 1026 
[Docket No. CFPB–2020–0028] 
RIN 3170–AA98 
Qualified Mortgage Definition Under 
the Truth in Lending Act (Regulation 
Z): Seasoned QM Loan Definition; 
Correction 
AGENCY: Bureau of Consumer Financial 
Protection. 
ACTION: Final rule; correction. 
SUMMARY: The Bureau of Consumer 
Financial Protection (Bureau) recently 
published ‘‘Qualified Mortgage 
Definition Under the Truth in Lending 
Act (Regulation Z): Seasoned QM Loan 
Definition,’’ which appeared in the 
Federal Register on December 29, 2020. 
This document corrects a scrivener’s 
error in an amendatory instruction in 
that document. 
DATES: Effective March 1, 2021. 
FOR FURTHER INFORMATION CONTACT: 
Amanda Quester, Senior Counsel, Office 
of Regulations, at (202) 435–7700. If you 
require this document in an alternative 
electronic format, please contact CFPB_
Accessibility@cfpb.gov. 
SUPPLEMENTARY INFORMATION: In FR Doc. 
2020–27571 appearing on page 86402 in 
the Federal Register of Tuesday, 
December 29, 2020, the following 
correction is made: 
§ 1026.43
[Corrected]
■On page 86452, in the second column, 
in amendment 2, the instruction
‘‘Amend § 1026.43 by revising
paragraphs (e)(1) and (e)(2) introductory
text and adding paragraph (e)(7) to read
as follows: ’’ is corrected to read:
‘‘Amend § 1026.43 by revising the
headings for paragraphs (e) and (e)(1)
and paragraphs (e)(1)(i) and (e)(2)
introductory text and adding paragraph
(e)(7) to read as follows:’’.
Dated: January 15, 2021. 
Grace Feola, 
Federal Register Liaison, Bureau of Consumer 
Financial Protection. 
[FR Doc. 2021–01387 Filed 2–4–21; 8:45 am] 
BILLING CODE 4810–AM–P 
SMALL BUSINESS ADMINISTRATION 
13 CFR Part 120 
[Docket Number SBA–2021–0006] 
RIN 3245–AH65 
DEPARTMENT OF THE TREASURY 
RIN 1505–AC75 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program—Loan Forgiveness 
Requirements and Loan Review 
Procedures as Amended by Economic 
Aid Act 
AGENCY: U.S. Small Business 
Administration; Department of the 
Treasury. 
ACTION: Interim final rule. 
SUMMARY: This interim final rule 
implements changes related to the 
forgiveness and review of loans made 
under the Paycheck Protection Program 
(PPP), which was originally established 
under the Coronavirus Aid, Relief, and 
Economic Security Act (CARES Act) to 
provide economic relief to small 
businesses nationwide adversely 
impacted by the Coronavirus Disease 
2019 (COVID–19). On December 27, 
2020, the Economic Aid to Hard-Hit 
Small Businesses, Nonprofits, and 
Venues Act (Economic Aid Act) was 
enacted, extending the authority to 
make PPP loans through March 31, 
2021, revising certain PPP requirements, 
and permitting second draw PPP loans. 
This interim final rule consolidates 
prior rules related to forgiveness and 
reviews of PPP loans and incorporates 
changes made by the Economic Aid Act, 
including with respect to forgiveness of 
second draw PPP loans. 
DATES: 
Effective date: Unless otherwise 
specified in the Economic Aid Act, the 
provisions of this interim final rule are 
effective February 3, 2021. 
Applicability date: This interim final 
rule applies to Paycheck Protection 
Programs loans for which a loan 
forgiveness payment had not been 
remitted by SBA as of December 27, 
2020. Parts IV.6.c., IV.7 and V of this 
interim final rule, Paycheck Protection 
Program SBA Loan Review Procedures 
and Related Borrower and Lender 
Responsibilities, apply to all Paycheck 
Protection Program loans. 
Comment date: Comments must be 
received on or before March 8, 2021. 
ADDRESSES: You may submit comments, 
identified by number SBA–2021–0006 
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. All 
other comments must be submitted 
through the Federal eRulemaking Portal 
described above. 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 continue to experience 
economic hardship as a direct result of 
the Federal, State, and local public 
health measures that continue to be 
taken to minimize the public’s exposure 
to the virus. In addition, based on the 
advice of public health officials, other 
voluntary measures continue to be 
observed, resulting in a 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 
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8284 
Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 
1 Because section 1106 of the CARES Act is now 
codified as section 7A of the Small Business Act, 
any reference to section 1106 of the CARES Act in 
the rules that are being restated herein will refer to 
section 7A. 
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 permitted SBA to guarantee 
100 percent of 7(a) loans under a new 
program titled the ‘‘Paycheck Protection 
Program,’’ pursuant to section 7(a)(36) 
of the Small Business Act (15 U.S.C. 
636(a)(36)). Section 1106 of the CARES 
Act provided 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 Paycheck Protection 
Program. 
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. On July 4, 2020, Public 
Law 116–147 extended the authority for 
SBA to guarantee PPP loans to August 
8, 2020. 
On December 27, 2020, the President 
signed the Economic Aid to Hard-Hit 
Small Businesses, Nonprofits and 
Venues Act (Economic Aid Act) (Pub. L. 
116–260), which reauthorizes lending 
under the PPP through March 31, 2021, 
and among other things, modifies the 
PPP, including provisions relating to 
forgiveness of PPP loans. The Economic 
Aid Act added a new temporary section 
7(a)(37) to the Small Business Act, 
which authorizes SBA to guarantee 
additional PPP loans to eligible 
borrowers under generally the same 
terms and conditions available under 
section 7(a)(36) of the Small Business 
Act through March 31, 2021. The 
Economic Aid Act also redesignates 
section 1106 of the CARES Act as 
section 7A and transfers that section to 
the Small Business Act, to appear after 
section 7 of the Small Business Act.1 
As described below, this interim final 
rule (1) provides borrowers and lenders 
with guidance on requirements 
governing forgiveness of PPP loans, and 
(2) informs borrowers and lenders of 
SBA’s process for reviewing loan 
applications and loan forgiveness 
applications. SBA is incorporating and 
restating the prior interim final rules 
relating to loan forgiveness and loan 
reviews and making revisions to 
conform these prior interim final rules 
to the amendments made by the 
Economic Aid Act, including for PPP 
loans made under section 7(a)(37) of the 
Small Business Act. The prior interim 
final rules relating to loan forgiveness 
and loan reviews that are incorporated 
in this interim final rule are: The first 
interim final rule on loan forgiveness 
(85 FR 33004) (June 1, 2020); the first 
interim final rule on SBA loan review 
procedures and related borrower and 
lender responsibilities (85 FR 33010) 
(June 1, 2020); the interim final rule 
incorporating Flexibility Act 
Amendments (85 FR 38304) (June 26, 
2020); the interim final rule on 
Treatment of Owners and Forgiveness of 
Certain Nonpayroll Costs (85 FR 52881) 
(August 27, 2020); and the interim final 
rule on Additional Revisions to Loan 
Forgiveness and Loan Review 
Procedures Interim Final Rules (85 FR 
66214) (October 19, 2020). The rule also 
incorporates the forgiveness portions of 
the interim final rules regarding 
individuals with self-employment 
income (85 FR 21747 (April 20, 2020) 
and 85 FR 36997 (June 19, 2020)) and 
fishing boat owners (85 FR 39066) (June 
30, 2020). 
This rule should be interpreted 
consistently with the sets of Frequently 
Asked Questions (FAQs) regarding the 
PPP that are posted on SBA’s and the 
Department of the Treasury’s (Treasury) 
websites, the consolidated interim final 
rule implementing updates to the 
Paycheck Protection Program (86 FR 
3692 (January 14, 2021)) and the interim 
final rule on second draw PPP loans (86 
FR 3712 (January 14, 2021)); however, 
the Economic Aid Act overrides any 
conflicting guidance in the FAQs, and 
SBA will be revising the FAQs to fully 
conform to the Economic Aid Act as 
quickly as feasible. 
Most of this document restates 
existing regulatory provisions to provide 
PPP lenders and new and existing PPP 
borrowers a single regulation to consult 
on loan forgiveness and loan review 
requirements and processes. To enhance 
the readability of this document, SBA 
has not reproduced the policy and legal 
justifications for existing regulatory 
provisions restated here, except to the 
extent that those justifications may be 
helpful to the borrower or lender. 
However, those justifications from the 
original interim final rules are adopted 
here. 
Six provisions of this interim final 
rule are an exercise of rulemaking 
authority by Treasury either jointly with 
SBA or by Treasury alone: (1) The 
additional reference period option 
provided for seasonal employers, (2) the 
de minimis exemption provided with 
respect to certain offers of rehire, (3) the 
de minimis exemption from the full- 
time equivalent employee reduction 
penalty when an employee is, for 
example, fired for cause, (4) the de 
minimis exemption from the full-time 
equivalent employee reduction penalty 
when the borrower eliminates 
reductions by December 31, 2020 or, for 
a PPP loan made after December 27, 
2020, the last day of the loan’s covered 
period, (5) the de minimis exemption 
from the full-time equivalent (FTE) 
employee reduction penalty for certain 
PPP loans of $50,000 or less, and (6) the 
de minimis exemption from the 
employee salary and wages reduction 
penalty for certain PPP loans of $50,000 
or less. Otherwise, all provisions in this 
rule are an exercise of rulemaking 
authority by SBA alone. 
II. Comments and Immediate Effective 
Date 
This interim final rule is being issued 
without advance notice and public 
comment because section 303 of the 
Economic Aid Act authorizes SBA to 
issue regulations to implement the 
Economic Aid Act without regard to 
notice requirements. In addition, this 
rule is being issued to allow for 
immediate implementation of this 
program. The intent of both the CARES 
Act and the Economic Aid Act is that 
SBA provides relief to America’s small 
businesses expeditiously. The Economic 
Aid Act provided that several of the 
changes relating to loan forgiveness are 
effective as if included in the CARES 
Act and apply to any loan made 
pursuant to section 7(a)(36) of the Small 
Business Act before, on, or after 
December 27, 2020, including 
forgiveness of such a loan. Accordingly, 
loans that were made in 2020 but for 
which SBA has not yet remitted 
forgiveness to the lender will be 
forgiven based on changes made in the 
Economic Aid Act, as implemented in 
this interim final rule. Given the urgent 
need to provide borrowers that are 
eligible for loan forgiveness with timely 
relief, the Administrator in consultation 
with the Secretary has determined that 
it is impractical and not in the public 
interest to provide a 30-day delayed 
effective date. An immediate effective 
date will allow SBA to continue 
remitting forgiveness payments to 
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8285 
Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 
2 See, e.g., section 303 of the Economic Aid Act; 
section 7(a)(37)(M) of the Small Business Act. 
3 15 U.S.C. 634(b)(11). 
4 15 U.S.C. 636(a). 
5 15 U.S.C. 634(b)(6) and (b)(7). 
6 13 CFR 120.524. 
7 This interim final rule is an exercise of SBA’s 
rulemaking authority under 15 U.S.C. 634(b), 15 
U.S.C. 633(d), and 5 U.S.C. App., Reorg. Plan No. 
4 of 1965, 11(b), 13(a) (abolishing Loan Policy 
Board and transferring functions to the 
Administrator); sections 1106(k) (now section 7A(k) 
of the Small Business Act) and 1114 of the CARES 
Act, and section 307 of the Economic Aid Act. 
lenders without disruption and in 
accordance with the amendments made 
by the Economic Aid Act. This good 
cause justification also supports waiver 
of the 60-day delayed effective date for 
major rules under the Congressional 
Review Act at 5 U.S.C. 808(2). Although 
this interim final rule is effective 
immediately, comments are solicited 
from interested members of the public 
on all aspects of the interim final rule. 
These comments must be submitted 
on or before March 8, 2021. SBA will 
consider these comments and the need 
for making any revisions as a result of 
these comments. 
III. Paycheck Protection Program— 
Loan Forgiveness and Loan Review 
Procedures as Amended by Economic 
Aid Act 
Overview 
The CARES Act was enacted to 
provide immediate assistance to 
individuals, families, and organizations 
affected by the COVID–19 emergency. 
