Business Loan Program Temporary Changes; Paycheck Protection Program-Treatment of Entities With Foreign Affiliates

Summary

A Small Business Administration interim final rule, "Paycheck Protection Program-Treatment of Entities With Foreign Affiliates", published in the Federal Register, Vol. 85, No. 99, on Thursday, May 21, 2020, under 13 CFR Parts 120 and 121, RIN 3245–AH44, docket number SBA–2020–0030. It supplements the previously posted PPP interim final rules with guidance on additional eligibility requirements related to entities with foreign affiliates. It discusses the standard under which an applicant may qualify by employing not more than the greater of 500 employees or SBA's employee-based size standard for its industry. The same pages carry part of a Department of Agriculture rule.

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Federal Register / Vol. 85, No. 99 / Thursday, May 21, 2020 / Rules and Regulations 30835

restriction on receipt of funds under SMALL BUSINESS ADMINISTRATION consider to be CBI and explain why you
CFAP but only as to beneficiaries who, believe SBA should hold this
as a condition of the waiver, agree to 13 CFR Parts 120 and 121 information as confidential. SBA will
apply the CFAP payments to reduce the [Docket Number SBA–2020–0030] review the information and make the
amount of the judgment lien. final determination whether it will
RIN 3245–AH44 publish the information.
(g) In addition to any other Federal
laws that apply to CFAP, the following Business Loan Program Temporary FOR FURTHER INFORMATION CONTACT: A
laws apply: 15 U.S.C. 714; 18 U.S.C. Changes; Paycheck Protection Call Center Representative at 833–572–
286, 287, 371, 1001; and 31 U.S.C. 1001. Program—Treatment of Entities With 0502, or the local SBA Field Office; the
(h) This part applies to applications Foreign Affiliates list of offices can be found at https://
submitted under CFAP through August www.sba.gov/tools/local-assistance/
AGENCY: U.S. Small Business districtoffices.
28, 2020, or until funds made available
Administration.
for CFAP are exhausted. SUPPLEMENTARY INFORMATION:
ACTION: Interim final rule.
§ 9.8 Perjury. I. Background Information
SUMMARY: On April 2, 2020, the U.S.
In either applying for or participating Small Business Administration (SBA) On March 13, 2020, President Trump
in CFAP, or both, the producer is posted an interim final rule announcing declared the ongoing Coronavirus
subject to laws against perjury and any the implementation of the Coronavirus Disease 2019 (COVID–19) pandemic of
penalties and prosecution resulting Aid, Relief, and Economic Security Act sufficient severity and magnitude to
therefrom, with such laws including but (CARES Act). The CARES Act warrant an emergency declaration for all
not limited to 18 U.S.C. 1621. If the temporarily adds a new program, titled States, territories, and the District of
producer willfully makes and represents the ‘‘Paycheck Protection Program,’’ to Columbia. With the COVID–19
as true any verbal or written declaration, the SBA’s 7(a) Loan Program. The emergency, many small businesses
certification, statement, or verification CARES Act also provides for forgiveness nationwide are experiencing economic
that the producer knows or believes not of up to the full principal amount of hardship as a direct result of the
to be true, in the course of either qualifying loans guaranteed under the Federal, State, tribal, and local public
applying for or participating in CFAP, or Paycheck Protection Program (PPP). The health measures that are being taken to
both, then the producer is guilty of PPP is intended to provide economic minimize the public’s exposure to the
