2020 04 Department Of The Treasury Sba Ppp Interim Final Rule Home Treasury Gov System Fil - 2020 04 Department Of The Treasury Sba Ppp.
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20811
Rules and Regulations Federal Register
Vol. 85, No. 73
Wednesday, April 15, 2020
This section of the FEDERAL REGISTER ADDRESSES: You may submit comments, and authority through the Act to modify
contains regulatory documents having general identified by number SBA–2020–0015 existing loan programs and establish a
applicability and legal effect, most of which through the Federal eRulemaking Portal: new loan program to assist small
are keyed to and codified in the Code of http://www.regulations.gov. Follow the businesses nationwide adversely
Federal Regulations, which is published under instructions for submitting comments. impacted by the COVID–19 emergency.
50 titles pursuant to 44 U.S.C. 1510.
SBA will post all comments on Section 1102 of the Act temporarily
The Code of Federal Regulations is sold by www.regulations.gov. If you wish to permits SBA to guarantee 100 percent of
the Superintendent of Documents. submit confidential business 7(a) loans under a new program titled
information (CBI) as defined in the User the ‘‘Paycheck Protection Program.’’
Notice at www.regulations.gov, please Section 1106 of the Act provides for
SMALL BUSINESS ADMINISTRATION send an email to ppp-ifr@sba.gov. forgiveness of up to the full principal
Highlight the information that you amount of qualifying loans guaranteed
13 CFR Part 120 consider to be CBI and explain why you under the Paycheck Protection Program.
[Docket No. SBA–2020–0015] believe SBA should hold this A more detailed discussion of sections
information as confidential. SBA will 1102 and 1106 of the Act is found in
RIN 3245–AH34
review the information and make the section III below.
Business Loan Program Temporary final determination whether it will
II. Comments and Immediate Effective
Changes; Paycheck Protection publish the information.
Date
Program FOR FURTHER INFORMATION CONTACT: Call
Center Representative at 833–572–0502, The intent of the Act is that SBA
AGENCY: U.S. Small Business or the local SBA Field Office; the list of provide relief to America’s small
Administration. offices can be found at https:// businesses expeditiously. This intent,
ACTION: Interim final rule. www.sba.gov/tools/local-assistance/ along with the dramatic decrease in
districtoffices. economic activity nationwide, provides
SUMMARY: This interim final rule good cause for SBA to dispense with the
SUPPLEMENTARY INFORMATION:
announces the implementation of 30-day delayed effective date provided
sections 1102 and 1106 of the I. Background Information in the Administrative Procedure Act.
Coronavirus Aid, Relief, and Economic On March 13, 2020, President Trump Specifically, small businesses need to be
Security Act (CARES Act or the Act). declared the ongoing Coronavirus informed on how to apply for a loan and
Section 1102 of the Act temporarily Disease 2019 (COVID–19) pandemic of the terms of the loan under section 1102
adds a new product, titled the sufficient severity and magnitude to of the Act as soon as possible because
‘‘Paycheck Protection Program,’’ to the warrant an emergency declaration for all the last day to apply for and receive a
U.S. Small Business Administration’s states, territories, and the District of loan is June 30, 2020. The immediate
(SBA’s) 7(a) Loan Program. Section 1106 Columbia. With the COVID–19 effective date of this interim final rule
of the Act provides for forgiveness of up emergency, many small businesses will benefit small businesses so that
to the full principal amount of nationwide are experiencing economic they can immediately apply for the loan
qualifying loans guaranteed under the hardship as a direct result of the with a full understanding of loan terms
Paycheck Protection Program. The Federal, State, and local public health and conditions. This interim final rule
Paycheck Protection Program and loan measures that are being taken to is effective without advance notice and
forgiveness are intended to provide minimize the public’s exposure to the public comment because section 1114 of
economic relief to small businesses virus. These measures, some of which the Act authorizes SBA to issue
nationwide adversely impacted under are government-mandated, are being regulations to implement Title 1 of the
the Coronavirus Disease 2019 (COVID– implemented nationwide and include Act without regard to notice
19) Emergency Declaration (COVID–19 the closures of restaurants, bars, and requirements. This rule is being issued
Emergency Declaration) issued by gyms. In addition, based on the advice to allow for immediate implementation
President Trump on March 13, 2020. of public health officials, other of this program. Although this interim
This interim final rule outlines the key measures, such as keeping a safe final rule is effective immediately,
provisions of SBA’s implementation of distance from others or even stay-at- comments are solicited from interested
sections 1102 and 1106 of the Act in home orders, are being implemented, members of the public on all aspects of
formal guidance and requests public resulting in a dramatic decrease in the interim final rule, including section
comment. economic activity as the public avoids III below. These comments must be
DATES: malls, retail stores, and other submitted on or before May 15, 2020.
