Federal Register, Vol. 86, No. 23, Friday, February 5, 2021 — Rules and Regulations
Summary
This Federal Register page, Vol. 86, No. 23, Friday, February 5, 2021, includes a joint Small Business Administration and Department of the Treasury interim final rule, Business Loan Program Temporary Changes; Paycheck Protection Program - Loan Forgiveness Requirements and Loan Review Procedures as Amended by Economic Aid Act. It states that comments must be received on or before March 8, 2021 and says Parts IV.6.c., IV.7 and V, on Paycheck Protection Program SBA Loan Review Procedures and Related Borrower and Lender Responsibilities, apply to all Paycheck Protection Program loans. The same page also carries a Bureau of Consumer Financial Protection correction concerning the Qualified Mortgage Definition under the Truth in Lending Act (Regulation Z).
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Cite this document
“Federal Register, Vol. 86, No. 23, Friday, February 5, 2021 — Rules and Regulations.”
Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/department-of-the-treasury-interim-final-rule-on-loan-forgiveness-requirements-and-loan-review-proce-edd03ebb52/
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8283
Rules and Regulations Federal Register
Vol. 86, No. 23
Friday, February 5, 2021
This section of the FEDERAL REGISTER Dated: January 15, 2021. forgiveness payment had not been
contains regulatory documents having general Grace Feola, remitted by SBA as of December 27,
applicability and legal effect, most of which Federal Register Liaison, Bureau of Consumer 2020. Parts IV.6.c., IV.7 and V of this
are keyed to and codified in the Code of Financial Protection. interim final rule, Paycheck Protection
Federal Regulations, which is published under Program SBA Loan Review Procedures
[FR Doc. 2021–01387 Filed 2–4–21; 8:45 am]
50 titles pursuant to 44 U.S.C. 1510.
BILLING CODE 4810–AM–P and Related Borrower and Lender
The Code of Federal Regulations is sold by Responsibilities, apply to all Paycheck
the Superintendent of Documents. Protection Program loans.
Comment date: Comments must be
SMALL BUSINESS ADMINISTRATION
received on or before March 8, 2021.
BUREAU OF CONSUMER FINANCIAL 13 CFR Part 120 ADDRESSES: You may submit comments,
PROTECTION identified by number SBA–2021–0006
[Docket Number SBA–2021–0006] through the Federal eRulemaking Portal:
12 CFR Part 1026 http://www.regulations.gov. Follow the
RIN 3245–AH65
[Docket No. CFPB–2020–0028]
instructions for submitting comments.
DEPARTMENT OF THE TREASURY SBA will post all comments on
RIN 3170–AA98 www.regulations.gov. If you wish to
RIN 1505–AC75 submit confidential business
Qualified Mortgage Definition Under Business Loan Program Temporary information (CBI) as defined in the User
the Truth in Lending Act (Regulation Changes; Paycheck Protection Notice at www.regulations.gov, please
Z): Seasoned QM Loan Definition; Program—Loan Forgiveness send an email to ppp-ifr@sba.gov. All
Correction Requirements and Loan Review other comments must be submitted
Procedures as Amended by Economic through the Federal eRulemaking Portal
AGENCY: Bureau of Consumer Financial described above. Highlight the
Protection. Aid Act
information that you consider to be CBI
ACTION: Final rule; correction. AGENCY: U.S. Small Business and explain why you believe SBA
Administration; Department of the should hold this information as
SUMMARY: The Bureau of Consumer
Treasury. confidential. SBA will review the
Financial Protection (Bureau) recently information and make the final
published ‘‘Qualified Mortgage ACTION: Interim final rule.
determination whether it will publish
Definition Under the Truth in Lending SUMMARY: This interim final rule the information.