Among the provisions contained in the 
CARES Act are provisions authorizing 
SBA to temporarily guarantee loans 
under the Paycheck Protection Program 
(PPP). Loans under the PPP will be 100 
percent guaranteed by SBA, and the full 
principal amount of the loans may 
qualify for loan forgiveness. 
Under the CARES Act, as amended by 
the Economic Aid Act, SBA is 
authorized to guarantee loans under the 
PPP, a new temporary 7(a) program, 
through March 31, 2021. PPP loans 
made under section 7(a)(36) of the Small 
Business Act may be referred to as 
‘‘First Draw PPP Loans,’’ and PPP loans 
made under section 7(a)(37) of the Small 
Business Act may be referred to as 
‘‘Second Draw PPP Loans.’’ (Any 
reference to ‘‘PPP loans’’ or ‘‘PPP loan’’ 
herein refers to both First Draw PPP 
Loans and Second Draw PPP Loans.) 
The intent of the CARES Act and the 
Economic Aid Act is that SBA provide 
relief to America’s small businesses 
expeditiously, which is expressed in the 
CARES Act by giving all lenders 
delegated authority and streamlining the 
requirements of the regular 7(a) loan 
program. This intent is also expressed in 
the Economic Aid Act through the 
statutory deadlines requiring that the 
Administrator issue certain guidance 
and regulations within 10 days of 
enactment.2 
The Small Business Act authorizes 
the Administrator to conduct 
investigations to determine whether a 
recipient or participant in any 
assistance under a 7(a) program, 
including the PPP, is ineligible for a 
loan, or has violated section 7(a), or any 
rule, regulation or order issued 
thereunder.3 Additionally, under 
section 7(a), the Administrator is 
empowered to make loans in 
cooperation with lenders through 
agreements to participate on a deferred 
(guaranteed) basis.4 Further, the 
Administrator may make such rules and 
regulations as deemed necessary and 
take any and all actions determined to 
be necessary or desirable with respect to 
7(a) loans.5 Pursuant to these provisions 
of the Small Business Act, SBA has 
issued regulations establishing the 
standards by which it will investigate 
whether a loan met program 
requirements and the circumstances 
under which SBA will be released from 
liability on a guarantee for such a loan.6 
Additionally, section 7A(l)(1)(E) of the 
Small Business Act expressly provides 
that SBA may review and audit PPP 
loans of $150,000 or less and access any 
records the borrower is required to 
retain. 
In light of the structure of the PPP 
program established by the CARES Act 
and the PPP Interim Final Rules, in 
which loans and loan forgiveness are 
provided based on the borrower’s 
certifications and documentation 
provided by the borrower, the 
Administrator, in consultation with the 
Secretary of the Treasury (Secretary), 
previously determined that it was 
appropriate to adopt additional 
procedures and criteria through which 
SBA will review whether an action by 
the borrower has resulted in its receipt 
of a PPP loan that did not meet program 
requirements.7 SBA’s review of 
borrower certifications and 
representations regarding the borrower’s 
eligibility for a PPP loan and loan 
forgiveness, and the borrower’s use of 
PPP loan proceeds, is essential to ensure 
that PPP loans are directed to the 
entities Congress intended, and that PPP 
loan proceeds are used for the purposes 
Congress required, including the CARES 
Act’s and the Economic Aid Act’s 
central purposes of keeping workers 
paid and employed. 
Table of Contents 
IV. Paycheck Protection Program Loan 
Forgiveness Requirements 
1. General 
a. What amounts are eligible for 
forgiveness? 
b. For borrowers that are individuals with 
self-employment income who file a Form 
1040, Schedule C or F, what amounts are 
eligible for forgiveness? 
2. Loan Forgiveness Process 
a. What is the general process to obtain 
loan forgiveness? 
b. When must a borrower apply for loan 
forgiveness or start making payments on 
a loan? 
3. Payroll Costs Eligible for Loan 
Forgiveness 
a. When must payroll costs be incurred 
and/or paid to be eligible for forgiveness? 
b. Are salary, wages, or commission 
payments to furloughed employees; 
bonuses; or hazard pay during the 
covered period eligible for loan 
forgiveness? 
c. Are there caps on the amount of loan 
forgiveness available for owner- 
employees and self-employed 
individuals’ own payroll compensation? 
d. Are any individuals with an ownership 
stake in a PPP borrower exempt from 
application of the PPP owner-employee 
compensation rule when determining the 
amount of their compensation that is 
eligible for loan forgiveness? 
e. 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 Internal Revenue Code with 
respect to that owner’s fishing boat? 
4. Nonpayroll Costs Eligible for Loan 
Forgiveness 
a. When must nonpayroll costs be incurred 
and/or paid to be eligible for forgiveness? 
b. Are advance payments of interest on 
mortgage obligations eligible for loan 
forgiveness? 
c. Are amounts attributable to the business 
operation of a tenant or sub-tenant of the 
PPP borrower or, in the context of home- 
based businesses, household expenses, 
eligible for forgiveness? 
d. Are rent payments to a related party 
eligible for loan forgiveness? 
5. Reductions to Loan Forgiveness Amount 
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? 
b. What effect does a reduction in a 
borrower’s number of full-time 
equivalent (FTE) employees have on the 
loan forgiveness amount? 
c. What does ‘‘full-time equivalent 
employee’’ mean? 
d. How should a borrower calculate its 
number of FTE employees? 
e. What effect does a borrower’s reduction 
in employees’ salary or wages have on 
the loan forgiveness amount? 
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8 This subsection was originally published at 85 
FR 33004, section III.1. (June 1, 2020) and has been 
modified to conform to section 304 of the Economic 
Aid Act. 
9 ‘‘Payroll costs’’ has the same meaning as in 
subsections III.B.4.g. and h. of the consolidated 
interim final rule implementing updates to the 
Paycheck Protection Program. 86 FR 3692, 3702 
(Jan. 14, 2021). 
10 Section 7(a)(37)(J)(iii) of the Small Business Act 
provides these amounts are not eligible for 
forgiveness for Second Draw PPP Loans. This 
provision similarly provides that these amounts are 
not eligible for forgiveness for First Draw PPP Loans 
in order to provide consistent treatment and to 
prevent a borrower from receiving forgiveness for 
amounts for which the borrower will also receive 
a tax credit. 
11 This eligible nonpayroll cost was added by 
section 304 of the Economic Aid Act. 
12 This eligible nonpayroll cost was added by 
section 304 of the Economic Aid Act. 
13 This eligible nonpayroll cost was added by 
section 304 of the Economic Aid Act. 
f. How should borrowers seeking loan 
forgiveness account for the reduction 
based on a reduction in the number of 
employees (section 7A(d)(2)) relative to 
the reduction relating to salary and 
wages (section 7A(d)(3))? 
g. If a borrower restores reductions made 
to employee salaries and wages or FTE 
employees, can the borrower avoid a 
reduction in its loan forgiveness amount? 
h. Will a borrower’s loan forgiveness 
amount be reduced if an employee is 
fired for cause, voluntarily resigns, or 
voluntarily requests a schedule 
reduction? 
i. Is a borrower with a loan of $50,000 or 
less exempt from any reductions to the 
loan forgiveness amount? 
6. Documentation Requirements 
a. What must borrowers submit for 
forgiveness of their PPP loans? 
b. What documentation must borrowers 
who are individuals with self- 
employment income who file a Form 
1040, Schedule C or F, submit to their 
lender with their request for loan 
forgiveness? 
c. What additional documentation must a 
borrower submit when the President of 
the United States, Vice President of the 
United States, the head of an Executive 
department, or a Member of Congress, or 
the spouse of any of the preceding, 
directly or indirectly holds a controlling 
interest in the borrower? 
7. Lender Hold Harmless 
V. Paycheck Protection Program SBA Loan 
Review Procedures and Related 
Borrower and Lender Responsibilities 
1. SBA Reviews of Individual PPP Loans 
a. Will SBA review individual PPP loans? 
b. What borrower representations and 
statements will SBA review? 
c. When will SBA undertake a loan review? 
d. Will I have the opportunity to respond 
to SBA’s questions in a review? 
e. If SBA determines that a borrower is 
ineligible for a PPP loan, can the loan be 
forgiven? 
f. May a borrower appeal SBA’s 
determination that the borrower is 
ineligible for a PPP loan or ineligible for 
the loan amount or the loan forgiveness 
amount claimed by the borrower? 
2. The Loan Forgiveness Process for 
Lenders 
a. What should a lender review? 
b. What is the timeline for the lender’s 
decision on a loan forgiveness 
application? 
c. What should a lender do if it receives 
notice that SBA is reviewing a loan? 
d. What should a lender do if a borrower 
submits documentation of eligible costs 
that exceed a borrower’s PPP Loan 
Amount? 
3. Lender Fees 
IV. Paycheck Protection Program Loan 
Forgiveness Requirements 
1. General 
a. What amounts are eligible for 
forgiveness? 8 
Section 7A(b) of the Small Business 
Act provides that, subject to several 
important limitations, borrowers shall 
be eligible for forgiveness of their PPP 
loan in an amount equal to the sum of 
the following costs incurred and 
payments made during the covered 
period (as described in section IV.3. 
below). 
(1) Payroll costs.9 Payroll costs consist 
of compensation to employees (whose 
principal place of residence is the 
United States) in the form of salary, 
wages, commissions, or similar 
compensation; cash tips or the 
equivalent (based on employer records 
of past tips or, in the absence of such 
records, a reasonable, good-faith 
employer estimate of such tips); 
payment for vacation, parental, family, 
medical, or sick leave; allowance for 
separation or dismissal; payment for the 
provision of employee benefits 
consisting of group health care or group 
life, disability, vision, or dental 
insurance, including insurance 
premiums, and retirement; payment of 
state and local taxes assessed on 
compensation of employees; and for an 
independent contractor or sole 
proprietor, wages, commissions, 
income, or net earnings from self- 
employment, or similar compensation. 
Payroll costs that are qualified wages 
taken into account in determining the 
Employer Retention Credit are not 
eligible for loan forgiveness.10 
(2) Interest payments on any business 
mortgage obligation on real or personal 
property that was incurred before 
February 15, 2020 (but not any 
prepayment or payment of principal). 
(3) Payments on business rent 
obligations on real or personal property 
under a lease agreement in force before 
February 15, 2020. 
(4) Business utility payments for the 
distribution of electricity, gas, water, 
transportation, telephone, or internet 
access for which service began before 
February 15, 2020. 
(5) Covered operations expenditures. 
A covered operations expenditure is a 
payment for any business software or 
cloud computing service that facilitates 
business operations, product or service 
delivery, the processing, payment, or 
tracking of payroll expenses, human 
resources, sales and billing functions, or 
accounting or tracking of supplies, 
inventory, records and expenses.11 
(6) Covered property damage costs. A 
covered property damage cost is a cost 
related to property damage and 
vandalism or looting due to public 
disturbances that occurred during 2020 
that was not covered by insurance or 
other compensation.12 
(7) Covered supplier costs. A covered 
supplier cost means an expenditure 
made by a borrower to a supplier of 
goods for the supply of goods that—(A) 
are essential to the operations of the 
borrower at the time at which the 
expenditure is made; and (B) is made 
pursuant to a contract, order, or 
purchase order—(i) in effect at any time 
before the covered period with respect 
to the applicable covered loan; or (ii) 
with respect to perishable goods, in 
effect before or at any time during the 
covered period with respect to the 
applicable covered loan.13 
(8) Covered worker protection 
expenditures. A covered worker 
protection expenditure: 
(A) Means an operating or a capital 
expenditure to facilitate the adaptation 
of the business activities of an entity to 
comply with requirements established 
or guidance issued by the Department of 
Health and Human Services, the Centers 
for Disease Control, or the Occupational 
Safety and Health Administration, or 
any equivalent requirements established 
or guidance issued by a State or local 
government related to the maintenance 
of standards for sanitation, social 
distancing, or any other worker or 
customer safety requirement related to 
COVID–19, during the period beginning 
on March 1, 2020 and ending the date 
on which the national emergency 
declared by the President under the 
National Emergencies Act (50 U.S.C. 
1601 et seq.) with respect to the 
Coronavirus Disease 2019 (COVID–19) 
expires; 
(B) may include— 
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14 This eligible nonpayroll cost was added by 
section 304 of the Economic Aid Act. 