perjury and, except as otherwise relief to small businesses nationwide virus. These measures, some of which
provided by law, may be fined, adversely impacted by the Coronavirus are government-mandated, are being
imprisoned for not more than 5 years, or Disease 2019 (COVID–19). SBA posted implemented nationwide and include
both, regardless of whether the producer additional interim final rules on April 3, the closures of restaurants, bars, and
makes such verbal or written 2020, April 14, 2020, April 24, 2020, gyms. In addition, based on the advice
declaration, certification, statement, or April 28, 2020, April 30, 2020, May 5, of public health officials, other
verification within or without the 2020, May 8, 2020, May 13, 2020, and measures, such as keeping a safe
United States. May 14, 2020, and the Department of distance from others or even stay-at-
Stephen L. Censky, the Treasury posted an additional home orders, are being implemented,
interim final rule on April 28, 2020. resulting in a dramatic decrease in
Vice Chairman, Commodity Credit
Corporation, and Deputy Secretary, U.S. This interim final rule supplements the economic activity as the public avoids
Department of Agriculture. previously posted interim final rules by malls, retail stores, and other
[FR Doc. 2020–11025 Filed 5–20–20; 8:45 am]
providing guidance on additional businesses.
eligibility requirements related to On March 27, 2020, the President
BILLING CODE 3410–05–P
entities with foreign affiliates, and signed the Coronavirus Aid, Relief, and
requests public comment. Economic Security Act (the CARES Act)
DEPARTMENT OF AGRICULTURE DATES: (Pub. L. 116–136) to provide emergency
Effective date: This rule is effective assistance and health care response for
Rural Housing Service May 21, 2020. individuals, families, and businesses
Applicability date: This interim final affected by the coronavirus pandemic.
7 CFR Part 1951 rule applies to applications submitted The Small Business Administration
under the Paycheck Protection Program (SBA) received funding and authority
[Docket No. RHS–20–CF–0011] through June 30, 2020, or until funds through the CARES Act to modify
made available for this purpose are existing loan programs and establish a
Notification of Direct Loan Payment exhausted. new loan program to assist small
Deferrals for the Community Facilities Comment date: Comments must be businesses nationwide adversely
Direct Loan Program received on or before June 22, 2020. impacted by the COVID–19 emergency.
ADDRESSES: You may submit comments, Section 1102 of the CARES Act
Correction identified by number SBA–2020–0030 temporarily permits SBA to guarantee
In rule document 2020–08429 through the Federal eRulemaking Portal: 100 percent of 7(a) loans under a new
beginning on page 22009 in the issue of http://www.regulations.gov. Follow the program titled the ‘‘Paycheck Protection
Tuesday, April 21, 2020, make the instructions for submitting comments. Program.’’ Section 1106 of the CARES
following correction: SBA will post all comments on Act provides for forgiveness of up to the
www.regulations.gov. If you wish to full principal amount of qualifying
On page 22009, in the DATES section, submit confidential business loans guaranteed under the Paycheck
‘‘May 12, 2020’’ should read ‘‘April 21, information (CBI) as defined in the User Protection Program (PPP). On April 24,
2020’’. Notice at www.regulations.gov, please 2020, the President signed the Paycheck
[FR Doc. C1–2020–08429 Filed 5–20–20; 8:45 am] send an email to ppp-ifr@sba.gov. Protection Program and Health Care
BILLING CODE 1301–00–D Highlight the information that you Enhancement Act (Pub. L. 116–139),