Act (Regulation Z): Seasoned QM Loan implements changes related to the FOR FURTHER INFORMATION CONTACT: A
Definition,’’ which appeared in the forgiveness and review of loans made
Federal Register on December 29, 2020. Call Center Representative at 833–572–
under the Paycheck Protection Program 0502, or the local SBA Field Office; the
This document corrects a scrivener’s (PPP), which was originally established
error in an amendatory instruction in list of offices can be found at https://
under the Coronavirus Aid, Relief, and www.sba.gov/tools/local-assistance/
that document. Economic Security Act (CARES Act) to districtoffices.
DATES: Effective March 1, 2021. provide economic relief to small
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT: businesses nationwide adversely
Amanda Quester, Senior Counsel, Office impacted by the Coronavirus Disease I. Background Information
of Regulations, at (202) 435–7700. If you 2019 (COVID–19). On December 27, On March 13, 2020, President Trump
require this document in an alternative 2020, the Economic Aid to Hard-Hit declared the ongoing Coronavirus
electronic format, please contact CFPB_ Small Businesses, Nonprofits, and Disease 2019 (COVID–19) pandemic of
Accessibility@cfpb.gov. Venues Act (Economic Aid Act) was sufficient severity and magnitude to
SUPPLEMENTARY INFORMATION: In FR Doc. enacted, extending the authority to warrant an emergency declaration for all
2020–27571 appearing on page 86402 in make PPP loans through March 31, States, territories, and the District of
the Federal Register of Tuesday, 2021, revising certain PPP requirements, Columbia. With the COVID–19
December 29, 2020, the following and permitting second draw PPP loans. emergency, many small businesses
correction is made: This interim final rule consolidates nationwide continue to experience
prior rules related to forgiveness and economic hardship as a direct result of
§ 1026.43 [Corrected] reviews of PPP loans and incorporates the Federal, State, and local public
■ On page 86452, in the second column, changes made by the Economic Aid Act, health measures that continue to be
in amendment 2, the instruction including with respect to forgiveness of taken to minimize the public’s exposure
‘‘Amend § 1026.43 by revising second draw PPP loans. to the virus. In addition, based on the
paragraphs (e)(1) and (e)(2) introductory DATES: advice of public health officials, other
text and adding paragraph (e)(7) to read Effective date: Unless otherwise voluntary measures continue to be
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as follows: ’’ is corrected to read: specified in the Economic Aid Act, the observed, resulting in a decrease in
‘‘Amend § 1026.43 by revising the provisions of this interim final rule are economic activity as the public avoids
headings for paragraphs (e) and (e)(1) effective February 3, 2021. malls, retail stores, and other
and paragraphs (e)(1)(i) and (e)(2) Applicability date: This interim final businesses.
introductory text and adding paragraph rule applies to Paycheck Protection On March 27, 2020, the President
(e)(7) to read as follows:’’. Programs loans for which a loan signed the Coronavirus Aid, Relief, and
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8284 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations
Economic Security Act (the CARES Act) with guidance on requirements original interim final rules are adopted
(Pub. L. 116–136) to provide emergency governing forgiveness of PPP loans, and here.