Effective date: This interim final rule businesses. The SBA will consider these comments
is effective April 15, 2020. On March 27, 2020, the President and the need for making any revisions
Applicability date: This interim final signed the Coronavirus Aid, Relief, and as a result of these comments.
rule applies to applications submitted Economic Security Act (the CARES Act III. Temporary New Business Loan
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under the Paycheck Protection Program or the Act) (Pub. L. 116–136) to provide Program: Paycheck Protection Program
through June 30, 2020, or until funds emergency assistance and health care
made available for this purpose are response for individuals, families, and Overview
exhausted. businesses affected by the coronavirus The CARES Act was enacted to
Comment Date: Comments must be pandemic. The Small Business provide immediate assistance to
received on or before May 15, 2020. Administration (SBA) received funding individuals, families, and businesses
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20812 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations
affected by the COVID–19 emergency. 501(c)(3) of the Internal Revenue Code c. How do I determine if I am ineligible?
Among the provisions contained in the (IRC), a tax-exempt veterans Businesses that are not eligible for
CARES Act are provisions authorizing organization described in section PPP loans are identified in 13 CFR
SBA to temporarily guarantee loans 501(c)(19) of the IRC, Tribal business 120.110 and described further in SBA’s
under a new 7(a) loan program titled the concern described in section 31(b)(2)(C) Standard Operating Procedure (SOP) 50
‘‘Paycheck Protection Program.’’ Loans of the Small Business Act, or any other 10, Subpart B, Chapter 2, except that
guaranteed under the Paycheck business; and nonprofit organizations authorized
Protection Program (PPP) will be 100 ii. You were in operation on February under the Act are eligible. (SOP 50 10
percent guaranteed by SBA, and the full 15, 2020 and either had employees for can be found at https://www.sba.gov/
principal amount of the loans may whom you paid salaries and payroll document/sop-50-10-5-lender-
qualify for loan forgiveness. The taxes or paid independent contractors, development-company-loan-programs.)
following outlines the key provisions of as reported on a Form 1099–MISC.
the PPP. You are also eligible for a PPP loan if d. I have determined that I am eligible.
you are an individual who operates How much can I borrow?
1. General
under a sole proprietorship or as an Under the PPP, the maximum loan
SBA is authorized to guarantee loans independent contractor or eligible self-
under the PPP through June 30, 2020. amount is the lesser of $10 million or
employed individual, and you were in an amount that you will calculate using
Congress authorized a program level of operation on February 15, 2020.
$349,000,000,000 to provide guaranteed a payroll-based formula specified in the
You must also submit such Act, as explained below.
loans under this new 7(a) program. The documentation as is necessary to
intent of the Act is that SBA provide e. How do I calculate the maximum
establish eligibility such as payroll
relief to America’s small businesses amount I can borrow?
processor records, payroll tax filings, or
expeditiously, which is expressed in the
Form 1099–MISC, or income and The following methodology, which is
Act by giving all lenders delegated
expenses from a sole proprietorship. For one of the methodologies contained in
authority and streamlining the
borrowers that do not have any such the Act, will be most useful for many
requirements of the regular 7(a) loan
documentation, the borrower must applicants.
program. For example, for loans made
provide other supporting i. Step 1: Aggregate payroll costs
under the PPP, SBA will not require the
documentation, such as bank records, (defined in detail below in f.) from the
lenders to comply with section 120.150
sufficient to demonstrate the qualifying last twelve months for employees whose
‘‘What are SBA’s lending criteria?.’’ SBA
will allow lenders to rely on payroll amount. principal place of residence is the
certifications of the borrower in order to SBA intends to promptly issue United States.
determine eligibility of the borrower additional guidance with regard to the ii. Step 2: Subtract any compensation
and use of loan proceeds and to rely on applicability of affiliation rules at 13 paid to an employee in excess of an
specified documents provided by the CFR 121.103 and 121.301 to PPP loans. annual salary of $100,000 and/or any
borrower to determine qualifying loan b. Could I be ineligible even if I meet the amounts paid to an independent
amount and eligibility for loan eligibility requirements in (a) above? contractor or sole proprietor in excess of
forgiveness. Lenders must comply with $100,000 per year.
the applicable lender obligations set You are ineligible for a PPP loan if, for iii. Step 3: Calculate average monthly
forth in this interim final rule, but will example: payroll costs (divide the amount from
be held harmless for borrowers’ failure i. You are engaged in any activity that Step 2 by 12).
to comply with program criteria; is illegal under Federal, state, or local iv. Step 4: Multiply the average
remedies for borrower violations or law; monthly payroll costs from Step 3 by
fraud are separately addressed in this ii. You are a household employer 2.5.
interim final rule. The program (individuals who employ household v. Step 5: Add the outstanding
requirements of the PPP identified in employees such as nannies or amount of an Economic Injury Disaster
this rule temporarily supersede any housekeepers); Loan (EIDL) made between January 31,
conflicting Loan Program Requirement iii. An owner of 20 percent or more 2020 and April 3, 2020, less the amount
(as defined in 13 CFR 120.10). of the equity of the applicant is of any ‘‘advance’’ under an EIDL
incarcerated, on probation, on parole; COVID–19 loan (because it does not
2. What do borrowers need to know and presently subject to an indictment, have to be repaid).
do? criminal information, arraignment, or The examples below illustrate this
a. Am I eligible? other means by which formal criminal methodology.