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30836 Federal Register / Vol. 85, No. 99 / Thursday, May 21, 2020 / Rules and Regulations

which provided additional funding and application of SBA’s affiliation rules, as the need for making any revisions as a
authority for the PPP. well as numerous other eligibility result of these comments.
Under the CARES Act, an entity is requirements. See, e.g., 13 CFR 120.110
eligible for a PPP loan if it is (1) a small III. Paycheck Protection Program
(listing 18 types of ineligible
business concern, or (2) a business Additional Eligibility Criteria
businesses); SBA Form 2483 (including
concern, nonprofit organization mandatory applicant representations Overview
described in section 501(c)(3) of the regarding defaults on previous The CARES Act was enacted to
Internal Revenue Code, veterans government loans or guarantees, Federal provide immediate assistance to
organization described in section suspension or debarment, and criminal individuals, families, and organizations
501(c)(19) of the Internal Revenue Code, backgrounds). The reference in SBA affected by the COVID–19 emergency.
or Tribal business concern described in guidance to employees whose principal Among the provisions contained in the
section 31(b)(2)(C) of the Small Business place of residence is in the United CARES Act are provisions authorizing
Act that employs not more than the States is relevant to a PPP applicant’s SBA to temporarily guarantee loans
greater of 500 employees, or, if calculation of payroll for purposes of under the PPP. Loans under the PPP
applicable, SBA’s employee-based size determining the PPP loan amount and to will be 100 percent guaranteed by SBA,
standard for the industry in which the the calculation of loan forgiveness. The
entity operates. Under existing SBA and the full principal amount of the
fact that an applicant might be eligible loans and any accrued interest may
regulations, an entity is generally for a PPP loan if it has 500 or fewer U.S.
considered together with its affiliates for qualify for loan forgiveness. Additional
employees does not mean that the information about the PPP is available
purposes of determining the entity’s applicant is not also subject to the other
eligibility for SBA loans. See 13 CFR in interim final rules published by SBA
requirements applicable to the PPP. and the Department of the Treasury in
121.301. SBA issued an interim final Instead, an applicant is eligible for a
rule on affiliation (posted April 4, 2020) the Federal Register (85 FR 20811, 85
PPP loan only if it meets all applicable FR 20817, 85 FR 21747, 85 FR 23450,
stating that PPP applicants are subject to eligibility criteria. If an applicant,
the affiliation rules set forth in 13 CFR 85 FR 23917, 85 FR 26321, 85 FR 26324,
together with its domestic and foreign and 85 FR 27287) and posted on May 8,
121.301. See 85 FR 20817 (April 15, affiliates, does not meet the 500-
2020). Those rules deem entities to be 2020, May 13, 2020, and May 14, 2020
employee or other applicable PPP size (85 FR 29845, 85 FR 29842, and 85 FR
affiliates based on factors including standard, it is not eligible for a PPP
stock ownership, overlapping 29847) (collectively, the PPP Interim
loan. Final Rules).
management, and identity of interest. Of
relevance here, SBA’s affiliation rules II. Comments and Immediate Effective 1. Treatment of Foreign Affiliates
provide that in determining an entity’s Date
Are employees of foreign affiliates
number of employees, employees of the The intent of the Act is that SBA
entity ‘‘and all of its domestic and included for purposes of determining
provide relief to America’s small whether a PPP borrower has more than
foreign affiliates’’ are included. As a
businesses expeditiously. This intent, 500 employees?