assistance and health care response for (2) informs borrowers and lenders of Six provisions of this interim final
individuals, families, and businesses SBA’s process for reviewing loan rule are an exercise of rulemaking
affected by the coronavirus pandemic. applications and loan forgiveness authority by Treasury either jointly with
The Small Business Administration applications. SBA is incorporating and SBA or by Treasury alone: (1) The
(SBA) received funding and authority restating the prior interim final rules additional reference period option
through the CARES Act to modify relating to loan forgiveness and loan provided for seasonal employers, (2) the
existing loan programs and establish a reviews and making revisions to de minimis exemption provided with
new loan program to assist small conform these prior interim final rules respect to certain offers of rehire, (3) the
businesses nationwide adversely to the amendments made by the de minimis exemption from the full-
impacted by the COVID–19 emergency. Economic Aid Act, including for PPP time equivalent employee reduction
Section 1102 of the CARES Act loans made under section 7(a)(37) of the penalty when an employee is, for
temporarily permitted SBA to guarantee Small Business Act. The prior interim example, fired for cause, (4) the de
100 percent of 7(a) loans under a new final rules relating to loan forgiveness minimis exemption from the full-time
program titled the ‘‘Paycheck Protection and loan reviews that are incorporated equivalent employee reduction penalty
Program,’’ pursuant to section 7(a)(36) in this interim final rule are: The first when the borrower eliminates
of the Small Business Act (15 U.S.C. interim final rule on loan forgiveness reductions by December 31, 2020 or, for
636(a)(36)). Section 1106 of the CARES (85 FR 33004) (June 1, 2020); the first a PPP loan made after December 27,
Act provided for forgiveness of up to the interim final rule on SBA loan review 2020, the last day of the loan’s covered
full principal amount of qualifying procedures and related borrower and period, (5) the de minimis exemption
loans guaranteed under the Paycheck lender responsibilities (85 FR 33010) from the full-time equivalent (FTE)
Protection Program (PPP). On April 24, (June 1, 2020); the interim final rule employee reduction penalty for certain
2020, the President signed the Paycheck incorporating Flexibility Act PPP loans of $50,000 or less, and (6) the
Protection Program and Health Care Amendments (85 FR 38304) (June 26, de minimis exemption from the
Enhancement Act (Pub. L. 116–139), 2020); the interim final rule on employee salary and wages reduction
which provided additional funding and Treatment of Owners and Forgiveness of penalty for certain PPP loans of $50,000
authority for the Paycheck Protection Certain Nonpayroll Costs (85 FR 52881) or less. Otherwise, all provisions in this
Program. (August 27, 2020); and the interim final rule are an exercise of rulemaking
On June 5, 2020, the President signed rule on Additional Revisions to Loan authority by SBA alone.
the Paycheck Protection Program Forgiveness and Loan Review
Flexibility Act of 2020 (Flexibility Act) II. Comments and Immediate Effective
Procedures Interim Final Rules (85 FR Date
(Pub. L. 116–142), which changed 66214) (October 19, 2020). The rule also
provisions of the PPP relating to the incorporates the forgiveness portions of This interim final rule is being issued
maturity of PPP loans, the deferral of the interim final rules regarding without advance notice and public
PPP loan payments, and the forgiveness individuals with self-employment comment because section 303 of the
of PPP loans. On July 4, 2020, Public income (85 FR 21747 (April 20, 2020) Economic Aid Act authorizes SBA to
Law 116–147 extended the authority for and 85 FR 36997 (June 19, 2020)) and issue regulations to implement the
SBA to guarantee PPP loans to August fishing boat owners (85 FR 39066) (June Economic Aid Act without regard to
8, 2020. 30, 2020). notice requirements. In addition, this
On December 27, 2020, the President This rule should be interpreted rule is being issued to allow for
signed the Economic Aid to Hard-Hit consistently with the sets of Frequently immediate implementation of this
Small Businesses, Nonprofits and Asked Questions (FAQs) regarding the program. The intent of both the CARES
Venues Act (Economic Aid Act) (Pub. L. PPP that are posted on SBA’s and the Act and the Economic Aid Act is that
116–260), which reauthorizes lending Department of the Treasury’s (Treasury) SBA provides relief to America’s small
under the PPP through March 31, 2021, websites, the consolidated interim final businesses expeditiously. The Economic
and among other things, modifies the rule implementing updates to the Aid Act provided that several of the
PPP, including provisions relating to Paycheck Protection Program (86 FR changes relating to loan forgiveness are
forgiveness of PPP loans. The Economic 3692 (January 14, 2021)) and the interim effective as if included in the CARES