You are eligible for a PPP loan if you charges are brought in any jurisdiction; i. Example 1—No employees make more
have 500 or fewer employees whose or has been convicted of a felony within than $100,000
principal place of residence is in the the last five years; or Annual payroll: $120,000
United States, or are a business that iv. You, or any business owned or Average monthly payroll: $10,000
operates in a certain industry and meet controlled by you or any of your Multiply by 2.5 = $25,000
the applicable SBA employee-based size owners, has ever obtained a direct or Maximum loan amount is $25,000
standards for that industry, and: guaranteed loan from SBA or any other ii. Example 2—Some employees make
i. You are: Federal agency that is currently more than $100,000
A. A small business concern as delinquent or has defaulted within the Annual payroll: $1,500,000
defined in section 3 of the Small last seven years and caused a loss to the Subtract compensation amounts in
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Business Act (15 U.S.C. 632), and government. excess of an annual salary of
subject to SBA’s affiliation rules under The Administrator, in consultation $100,000: $1,200,000
13 CFR 121.301(f) unless specifically with the Secretary of the Treasury (the Average monthly qualifying payroll:
waived in the Act; or Secretary), determined that household $100,000
B. A tax-exempt nonprofit employers are ineligible because they Multiply by 2.5 = $250,000
organization described in section are not businesses. 13 CFR 120.100. Maximim loan amount is $250,000
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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20813
iii. Example 3—No employees make h. Do independent contractors count as loan you should consider applying for
more than $100,000, outstanding employees for purposes of PPP loan the maximum amount. While the Act
EIDL loan of $10,000. calculations? does not expressly provide that each
Annual payroll: $120,000 No, independent contractors have the eligible borrower may only receive one
Average monthly payroll: $10,000 ability to apply for a PPP loan on their PPP loan, the Administrator has
Multiply by 2.5 = $25,000 own so they do not count for purposes determined, in consultation with the
Add EIDL loan of $10,000 = $35,000 of a borrower’s PPP loan calculation. Secretary, that because all PPP loans
Maximum loan amount is $35,000 must be made on or before June 30,
iv. Example 4—Some employees make i. What is the interest rate on a PPP 2020, a one loan per borrower limitation
more than $100,000, outstanding loan? is necessary to help ensure that as many
EIDL loan of $10,000 The interest rate will be 100 basis eligible borrowers as possible may
Annual payroll: $1,500,000 points or one percent. obtain a PPP loan. This limitation will
Subtract compensation amounts in The Administrator, in consultation also help advance Congress’ goal of
excess of an annual salary of with the Secretary, determined that a keeping workers paid and employed
$100,000: $1,200,000 one percent interest rate is appropriate. across the United States.
Average monthly qualifying payroll: First, it provides low cost funds to
$100,000 l. Can I use e-signatures or e-consents if
borrowers to meet eligible payroll costs
Multiply by 2.5 = $250,000 and other eligible expenses during this a borrower has multiple owners?
Add EIDL loan of $10,000 = $260,000 temporary period of economic Yes, e-signature or e-consents can be
Maximum loan amount is $260,000 dislocation caused by the coronavirus. used regardless of the number of
f. What qualifies as ‘‘payroll costs?’’ Second, for lenders, the 100 basis points owners.
offers an attractive interest rate relative m. Is the PPP ‘‘first-come, first-served?’’
Payroll costs consist of compensation to the cost of funding for comparable
to employees (whose principal place of maturities. For example, the FDIC’s Yes.
residence is the United States) in the weekly national average rate for a 24-
form of salary, wages, commissions, or n. When will I have to begin paying
month CD deposit product for the week principal and interest on my PPP loan?
similar compensation; cash tips or the of March 30, 2020 is 42 basis points for
equivalent (based on employer records non-jumbo and 44 basis points for You will not have to make any
of past tips or, in the absence of such jumbo (https://www.fdic.gov/ payments for six months following the
records, a reasonable, good-faith regulations/resources/rates/). Third, the date of disbursement of the loan.
employer estimate of such tips); interest rate is higher than the yield on However, interest will continue to
payment for vacation, parental, family, Treasury securities of comparable accrue on PPP loans during this six-
medical, or sick leave; allowance for maturity. For example, the yield on the month deferment. The Act authorizes
separation or dismissal; payment for the Treasury two-year note is approximately the Administrator to defer loan
provision of employee benefits 23 basis points. This higher yield payments for up to one year. The
consisting of group health care coverage, combined with the fact that the loans Administrator determined, in
including insurance premiums, and are 100 percent guaranteed by the SBA consultation with the Secretary, that a
retirement; payment of state and local and the fact that lenders will receive a six-month deferment period is
taxes assessed on compensation of substantial processing fee from the SBA appropriate in light of the modest
employees; and for an independent provide ample inducement for lenders interest rate (one percent) on PPP loans
contractor or sole proprietor, wages, to participate in the PPP. and the loan forgiveness provisions
commissions, income, or net earnings contained in the Act.
from self-employment, or similar j. What will be the maturity date on a
PPP loan? o. Can my PPP loan be forgiven in
compensation. whole or in part?
