Business Loan Program Temporary Changes; Paycheck Protection Program-Eligibility of Certain Electric Cooperatives

Summary

A Small Business Administration interim final rule, "Paycheck Protection Program-Eligibility of Certain Electric Cooperatives", published in the Federal Register, Vol. 85, No. 97, on Tuesday, May 19, 2020, under 13 CFR Parts 120 and 121, RIN 3245–AH43, docket number SBA–2020–0029. It supplements the previously posted PPP interim final rules by providing guidance on the eligibility of certain electric cooperatives for PPP loans. The same pages carry part of another agency's rule.

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

Full text

Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 29847

12866 Section 6(a)(3)(D) based on the promulgated, have a significant relief to small businesses nationwide
need to move expeditiously to mitigate economic impact on a substantial adversely impacted by the Coronavirus
the current economic conditions arising number of small entities.’’ 5 U.S.C. Disease 2019 (COVID–19). SBA posted
from the COVID–19 emergency. This 605(b). The agency must, however, additional interim final rules on April 3,
rule’s designation under Executive publish the certification in the Federal 2020, April 14, 2020, April 24, 2020,
Order 13771 will be informed by public Register at the time of publication of the April 28, 2020, April 30, 2020, May 5,
comment. rule, ‘‘along with a statement providing 2020, and May 8, 2020, and the
the factual basis for such certification.’’ Department of the Treasury posted an
Executive Order 12988 additional interim final rule on April
If the agency head has not waived the
SBA has drafted this rule, to the requirements for a regulatory flexibility 28, 2020. This interim final rule
extent practicable, in accordance with analysis in accordance with the RFA’s supplements the previously posted
the standards set forth in section 3(a) waiver provision, and no other RFA interim final rules by providing
and 3(b)(2) of Executive Order 12988, to exception applies, the agency must guidance on additional eligibility
minimize litigation, eliminate prepare the regulatory flexibility requirements for certain electric
ambiguity, and reduce burden. The rule analysis and publish it in the Federal cooperatives, and requests public
has no preemptive or retroactive effect. Register at the time of promulgation or, comment.
Executive Order 13132 if the rule is promulgated in response to DATES:
an emergency that makes timely Effective date: This rule is effective
SBA has determined that this rule compliance impracticable, within 180 May 19, 2020.
will not have substantial direct effects days of publication of the final rule. 5 Applicability date: This interim final
on the States, on the relationship U.S.C. 604(a), 608(b). Rules that are rule applies to applications submitted
between the National Government and exempt from notice and comment are under the Paycheck Protection Program
the States, or on the distribution of also exempt from the RFA requirements, through June 30, 2020, or until funds
power and responsibilities among the including conducting a regulatory made available for this purpose are
various layers of government. Therefore, flexibility analysis, when among other exhausted.
SBA has determined that this rule has things the agency for good cause finds Comment date: Comments must be
no federalism implications warranting that notice and public procedure are received on or before June 18, 2020.
preparation of a federalism assessment. impracticable, unnecessary, or contrary ADDRESSES: You may submit comments,
Paperwork Reduction Act, 44 U.S.C. to the public interest. SBA Office of identified by number SBA–2020–0029