Aid Act added a new temporary section final rule on second draw PPP loans (86 Act and apply to any loan made
7(a)(37) to the Small Business Act, FR 3712 (January 14, 2021)); however, pursuant to section 7(a)(36) of the Small
which authorizes SBA to guarantee the Economic Aid Act overrides any Business Act before, on, or after
additional PPP loans to eligible conflicting guidance in the FAQs, and December 27, 2020, including
borrowers under generally the same SBA will be revising the FAQs to fully forgiveness of such a loan. Accordingly,
terms and conditions available under conform to the Economic Aid Act as loans that were made in 2020 but for
section 7(a)(36) of the Small Business quickly as feasible. which SBA has not yet remitted
Act through March 31, 2021. The Most of this document restates forgiveness to the lender will be
Economic Aid Act also redesignates existing regulatory provisions to provide forgiven based on changes made in the
section 1106 of the CARES Act as PPP lenders and new and existing PPP Economic Aid Act, as implemented in
section 7A and transfers that section to borrowers a single regulation to consult this interim final rule. Given the urgent
the Small Business Act, to appear after on loan forgiveness and loan review need to provide borrowers that are
section 7 of the Small Business Act.1 requirements and processes. To enhance eligible for loan forgiveness with timely
As described below, this interim final the readability of this document, SBA relief, the Administrator in consultation
rule (1) provides borrowers and lenders
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has not reproduced the policy and legal with the Secretary has determined that
justifications for existing regulatory it is impractical and not in the public
1 Because section 1106 of the CARES Act is now
provisions restated here, except to the interest to provide a 30-day delayed
codified as section 7A of the Small Business Act,
any reference to section 1106 of the CARES Act in
extent that those justifications may be effective date. An immediate effective
the rules that are being restated herein will refer to helpful to the borrower or lender. date will allow SBA to continue
section 7A. However, those justifications from the remitting forgiveness payments to
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8285
lenders without disruption and in including the PPP, is ineligible for a Table of Contents
accordance with the amendments made loan, or has violated section 7(a), or any IV. Paycheck Protection Program Loan
by the Economic Aid Act. This good rule, regulation or order issued Forgiveness Requirements
cause justification also supports waiver thereunder.3 Additionally, under 1. General
of the 60-day delayed effective date for section 7(a), the Administrator is a. What amounts are eligible for
major rules under the Congressional empowered to make loans in forgiveness?
Review Act at 5 U.S.C. 808(2). Although cooperation with lenders through b. For borrowers that are individuals with
this interim final rule is effective self-employment income who file a Form
agreements to participate on a deferred 1040, Schedule C or F, what amounts are
immediately, comments are solicited (guaranteed) basis.4 Further, the eligible for forgiveness?
from interested members of the public Administrator may make such rules and 2. Loan Forgiveness Process
on all aspects of the interim final rule. regulations as deemed necessary and a. What is the general process to obtain
These comments must be submitted loan forgiveness?
take any and all actions determined to
on or before March 8, 2021. SBA will b. When must a borrower apply for loan
consider these comments and the need be necessary or desirable with respect to
forgiveness or start making payments on
for making any revisions as a result of 7(a) loans.5 Pursuant to these provisions a loan?
these comments. of the Small Business Act, SBA has 3. Payroll Costs Eligible for Loan
issued regulations establishing the Forgiveness
III. Paycheck Protection Program— standards by which it will investigate a. When must payroll costs be incurred
Loan Forgiveness and Loan Review whether a loan met program and/or paid to be eligible for forgiveness?
Procedures as Amended by Economic requirements and the circumstances b. Are salary, wages, or commission
Aid Act payments to furloughed employees;
under which SBA will be released from
bonuses; or hazard pay during the
Overview liability on a guarantee for such a loan.6 covered period eligible for loan
The CARES Act was enacted to Additionally, section 7A(l)(1)(E) of the forgiveness?
provide immediate assistance to Small Business Act expressly provides c. Are there caps on the amount of loan
that SBA may review and audit PPP forgiveness available for owner-
individuals, families, and organizations
loans of $150,000 or less and access any employees and self-employed
affected by the COVID–19 emergency. individuals’ own payroll compensation?