The maturity is two years. While the
g. Is there anything that is expressly Yes. The amount of loan forgiveness
Act provides that a loan will have a
excluded from the definition of payroll can be up to the full principal amount
maximum maturity of up to ten years
costs? of the loan and any accrued interest.
from the date the borrower applies for
Yes. The Act expressly excludes the loan forgiveness (described below), the That is, the borrower will not be
following: Administrator, in consultation with the responsible for any loan payment if the
i. Any compensation of an employee Secretary, determined that a two year borrower uses all of the loan proceeds
whose principal place of residence is loan term is sufficient in light of the for forgiveable purposes described
outside of the United States; temporary economic dislocations below and employee and compensation
ii. The compensation of an individual caused by the coronavirus. Specifically, levels are maintained. The actual
employee in excess of an annual salary the considerable economic disruption amount of loan forgiveness will depend,
of $100,000, prorated as necessary; caused by the coronavirus is expected to in part, on the total amount of payroll
iii. Federal employment taxes abate well before the two year maturity costs, payments of interest on mortgage
imposed or withheld between February date such that borrowers will be able to obligations incurred before February 15,
15, 2020 and June 30, 2020, including re-commence business operations and 2020, rent payments on leases dated
the employee’s and employer’s share of pay off any outstanding balances on before February 15, 2020, and utility
FICA (Federal Insurance Contributions their PPP loans. payments under service agreements
Act) and Railroad Retirement Act taxes, dated before February 15, 2020, over the
and income taxes required to be k. Can I apply for more than one PPP eight-week period following the date of
loan?
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withheld from employees; and the loan. However, not more than 25
iv. Qualified sick and family leave No. The Administrator, in percent of the loan forgiveness amount
wages for which a credit is allowed consultation with the Secretary, may be attributable to non-payroll costs.
under sections 7001 and 7003 of the determined that no eligible borrower While the Act provides that borrowers
Families First Coronavirus Response may receive more than one PPP loan. are eligible for forgiveness in an amount
Act (Pub. L. 116–127). This means that if you apply for a PPP equal to the sum of payroll costs and
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20814 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations
any payments of mortgage interest, rent, vii. refinancing an SBA EIDL loan t. What certifications need to be made?
and utilities, the Administrator has made between January 31, 2020 and On the Paycheck Protection Program
determined that the non-payroll portion April 3, 2020. If you received an SBA application, an authorized
of the forgivable loan amount should be EIDL loan from January 31, 2020 representative of the applicant must
limited to effectuate the core purpose of through April 3, 2020, you can apply for certify in good faith to all of the below: 1
the statute and ensure finite program a PPP loan. If your EIDL loan was not i. The applicant was in operation on
resources are devoted primarily to used for payroll costs, it does not affect February 15, 2020 and had employees
payroll. The Administrator has your eligibility for a PPP loan. If your for whom it paid salaries and payroll
determined in consultation with the EIDL loan was used for payroll costs, taxes or paid independent contractors,
Secretary that 75 percent is an your PPP loan must be used to refinance as reported on a Form 1099–MISC.
appropriate percentage in light of the your EIDL loan. Proceeds from any ii. Current economic uncertainty
Act’s overarching focus on keeping advance up to $10,000 on the EIDL loan makes this loan request necessary to
workers paid and employed. Further, will be deducted from the loan support the ongoing operations of the
the Administrator and the Secretary forgiveness amount on the PPP loan. applicant.
believe that applying this threshold to iii. The funds will be used to retain
loan forgiveness is consistent with the However, at least 75 percent of the workers and maintain payroll or make
structure of the Act, which provides a PPP loan proceeds shall be used for mortgage interest payments, lease
loan amount 75 percent of which is payroll costs. For purposes of payments, and utility payments; I
equivalent to eight weeks of payroll (8 determining the percentage of use of understand that if the funds are
weeks/2.5 months = 56 days/76 days = proceeds for payroll costs, the amount knowingly used for unauthorized
74 percent rounded up to 75 percent). of any EIDL refinanced will be included. purposes, the Federal Government may
Limiting non-payroll costs to 25 percent For purposes of loan forgiveness, hold me legally liable such as for
of the forgiveness amount will align however, the borrower will have to charges of fraud. As explained above,
these elements of the program, and will document the proceeds used for payroll not more than 25 percent of loan
also help to ensure that the finite costs in order to determine the amount proceeds may be used for non-payroll
appropriations available for PPP loan of forgiveness. While the Act provides costs.
forgiveness are directed toward payroll that PPP loan proceeds may be used for iv. Documentation verifying the
protection. SBA will issue additional the purposes listed above and for other number of full-time equivalent
guidance on loan forgiveness. allowable uses described in section 7(a) employees on payroll as well as the
of the Small Business Act (15 U.S.C. dollar amounts of payroll costs, covered
p. Do independent contractors count as mortgage interest payments, covered
employees for purposes of PPP loan 636(a)), the Administrator believes that
finite appropriations and the structure rent payments, and covered utilities for
forgiveness? the eight week period following this
of the Act warrant a requirement that
No, independent contractors have the borrowers use a substantial portion of loan will be provided to the lender.
ability to apply for a PPP loan on their v. Loan forgiveness will be provided
the loan proceeds for payroll costs,
own so they do not count for purposes for the sum of documented payroll
consistent with Congress’ overarching
of a borrower’s PPP loan forgiveness. costs, covered mortgage interest
goal of keeping workers paid and
payments, covered rent payments, and
q. What forms do I need and how do I employed. As with the similar
covered utilities. As explained above,
submit an application? limitation on the forgiveness amount not more than 25 percent of the forgiven
The applicant must submit SBA Form explained earlier, the Administrator, in amount may be for non-payroll costs.