15 See section 7A(d)(8) of the Small Business Act. 
16 This subsection was originally published at 85 
FR 21747, subsection III.1.f. (Apr. 20, 2020) and has 
been modified to conform to subsequent rules or 
guidance and sections 306, 313, and 344 of the 
Economic Aid Act. 
17 The Economic Aid Act amended the definition 
of the forgiveness covered period. 
18 Due to the amended definition of forgiveness 
covered period in the Economic Aid Act, this 
calculated amount has changed. 
19 For First Draw PPP loans made in 2020, 
borrowers use 2019. For First Draw PPP loans made 
in 2021 and Second Draw PPP Loans, borrowers use 
the year (2019 or 2020) that was used to calculate 
the borrower’s loan amount. 
20 For self-employed borrowers that file Form 
1040, Schedule F and have no employees, gross 
income may be used instead of net profit 
throughout this calculation. For self-employed 
borrowers that file Schedule F and have employees, 
the difference between gross income and employee 
payroll costs may be used instead of net profit 
throughout this calculation. See section 313 of the 
Economic Aid Act. 
21 Section 306 of the Economic Aid Act allows the 
borrower to select a covered period between 8 
weeks and 24 weeks. 
22 This eligible nonpayroll cost was added by 
section 304 of the Economic Aid Act. 
23 This eligible nonpayroll cost was added by 
section 304 of the Economic Aid Act. 
24 This eligible nonpayroll cost was added by 
section 304 of the Economic Aid Act. 
25 This eligible nonpayroll cost was added by 
section 304 of the Economic Aid Act. 
26 This subsection was originally published at 85 
FR 33004, section III.2. (June 1, 2020) and was 
amended by 85 FR 38304, subsection III.2.a. (June 
26, 2020) and 85 FR 66214, subsections III.2.a. and 
b. (Oct. 19, 2020) and has been modified to conform 
to section 307 of the Economic Aid Act. 
27 SBA Form 3508, 3508EZ, 3508S, as applicable, 
or lender equivalent. Loan Forgiveness Application 
forms were amended to conform to the Economic 
Aid Act, including section 307, which requires a 
simplified forgiveness application for loans of not 
more than $150,000. The Simplified Forgiveness 
Application is SBA Form 3508S (as amended). 
28 This requirement is necessary to provide 
information relevant to the borrower’s eligibility for 
the Second Draw PPP Loan and loan forgiveness. 
A borrower is eligible for a Second Draw PPP Loan 
Continued 
(i) the purchase, maintenance, or 
renovation of assets that create or 
expand— 
(I) a drive-through window facility; 
(II) an indoor, outdoor, or combined 
air or air pressure ventilation or 
filtration system; 
(III) a physical barrier such as a 
sneeze guard; 
(IV) an expansion of additional 
indoor, outdoor, or combined business 
space; 
(V) an onsite or offsite health 
screening capability; or 
(VI) other assets relating to the 
compliance with the requirements or 
guidance described in subsection (A), as 
determined by the Administrator in 
consultation with the Secretary of 
Health and Human Services and the 
Secretary of Labor; and 
(ii) the purchase of— 
(I) covered materials described in 
§ 328.103(a) of title 44, Code of Federal 
Regulations, or any successor 
regulation; 
(II) particulate filtering facepiece 
respirators approved by the National 
Institute for Occupational Safety and 
Health, including those approved only 
for emergency use authorization; or 
(III) other kinds of personal protective 
equipment, as determined by the 
Administrator in consultation with the 
Secretary of Health and Human Services 
and the Secretary of Labor; and 
(C) does not include residential real 
property or intangible property.14 
This interim final rule uses the term 
‘‘nonpayroll costs’’ to refer to the 
payments described in (2)–(8) above. 
Eligible nonpayroll costs cannot exceed 
40 percent of the loan forgiveness 
amount.15 A borrower may receive 
forgiveness for the nonpayroll costs 
described in (5), (6), (7) and (8) only if 
SBA had not yet remitted a forgiveness 
payment on the borrower’s loan to the 
borrower’s PPP lender as of December 
27, 2020 (the date of the Economic Aid 
Act’s enactment). 
b. For borrowers that are individuals 
with self-employment income who file 
a Form 1040, Schedule C or F, what 
amounts are eligible for forgiveness? 16 
The amount of loan forgiveness can be 
up to the full principal amount of the 
loan plus accrued interest. The actual 
amount of loan forgiveness will depend, 
in part, on the total amount spent 
during the covered period (as described 
in section IV.3 below) 17 on: 
i. Payroll costs including salary, 
wages, and tips, up to $100,000 of 
annualized pay per employee, as 
prorated for the period during which the 
payments are made or the obligation to 
make the payments is incurred 
(maximum per individual is $100,000 
prorated for the covered period, e.g., for 
an 8-week covered period a maximum 
of $15,385 and for a 24-week covered 
period a maximum of $46,154),18 as 
well as covered benefits for employees 
(but not owners), including health care 
expenses, retirement contributions, and 
state taxes imposed on employee payroll 
paid by the employer (such as 
unemployment insurance premiums), 
but excluding any qualified wages taken 
into account in determining the 
Employer Retention Credit; 
ii. owner compensation replacement, 
calculated based on 2019 or 2020 19 net 
profit 20 as described in subsection 3.c. 
below; forgiveness of such amounts is 
limited to either (a) the prorated portion 
of 2019 or 2020 net profit for a covered 
period up to 2.5 months, or (b) 2.5 
months’ worth (2.5/12) of 2019 or 2020 
net profit (up to $20,833) for a covered 
period greater than 2.5 months,21 
excluding any qualified sick leave 
equivalent amount for which a credit is 
claimed under section 7002 of the 
Families First Coronavirus Response 
Act (FFCRA) (Pub. L. 116–127) or 
qualified family leave equivalent 
amount for which a credit is claimed 
under section 7004 of FFCRA; 
iii. payments of interest on mortgage 
obligations on real or personal property 
incurred before February 15, 2020, to 
the extent they are deductible on Form 
1040 Schedule C or F (business 
mortgage payments); 
iv. rent payments on lease agreements 
in force before February 15, 2020, to the 
extent they are deductible on Form 1040 
Schedule C or F (business rent 
payments); 
v. utility payments under service 
agreements dated before February 15, 
2020 to the extent they are deductible 
on Form 1040 Schedule C or F (business 
utility payments); 
vi. any covered operations 
expenditures to the extent they are 
deductible on Form 1040 Schedule C or 
F; 22 
vii. any covered property damage 
costs to the extent they are deductible 
on Form 1040 Schedule C or F; 23 
viii. Any covered supplier costs to the 
extent they are deductible on Form 1040 
Schedule C or F; 24 and 
ix. any covered worker protection 
expenditures to the extent they are 
deductible on Form 1040 Schedule C or 
F.25 
A borrower may receive forgiveness 
for the new nonpayroll costs described 
in vi., vii., viii., and ix. only if SBA had 
not yet remitted a forgiveness payment 
on the borrower’s loan to the borrower’s 
PPP lender as of December 27, 2020. 
2. Loan Forgiveness Process 
a. What is the general process to obtain 
loan forgiveness? 26 
To receive loan forgiveness on either 
a First Draw PPP Loan or a Second Draw 
PPP Loan, a borrower must complete 
and submit the Loan Forgiveness 
Application 27 to its lender (or to the 
lender servicing its loan). For Second 
Draw PPP Loans in excess of $150,000, 
the borrower must submit its loan 
forgiveness application for the First 
Draw PPP Loan before or 
simultaneously with the loan 
forgiveness application for the Second 
Draw PPP Loan, even if the calculated 
amount of forgiveness on the First Draw 
PPP Loan is zero.28 
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if they have used, or will use, the full amount of 
its First Draw PPP Loan (including the amount of 
any increase on such First Draw PPP Loan) on 
authorized uses on or before the expected date on 
which the Second Draw PPP Loan will be 
disbursed. See interim final rule on Second Draw 
PPP Loans. 86 FR 3712, 3717 (Jan. 14, 2021). This 
requirement does not apply to Second Draw PPP 
Loans of $150,000 or less that use the simplified 
forgiveness application (SBA Form 3508S). 
29 Section 333 of the Economic Aid Act repealed 
the CARES Act provision requiring SBA to deduct 
EIDL Advance Amounts received by borrowers from 
the forgiveness payment amounts remitted by SBA 
to the lender. Any EIDL Advance Amounts 
previously deducted from a borrower’s forgiveness 
amount will be remitted to the lender, together with 
interest through the remittance date. 
30 Although the note is marked ‘‘Paid in Full,’’ the 
forgiven amount is considered canceled 
indebtedness under section 7A(c)(1) of the Small 
Business Act. 
31 This subsection was originally published at 85 
FR 38304, section III.1.c. (June 26, 2020) and has 
been modified to conform to sections 306 and 307 
of the Economic Aid Act. 
32 Because section 306 of the Economic Aid Act 
allows the borrower to select a covered period 
between 8 weeks and 24 weeks, there is no longer 
a need to allow a borrower to apply for forgiveness 
‘‘before the end of the covered period’’ and that text 
has been deleted. 
33 The Economic Aid Act is silent on what 
covered period applies for a borrower who does not 
apply for forgiveness, so SBA will apply the longest 
available covered period to such borrowers. 
34 This subsection was originally published at 85 
FR 33004, subsection III.3.a. (June 1, 2020) and 
amended by 85 FR 38304, subsection III.1.d. (June 
26, 2020) and has been modified to conform to 
section 306 of the Economic Aid Act and for 
readability. 
35 Amended to conform to the section 306 of 
Economic Aid Act change to definition of covered 
period. The option to elect an alternative covered 
period has been removed because the Economic Aid 
Act provided borrowers flexibility to choose the 
end of their covered period. 
36 This subsection was originally published at 85 
FR 33004, subsection III.3.b. (June 1, 2020) and has 
been modified to conform to section 344 of the 
Economic Aid Act. 
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 
borrower’s loan(s) or loan application(s), 
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. The EIDL 
Advance Amount received by the 
borrower will not reduce the amount of 
forgiveness to which the borrower is 
entitled and will not be deducted from 
the forgiveness payment amount that 
SBA remits to the Lender.29 If SBA 
determines in the course of its review 
that the borrower was ineligible for the 
PPP loan under the statute, the 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 
must notify 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 
must notify the borrower of remittance 
by SBA of (i) the loan forgiveness 
amount (or that SBA determined that no 
amount of the loan is eligible for 
forgiveness), and (ii) 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.30 
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. 
Part V of this interim final rule 
describes SBA’s procedures for 
reviewing PPP loan applications and 
loan forgiveness applications. 
b. When must a borrower apply for loan 
forgiveness or start making payments on 
a loan? 31 
A borrower may submit a loan 
forgiveness application any time on or 
before the maturity date of the loan if 
the borrower has used all of the loan 
proceeds for which the borrower is 
requesting forgiveness, except that a 
borrower applying for forgiveness of a 
Second Draw PPP Loan that is more 
than $150,000 must submit the loan 
forgiveness application for its First 
Draw PPP Loan before or 
simultaneously with the loan 
forgiveness application for its Second 
Draw PPP Loan.32 If the borrower does 
not apply for loan forgiveness within 10 
months after the last day of the 
maximum covered period of 24 weeks,33 
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. 
3. Payroll Costs Eligible for Loan 
Forgiveness 
a. When must payroll costs be incurred 
and/or paid to be eligible for 
forgiveness? 34 
In general, payroll costs paid or 
incurred during the covered period are 
eligible for forgiveness. For purposes of 
loan forgiveness, the covered period is 
the period beginning on the date the 
lender disburses the PPP loan and 
ending on a date selected by the 
borrower that occurs during the period 
(i) beginning on the date that is 8 weeks 
after the date of disbursement, and (ii) 
ending on the date that is 24 weeks after 
the date of disbursement.35 The covered 
periods for a First Draw PPP Loan and 
a Second Draw PPP Loan cannot 
overlap; the borrower must use all 
proceeds of the First Draw PPP Loan for 
eligible expenses before disbursement of 
the Second Draw PPP Loan. 