Chapter 35 Advocacy guide: How to Comply with through the Federal eRulemaking Portal:
the Regulatory Flexibility Act, Ch.1. p.9. http://www.regulations.gov. Follow the
SBA has determined that this rule
Accordingly, SBA is not required to instructions for submitting comments.
will not impose new or modify existing
conduct a regulatory flexibility analysis. SBA will post all comments on
recordkeeping or reporting requirements
under the Paperwork Reduction Act. www.regulations.gov. If you wish to
Jovita Carranza,
submit confidential business
Regulatory Flexibility Act (RFA) Administrator.
information (CBI) as defined in the User
[FR Doc. 2020–10649 Filed 5–18–20; 8:45 am]
The Regulatory Flexibility Act (RFA) Notice at www.regulations.gov, please
BILLING CODE P send an email to ppp-ifr@sba.gov.
generally requires that when an agency
issues a proposed rule, or a final rule Highlight the information that you
pursuant to section 553(b) of the APA or consider to be CBI and explain why you
SMALL BUSINESS ADMINISTRATION
another law, the agency must prepare a believe SBA should hold this
regulatory flexibility analysis that meets 13 CFR Parts 120 and 121 information as confidential. SBA will
the requirements of the RFA and review the information and make the
[Docket Number SBA–2020–0029] final determination whether it will
publish such analysis in the Federal
Register. 5 U.S.C. 603, 604. Specifically, RIN 3245–AH43 publish the information.
the RFA normally requires agencies to FOR FURTHER INFORMATION CONTACT: A
describe the impact of a rulemaking on Business Loan Program Temporary Call Center Representative at 833–572–
small entities by providing a regulatory Changes; Paycheck Protection 0502, or the local SBA Field Office; the
impact analysis. Such analysis must Program—Eligibility of Certain Electric list of offices can be found at https://
address the consideration of regulatory Cooperatives www.sba.gov/tools/local-assistance/
options that would lessen the economic AGENCY: U.S. Small Business districtoffices.
effect of the rule on small entities. The Administration. SUPPLEMENTARY INFORMATION:
RFA defines a ‘‘small entity’’ as (1) a ACTION: Interim final rule.
proprietary firm meeting the size I. Background Information
standards of the Small Business SUMMARY: On April 2, 2020, the U.S. On March 13, 2020, President Trump
Administration (SBA); (2) a nonprofit Small Business Administration (SBA) declared the ongoing Coronavirus
organization that is not dominant in its posted an interim final rule announcing Disease 2019 (COVID–19) pandemic of
field; or (3) a small government the implementation of the Coronavirus sufficient severity and magnitude to
jurisdiction with a population of less Aid, Relief, and Economic Security Act warrant an emergency declaration for all
than 50,000. 5 U.S.C. 601(3)–(6). Except (CARES Act). The CARES Act States, territories, and the District of
for such small government jurisdictions, temporarily adds a new program, titled Columbia. With the COVID–19
neither State nor local governments are the ‘‘Paycheck Protection Program,’’ to emergency, many small businesses
‘‘small entities.’’ Similarly, for purposes the SBA’s 7(a) Loan Program. The nationwide are experiencing economic
of the RFA, individual persons are not CARES Act also provides for forgiveness hardship as a direct result of the
small entities. The requirement to of up to the full principal amount of Federal, State, tribal, and local public
conduct a regulatory impact analysis qualifying loans guaranteed under the health measures that are being taken to
does not apply if the head of the agency Paycheck Protection Program (PPP). The minimize the public’s exposure to the
‘‘certifies that the rule will not, if PPP is intended to provide economic virus. These measures, some of which