2483 (Paycheck Protection Program consultation with the Secretary, has vi. During the period beginning on
Application Form) and payroll determined that 75 percent is an February 15, 2020 and ending on
documentation, as described above. The appropriate percentage that will align December 31, 2020, the applicant has
lender must submit SBA Form 2484 this element of the program with the not and will not receive another loan
(Paycheck Protection Program Lender’s loan amount, 75 percent of which is under this program.
Application for 7(a) Loan Guaranty) equivalent to eight weeks of payroll. vii. I further certify that the
electronically in accordance with This limitation on use of the loan funds information provided in this application
program requirements and maintain the will help to ensure that the finite and the information provided in all
forms and supporting documentation in appropriations available for these loans supporting documents and forms is true
its files. are directed toward payroll protection, and accurate in all material respects. I
as each loan that is issued depletes the understand that knowingly making a
r. How can PPP loans be used?
appropriation, regardless of whether false statement to obtain a guaranteed
The proceeds of a PPP loan are to be portions of the loan are later forgiven. loan from SBA is punishable under the
used for: law, including under 18 U.S.C. 1001
i. payroll costs (as defined in the Act s. What happens if PPP loan funds are and 3571 by imprisonment of not more
and in 2.f.); misused? than five years and/or a fine of up to
ii. costs related to the continuation of $250,000; under 15 U.S.C. 645 by
group health care benefits during If you use PPP funds for unauthorized
purposes, SBA will direct you to repay imprisonment of not more than two
periods of paid sick, medical, or family years and/or a fine of not more than
leave, and insurance premiums; those amounts. If you knowingly use the
funds for unauthorized purposes, you $5,000; and, if submitted to a federally
iii. mortgage interest payments (but insured institution, under 18 U.S.C.
not mortgage prepayments or principal will be subject to additional liability
such as charges for fraud. If one of your 1014 by imprisonment of not more than
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payments); thirty years and/or a fine of not more
iv. rent payments; shareholders, members, or partners uses
than $1,000,000.
v. utility payments; PPP funds for unauthorized purposes,
vi. interest payments on any other SBA will have recourse against the 1 A representative of the applicant can certify for
debt obligations that were incurred shareholder, member, or partner for the the business as a whole if the representative is
before February 15, 2020; and/or unauthorized use. legally authorized to do so.
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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20815
viii. I acknowledge that the lender institution, or the BSA requirements of the comparable federally regulated
will confirm the eligible loan amount an equivalent federally regulated institution, such a program may include
using tax documents I have submitted. financial institution; has been operating a customer identification program (CIP),
I affirm that these tax documents are since at least February 15, 2019, and has which includes identifying and
identical to those submitted to the originated, maintained, and serviced verifying their PPP borrowers’ identities
Internal Revenue Service. I also more than $50 million in business loans (including e.g., date of birth, address,
understand, acknowledge, and agree or other commercial financial and taxpayer identification number),
that the Lender can share the tax receivables during a consecutive 12 and, if that PPP borrower is a company,
information with SBA’s authorized month period in the past 36 months, or following any applicable beneficial
representatives, including authorized is a service provider to any insured ownership information collection
representatives of the SBA Office of depository institution that has a contract requirements. Alternatively, if available,
Inspector General, for the purpose of to support such institution’s lending entities may rely on the CIP of a
compliance with SBA Loan Program activities in accordance with 12 U.S.C. federally insured depository institution
Requirements and all SBA reviews. 1867(c) and is in good standing with the or federally insured credit union with
appropriate Federal banking agency. an established CIP as part of its AML
3. What do lenders need to know and iv. Qualified institutions described in program. In either instance, entities
do? 3.a.iii.I. and II. will be automatically should also understand the nature and
a. Who is eligible to make PPP loans? qualified under delegated authority by purpose of their PPP customer
the SBA upon transmission of CARES relationships to develop customer risk
i. All SBA 7(a) lenders are
Act Section 1102 Lender Agreement profiles. Such entities will also
automatically approved to make PPP
(SBA Form 3506) unless they currently generally have to identify and report
loans on a delegated basis.
are designated in Troubled Condition by certain suspicious activity to the U.S.
ii. The Act provides that the authority
their primary Federal regulator or are Department of the Treasury’s Financial
to make PPP loans can be extended to
subject to a formal enforcement action Crimes Enforcement Network (FinCEN).