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 are eligible for 
forgiveness if paid on or before the next 
regular payroll date; otherwise, payroll 
costs must be paid during the covered 
period to be eligible for forgiveness. 
Payroll costs generally are 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). 
b. Are salary, wages, or commission 
payments to furloughed employees; 
bonuses; or hazard pay during the 
covered period eligible for loan 
forgiveness? 36 
Yes. The CARES Act defines the term 
‘‘payroll costs’’ broadly to include 
compensation in the form of salary, 
wages, commissions, or similar 
compensation. If a borrower pays 
furloughed employees their salary, 
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37 This subsection was originally published at 85 
FR 33004, subsection III.3.c. (June 1, 2020) and 
amended by 85 FR 38304, subsection III.1.d (June 
26, 2020) and has been modified to conform to 
sections 308 and 344 of the Economic Aid Act and 
for readability. 
38 For First Draw PPP loans made in 2020, 
borrowers use 2019. For First Draw PPP loans made 
in 2021 and Second Draw PPP loans, borrowers use 
the year (2019 or 2020) that was used to calculate 
the borrower’s loan amount. 
39 Use whichever year was used to calculate the 
borrower’s loan amount. 
40 Use whichever year was used to calculate the 
borrower’s loan amount. 
41 For self-employed borrowers that file Form 
1040, Schedule F and have no employees, gross 
income may be used instead of net profit. For self- 
employed borrowers that file Schedule F and have 
employees, the difference between gross income 
and employee payroll costs may be used instead of 
net profit. See section 313 of the Economic Aid Act. 
42 This subsection was originally published at 85 
FR 52881, section III.1. (Aug. 27, 2020) and has 
been modified for readability. 
43 This subsection was originally published at 85 
FR 39066, subsection III.2. (June 30, 2020) and has 
been modified for consistency with the Economic 
Aid Act. 
44 This subsection was originally published at 85 
FR 33004, subsection III.4.a. (June 1, 2020) and 
amended by 85 FR 38304, subsection III.1.e (June 
26, 2020) and has been modified for readability. 
wages, or commissions during the 
covered period, those payments are 
eligible for forgiveness as long as they 
do not exceed an annual salary of 
$100,000, as prorated for the period 
during which the payments are made or 
the obligation to make the payments is 
incurred. The Administrator, in 
consultation with the Secretary, has also 
determined that, if an employee’s total 
compensation does not exceed $100,000 
on an annualized basis, as prorated for 
the period during which the payments 
are made or the obligation to make the 
payments is incurred, the employee’s 
hazard pay and bonuses are eligible for 
loan forgiveness because they constitute 
a supplement to salary or wages, and are 
thus a similar form of compensation. 
c. Are there caps on the amount of loan 
forgiveness available for owner- 
employees and self-employed 
individuals’ own payroll 
compensation? 37 
Yes. Forgiveness is capped at 2.5 
months’ worth (2.5/12) of an owner- 
employee or self-employed individual’s 
2019 or 2020 38 compensation (up to a 
maximum $20,833 per individual in 
total across all businesses). The 
individual’s total compensation may not 
exceed $100,000 on an annualized basis, 
as prorated for the period during which 
the payments are made or the obligation 
to make the payments is incurred. For 
example, for borrowers that 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 or 2020 compensation (i.e., 
approximately 15.38 percent of 2019 or 
2020 compensation) or $15,385 per 
individual, whichever is less, in total 
across all businesses. For borrowers that 
elect to use a ten-week covered period, 
the cap is ten weeks’ worth (10/52) of 
2019 or 2020 compensation 
(approximately 19.23 percent) or 
$19,231 per individual, whichever is 
less, in total across all businesses. For 
a covered period longer than 2.5 
months, 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 or 2020 
compensation (up to $20,833) in total 
across all businesses. 
In particular, C-corporation owner- 
employees are capped by the prorated 
amount of their 2019 or 2020 39 
employee cash compensation and 
employer retirement and health, life, 
disability, vision and dental insurance 
contributions made on their behalf. S- 
corporation owner-employees are 
capped by the prorated amount of their 
2019 or 2020 40 employee cash 
compensation and employer retirement 
contributions made on their behalf. 
However, employer health, life, 
disability, vision and dental insurance 
contributions made on their behalf 
cannot be separately added; those 
payments are already included in their 
employee cash compensation. Schedule 
C or F filers are capped by the prorated 
amount of their owner compensation 
replacement, calculated based on 2019 
or 2020 net profit.41 General partners are 
capped by the prorated amount of their 
2019 or 2020 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, life, 
disability, vision or dental insurance 
contributions are included in their net 
self-employment income and therefore 
cannot be separately added to their 
payroll calculation. LLC members are 
subject to the rules based on their LLC’s 
tax filing status in the reference year 
used to determine their loan amount. 
d. Are any individuals with an 
ownership stake in a PPP borrower 
exempt from application of the PPP 
owner-employee compensation rule 
when determining the amount of their 
compensation that is eligible for loan 
forgiveness? 42 
Yes, owner-employees with less than 
a 5 percent ownership stake in a C- or 
S-corporation are not subject to the 
owner-employee compensation rule in 
subsection IV.3.c. above. 
e. 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 Internal Revenue 
Code with respect to that owner’s 
fishing boat? 43 
No. If a fishing boat crewmember 
obtains his or her own PPP loan during 
the fishing boat owner’s covered period 
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 Internal Revenue Code for the 
particular fishing boat owner. The 
fishing boat owner is responsible for 
determining whether any of its 
crewmembers received their own PPP 
loans during the fishing boat owner’s 
loan forgiveness covered period. 
4. Nonpayroll Costs Eligible for Loan 
Forgiveness 
a. When must nonpayroll costs be 
incurred and/or paid to be eligible for 
forgiveness? 44 
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 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 
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45 This subsection was originally published at 85 
FR 33004, subsection III.4.b. (June 1, 2020). 
46 This subsection was originally published at 85 
FR 52881, subsection III.2.a. (Aug. 27, 2020). 
47 This subsection was originally published at 85 
FR 52881, subsection III.2.b. (Aug. 27, 2020) and 
has been modified for readability. 
48 In this context, the related party itself would 
not also be eligible to request forgiveness for this 
amount. 
49 This subsection was originally published at 85 
FR 33004, subsection III.5. (June 1, 2020) and 
amended by 85 FR 38304, subsection III.1.f. (June 
26, 2020), and has been modified to conform to 
subsequent rules or guidance and section 311 of the 
Economic Aid Act. 
50 This subsection was originally published at 85 
FR 33004, subsection III.5.a. (June 1, 2020) and 
amended by 85 FR 38304, section III.5. (June 26, 
2020) and has been modified for readability. 
51 This subsection was originally published at 85 
FR 33004, subsection III.5.b. (June 1, 2020) and 
amended by 85 FR 38304, section III.1.f. (June 26, 
2020) and has been modified to conform to sections 
306, 311 and 336 of the Economic Aid Act and for 
readability. 
52 The term ‘‘seasonal employer’’ is defined in 
section 7(a)(36)(A)(xiii) of the Small Business Act. 
53 This decision to permit seasonal employers to 
use, as a reference period, any consecutive 12-week 
period between February 15, 2019 and February 15, 
2020 is an exercise of the Secretary’s rulemaking 
authority under section 1109 of the CARES Act. 
This reference period is consistent with section 336 
of the Economic Aid Act, which amends the 
calculation of the maximum loan amount for 
seasonal employers. 
incurred during the covered period and 
paid on the next regular billing date. 
b. Are advance payments of interest on 
mortgage obligations eligible for loan 
forgiveness? 45 
No. Advance payments of interest on 
a covered mortgage obligation are not 
eligible for loan forgiveness because the 
CARES Act’s loan forgiveness 
provisions regarding mortgage 
obligations specifically exclude 
‘‘prepayments.’’ Principal on mortgage 
obligations is not eligible for forgiveness 
under any circumstances. 
c. Are amounts attributable to the 
business operation of a tenant or sub- 
tenant of the PPP borrower or, in the 
context of home-based businesses, 
household expenses, eligible for 
forgiveness? 46 
No, the amount of loan forgiveness 
requested for nonpayroll costs may not 
include any amount attributable to the 
business operation of a tenant or sub- 
tenant of the PPP borrower or, for home- 
based businesses, household expenses. 
The examples below illustrate this rule. 
Example 1: A borrower rents an office 
building for $10,000 per month and sub- 
leases out a portion of the space to other 
businesses for $2,500 per month. Only 
$7,500 per month is eligible for loan 
forgiveness. 
Example 2: A borrower has a 
mortgage on an office building it 
operates out of, and it leases out a 
portion of the space to other businesses. 
The portion of mortgage interest that is 
eligible for loan forgiveness is limited to 
the percent share of the fair market 
value of the space that is not leased out 
to other businesses. As an illustration, if 
the leased space represents 25% of the 
fair market value of the office building, 
then the borrower may only claim 
forgiveness on 75% of the mortgage 
interest. 
Example 3: A borrower shares a 
rented space with another business. 
When determining the amount that is 
eligible for loan forgiveness, the 
borrower must prorate rent and utility 
payments in the same manner as on the 
borrower’s 2019 tax filings, or if a new 
business, the borrower’s expected 2020 
tax filings. 
Example 4: A borrower works out of 
his or her home. When determining the 
amount of nonpayroll costs that are 
eligible for loan forgiveness, the 
borrower may include only the share of 
covered expenses that were deductible 
on the borrower’s 2019 tax filings, or if 
a new business, the borrower’s expected 
2020 tax filings. 
d. Are rent payments to a related party 
eligible for loan forgiveness? 47 
Yes, as long as (1) the amount of loan 
forgiveness requested for rent or lease 
payments to a related party is no more 
than the amount of mortgage interest 
owed on the property during the 
covered period that is attributable to the 
space being rented by the business, and 
(2) the lease and the mortgage were 
entered into prior to February 15, 
2020.48 Any ownership in common 
between the business and the property 
owner is a related party for these 
purposes. The borrower must provide 
its lender with mortgage interest 
documentation to substantiate these 
payments. While rent or lease payments 
to a related party may be eligible for 
forgiveness, mortgage interest payments 
to a related party are not eligible for 
forgiveness. 
5. Reductions to Loan Forgiveness 
Amount 
Section 7A of the Small Business 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. It includes an 
important statutory exemption for 
borrowers that have eliminated the 
reduction on or before December 31, 
2020 (or, for a PPP loan made on or after 
December 27, 2020, not later than the 
last day of the loan’s covered period).49 
Section 7A(d)(7) of the Small Business 
Act also allows exemptions from 
reductions in loan forgiveness amounts 
based on employee availability and 
business activity. In addition, SBA and 
Treasury have adopted regulatory 
exemptions to the reduction rules for 
borrowers that (1) have offered to restore 
employee hours at the same salary or 
wages, even if the employees have not 
accepted, (2) fired an employee for 
cause or have an employee that 
voluntarily resigns or voluntarily 
requests a schedule reduction, (3) 
eliminate reductions by December 31, 
2020 or, for a PPP loan made after 
December 27, 2020, the last day of the 
loan’s covered period, or (4) have a PPP 
loan of $50,000 or less. The instructions 
to the loan forgiveness applications and 
the guidance below explain how the 
statutory forgiveness reduction formulas 
work. 
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? 50 
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. 
b. What effect does a reduction in a 
borrower’s number of full-time 
equivalent (FTE) employees have on the 
loan forgiveness amount? 51 
In general, a reduction in FTE 
employees during the covered period 
reduces the loan forgiveness amount by 
the same percentage as the percentage 
reduction in FTE employees. For both 
First Draw PPP Loans and Second Draw 
PPP Loans, the borrower must first 
select a reference period: (i) February 
15, 2019 through June 30, 2019; (ii) 
January 1, 2020 through February 29, 
2020; or (iii) in the case of a seasonal 
employer,52 either of the two preceding 
methods or a consecutive 12-week 
period between February 15, 2019 and 
February 15, 2020.53 If the average 
number of FTE employees during the 
covered period is less than during the 
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54 This text was originally published at 85 FR 
38304, subsection III.1.f. (June 26, 2020) and has 
been modified to conform to section 311 of the 
Economic Aid Act. 
55 This text was originally published at 85 FR 
38304, subsection III.1.f. (June 26, 2020) and has 
been modified to conform to section 311 the 
Economic Aid Act. 