VerDate Sep<11>2014 17:20 May 18, 2020 Jkt 250001 PO 00000 Frm 00009 Fmt 4700 Sfmt 4700 E:\FR\FM\19MYR1.SGM 19MYR1
29848 Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations

are government-mandated, are being income test is computed annually. An the interim final rule, including section
implemented nationwide and include electric cooperative may be exempt in III below. These comments must be
the closures of restaurants, bars, and one year, lose exemption in another year submitted on or before June 18, 2020.
gyms. In addition, based on the advice if it does not derive at least 85 percent SBA will consider these comments and
of public health officials, other of its income from members, and the need for making any revisions as a
measures, such as keeping a safe become exempt in a third year. Because result of these comments.
distance from others or even stay-at- of their potential tax exemption under
home orders, are being implemented, section 501(c)(12) of the Code, electric III. Paycheck Protection Program
resulting in a dramatic decrease in cooperatives have faced uncertainty Additional Eligibility Criteria
economic activity as the public avoids about their eligibility to receive PPP Overview
malls, retail stores, and other loans.
businesses. The Administrator, in consultation The CARES Act was enacted to
On March 27, 2020, the President with the Secretary, understands that provide immediate assistance to
signed the Coronavirus Aid, Relief, and electric cooperatives are unusual in that individuals, families, and organizations
Economic Security Act (the CARES Act) they may be exempt from taxation or affected by the COVID–19 emergency.
(Pub. L. 116–136) to provide emergency organized under state nonprofit statutes Among the provisions contained in the
assistance and health care response for in certain jurisdictions, while they CARES Act are provisions authorizing
individuals, families, and businesses operate as businesses. For example, SBA to temporarily guarantee loans
affected by the coronavirus pandemic. electric cooperatives provide utility under the PPP. Loans under the PPP
The Small Business Administration services and distribute savings to their will be 100 percent guaranteed by SBA,
(SBA) received funding and authority member-owners. Accordingly, as and the full principal amount of the
through the CARES Act to modify described below, to provide certainty to loans and any accrued interest may
existing loan programs and establish a potential PPP loan applicants, this qualify for loan forgiveness. Additional
new loan program to assist small interim final rule provides that, for information about the PPP is available
businesses nationwide adversely purposes of the PPP, an electric in interim final rules published by SBA
impacted by the COVID–19 emergency. cooperative that is exempt from Federal and the Department of the Treasury in
Section 1102 of the CARES Act income taxation under section the Federal Register (85 FR 20811, 85
temporarily permits SBA to guarantee 501(c)(12) of the Code will be FR 20817, 85 FR 21747, 85 FR 23450,
100 percent of 7(a) loans under a new considered to be ‘‘a business entity
85 FR 23917, 85 FR 26321, 85 FR 26324,
program titled the ‘‘Paycheck Protection organized for profit’’ under 13 CFR
and 85 FR 27287) and the interim rule
Program.’’ Section 1106 of the CARES 121.105(a)(1). As a result, such electric
entitled ‘‘Business Loan Program
Act provides for forgiveness of up to the cooperatives are eligible PPP borrowers,
Temporary Changes; Paycheck
full principal amount of qualifying as long as other eligibility requirements
Protection Program—Requirements—
loans guaranteed under the Paycheck are met.
Protection Program (PPP). On April 24, Extension of Limited Safe Harbor with
II. Comments and Immediate Effective Respect to Certification Concerning
2020, the President signed the Paycheck
Date Need for PPP Loan Request,’’ which
Protection Program and Health Care
Enhancement Act (Pub. L. 116–139), The intent of the Act is that SBA SBA posted on May 8, 2020, and is
which provided additional funding and provide relief to America’s small published elsewhere in this issue of the
authority for the PPP. businesses expeditiously. This intent, Federal Register (collectively, the PPP
Among the categories of entities that along with the dramatic decrease in Interim Final Rules).
are eligible PPP borrowers are business economic activity nationwide, provides 1. Eligibility of Certain Electric
concerns and certain nonprofit good cause for SBA to dispense with the
Cooperatives
organizations described in section 30-day delayed effective date provided
501(c)(3) of the Internal Revenue Code in the Administrative Procedure Act. Are electric cooperatives that are
(the Code). This interim final rule Specifically, it is critical to meet exempt from Federal income taxation
addresses the eligibility of electric lenders’ and borrowers’ need for clarity under section 501(c)(12) of the Internal
cooperatives as PPP borrowers. Existing concerning program requirements as Revenue Code eligible for a PPP loan?
SBA regulations define a ‘‘business rapidly as possible because the last day
eligible borrowers can apply for and Yes. Electric cooperatives provide
concern’’ as ‘‘a business entity
receive a loan is June 30, 2020. utility services and distribute savings to
organized for profit,’’ subject to certain
This interim final rule supplements their member-owners. Accordingly, for
limitations. 13 CFR 121.105(a)(1).
Generally, electric cooperatives are previous regulations and guidance on an purposes of the PPP, the Administrator,
organizations that are owned and important, discrete issue. The in consultation with the Secretary, has
controlled by members who receive immediate effective date of this interim determined that an electric cooperative
services from the cooperative. Electric final rule will benefit lenders so that that is exempt from Federal income
cooperatives periodically return any they can swiftly close and disburse taxation under section 501(c)(12) of the
excess of net operating revenues over loans to small businesses. This interim Internal Revenue Code will be
their cost of operations—generally final rule is effective without advance considered to be ‘‘a business entity
referred to as ‘‘savings’’—to their notice and public comment because organized for profit’’ for purposes of 13
member-owners. In addition, electric section 1114 of the Act authorizes SBA CFR 121.105(a)(1). As a result, such
cooperatives meeting the description of to issue regulations to implement Title entities are eligible PPP borrowers, as
section 501(c)(12) of the Code may be I of the Act without regard to notice long as other eligibility requirements are
exempt from Federal income taxation requirements. This rule is being issued met. To be eligible, an electric
under section 501(a) of the Code. To to allow for immediate implementation cooperative must satisfy the employee-
qualify for the exemption, an electric of this program. Although this interim based size standard established in the
cooperative must receive at least 85 final rule is effective immediately, CARES Act, SBA’s employee-based size
percent of its income each year from its comments are solicited from interested standard corresponding to its primary
members. The 85 percent member members of the public on all aspects of industry, if higher, or both tests in