additional lenders determined by the
by their primary Federal regulator that If such entities have questions with
Administrator and the Secretary to have
addresses unsafe or unsound lending regard to meeting these requirements,
the necessary qualifications to process,
practices. they should contact the FinCEN
close, disburse, and service loans made
Regulatory Support Section at FRC@
with the SBA guarantee. Since SBA is b. What do lenders have to do in terms fincen.gov. In addition, FinCEN has
authorized to make PPP loans up to of loan underwriting? created a COVID–19-specific contact
$349 billion by June 30, 2020, the Each lender shall: channel, via a specific drop-down
Adminstrator and the Secretary have i. Confirm receipt of borrower category, for entities to communicate to
jointly determined that authorizing certifications contained in Paycheck FinCEN COVID–19-related concerns
additional lenders is necessary to Protection Program Application form while adhering to their BSA obligations.
achieve the purpose of allowing as issued by the Administration; Entities that wish to communicate such
many eligible borrowers as possible to ii. Confirm receipt of information COVID–19-related concerns to FinCEN
receive loans by the June 30, 2020 demonstrating that a borrower had should go to www.FinCEN.gov, click on
deadline. employees for whom the borrower paid ‘‘Need Assistance,’’ and select
iii. The following types of lenders salaries and payroll taxes on or around ‘‘COVID19’’ in the subject drop-down
have been determined to meet the February 15, 2020; list.
criteria and are eligible to make PPP iii. Confirm the dollar amount of Each lender’s underwriting obligation
loans unless they currently are average monthly payroll costs for the under the PPP is limited to the items
designated in Troubled Condition by preceding calendar year by reviewing above and reviewing the ‘‘Paycheck
their primary Federal regulator or are the payroll documentation submitted Protection Application Form.’’
subject to a formal enforcement action with the borrower’s application; and Borrowers must submit such
with their primary Federal regulator that iv. Follow applicable BSA documentation as is necessary to
addresses unsafe or unsound lending requirements: establish eligibility such as payroll
practices: I. Federally insured depository processor records, payroll tax filings, or
I. Any federally insured depository institutions and federally insured credit Form 1099–MISC, or income and
institution or any federally insured unions should continue to follow their expenses from a sole proprietorship. For
credit union; existing BSA protocols when making borrowers that do not have any such
II. Any Farm Credit System institution PPP loans to either new or existing documentation, the borrower must
(other than the Federal Agricultural customers who are eligible borrowers provide other supporting
Mortgage Corporation) as defined in 12 under the PPP. PPP loans for existing documentation, such as bank records,
U.S.C. 2002(a) that applies the customers will not require re- sufficient to demonstrate the qualifying
requirements under the Bank Secrecy verification under applicable BSA payroll amount.
Act and its implementing regulations requirements, unless otherwise
(collectively, BSA) as a federally indicated by the institution’s risk-based c. Can lenders rely on borrower
regulated financial institution, or approach to BSA compliance. documentation for loan forgiveness?
functionally equivalent requirements II. Entities that are not presently Yes. The lender does not need to
that are not altered by this rule; and subject to the requirements of the BSA, conduct any verification if the borrower
III. Any depository or non-depository should, prior to engaging in PPP lending submits documentation supporting its
financing provider that originates, activities, including making PPP loans request for loan forgiveness and attests
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maintains, and services business loans to either new or existing customers who that it has accurately verified the
or other commercial financial are eligible borrowers under the PPP, payments for eligible costs. The
receivables and participation interests; establish an anti-money laundering Administrator will hold harmless any
has a formalized compliance program; (AML) compliance program equivalent lender that relies on such borrower
applies the requirements under the BSA to that of a comparable federally documents and attestation from a
as a federally regulated financial regulated institution. Depending upon borrower. The Administrator, in
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20816 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations
consultation with the Secretary, has SBA. Agents may not collect fees from borrower since the loan was disbursed
determined that lender reliance on a the borrower or be paid out of the PPP that the lender used to determine the
borrower’s required documents and loan proceeds. The total amount that an expected forgiveness amount, which
attestation is necessary and appropriate agent may collect from the lender for should include the same documentation
in light of section 1106(h) of the Act, assistance in preparing an application required to apply for loan forgiveness
which prohibits the Administrator from for a PPP loan (including referral to the such as payroll tax filings, cancelled
taking an enforcement action or lender) may not exceed: checks, and other payment
imposing penalties if the lender has i. One (1) percent for loans of not documentation; and any additional
received a borrower attestation. more than $350,000; information the Administrator may
ii. 0.50 percent for loans of more than require to determine whether the
d. What fees will lenders be paid? $350,000 and less than $2 million; and expected forgiveness amount is
SBA will pay lenders fees for iii. 0.25 percent for loans of at least $2 reasonable. The Administrator, in
processing PPP loans in the following million. consultation with the Secretary,
amounts: The Act authorizes the Administrator
determined that seven weeks is the
i. Five (5) percent for loans of not to establish limits on agent fees. The
minimum period of time necessary for
more than $350,000; Administrator, in consultation with the
ii. Three (3) percent for loans of more a lender to reasonably determine the
Secretary, determined that the agent fee
than $350,000 and less than $2,000,000; limits set forth above are reasonable expected forgiveness amount for a PPP
and based upon the application req loan or pool of PPP loans, since the PPP
iii. One (1) percent for loans of at least uirements and the fees that lenders is a new program and the likelihood that
$2,000,000. receive for making PPP loans. many borrowers will be new clients of
the lender. The expected forgiveness
e. Do lenders have to apply the ‘‘credit d. Can PPP loans be sold into the amount may not exceed the total
elsewhere test’’? secondary market? amount of principal on the PPP loan or
No. When evaluating an applicant’s Yes. A PPP loan may be sold on the pool of loans. The Administrator will
eligibility lenders will not be required to secondary market after the loan is fully purchase the expected forgiveness
apply the ‘‘credit elsewhere test’’ (as set disbursed. A PPP loan may be sold on amount of the PPP loan(s) within 15
forth in section 7(a)(1)(A) of the Small the secondary market at a premium or days of the date on which the
Business Act (15 U.S.C. 636) and SBA a discount to par value. SBA will issue Administrator receives a complete
regulations at 13 CFR 120.101)). guidance regarding any advance report that demonstrates that the
4. What do both borrowers and lenders purchase for loans sold in the secondary expected forgiveness amount is indeed
need to know and do? market. reasonable.