56 This subsection was originally published at 85 
FR 33004, subsection III.5.c. (June 1, 2020) and has 
been modified for readability. 
57 This subsection was originally published at 85 
FR 33004, subsection III.5.d. (June 1, 2020) and has 
been modified to conform to section 311 of the 
Economic Aid Act and for readability. 
58 This subsection was originally published at 85 
FR 33004, subsection III.5.e. (June 1, 2020) and has 
been modified to conform to section 306 of the 
Economic Aid Act and for readability. 
reference period, the total eligible 
expenses available for forgiveness is 
reduced proportionally by the 
percentage reduction in FTE employees. 
For example, if a borrower had 10.0 FTE 
employees during the reference period 
and this declined to 8.0 FTE employees 
during the covered period, the 
percentage of FTE employees declined 
by 20 percent and thus only 80 percent 
of otherwise eligible expenses are 
available for forgiveness. 
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 (or, for a PPP loan 
made on or after December 27, 2020, not 
later than the last day of the loan’s 
covered period).54 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. 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 (or, for a PPP 
loan made on or after December 27, 
2020, not later than the last day of the 
loan’s covered period) 55 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. 
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 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. 
c. What does ‘‘full-time equivalent 
employee’’ mean? 56 
Full-time equivalent employee means 
an employee who works 40 hours or 
more, on average, each week. The hours 
of employees who work less than 40 
hours are calculated as proportions of a 
single full-time equivalent employee 
and aggregated, as explained further 
below in subsection IV.5.d. 
d. How should a borrower calculate its 
number of FTE employees? 57 
Borrowers seeking forgiveness must 
document their average number of FTE 
employees during the covered period 
and their selected reference period. If 
applicable, a borrower must perform 
this calculation for both its First Draw 
PPP Loan and Second Draw PPP Loan. 
For purposes of this calculation, 
borrowers must divide the average 
number of hours paid for each employee 
per week by 40, capping this quotient at 
1.0. For example, an employee who was 
paid 48 hours per week during the 
covered period would be considered to 
be an FTE employee of 1.0. 
For employees who were paid for less 
than 40 hours per week, borrowers may 
choose to calculate the full-time 
equivalency in one of two ways. First, 
the borrower may calculate the average 
number of hours a part-time employee 
was paid per week during the covered 
period. For example, if an employee was 
paid for 30 hours per week on average 
during the covered period, the employee 
could be considered to be an FTE 
employee of 0.75. Similarly, if an 
employee was paid for ten hours per 
week on average during the covered 
period, the employee could be 
considered to be an FTE employee of 
0.25. Second, for administrative 
convenience, borrowers may elect to use 
a full-time equivalency of 0.5 for each 
part-time employee. The Administrator 
recognizes that not all borrowers 
maintain hours-worked data, and has 
decided to afford such borrowers this 
flexibility in calculating the full-time 
equivalency of their part-time 
employees. 
Borrowers may select only one of 
these two methods, and must apply that 
method consistently to all of their part- 
time employees for the covered period 
and the selected reference period. In 
either case, the borrower shall provide 
the aggregate total of FTE employees for 
both the selected reference period and 
the covered period by adding together 
all of the employee-level FTE employee 
calculations. The borrower must then 
divide the average FTE employees 
during the covered period by the 
average FTE employees during the 
selected reference period, resulting in 
the reduction quotient. 
e. What effect does a borrower’s 
reduction in employees’ salary or wages 
have on the loan forgiveness amount? 58 
Under section 7A(d)(3) of the Small 
Business Act, a reduction in an 
employee’s salary or wages in excess of 
25 percent will generally result in a 
reduction in the loan forgiveness 
amount, unless an exception applies. 
Specifically, for each new employee in 
2020 and 2021, as well as each existing 
employee who was not paid more than 
the annualized equivalent of $100,000 
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59 This subsection previously provided that a 
borrower must account for the salary reduction for 
the full 24-week covered period if the borrower 
applies for forgiveness before the end of the covered 
period. 85 FR 38304, 38308 (June 26, 2020). This 
text has been removed because section 306 of the 
Economic Aid Act allows the borrower to select a 
covered period between 8 and 24 weeks and there 
is no need to apply for forgiveness before the end 
of the covered period. 
60 This subsection was originally published at 85 
FR 33004, subsection III.5.e. (June 1, 2020) and has 
been modified for readability. 
61 This subsection was originally published at 85 
FR 33004, subsection III.5.g. (June 1, 2020) and has 
been modified to conform to section 311 of the 
Economic Aid Act. 
62 In light of the flexibility the Small Business Act 
provides to borrowers with respect to their selection 
of the reference time period for any potential 
reduction in loan forgiveness, and the statutory 
authority for SBA and the Treasury to grant de 
minimis exemptions from this requirement, if the 
borrower meets the requirements for the FTE 
reduction safe harbor, it will not be subject to any 
loan forgiveness reduction based on a reduction in 
FTE employees. 
63 This subsection was originally published at 85 
FR 33004, subsection III.5.h. (June 1, 2020) and has 
been modified to conform to section 304 of the 
Economic Aid Act and for readability. 
64 This subsection was originally published at 85 
FR 66214, subsection III.1.b. (Oct. 19, 2020) and has 
been modified to conform to sections 304 and 307 
the Economic Aid Act and for readability. As 
described further below in subsection 6.a and 6.b, 
borrowers with loans up to $150,000 may use SBA 
Form 3508S. However, only borrowers with loans 
of $50,000 or less, other than any borrower that 
together with its affiliates received First Draw Loans 
totaling $2 million or more or Second Draw Loans 
totaling $2 million or more, are exempt from any 
reductions to the loan forgiveness amount. 
Accordingly, the exemptions in this subsection are 
in any pay period in 2019, the borrower 
must reduce the total forgiveness 
amount by the total dollar amount of the 
salary or wage reductions that are in 
excess of 25 percent of base salary or 
wages of the employee during the most 
recent full quarter during which the 
employee was employed before the 
covered period (the reference period), 
subject to exceptions for borrowers who 
restore reduced wages or salaries (see g. 
below). This reduction calculation is 
performed on a per employee basis, not 
in the aggregate. Additionally, this 
reduction is performed based on the 
covered period and reference period 
applicable to the First Draw Loan or 
Second Draw Loan. 
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).59 
Example: A borrower 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). 
f. How should borrowers seeking loan 
forgiveness account for the reduction 
based on a reduction in the number of 
employees (section 7A(d)(2)) relative to 
the reduction relating to salary and 
wages (section 7A(d)(3))? 60 
To ensure that borrowers are not 
doubly penalized, the salary/wage 
reduction applies only to the portion of 
the decline in employee salary and 
wages that is not attributable to the FTE 
reduction. 
Example: An hourly wage employee 
had been working 40 hours per week 
during the borrower selected reference 
period (FTE employee of 1.0) and the 
borrower reduced the employee’s hours 
to 20 hours per week during the covered 
period (FTE employee of 0.5). There was 
no change to the employee’s hourly 
wage during the covered period. 
Because the hourly wage did not 
change, the reduction in the employee’s 
total wages is entirely attributable to the 
FTE employee reduction and the 
borrower is not required to conduct a 
salary/wage reduction calculation for 
that employee. 
g. If a borrower restores reductions 
made to employee salaries and wages or 
FTE employees, can the borrower avoid 
a reduction in its loan forgiveness 
amount? 61 
Yes. Section 7A(d)(5) of the Small 
Business Act provides that if certain 
employee salaries and wages were 
reduced between February 15, 2020 and 
April 26, 2020 (the safe harbor period) 
but the borrower eliminates those 
reductions by December 31, 2020 (or, for 
a PPP loan made on or after December 
27, 2020, by the last day of the loan’s 
covered period), the borrower is exempt 
from any reduction in loan forgiveness 
amount that would otherwise be 
required due to reductions in salaries 
and wages under section 7A(d)(3) of the 
Small Business Act. Similarly, if a 
borrower eliminates any reductions in 
FTE employees occurring during the 
safe harbor period by December 31, 
2020 (or, for a PPP loan made on or after 
December 27, 2020, by last day of the 
loan’s covered period), the borrower is 
exempt from any reduction in loan 
forgiveness amount that would 
otherwise be required due to reductions 
in FTE employees.62 
This provision implements section 
7A(d)(5) of the Small Business Act, 
which gives borrowers an opportunity 
to cure reductions in FTEs, salary/wage 
reductions in excess of 25 percent, or 
both, using the applicable methodology 
set forth in section 7A(d)(5). The Small 
Business Act provides that the 
reduction in FTEs or the reduction in 
salary/hourly wages must be eliminated 
not later than December 31, 2020 (or, for 
a PPP loan made on or after December 
27, 2020, not later than the last day of 
the loan’s covered period). This does 
not change or affect the requirement that 
at least 60 percent of the loan 
forgiveness amount must be attributable 
to payroll costs. 
h. Will a borrower’s loan forgiveness 
amount be reduced if an employee is 
fired for cause, voluntarily resigns, or 
voluntarily requests a schedule 
reduction? 63 
No. When an employee of the 
borrower is fired for cause, voluntarily 
resigns, or voluntarily requests a 
reduced schedule during the covered 
period (FTE reduction event), the 
borrower may count such employee at 
the same full-time equivalency level 
before the FTE reduction event when 
calculating the section 7A(d)(2) FTE 
employee reduction penalty. Borrowers 
that avail themselves of this de minimis 
exemption shall maintain records 
demonstrating that each such employee 
was fired for cause, voluntarily 
resigned, or voluntarily requested a 
schedule reduction. The borrower shall 
provide such documentation upon 
request. 
i. Is a borrower with a loan of $50,000 
or less exempt from any reductions to 
the loan forgiveness amount? 64 
Yes. A borrower with a loan of 
$50,000 or less, other than any borrower 
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limited to qualifying borrowers with loans of 
$50,000 or less. A borrower with a loan greater than 
$50,000 and up to $150,000 must comply with the 
requirements under the Paycheck Protection 
Program, including calculating any reduction in 
forgiveness amounts based on reductions in FTEs 
or employee salary or wages. 
65 This subsection was originally published at 85 
FR 33004, section III.6. (June 1, 2020) and amended 
at 85 FR 38304, subsection III.1.g. (June 26, 2020) 
and has been modified to conform to sections 304 
and 307 of the Economic Aid Act and for 
readability. 
66 See interim final rule on Second Draw PPP 
Loans. 86 FR 3712, 3721 (Jan. 14, 2021). Subsection 
(g)(2)(v) of the interim final rule on Second Draw 
PPP Loans implements section 7(a)(37)(J)(v) of the 
Small Business Act. 
67 This subsection was originally published at 85 
FR 21747, subsection III.1.g. (Apr. 20, 2020) and has 
been modified to conform to sections 304, 307, 308, 
and 313 of the Economic Aid Act and for 
readability. 
68 See subsection (g)(2)(v) of the interim final rule 
on Second Draw PPP Loans. 86 FR 3712, 3721 (Jan. 
14, 2021). 
69 For self-employed borrowers that file Form 
1040, Schedule F and have no employees, gross 
income may be used instead of net profit. For self- 
employed borrowers that file Schedule F and have 
employees, the difference between gross income 
and employee payroll costs may be used instead of 
net profit. 
70 This subsection has been added to conform to 
section 322 of the Economic Aid Act. 
that together with its affiliates received 
First Draw PPP Loans totaling $2 
million or more or Second Draw PPP 
Loans totaling $2 million or more, is 
exempt from any reductions in the 
borrower’s loan forgiveness amount 
based on reductions in FTE employees 
(section 7A(d)(2) of the Small Business 
Act) or reductions in employee salary or 
wages (section 7A(d)(3) of the Small 
Business Act) that would otherwise 
apply. As such, subsections IV.5.a. 
through IV.5.h. above do not apply to 
qualifying borrowers with loans of 
$50,000 or less. 