Among the provisions contained in the records the borrower is required to
d. Are any individuals with an ownership
CARES Act are provisions authorizing retain. stake in a PPP borrower exempt from
SBA to temporarily guarantee loans In light of the structure of the PPP application of the PPP owner-employee
under the Paycheck Protection Program program established by the CARES Act compensation rule when determining the
(PPP). Loans under the PPP will be 100 and the PPP Interim Final Rules, in amount of their compensation that is
percent guaranteed by SBA, and the full eligible for loan forgiveness?
which loans and loan forgiveness are e. May a fishing boat owner include as
principal amount of the loans may provided based on the borrower’s payroll costs in its application for loan
qualify for loan forgiveness. certifications and documentation forgiveness any compensation paid to a
Under the CARES Act, as amended by provided by the borrower, the crewmember who received his or her
the Economic Aid Act, SBA is own PPP loan and is seeking forgiveness
Administrator, in consultation with the
authorized to guarantee loans under the for amounts of compensation the
Secretary of the Treasury (Secretary),
PPP, a new temporary 7(a) program, crewmember received for performing
through March 31, 2021. PPP loans previously determined that it was
services described in Section 3121(b)(20)
made under section 7(a)(36) of the Small appropriate to adopt additional of the Internal Revenue Code with
Business Act may be referred to as procedures and criteria through which respect to that owner’s fishing boat?
‘‘First Draw PPP Loans,’’ and PPP loans SBA will review whether an action by 4. Nonpayroll Costs Eligible for Loan
made under section 7(a)(37) of the Small the borrower has resulted in its receipt Forgiveness
of a PPP loan that did not meet program a. When must nonpayroll costs be incurred
Business Act may be referred to as and/or paid to be eligible for forgiveness?
‘‘Second Draw PPP Loans.’’ (Any requirements.7 SBA’s review of
b. Are advance payments of interest on
reference to ‘‘PPP loans’’ or ‘‘PPP loan’’ borrower certifications and mortgage obligations eligible for loan
herein refers to both First Draw PPP representations regarding the borrower’s forgiveness?
Loans and Second Draw PPP Loans.) eligibility for a PPP loan and loan c. Are amounts attributable to the business
The intent of the CARES Act and the forgiveness, and the borrower’s use of operation of a tenant or sub-tenant of the
Economic Aid Act is that SBA provide PPP loan proceeds, is essential to ensure PPP borrower or, in the context of home-
relief to America’s small businesses that PPP loans are directed to the based businesses, household expenses,
eligible for forgiveness?
expeditiously, which is expressed in the entities Congress intended, and that PPP d. Are rent payments to a related party
CARES Act by giving all lenders loan proceeds are used for the purposes eligible for loan forgiveness?
delegated authority and streamlining the Congress required, including the CARES 5. Reductions to Loan Forgiveness Amount
requirements of the regular 7(a) loan Act’s and the Economic Aid Act’s a. Will a borrower’s loan forgiveness
program. This intent is also expressed in central purposes of keeping workers amount be reduced if the borrower
the Economic Aid Act through the paid and employed. reduced the hours of an employee, then
statutory deadlines requiring that the offered to restore the reduction in hours,
Administrator issue certain guidance but the employee declined the offer?
3 15 U.S.C. 634(b)(11).
and regulations within 10 days of b. What effect does a reduction in a
4 15 U.S.C. 636(a).
borrower’s number of full-time
enactment.2 5 15 U.S.C. 634(b)(6) and (b)(7).
equivalent (FTE) employees have on the
The Small Business Act authorizes 6 13 CFR 120.524.
loan forgiveness amount?
the Administrator to conduct 7 This interim final rule is an exercise of SBA’s
c. What does ‘‘full-time equivalent
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investigations to determine whether a rulemaking authority under 15 U.S.C. 634(b), 15 employee’’ mean?
recipient or participant in any U.S.C. 633(d), and 5 U.S.C. App., Reorg. Plan No.