a. What are the loan terms and e. Can SBA purchase some or all of the 5. Additional Information
conditions? loan in advance?
All loans guaranteed by the SBA
Loans will be guaranteed under the Yes. A lender may request that the pursuant to the CARES Act will be
PPP under the same terms, conditions SBA purchase the expected forgiveness made consistent with constitutional,
and processes as other 7(a) loans, with amount of a PPP loan or pool of PPP statutory, and regulatory protections for
certain changes including but not loans at the end of week seven of the religious liberty, including the First
limited to: covered period. The expected Amendment to the Constitution, the
i. The guarantee percentage is 100 forgiveness amount is the amount of Religious Freedom Restoration Act, 42
percent. loan principal the lender reasonably U.S.C. 2000bb–1 and bb–3, and SBA
ii. No collateral will be required. expects the borrower to expend on regulation at 13 CFR 113.3–1h, which
iii. No personal guarantees will be payroll costs, covered mortgage interest, provides that nothing in SBA
required. covered rent, and covered utility
iv. The interest rate will be 100 basis nondiscrimination regulations shall
payments during the eight week period apply to a religious corporation,
points or one percent. after loan disbursement. At least 75
v. All loans will be processed by all association, educational institution or
percent of the expected forgiveness society with respect to the membership
lenders under delegated authority and amount shall be for payroll costs, as
lenders will be permitted to rely on or the employment of individuals of a
provided in 2.o. To submit a PPP loan particular religion to perform work
certifications of the borrower in order to or pool of PPP loans for advance
determine eligibility of the borrower connected with the carrying on by such
purchase, a lender shall submit a report corporation, association, educational
and the use of loan proceeds. requesting advance purchase with the institution or society of its religious
b. Are there any fee waivers? expected forgiveness amount to the activities. SBA intends to promptly
i. There will be no up-front guarantee SBA. The report shall include: the issue additional guidance with regard to
fee payable to SBA by the Borrower; Paycheck Protection Program religious liberty protections under this
ii. There will be no lender’s annual Application Form (SBA Form 2483) and program.
service fee (‘‘on-going guaranty fee’’) any supporting documentation
submitted with such application; the SBA may provide further guidance, if
payable to SBA; needed, through SBA notices and a
iii. There will be no subsidy Paycheck Protection Program Lender’s
Application for 7(a) Loan Guaranty program guide which will be posted on
recoupment fee; and SBA’s website at www.sba.gov.
iv. There will be no fee payable to (SBA Form 2484) and any supporting
SBA for any guarantee sold into the documentation; a detailed narrative Questions on the Paycheck Protection
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secondary market. explaining the assumptions used in Program 7(a) Loans may be directed to
determining the expected forgiveness the Lender Relations Specialist in the
c. Who pays the fee to an agent who amount, the basis for those assumptions, local SBA Field Office. The local SBA
assists a borrower? alternative assumptions considered, and Field Office may be found at https://
Agent fees will be paid by the lender why alternative assumptions were not www.sba.gov/tools/local-assistance/
out of the fees the lender receives from used; any information obtained from the districtoffices.
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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20817
Compliance With Executive Orders Section 1102 Lender Agreement), and unnecessary, or contrary to the public
12866, 12988, 13132, and 13771, the SBA Form 3507 (CARES Act Section interest. Small Business
Paperwork Reduction Act (44 U.S.C. 1102 Lender Agreement—Non-Bank and Administration’s Office of Advocacy
Ch. 35), and the Regulatory Flexibility Non-Insured Depository Institution guide: How to Comply with the
Act (5 U.S.C. 601–612) Lender). The collection is approved for Regulatory Flexibility Ac. Ch.1. p.9.
use until September 30, 2020. Accordingly, SBA is not required to
E.O. 12866 and E.O. 13563 conduct a regulatory flexibility analysis.
This interim final rule is Regulatory Flexibility Act (RFA) Authority: 15 U.S.C. 636(a)(36);
economically significant for the The Regulatory Flexibility Act (RFA) Coronavirus Aid, Relief, and Economic
purposes of Executive Orders 12866 and generally requires that when an agency Security Act, Public Law 116–136,
13563. SBA, however, is proceeding issues a proposed rule, or a final rule Section 1114.
under the emergency provision at pursuant to section 553(b) of the APA or
another law, the agency must prepare a Jovita Carranza,
Executive Order 12866 Section
regulatory flexibility analysis that meets Administrator.