result, in most cases, a borrower is
along with the dramatic decrease in Yes. The CARES Act specifies that an
considered together with its U.S. and
economic activity nationwide, provides entity is eligible for a PPP loan only if
foreign affiliates for purposes of
good cause for SBA to dispense with the it is (1) a small business concern, or (2)
determining eligibility for the PPP.
30-day delayed effective date provided a business concern, nonprofit
Based on that methodology, the
in the Administrative Procedure Act. organization described in section
borrower application form (SBA Form
Specifically, it is critical to meet 501(c)(3) of the Internal Revenue Code,
2483), which all applicants must
lenders’ and borrowers’ need for clarity veterans organization described in
complete and submit, includes a
concerning program requirements as section 501(c)(19) of the Internal
certification that the applicant ‘‘employs
no more than the greater of 500 or rapidly as possible because the last day Revenue Code, or Tribal business
employees or, if applicable, the size eligible borrowers can apply for and concern described in section 31(b)(2)(C)
standard in number of employees receive a loan is June 30, 2020. of the Small Business Act that employs
established by the SBA in 13 CFR This interim final rule supplements not more than the greater of 500
121.201 for the Applicant’s industry.’’ previous regulations and guidance on an employees, or, if applicable, SBA’s
To provide further clarification of this important, discrete issue. The employee-based size standard for the
methodology, SBA issued guidance on immediate effective date of this interim industry in which the entity operates.
May 5, 2020 (FAQ 44) stating that an final rule will benefit lenders so that SBA’s affiliation regulations provide
applicant must count all of its they can swiftly close and disburse that to determine a concern’s size,
employees and the employees of its U.S. loans to small businesses. This interim employees of the concern ‘‘and all of its
and foreign affiliates, absent a waiver of final rule is effective without advance domestic and foreign affiliates’’ are
or an exception to the affiliation rules. notice and public comment because included. 13 CFR 121.301(f). Therefore,
Some market participants have section 1114 of the Act authorizes SBA to calculate the number of employees of
indicated that there may be uncertainty to issue regulations to implement Title an entity for purposes of determining
regarding whether PPP applicants must I of the Act without regard to notice eligibility for the PPP, an entity must
include employees of foreign affiliates requirements. This rule is being issued include all employees of its domestic
in their employee counts, because SBA to allow for immediate implementation and foreign affiliates, except in those
has previously issued guidance stating of this program. Although this interim limited circumstances where the
that an entity is eligible for a PPP loan final rule is effective immediately, affiliation rules expressly do not apply
if it has 500 or fewer employees whose comments are solicited from interested to the entity.1 Any entity that, together
principal place of residence is in the members of the public on all aspects of
1 Section 7(a)(36)(D)(iv) of the Small Business Act
United States. See 85 FR 20811, 20812 the interim final rule, including section
(15 U.S.C. 636(a)(36)(D)(iv), as added by the CARES
(April 15, 2020). As described above, III below. These comments must be Act, waives SBA’s affiliation rules for (1) any
the generally applicable 500-employee submitted on or before June 22, 2020. business concern with not more than 500
size standard is subject to the SBA will consider these comments and employees that, as of the date on which the loan