4 of 1965, 11(b), 13(a) (abolishing Loan Policy
d. How should a borrower calculate its
assistance under a 7(a) program, Board and transferring functions to the number of FTE employees?
Administrator); sections 1106(k) (now section 7A(k) e. What effect does a borrower’s reduction
2 See, e.g., section 303 of the Economic Aid Act; of the Small Business Act) and 1114 of the CARES in employees’ salary or wages have on
section 7(a)(37)(M) of the Small Business Act. Act, and section 307 of the Economic Aid Act. the loan forgiveness amount?
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8286 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations
f. How should borrowers seeking loan IV. Paycheck Protection Program Loan (4) Business utility payments for the
forgiveness account for the reduction Forgiveness Requirements distribution of electricity, gas, water,
based on a reduction in the number of transportation, telephone, or internet
employees (section 7A(d)(2)) relative to 1. General
access for which service began before
the reduction relating to salary and a. What amounts are eligible for February 15, 2020.
wages (section 7A(d)(3))? forgiveness? 8 (5) Covered operations expenditures.
g. If a borrower restores reductions made A covered operations expenditure is a
to employee salaries and wages or FTE Section 7A(b) of the Small Business
payment for any business software or
employees, can the borrower avoid a Act provides that, subject to several cloud computing service that facilitates
reduction in its loan forgiveness amount? important limitations, borrowers shall business operations, product or service
h. Will a borrower’s loan forgiveness be eligible for forgiveness of their PPP delivery, the processing, payment, or
amount be reduced if an employee is loan in an amount equal to the sum of tracking of payroll expenses, human
fired for cause, voluntarily resigns, or the following costs incurred and resources, sales and billing functions, or
voluntarily requests a schedule payments made during the covered accounting or tracking of supplies,
reduction? period (as described in section IV.3. inventory, records and expenses.11
i. Is a borrower with a loan of $50,000 or below). (6) Covered property damage costs. A
less exempt from any reductions to the (1) Payroll costs.9 Payroll costs consist covered property damage cost is a cost
loan forgiveness amount? of compensation to employees (whose related to property damage and
6. Documentation Requirements principal place of residence is the vandalism or looting due to public
a. What must borrowers submit for United States) in the form of salary, disturbances that occurred during 2020
forgiveness of their PPP loans? wages, commissions, or similar that was not covered by insurance or
b. What documentation must borrowers compensation; cash tips or the other compensation.12
who are individuals with self- equivalent (based on employer records (7) Covered supplier costs. A covered
employment income who file a Form of past tips or, in the absence of such supplier cost means an expenditure
1040, Schedule C or F, submit to their records, a reasonable, good-faith made by a borrower to a supplier of
lender with their request for loan employer estimate of such tips); goods for the supply of goods that—(A)
forgiveness? payment for vacation, parental, family, are essential to the operations of the
c. What additional documentation must a medical, or sick leave; allowance for borrower at the time at which the
borrower submit when the President of separation or dismissal; payment for the expenditure is made; and (B) is made
the United States, Vice President of the provision of employee benefits pursuant to a contract, order, or
United States, the head of an Executive consisting of group health care or group purchase order—(i) in effect at any time
department, or a Member of Congress, or life, disability, vision, or dental before the covered period with respect
the spouse of any of the preceding, insurance, including insurance to the applicable covered loan; or (ii)
directly or indirectly holds a controlling premiums, and retirement; payment of with respect to perishable goods, in
interest in the borrower? state and local taxes assessed on effect before or at any time during the
7. Lender Hold Harmless compensation of employees; and for an covered period with respect to the
V. Paycheck Protection Program SBA Loan independent contractor or sole applicable covered loan.13
Review Procedures and Related proprietor, wages, commissions, (8) Covered worker protection
Borrower and Lender Responsibilities income, or net earnings from self- expenditures. A covered worker
1. SBA Reviews of Individual PPP Loans employment, or similar compensation. protection expenditure:
a. Will SBA review individual PPP loans? Payroll costs that are qualified wages (A) Means an operating or a capital
b. What borrower representations and taken into account in determining the expenditure to facilitate the adaptation
statements will SBA review? Employer Retention Credit are not of the business activities of an entity to
c. When will SBA undertake a loan review? eligible for loan forgiveness.10 comply with requirements established
d. Will I have the opportunity to respond (2) Interest payments on any business or guidance issued by the Department of
to SBA’s questions in a review? mortgage obligation on real or personal Health and Human Services, the Centers
e. If SBA determines that a borrower is for Disease Control, or the Occupational
property that was incurred before
ineligible for a PPP loan, can the loan be Safety and Health Administration, or
February 15, 2020 (but not any
forgiven? any equivalent requirements established
prepayment or payment of principal).