6. Documentation Requirements 
a. What must borrowers submit for 
forgiveness of their PPP loans? 65 
The loan forgiveness application form 
details the documentation requirements; 
specifically, documentation each 
borrower must submit with its Loan 
Forgiveness Application (SBA Form 
3508, 3508EZ, 3508S as applicable, or 
lender equivalent), documentation each 
borrower is required to maintain and 
make available upon request, and 
documentation each borrower may 
voluntarily submit with its loan 
forgiveness application. An eligible 
borrower that received a loan of 
$150,000 or less should use the SBA 
Form 3508S and shall not, at the time 
of its application for loan forgiveness, be 
required to submit any application or 
documentation in addition to the 
certification and information required 
by section 7A(l)(1)(A) of the Small 
Business Act. However, an eligible 
borrower that received a Second Draw 
loan of $150,000 or less and is using the 
SBA Form 3508S must, before or at the 
time of its application for loan 
forgiveness, submit documentation 
sufficient to establish that the borrower 
experienced a reduction in revenue as 
provided in subsection (g)(2)(v) of the 
interim final rule on Second Draw PPP 
Loans, unless the borrower already 
provided such documentation at the 
time of its application for the Second 
Draw PPP Loan.66 Such documentation 
may include relevant tax forms, 
including annual tax forms, or, if 
relevant tax forms are not available, a 
copy of the applicant’s quarterly income 
statements or bank statements. 
For Second Draw PPP Loans, all 
borrowers must certify on their loan 
forgiveness application that the 
borrower used all First Draw PPP Loan 
amounts on eligible expense prior to 
disbursement of the Second Draw PPP 
Loan. For Second Draw PPP Loans in 
excess of $150,000, the borrower must 
submit its loan forgiveness application 
for the First Draw PPP Loan before or 
simultaneously with the loan 
forgiveness application for the Second 
Draw PPP Loan, even if the calculated 
forgiveness amount for the First Draw 
PPP Loan is zero. 
b. What documentation are borrowers 
who are individuals with self- 
employment income who file a Form 
1040, Schedule C or F required to 
submit to their lender with their request 
for loan forgiveness? 67 
For borrowers that received loans of 
$150,000 or less that use the SBA Form 
3508S, the borrower must submit the 
certification and information required 
by section 7A(l)(1)(A) of the Small 
Business Act and, for a Second Draw 
PPP Loan, revenue reduction 
documentation if such documentation 
was not provided at the time of 
application.68 All other borrowers must 
submit the certification required by 
section 7A(e)(3) of the Small Business 
Act, and (if the borrower has employees) 
Form 941 and state quarterly business 
and individual employee wage reporting 
and unemployment insurance tax forms 
or equivalent payroll processor records 
that best correspond to the covered 
period (with evidence of any retirement 
and group health, life, disability, vision, 
and dental insurance contributions). 
Whether or not the borrower has 
employees, the borrower must submit 
evidence of business rent, business 
mortgage interest payments on real or 
personal property, business utility 
payments, or payments for a covered 
operations expenditure, covered 
property damage cost, covered supplier 
cost, or covered worker protection 
expenditure during the covered period 
if the borrower used loan proceeds for 
those purposes. This documentation 
may include cancelled checks, payment 
receipts, transcripts of accounts, 
purchase orders, orders, invoices, or 
other documents verifying payments on 
nonpayroll costs. 
For all loans, the 2019 or 2020 Form 
1040 Schedule C or F that the borrower 
provided at the time of the PPP loan 
application must be used to determine 
the amount of net profit allocated to the 
owner for the covered period.69 
c. What additional documentation must 
a borrower submit when the President 
of the United States, Vice President of 
the United States, the head of an 
Executive department, or a Member of 
Congress, or the spouse of any of the 
preceding, directly or indirectly holds a 
controlling interest in the borrower? 70 
For any First Draw PPP loan made 
before December 27, 2020, if the 
President of the United States, Vice 
President of the United States, the head 
of an Executive department, or a 
Member of Congress, or the spouse of 
any such person as determined under 
applicable common law, directly or 
indirectly held a controlling interest in 
the borrower on the date of the loan 
application, the borrower is required to 
make certain disclosures following 
submission of the borrower’s 
application for loan forgiveness. 
For purposes of this section, the term 
‘‘controlling interest’’ means owning, 
controlling, or holding not less than 20 
percent, by vote or value, of the 
outstanding amount of any class of 
equity interest in a borrower. For 
purposes of making this determination, 
the securities owned, controlled or held 
by the individual and spouse shall be 
aggregated. The term ‘‘equity interest’’ 
means (1) a share in a borrower, without 
regard to whether the share is 
transferable or classified as stock or 
anything similar, (2) a capital or profit 
interest in a limited liability company or 
partnership, or (3) a warrant or right, 
other than a right to convert, to 
purchase, sell, or subscribe to a share of 
interest described in (1) or (2), 
respectively. The term ‘‘Executive 
department’’ has the meaning given the 
term in section 101 of title 5, United 
States Code. The term ‘‘Member of 
Congress’’ means a Member of the 
Senate or House of Representatives, a 
Delegate to the House of 
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71 See subsection III.B.2.a. of the consolidated 
interim final rule implementing updates to the 
Paycheck Protection Program, 86 FR 3692, 3698 
(Jan. 14, 2021); subsection III.e.6. of the interim 
final rule for Second Draw PPP loans, 86 FR 3712, 
3719 (Jan. 14, 2021). 
72 This section has been added to conform to 
section 305 of the Economic Aid Act. 
73 This provision is effective as if included in the 
CARES Act and shall apply to any loan made 
pursuant to section 7(a)(36) or 7(a)(37) of the Small 
Business Act before, on, or after the date of 
enactment of the Economic Aid Act, including 
forgiveness of such a loan. 
74 This subsection was originally published at 85 
FR 33010, subsection III.1.a. (June 1, 2020). 
75 This subsection was originally published at 85 
FR 33010, subsection III.1.b. (June 1, 2020) and 
amended by 85 FR 38304, subsection III.2.a. (June 
26, 2020) and 85 FR 66214, subsection III.2.a. (Oct. 
19, 2020) and has been modified to conform to 
section 311 of the Economic Aid Act. 
76 https://www.sba.gov/document/support—faq- 
lenders-borrowers. 
77 This subsection was originally published at 85 
FR 33010, subsection III.1.c. (June 1, 2020) and has 
been modified to conform to sections 307 and 311 
of the Economic Aid Act. 
78 13 CFR 120.524(c). 
Representatives, and the Resident 
Commissioner from Puerto Rico. 
If the borrower submitted a loan 
forgiveness application to its PPP lender 
before December 27, 2020, then the 
principal executive officer, or 
individual performing a similar 
function, of the borrower shall submit to 
its PPP lender an SBA Form 3508D 
disclosing the controlling interest(s) not 
later than January 26, 2021. If the PPP 
lender has already submitted a 
forgiveness decision to SBA, the lender 
shall promptly transmit the SBA Form 
3508D to SBA. Otherwise, the PPP 
lender shall transmit the SBA Form 
3508D to SBA at the time the lender 
issues its forgiveness decision to SBA. If 
the borrower submits a loan forgiveness 
application to its PPP lender on or after 
December 27, 2020, then the principal 
executive officer, or individual 
performing a similar function, of the 
borrower shall submit to its PPP lender 
an SBA Form 3508D disclosing the 
controlling interest(s) not later than 30 
days after submitting the application. 
The PPP lender shall transmit the SBA 
Form 3508D to SBA with the PPP 
lender’s forgiveness decision. 
Alternatively, the PPP lender may 
transmit the completed Form 3508D to 
SBA when received. 
An entity is prohibited from receiving 
a PPP loan after December 27, 2020 if 
a controlling interest is held directly or 
indirectly by the President of the United 
States, Vice President of the United 
States, the head of an Executive 
department, or a Member of Congress, or 
the spouse of any of the preceding.71 
7. Lender Hold Harmless 72 
Under what circumstances may a lender 
rely on a certification or documentation 
submitted by an eligible PPP borrower 
that received a PPP loan? 
A lender may rely on any certification 
or documentation submitted by a PPP 
applicant or an eligible PPP borrower 
that received a PPP loan that—(a) is 
submitted pursuant to all applicable 
statutory requirements, regulations, and 
guidance related to a PPP loan, 
including sections 7(a)(36), 7(a)(37), and 
7A of the Small Business Act; and (b) 
attests that the PPP applicant or eligible 
PPP borrower, as applicable, has 
accurately provided the certification or 
documentation to the lender in 
accordance with the statutory 
requirements, regulations, and guidance 
described in (a). With respect to a lender 
that relies on a borrower certification or 
documentation meeting the 
requirements of this subsection, an 
enforcement action may not be taken 
against the lender related to the PPP 
loan, and the lender shall not be subject 
to any penalties relating to loan 
origination or forgiveness of the PPP 
loan, if: 
(i) The lender acts in good faith 
relating to loan origination or 
forgiveness of the PPP loan based on 
that reliance; and 
(ii) all other relevant Federal, State, 
local, and other statutory and regulatory 
requirements applicable to the lender 
are satisfied with respect to the PPP 
loan.73 
V. Paycheck Protection Program SBA 
Loan Review Procedures and Related 
Borrower and Lender Responsibilities 
1. SBA Reviews of Individual PPP Loans 
a. Will SBA review individual PPP 
loans? 74 
Yes. SBA may review any PPP loan, 
as the Administrator deems appropriate, 
as described below. 
b. What borrower representations and 
statements will SBA review? 75 
The Administrator is authorized to 
review the following: 
Borrower Eligibility: The 
Administrator may review whether a 
borrower is eligible for the PPP loan 
based on the provisions of the CARES 
Act, the Economic Aid Act, the rules 
and guidance available at the time of the 
borrower’s PPP loan application, and 
the terms of the borrower’s loan 
application. See FAQ 17 (posted April 
6, 2020).76 These include, but are not 
limited to, SBA’s regulations under 13 
CFR 120.110 (as modified and clarified 
by the PPP Interim Final Rules) and 13 
CFR 121.301(f) and the information, 
certifications, and representations on 
the Borrower Application Form (SBA 
Form 2483, 2483–SD, or lender’s 
equivalent form) and the Loan 
Forgiveness Application Form (SBA 
Form 3508, 3508EZ, 3508S, or lender’s 
equivalent form). With respect to a 
Second Draw PPP Loan, this may 
include a review of whether the 
borrower experienced the 25 percent 
revenue reduction required under the 
Economic Aid Act. 
Loan Amounts and Use of Proceeds: 
The Administrator may review whether 
a borrower calculated the loan amount 
correctly and used loan proceeds for the 
allowable uses specified in the CARES 
Act and the Economic Aid Act. 
Loan Forgiveness Amounts: The 
Administrator may review whether a 
borrower is entitled to loan forgiveness 
in the amount claimed on the 
borrower’s Loan Forgiveness 
Application (SBA Form 3508, 3508EZ, 
3508S, or lender’s equivalent form). 
c. When will SBA undertake a loan 
review? 77 
For a PPP loan of any size, SBA may 
undertake a review at any time in SBA’s 
discretion. For example, SBA may 
review a loan if the loan documentation 
submitted to SBA by the lender or any 
other information indicates that the 
borrower may be ineligible for a PPP 
loan, or may be ineligible to receive the 
loan amount or loan forgiveness amount 
claimed by the borrower.78 
Additionally, section 7A(l)(1)(E) of the 
Small Business Act expressly provides 
that SBA may review and audit PPP 
loans of $150,000 or less and access any 
records the borrower is required to 
retain. SBA may, in its discretion, 
review a borrower’s First Draw PPP 
Loan and Second Draw PPP Loan at the 
same time or at different times. For 
loans of more than $150,000, as noted 
on the loan forgiveness application 
forms, the borrower must retain PPP 
documentation in its files for six years 
after the date the loan is forgiven or 
repaid in full. For loans of $150,000 and 
under, the borrower must retain records 
relevant to the form that prove 
compliance with the requirements of 
section 7(a)(36) or 7(a)(37), as 
applicable, of the Small Business Act— 
for employment records, for the 4-year 
period following submission of the loan 
forgiveness application, and for other 
records, for the 3-year period following 
submission of the loan forgiveness 
application. All borrowers must permit 
authorized representatives of SBA, 
including representatives of its Office of 
Inspector General, to access such files 
upon request. Additionally, all 
borrowers must provide documentation 
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 
79 This subsection was originally published at 85 
FR 33010, subsection III.1.d. (June 1, 2020). 