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Federal Register / Vol. 85, No. 99 / Thursday, May 21, 2020 / Rules and Regulations 30837

with its domestic and foreign affiliates, from the COVID–19 emergency. This 605(b). The agency must, however,
does not meet the 500-employee or rule’s designation under Executive publish the certification in the Federal
other applicable PPP size standard is Order 13771 will be informed by public Register at the time of publication of the
therefore ineligible for a PPP loan. comment. rule, ‘‘along with a statement providing
However, as an exercise of the factual basis for such certification.’’
enforcement discretion due to Executive Order 12988
If the agency head has not waived the
reasonable borrower confusion based on SBA has drafted this rule, to the requirements for a regulatory flexibility
SBA guidance (which was later resolved extent practicable, in accordance with analysis in accordance with the RFA’s
through a clarifying FAQ on May 5, the standards set forth in section 3(a) waiver provision, and no other RFA
2020), SBA will not find any borrower and 3(b)(2) of Executive Order 12988, to exception applies, the agency must
that applied for a PPP loan prior to May minimize litigation, eliminate prepare the regulatory flexibility
5, 2020 to be ineligible based on the ambiguity, and reduce burden. The rule analysis and publish it in the Federal
borrower’s exclusion of non-U.S has no preemptive or retroactive effect. Register at the time of promulgation or,
employees from the borrower’s Executive Order 13132 if the rule is promulgated in response to
calculation of its employee headcount if an emergency that makes timely
the borrower (together with its SBA has determined that this rule compliance impracticable, within 180
affiliates) 2 had no more than 500 will not have substantial direct effects days of publication of the final rule. 5
employees whose principal place of on the States, on the relationship U.S.C. 604(a), 608(b). Rules that are
residence is in the United States. Such between the National Government and exempt from notice and comment are
borrowers shall not be deemed to have the States, or on the distribution of also exempt from the RFA requirements,
made an inaccurate certification of power and responsibilities among the including conducting a regulatory
eligibility solely on that basis. Under no various layers of government. Therefore, flexibility analysis, when among other
circumstances may PPP funds be used SBA has determined that this rule has things the agency for good cause finds
to support non-U.S. workers or no federalism implications warranting that notice and public procedure are
operations. preparation of a federalism assessment. impracticable, unnecessary, or contrary
2. Additional Information Paperwork Reduction Act, 44 U.S.C. to the public interest. SBA Office of
Chapter 35 Advocacy Guide: How to Comply with
SBA may provide further guidance, if the Regulatory Flexibility Act, Ch.1. p.9.
needed, through SBA notices that will SBA has determined that this rule
will not impose new or modify existing Accordingly, SBA is not required to
be posted on SBA’s website at conduct a regulatory flexibility analysis.
www.sba.gov. Questions on the recordkeeping or reporting requirements
Paycheck Protection Program may be under the Paperwork Reduction Act. Jovita Carranza,
directed to the Lender Relations Regulatory Flexibility Act (RFA) Administrator.
Specialist in the local SBA Field Office. [FR Doc. 2020–10967 Filed 5–19–20; 11:15 am]
The Regulatory Flexibility Act (RFA)
The local SBA Field Office may be BILLING CODE P
generally requires that when an agency
found at https://www.sba.gov/tools/
issues a proposed rule, or a final rule
local-assistance/districtoffices.
pursuant to section 553(b) of the APA or
Compliance With Executive Orders another law, the agency must prepare a DEPARTMENT OF TRANSPORTATION
12866, 12988, 13132, 13563, and 13771, regulatory flexibility analysis that meets
the Paperwork Reduction Act (44 the requirements of the RFA and Federal Aviation Administration
U.S.C. Ch. 35), and the Regulatory publish such analysis in the Federal
Flexibility Act (5 U.S.C. 601–612) Register. 5 U.S.C. 603, 604. Specifically, 14 CFR Part 39
Executive Orders 12866, 13563, and the RFA normally requires agencies to [Docket No. FAA–2019–0204; Project
13771 describe the impact of a rulemaking on Identifier 2018–CE–042–AD; Amendment
small entities by providing a regulatory 39–21129; AD 2020–11–04]
This interim final rule is impact analysis. Such analysis must
economically significant for the address the consideration of regulatory RIN 2120–AA64
purposes of Executive Orders 12866 and options that would lessen the economic
13563, and is considered a major rule Airworthiness Directives; Learjet Inc.
effect of the rule on small entities. The
under the Congressional Review Act. Airplanes
RFA defines a ‘‘small entity’’ as (1) a
SBA, however, is proceeding under the proprietary firm meeting the size AGENCY: Federal Aviation
emergency provision at Executive Order standards of the Small Business Administration (FAA), DOT.
12866 Section 6(a)(3)(D) based on the Administration (SBA); (2) a nonprofit ACTION: Final rule.
need to move expeditiously to mitigate organization that is not dominant in its
the current economic conditions arising field; or (3) a small government SUMMARY: The FAA is adopting a new
jurisdiction with a population of less airworthiness directive (AD) for certain
is disbursed, is assigned a North American Industry than 50,000. 5 U.S.C. 601(3)–(6). Except Learjet Inc. Model 60 airplanes. This AD
Classification System code beginning with 72; (2)
any business concern operating as a franchise that for such small government jurisdictions, was prompted by a report of a reverse
is assigned a franchise identifier code by the neither State nor local governments are thrust command accelerating the
Administration; and (3) any business concern that ‘‘small entities.’’ Similarly, for purposes airplane instead of decelerating the
receives financial assistance from a company of the RFA, individual persons are not airplane. The acceleration with reverse
licensed under section 301 of the Small Business
Investment Act of 1958 (15 U.S.C. 681). SBA also small entities. The requirement to thrust commanded occurred when the
applies affiliation exceptions to certain categories of conduct a regulatory impact analysis thrust reverser doors were in the stowed
entities. 13 CFR 121.103(b). does not apply if the head of the agency position instead of the deployed
2 For purposes of this safe harbor, a borrower
‘‘certifies that the rule will not, if position. This AD requires installing a
must include its affiliates to the extent required
under the interim final rule on affiliates, 85 FR
promulgated, have a significant thrust reverser (T/R) Voice Command
20817 (April 15, 2020). SBA’s affiliation exceptions economic impact on a substantial Warning System (VCWS) to alert the
in 13 CFR 121.103(b) apply to the PPP. number of small entities.’’ 5 U.S.C. crew of a T/R malfunction. The FAA is

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