VerDate Sep<11>2014 17:20 May 18, 2020 Jkt 250001 PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 E:\FR\FM\19MYR1.SGM 19MYR1
Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 29849

SBA’s ‘‘alternative size standard.’’ 1 The the States, or on the distribution of also exempt from the RFA requirements,
Administrator, in consultation with the power and responsibilities among the including conducting a regulatory
Secretary, has determined that this various layers of government. Therefore, flexibility analysis, when among other
treatment is appropriate to effectuate the SBA has determined that this rule has things the agency for good cause finds
purposes of the CARES Act to provide no federalism implications warranting that notice and public procedure are
assistance to eligible PPP borrowers, preparation of a federalism assessment. impracticable, unnecessary, or contrary
including business concerns, affected by Paperwork Reduction Act, 44 U.S.C. to the public interest. SBA Office of
the COVID–19 emergency. Chapter 35 Advocacy guide: How to Comply with
the Regulatory Flexibility Act, Ch.1. p.9.
2. Additional Information SBA has determined that this rule Accordingly, SBA is not required to
SBA may provide further guidance, if will not impose new or modify existing conduct a regulatory flexibility analysis.
needed, through SBA notices that will recordkeeping or reporting requirements
be posted on SBA’s website at under the Paperwork Reduction Act. Jovita Carranza,
www.sba.gov. Questions on the Administrator.
Regulatory Flexibility Act (RFA)
Paycheck Protection Program may be [FR Doc. 2020–10674 Filed 5–18–20; 8:45 am]
directed to the Lender Relations The Regulatory Flexibility Act (RFA) BILLING CODE P
Specialist in the local SBA Field Office. generally requires that when an agency
The local SBA Field Office may be issues a proposed rule, or a final rule
found at https://www.sba.gov/tools/ pursuant to section 553(b) of the APA or DEPARTMENT OF COMMERCE
local-assistance/districtoffices. another law, the agency must prepare a
regulatory flexibility analysis that meets Bureau of Industry and Security
Compliance With Executive Orders the requirements of the RFA and
12866, 12988, 13132, 13563, and 13771, publish such analysis in the Federal 15 CFR Parts 730, 732, 736, and 744
the Paperwork Reduction Act (44 U.S.C. Register. 5 U.S.C. 603, 604. Specifically,
Ch. 35), and the Regulatory Flexibility the RFA normally requires agencies to [Docket No. 200514–0100]
Act (5 U.S.C. 601–612) describe the impact of a rulemaking on RIN 0694–AH99
Executive Orders 12866, 13563, and small entities by providing a regulatory
13771 impact analysis. Such analysis must Export Administration Regulations:
address the consideration of regulatory Amendments to General Prohibition
This interim final rule is options that would lessen the economic Three (Foreign-Produced Direct
economically significant for the effect of the rule on small entities. The Product Rule) and the Entity List
purposes of Executive Orders 12866 and RFA defines a ‘‘small entity’’ as (1) a
13563, and is considered a major rule AGENCY: Bureau of Industry and
proprietary firm meeting the size
under the Congressional Review Act. standards of the Small Business Security, Commerce.
SBA, however, is proceeding under the Administration (SBA); (2) a nonprofit ACTION: Interim final rule; request for
emergency provision at Executive Order organization that is not dominant in its comments.
12866 Section 6(a)(3)(D) based on the field; or (3) a small government
need to move expeditiously to mitigate SUMMARY: This rule amends General
jurisdiction with a population of less
the current economic conditions arising than 50,000. 5 U.S.C. 601(3)–(6). Except Prohibition Three, also known as the