6(a)(3)(D) based on the need to move
expeditiously to mitigate the current the requirements of the RFA and [FR Doc. 2020–07672 Filed 4–10–20; 4:15 pm]
economic conditions arising from the publish such analysis in the Federal BILLING CODE P
COVID–19 emergency. This rule’s Register. 5 U.S.C. 603, 604. Specifically,
designation under Executive Order the RFA normally requires agencies to
13771 will be informed by public describe the impact of a rulemaking on SMALL BUSINESS ADMINISTRATION
comment. small entities by providing a regulatory
13 CFR Part 121
This rule is necessary to implement impact analysis. Such analysis must
Sections 1102 and 1106 of the CARES address the consideration of regulatory [Docket No. SBA–2020–0019]
Act in order to provide economic relief options that would lessen the economic RIN 3245–AH35
to small businesses nationwide effect of the rule on small entities. The
adversely impacted under the COVID– RFA defines a ‘‘small entity’’ as (1) a Business Loan Program Temporary
19 Emergency Declaration. We proprietary firm meeting the size Changes; Paycheck Protection
anticipate that this rule will result in standards of the Small Business Program
substantial benefits to small businesses, Administration (SBA); (2) a nonprofit
organization that is not dominant in its AGENCY: U.S. Small Business
their employees, and the communities
they serve. However, we lack data to field; or (3) a small government Administration.
estimate the effects of this rule. jurisdiction with a population of less ACTION: Interim final rule.
than 50,000. 5 U.S.C. 601(3)–(6). Except
Executive Order 12988 SUMMARY: Elsewhere in this issue of the
for such small government jurisdictions,
neither State nor local governments are Federal Register, the U.S. Small
SBA has drafted this rule, to the
‘‘small entities.’’ Similarly, for purposes Business Administration (SBA) is
extent practicable, in accordance with
of the RFA, individual persons are not publishing an interim final rule (the
the standards set forth in section 3(a)
small entities. Initial Rule) announcing the
and 3(b)(2) of Executive Order 12988, to
The requirement to conduct a implementation of sections 1102 and
minimize litigation, eliminate
regulatory impact analysis does not 1106 of the Coronavirus Aid, Relief, and
ambiguity, and reduce burden. The rule
apply if the head of the agency ‘‘certifies Economic Security Act (CARES Act or
has no preemptive or retroactive effect.
that the rule will not, if promulgated, the Act). Section 1102 of the Act
Executive Order 13132 have a significant economic impact on temporarily adds a new program, titled
SBA has determined that this rule a substantial number of small entities.’’ the ‘‘Paycheck Protection Program,’’ to
will not have substantial direct effects 5 U.S.C. 605(b). The agency must, the SBA’s 7(a) Loan Program. Section
on the States, on the relationship however, publish the certification in the 1106 of the Act provides for forgiveness
between the National Government and Federal Register at the time of of up to the full principal amount of
the States, or on the distribution of publication of the rule, ‘‘along with a qualifying loans guaranteed under the
power and responsibilities among the statement providing the factual basis for Paycheck Protection Program. The
various layers of government. Therefore, such certification.’’ If the agency head Paycheck Protection Program and loan
SBA has determined that this rule has has not waived the requirements for a forgiveness are intended to provide
no federalism implications warranting regulatory flexibility analysis in economic relief to small businesses
preparation of a federalism assessment. accordance with the RFA’s waiver nationwide adversely impacted by the
provision, and no other RFA exception Coronavirus Disease 2019 (COVID–19).
Paperwork Reduction Act, 44 U.S.C. applies, the agency must prepare the This interim final rule supplements the
Chapter 35 regulatory flexibility analysis and Initial Rule with additional guidance
SBA has determined that this rule publish it in the Federal Register at the regarding the application of certain
will impose recordkeeping or reporting time of promulgation or, if the rule is affiliate rules applicable to SBA’s
requirements under the Paperwork promulgated in response to an implementation of sections 1102 and
Reduction Act (‘‘PRA’’). SBA has emergency that makes timely 1106 of the Act and requests public
obtained emergency approval under compliance impracticable, within 180 comment.
OMB Control Number 3245–0407 for the days of publication of the final rule. 5 DATES:
information collection (IC) required to U.S.C. 604(a), 608(b). Effective date: This interim final rule
implement the program described Rules that are exempt from notice and is effective April 15, 2020.
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above. This IC consists of Form 2483 comment are also exempt from the RFA Applicability date: This interim final
(Paycheck Protection Program requirements, including conducting a rule applies to applications submitted
Application Form), SBA Form 2484 regulatory flexibility analysis, when under the Paycheck Protection Program
(Paycheck Protection Program Lender’s among other things the agency for good through June 30, 2020, or until funds
Application for 7(a) Loan Guaranty), cause finds that notice and public made available for this purpose are
and SBA Form 3506 (CARES Act procedure are impracticable, exhausted.
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