80 This subsection was originally published at 85 
FR 33010, subsection III.1.e. (June 1, 2020) and has 
been modified for readability. 
81 This subsection was originally published at 85 
FR 33010, subsection III.1.f. (June 1, 2020) and has 
been modified to reflect the issuance of the interim 
final rule on appeals of SBA loan review decisions 
under the Paycheck Protection Program. 85 FR 
52883 (Aug. 27, 2020). 
82 See 85 FR 52883 (Aug. 27, 2020). 
83 This subsection was originally published at 85 
FR 33010, subsection III.2.a. (June 1, 2020) and 
amended by 85 FR 38304, subsection III.2.b. (June 
26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. 
19, 2020) and has been modified to conform to 
sections 307 and 311 of the Economic Aid Act. 
independently to a lender to satisfy 
relevant Federal, State, local or other 
statutory or regulatory requirements or 
in connection with an SBA loan review. 
Lenders must comply with applicable 
SBA requirements for records retention, 
which for Federally regulated lenders 
means compliance with the 
requirements of their federal financial 
institution regulator and for SBA 
supervised lenders (as defined in 13 
CFR 120.10 and including PPP lenders 
with authority under SBA Form 3507) 
means compliance with 13 CFR 
120.461. 
d. Will I have the opportunity to 
respond to SBA’s questions in a 
review? 79 
Yes. If loan documentation submitted 
to SBA by the lender or any other 
information indicates that the borrower 
may be ineligible for a PPP loan or may 
be ineligible to receive the loan amount 
or loan forgiveness amount claimed by 
the borrower, SBA will require the 
lender to contact the borrower in 
writing to request additional 
information. SBA may also request 
information directly from the borrower. 
The lender will provide any additional 
information provided to it by the 
borrower to SBA. SBA will consider all 
information provided by the borrower in 
response to such an inquiry. 
Failure to respond to SBA’s inquiry 
may result in a determination that the 
borrower was ineligible for a PPP loan 
or ineligible to receive the loan amount 
or loan forgiveness amount claimed by 
the borrower. 
e. If SBA determines that a borrower is 
ineligible for a PPP loan, can the loan 
be forgiven? 80 
No. If SBA determines that a borrower 
is ineligible for the PPP loan, SBA will 
direct the lender to deny the loan 
forgiveness application. An SBA 
determination that a borrower is 
ineligible for a First Draw PPP Loan may 
also result in an SBA determination that 
the borrower is ineligible for any 
Second Draw PPP Loan, and SBA may 
direct the lender to deny any loan 
forgiveness application submitted for 
the Second Draw PPP Loan. Further, if 
SBA determines that the borrower is 
ineligible for the loan amount or loan 
forgiveness amount claimed by the 
borrower, SBA will direct the lender to 
deny the loan forgiveness application in 
whole or in part, as appropriate. SBA 
may also seek repayment of the 
outstanding PPP loan balance or pursue 
other available remedies. 
Section 7A(b) of the Small Business 
Act provides for forgiveness of a PPP 
loan only if the borrower is an ‘‘eligible 
recipient.’’ The Administrator has 
determined that to be an eligible 
recipient that is entitled to forgiveness 
under section 7A(b), the borrower must 
be an ‘‘eligible recipient’’ under section 
7(a)(36) and section 7(a)(37) of the Small 
Business Act and rules and guidance 
available at the time of the borrower’s 
loan application. This requirement 
promotes the public interest, aligns 
SBA’s functions with other 
governmental policies, and 
appropriately carries out the PPP 
provisions of the CARES Act and the 
Economic Aid Act, including by 
preventing evasion of the requirements 
for PPP loan eligibility and ensuring 
program integrity with respect to this 
emergency financial assistance program. 
It is also consistent with the CARES 
Act’s nonrecourse provision, 15 U.S.C. 
636(a)(36)(F)(v), which limits SBA’s 
recourse against individual 
shareholders, members, or partners of a 
PPP borrower for nonpayment of a PPP 
loan only if the borrower is an eligible 
recipient of the loan. 
f. May a borrower appeal SBA’s 
determination that the borrower is 
ineligible for a PPP loan or ineligible for 
the loan amount or the loan forgiveness 
amount claimed by the borrower? 81 
Yes. SBA has issued a separate 
interim final rule addressing this 
process.82 
2. The Loan Forgiveness Process for 
Lenders 
a. What should a lender review? 83 
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. 
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, 
Business Utility Payments, Covered 
Operations Expenditures, Covered 
Property Damage Costs, Covered 
Supplier Costs, and Covered Worker 
Protection Expenditures claimed on 
Lines 2 through 8 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 14 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, Business Utility 
Payments, Covered Operations 
Expenditures, Covered Property Damage 
Costs, Covered Supplier Costs, and 
Covered Worker Protection 
Expenditures claimed on Lines 1 
through 8 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 11 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 
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8296 
Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 
84 85 FR 20811, 20815–20816 (Apr. 15, 2020). 
85 See subsection (h)(2)(i)(D) of the interim final 
rule on Second Draw PPP Loans. 86 FR 3712, 3721 
(Jan. 14, 2021). 
86 85 FR 20811, 20815–20816 (Apr. 15, 2020). 
87 This subsection was originally published at 85 
FR 33010, subsection III.2.b. (June 1, 2020) and 
amended by 85 FR 38304, subsection III.2.b. (June 
26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. 
19, 2020) and has been modified to conform to 
sections 311, 322, and 333 of the Economic Aid Act 
and for readability. 
88 Section 333 of the Economic Aid Act repealed 
the CARES Act provision requiring SBA to deduct 
EIDL Advance Amounts received by borrowers from 
the forgiveness payment amounts remitted by SBA 
to the lender. Any EIDL Advance Amounts 
previously deducted from a borrower’s forgiveness 
amount will be remitted to the lender, together with 
interest to the remittance date. 
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 84 and 
section IV.7 above indicate, 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. 
When a borrower submits SBA Form 
3508S or lender’s equivalent form, the 
lender shall: 
i. Confirm receipt of the borrower 
certifications contained in the SBA 
Form 3508S or lender’s equivalent form. 
ii. In the case of a Second Draw PPP 
Loan for which the borrower did not 
provide documentation of revenue 
reduction with its application and the 
lender did not conduct a review of the 
documentation at the time of 
application, confirm the dollar amount 
and percentage of the borrower’s 
revenue reduction by performing a good 
faith review, in a reasonable time, of the 
borrower’s calculations and supporting 
documents concerning the borrower’s 
revenue reduction.85 
If the lender identifies errors in the 
borrower’s calculation or material lack 
of substantiation in the borrower’s 
supporting documents regarding 
revenue reduction, the lender should 
work with the borrower to remedy the 
issue. 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. 
The borrower shall not receive 
forgiveness without submitting all 
required documentation to the lender. 
As the First Interim Final Rule 86 and 
section IV.7 above indicate, lenders may 
rely on borrower representations. 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 (if required) and attests that 
it accurately verified the payments for 
eligible costs. 
b. What is the timeline for the lender’s 
decision on a loan forgiveness 
application? 87 
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; 
(3) the (optional) PPP Borrower 
Demographic Information Form (if 
submitted to the lender); and 
(4) the SBA Form 3508D, if 
applicable. 
ii. For applications submitted using 
the SBA Form 3508EZ, 3508S, or 
lender’s equivalent form: 
(1) The SBA Form 3508EZ, 3508S, or 
lender’s equivalent form; 
(2) the (optional) Borrower 
Demographic Information Form (if 
submitted to the lender); and 
(3) the SBA Form 3508D, if 
applicable. 
The lender must confirm that the 
information provided by the lender to 
SBA accurately reflects lender’s records 
for the loan, that the lender has made its 
decision in accordance with the 
requirements set forth in subsection 
V.2.a., and for a Second Draw PPP Loan 
of $150,000 or less, if applicable, the 
lender has reviewed the revenue 
reduction documentation provided by 
the borrower and confirmed the dollar 
amount and percentage of the 
borrower’s revenue reduction. 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 borrower’s loan(s) or loan 
application(s), 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. The 
EIDL Advance Amount received by the 
borrower will not reduce the amount of 
forgiveness to which the borrower is 
entitled and will not be deducted from 
the forgiveness payment amount that 
SBA remits to the Lender.88 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; 
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89 This change has been made so that SBA can 
determine whether the borrower requested review 
within the appropriate time frame. 
90 This text has been added to clarify the 
information that will be provided to borrowers 
regarding the lender’s forgiveness decision. 
91 This subsection was originally published at 85 
FR 33010, subsection III.2.c. (June 1, 2020) and 
amended by 85 FR 38304, subsection III.2.b. (June 
26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. 
19, 2020) and has been modified to conform to 
section 311 of the Economic Aid Act and updates 
to SBA loan review procedures. 
92 This subsection was originally published at 85 
FR 66214, subsection III.2.c. (Oct. 19, 2020) and has 
been modified to conform to section 307 of the 
Economic Aid Act. 
93 This section was originally published at 85 FR 
33010, subsection III.3. (June 1, 2020) and has been 
modified to conform to section 340 of the Economic 
Aid Act. Section 340 of the Economic Aid Act 
provides that a lender may not be required to repay 
a processing fee unless the lender is found guilty 
of an act of fraud in connection with the PPP loan. 
(3) the (optional) PPP Borrower 
Demographic Information Form (if 
submitted to the lender); and 
(4) the SBA Form 3508D, if 
applicable. 
ii. For applications submitted using 
the SBA Form 3508EZ, 3508S, or 
lender’s equivalent form: 
(1) The SBA Form 3508EZ, 3508S, or 
lender’s equivalent form; 
(2) the (optional) Borrower 
Demographic Information Form (if 
submitted to the lender); and 
(3) the SBA Form 3508D, if 
applicable. 
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 subsection 
V.2.a., and for a Second Draw PPP Loan 
of $150,000 or less, if applicable, the 
lender has reviewed the revenue 
reduction documentation provided by 
the borrower and confirmed the dollar 
amount and percentage of the 
borrower’s revenue reduction. The 
lender must also notify the borrower in 
writing that the lender has issued a 
decision to SBA denying the loan 
forgiveness application and provide 
SBA with a copy of the notice.89 The 
notice to the borrower must include the 
reasons that the lender concluded that 
the borrower is not entitled to loan 
forgiveness in any amount and inform 
the borrower that the borrower has 30 
calendar days from receipt of the 
notification to seek, through the lender, 
SBA review of the lender’s decision.90 
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 in accordance with 
subsection V.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 
decides to review the lender’s decision 
or if SBA declines a request for review. 
If the borrower does not timely 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 lender is 
responsible for notifying the borrower of 
the date on which the borrower’s first 
payment is due. 
c. What should a lender do if it receives 
notice that SBA is reviewing a loan? 91 
SBA may begin a review of any PPP 
loan of any size at any time in SBA’s 
discretion. SBA may, in its discretion, 
review the borrower’s First Draw PPP 
Loan and Second Draw PPP Loan at the 
same time or at different times. If SBA 
undertakes such a review, SBA will 
notify the lender in writing and the 
lender must notify the borrower in 
writing within five business days of 
receipt. 
Within five business days of receipt of 
such notice, the lender shall transmit to 
SBA electronic copies of the following: 
i. The Borrower Application Form 
(SBA Form 2483, 2483–SD, or lender’s 
equivalent form) and all supporting 
documentation provided by the 
borrower, including revenue reduction 
documentation provided by the 
borrower on a Second Draw PPP Loan. 
ii. The Loan Forgiveness Application 
(SBA Form 3508, 3508EZ, 3508S, or 
lender’s equivalent form), and all 
supporting documentation provided by 
the borrower (if the lender has received 
such application), including revenue 
reduction documentation provided by 
the borrower on a Second Draw PPP 
Loan of $150,000 or less if not provided 
at the time of loan application. If the 
lender receives the borrower’s loan 
forgiveness 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, 3508S, 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’’). 
For Second Draw PPP Loans of 
$150,000 or less where a loan 
forgiveness application has not been 
submitted by the borrower, the lender 
must also request that the borrower 
provide the lender with revenue 
reduction documentation, if not 
previously provided to the lender. 