from the COVID–19 emergency. This for such small government jurisdictions, foreign-produced direct product rule, by
rule’s designation under Executive neither State nor local governments are exercising existing authority under the
Order 13771 will be informed by public ‘‘small entities.’’ Similarly, for purposes Export Control Reform Act of 2018
comment. of the RFA, individual persons are not (ECRA), to impose a new control over
small entities. The requirement to certain foreign-produced items, when
Executive Order 12988 there is knowledge that such items are
conduct a regulatory impact analysis
SBA has drafted this rule, to the does not apply if the head of the agency destined to a designated entity on the
extent practicable, in accordance with ‘‘certifies that the rule will not, if Entity List. A foreign-produced item is
the standards set forth in section 3(a) promulgated, have a significant subject to the new control if the entity
and 3(b)(2) of Executive Order 12988, to economic impact on a substantial for which the item is destined has a
minimize litigation, eliminate number of small entities.’’ 5 U.S.C. footnote 1 designation in the Entity List.
ambiguity, and reduce burden. The rule 605(b). The agency must, however, This rule also applies this new control
has no preemptive or retroactive effect. publish the certification in the Federal to Huawei Technologies Co., Ltd.
Register at the time of publication of the (Huawei) and its non-U.S. affiliates
Executive Order 13132
rule, ‘‘along with a statement providing listed as entities. The Bureau of Industry
SBA has determined that this rule and Security (BIS) is requesting
the factual basis for such certification.’’
will not have substantial direct effects comments on the impact of this rule.
If the agency head has not waived the
on the States, on the relationship DATES:
requirements for a regulatory flexibility
between the National Government and Effective date: This rule is effective
analysis in accordance with the RFA’s
1 Under the alternative size standard, a business waiver provision, and no other RFA May 15, 2020.
concern, including an electric cooperative, can exception applies, the agency must Comment date: Submit comments on
qualify for the PPP as a small business concern if, prepare the regulatory flexibility or before July 14, 2020.
as of March 27, 2020: (1) The maximum tangible net analysis and publish it in the Federal ADDRESSES: You may submit comments,
worth of the business was not more than $15
million; and (2) the average net income after
Register at the time of promulgation or, identified by docket number BIS 2020–
Federal income taxes (excluding any carry-over if the rule is promulgated in response to 0011 or RIN 0694–AH99, through the
losses) of the business for the two full fiscal years an emergency that makes timely Federal eRulemaking Portal: http://
before the date of the application is not more than compliance impracticable, within 180 www.regulations.gov. Follow the
$5 million. For an electric cooperative that does not
have net income, the cooperative’s savings
days of publication of the final rule. 5 instructions for submitting comments.
distributed to its owner-members will be U.S.C. 604(a), 608(b). Rules that are All filers using the portal should use
considered its net income. exempt from notice and comment are the name of the person or entity

VerDate Sep<11>2014 17:20 May 18, 2020 Jkt 250001 PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 E:\FR\FM\19MYR1.SGM 19MYR1

File and source

File

ppr-eeeede08c1ce58c1-2020-05-19_2020-10674-3c4935ffbd.txt

Size

21,917 bytes

SHA-256

13846858e06d1c8201a6da5acde75a0e5bca13a7444fdde3a9c051236c739fb0

Our copy

ppr-eeeede08c1ce58c1-2020-05-19_2020-10674-3c4935ffbd.txt

Original

www.federalregister.gov