The lender must submit documents 
received from the borrower to SBA 
within five business days of receipt 
from the borrower. 
iii. A signed and certified transcript of 
account. 
iv. A copy of the executed note 
evidencing the PPP loan. 
v. Any memorandum or other analysis 
that the lender prepared in making its 
decision on the borrower’s loan 
forgiveness application, if applicable. 
vi. Any other documents related to 
the loan requested by SBA. 
If SBA has notified the lender that 
SBA has commenced a loan review, the 
lender should issue a forgiveness 
decision to SBA not later than 60 days 
after receipt of the complete loan 
forgiveness application from the 
borrower, unless otherwise directed by 
SBA. 
d. What should a lender do if a borrower 
submits documentation of eligible costs 
that exceed a borrower’s PPP Loan 
Amount? 92 
The amount of loan forgiveness that a 
borrower may receive cannot exceed the 
principal amount of the PPP loan. 
Whether a borrower submits SBA Form 
3508, 3508EZ, 3508S, or lender’s 
equivalent form, a lender should 
confirm receipt of the documentation 
the borrower is required to submit to aid 
in verifying payroll and nonpayroll 
costs, and, if applicable (for SBA Form 
3508, 3508EZ, or lender’s equivalent 
form), confirm the borrower’s 
calculations on the borrower’s Loan 
Forgiveness Application, up to the 
amount required to reach the requested 
Forgiveness Amount. Supporting 
documentation regarding a borrower’s 
payroll and nonpayroll costs is not 
required to be submitted to the lender 
with the SBA Form 3508S. 
3. Lender Fees 93 
Are lender processing fees subject to 
clawback if a lender has not fulfilled its 
obligations under PPP regulations? 
A lender is required to repay the 
processing fee to SBA if a lender is 
found guilty of an act of fraud in 
connection with the PPP loan. In such 
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8298 
Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 
94 See 13 CFR 120.524. 
case, the loan is not eligible for a 
guaranty.94 
VI. 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 Congressional Review Act, the 
Administrative Procedure Act, 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. SBA, however, is proceeding 
under the emergency provision at 
Executive Order 12866 section 6(a)(3)(D) 
based on the need to move 
expeditiously to mitigate the current 
economic conditions arising from the 
COVID–19 emergency. This rule’s 
designation under Executive Order 
13771 will be informed by public 
comment. 
This rule is necessary to implement 
the Economic Aid 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. 
The Administrator of the Office of 
Management and Budget’s Office of 
Information and Regulatory Affairs 
(OIRA) has determined that this is a 
major rule for purposes of Subtitle E of 
the Small Business Regulatory 
Enforcement and Fairness Act of 1996 
(also known as the Congressional 
Review Act or CRA) (5 U.S.C. 804(2) et 
seq.). Under the CRA, a major rule takes 
effect 60 days after the rule is published 
in the Federal Register. 5 U.S.C. 
801(a)(3). 
Notwithstanding this requirement, the 
CRA allows agencies to dispense with 
the requirements of section 801 when 
the agency for good cause finds that 
such procedure would be impracticable, 
unnecessary, or contrary to the public 
interest and the rule shall take effect at 
such time as the agency promulgating 
the rule determines. 5 U.S.C. 808(2). 
Pursuant to § 808(2), SBA for good cause 
finds that a 60-day delay to provide 
public notice is impracticable and 
contrary to the public interest. Likewise, 
for the same reasons, SBA for good 
cause finds that there are grounds to 
waive the 30-day effective date delay 
under the Administrative Procedure 
Act. 5 U.S.C. 553(d)(3). 
As discussed elsewhere in this 
interim final rule, the Economic Aid Act 
provided that several of the changes 
relating to loan forgiveness are effective 
as if included in the CARES Act and 
apply to any loan made pursuant to 
section 7(a)(36) of the Small Business 
Act before, on, or after December 27, 
2020, including forgiveness of such a 
loan. Accordingly, loans that were made 
in 2020 but that have not yet received 
forgiveness will be forgiven based on 
changes made in the Economic Aid Act, 
as implemented in this interim final 
rule. Given the urgent need to provide 
borrowers that are eligible for loan 
forgiveness with timely relief, the 
Administrator in consultation with the 
Secretary has determined that it is 
impractical and not in the public 
interest to provide a delayed effective 
date. An immediate effective date will 
allow SBA to continue remitting 
forgiveness payments to lenders without 
disruption and in accordance with the 
amendments made by the Economic Aid 
Act. 
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 
some retroactive effect consistent with 
specific applicability provisions of the 
Economic Aid 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 revisions to existing 
recordkeeping or reporting requirements 
of the Paycheck Protection Program 
(PPP) information collection (OMB 
Control Number 3245–0407) as a result 
of amendments made to the PPP by the 
Economic Aid Act and implemented in 
this interim final rule. The revisions 
will affect the PPP Loan Forgiveness 
Application Form 3508, PPP Loan 
Forgiveness Application Form 3508EZ, 
and PPP Loan Forgiveness Application 
Form 3508S. 
Further, to address the conflict of 
interest provisions in section 322 of the 
Economic Aid Act, SBA has developed 
a new form, Paycheck Protection 
Program—Borrower’s Disclosure of 
Certain Controlling Interests Form 
3508D, which is required for certain 
borrowers who have disclosure 
requirements under the Economic Aid 
Act. 
SBA Form 3508S was amended to 
conform to section 307 of the Economic 
Aid Act, which requires a simplified 
forgiveness application for loans of not 
more than $150,000. SBA Forms 3508, 
3508EZ and 3508S were also amended 
to address the new Second Draw PPP 
Loan program under section 311 of the 
Economic Aid Act, include the 
additional expenses that are eligible for 
forgiveness under section 304 of the 
Economic Aid Act, address the changes 
to the covered period definition in 
section 306 of the Economic Aid Act, 
and implement the EIDL advance 
deduction repeal in section 333 of the 
Economic Aid Act. SBA Form 3508D 
will be used by borrowers where a 
covered individual, as defined in 
section 322 of the Economic Aid Act, 
holds a controlling interest in the 
borrower. 
SBA has requested Office of 
Management and Budget (OMB) 
emergency approval of the revisions to 
the information collection to enable 
borrowers to begin submitting loan 
forgiveness applications with the 
Economic Aid Act changes as quickly as 
possible and to enable borrowers with 
disclosure requirements to meet the 
statutory deadline for disclosure. 
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 
Administrative Procedure Act 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. 
Rules that are exempt from notice and 
comment are also exempt from the RFA 
requirements, including conducting a 
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8299 
Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 
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. Since this rule 
is exempt from notice and comment, 
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 
and Economic Aid to Hard-Hit Small 
Businesses, Nonprofits, and Venues Act (Pub. 
L. 116–260), section 303. 
Tami Perriello, 
Acting Administrator, Small Business 
Administration. 
Andy P. Baukol, 
Principal Deputy Assistant Secretary for 
International Monetary Policy (performing the 
delegable duties of the Deputy Secretary), 
Department of the Treasury. 
[FR Doc. 2021–02314 Filed 2–3–21; 11:15 am] 
BILLING CODE P 
DEPARTMENT OF TRANSPORTATION 
Federal Aviation Administration 
14 CFR Part 39 
[Docket No. FAA–2020–1177; Project 
Identifier MCAI–2020–01336–R; Amendment 
39–21403; AD 2021–02–20] 
RIN 2120–AA64 
Airworthiness Directives; He´licopte`res 
Guimbal Helicopters 
AGENCY: Federal Aviation 
Administration (FAA), DOT. 
ACTION: Final rule; request for 
comments. 
SUMMARY: The FAA is adopting a new 
airworthiness directive (AD) for all 
He´licopte`res Guimbal Model Cabri G2 
helicopters. This AD was prompted by 
a report of a crack in a rotating scissor 
fitting. This AD requires an initial and 
repetitive inspections of certain rotating 
and non-rotating scissor fittings, and 
depending on the results, replacing the 
affected assembly. This AD also 
prohibits installing certain main rotor 
hubs (MRHs) and swashplate guides 
unless the initial inspection has been 
accomplished. The FAA is issuing this 
AD to address the unsafe condition on 
these products. 
DATES: This AD becomes effective 
February 22, 2021. 
The Director of the Federal Register 
approved the incorporation by reference 
of certain documents listed in this AD 
as of February 22, 2021. 
The FAA must receive comments on 
this AD by March 22, 2021. 
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: Deliver to Mail 
address above between 9 a.m. and 5 
p.m., Monday through Friday, except 
Federal holidays. 
For service information identified in 
this final rule, contact He´licopte`res 
Guimbal, Basile Ginel, 1070, rue du 
Lieutenant Parayre, Ae´rodrome d’Aix- 
en-Provence, 13290 Les Milles, France; 
telephone 33–04–42–39–10–88; email 
basile.ginel@guimbal.com; web https://
www.guimbal.com. You may view this 
service information at the FAA, Office 
of the Regional Counsel, Southwest 
Region, 10101 Hillwood Pkwy., Room 
6N–321, Fort Worth, TX 76177. For 
information on the availability of this 
material at the FAA, call (817) 222– 
5110. It is also available at https://
www.regulations.gov by searching for 
and locating Docket No. FAA–2020– 
1177. 
Examining the AD Docket 
You may examine the AD docket at 
https://www.regulations.gov by 
searching for and locating Docket No. 
FAA–2020–1177; 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 European Union Aviation 
Safety Agency (EASA) AD, any 
comments received, and other 
information. The street address for 
Docket Operations is listed above. 
FOR FURTHER INFORMATION CONTACT: Fred 
Guerin, Aerospace Engineer, General 
Aviation & Rotorcraft Section, 
International Validation Branch, FAA, 
2200 South 216th St. Des Moines, WA 
98198; telephone (206) 231–3500; email 
fred.guerin@faa.gov. 
SUPPLEMENTARY INFORMATION: 
Background 
The EASA, which is the Technical 
Agent for the Member States of the 
European Union, has issued EASA AD 
No. 2020–0199, dated September 21, 
2020, and corrected September 24, 2020 
(EASA AD 2020–0199), to correct an 
unsafe condition for He´licopte`res 
Guimbal (HG) Model Cabri G2 
helicopters. EASA advises of a report of 
a crack in a rotating scissor fitting 
discovered during maintenance. 
According to EASA, the suspected root 
cause of the crack was corrosion under 
residual stress. This condition, if not 
addressed, could result in failure of the 
rotating or non-rotating scissor fitting on 
either the MRH or the swashplate guide, 
and subsequent loss of control of the 
helicopter. 
Accordingly, EASA AD 2020–0199 
requires an initial and repetitive 
inspections of the rotating and non- 
rotating scissor fittings part number (P/ 
N) G12–00–200 installed on the MRH or 
swashplate guide, respectively. If a 
crack is detected, the EASA AD requires 
replacing the affected MRH or 
swashplate guide with a serviceable 
part. The EASA AD prohibits installing 
certain MRHs and swashplate guides 
unless the initial inspection has been 
accomplished. The EASA AD also 
requires reporting certain information to 
HG. 
FAA’s Determination 
These helicopters have been approved 
by EASA and are approved for operation 
in the United States. Pursuant to the 
FAA’s bilateral agreement with the 
European Union, EASA has notified the 
FAA about the unsafe condition 
described in its AD. The FAA is 
proposing this AD after evaluating all 
known relevant information and 
determining that the unsafe condition 
described previously is likely to exist or 
develop on other helicopters of the same 
type design. 
Related Service Information Under 1 
CFR Part 51 
The FAA reviewed Guimbal Service 
Bulletin SB 20–011, Revision C, and SB 
20–012, Revision B, each dated October 
5, 2020 (SB 20–011 Rev C and SB 20– 
012 Rev B). SB 20–012 Rev B specifies 
removing the bolts connecting the two 
scissor fittings P/N G12–00–200 and 
accomplishing a one-time detailed 
inspection for a crack in certain areas. 
SB 20–012 Rev B also specifies 
reassembling the two scissor fittings 
using correct bolt torque limits, 
installing new cotter pins, and reporting 
any findings to HG customer service. SB 
20–011 Rev C specifies procedures for a 
recurring inspection after 
accomplishment of SB 20–012 Rev B of 
the same areas of the scissor fittings for 
a crack as SB 20–012 Rev B, except 
without removing the bolts which 
connect the two scissor fittings. SB 20– 
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