f. May a borrower appeal SBA’s or guidance issued by a State or local
(3) Payments on business rent
determination that the borrower is government related to the maintenance
obligations on real or personal property
ineligible for a PPP loan or ineligible for of standards for sanitation, social
under a lease agreement in force before
the loan amount or the loan forgiveness distancing, or any other worker or
amount claimed by the borrower?
February 15, 2020.
customer safety requirement related to
2. The Loan Forgiveness Process for 8 This subsection was originally published at 85 COVID–19, during the period beginning
Lenders FR 33004, section III.1. (June 1, 2020) and has been on March 1, 2020 and ending the date
a. What should a lender review? modified to conform to section 304 of the Economic on which the national emergency
b. What is the timeline for the lender’s Aid Act. declared by the President under the
decision on a loan forgiveness 9 ‘‘Payroll costs’’ has the same meaning as in
National Emergencies Act (50 U.S.C.
application? subsections III.B.4.g. and h. of the consolidated
interim final rule implementing updates to the 1601 et seq.) with respect to the
c. What should a lender do if it receives Paycheck Protection Program. 86 FR 3692, 3702 Coronavirus Disease 2019 (COVID–19)
notice that SBA is reviewing a loan? (Jan. 14, 2021). expires;
d. What should a lender do if a borrower 10 Section 7(a)(37)(J)(iii) of the Small Business Act
(B) may include—
submits documentation of eligible costs provides these amounts are not eligible for
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that exceed a borrower’s PPP Loan forgiveness for Second Draw PPP Loans. This
11 This eligible nonpayroll cost was added by
provision similarly provides that these amounts are
Amount? not eligible for forgiveness for First Draw PPP Loans section 304 of the Economic Aid Act.
3. Lender Fees in order to provide consistent treatment and to 12 This eligible nonpayroll cost was added by
prevent a borrower from receiving forgiveness for section 304 of the Economic Aid Act.
amounts for which the borrower will also receive 13 This eligible nonpayroll cost was added by
a tax credit. section 304 of the Economic Aid Act.
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8287
(i) the purchase, maintenance, or during the covered period (as described Schedule C or F (business rent
renovation of assets that create or in section IV.3 below) 17 on: payments);
expand— i. Payroll costs including salary, v. utility payments under service
(I) a drive-through window facility; wages, and tips, up to $100,000 of agreements dated before February 15,
(II) an indoor, outdoor, or combined annualized pay per employee, as 2020 to the extent they are deductible
air or air pressure ventilation or prorated for the period during which the on Form 1040 Schedule C or F (business
filtration system; payments are made or the obligation to utility payments);
(III) a physical barrier such as a make the payments is incurred vi. any covered operations
sneeze guard; (maximum per individual is $100,000 expenditures to the extent they are
(IV) an expansion of additional prorated for the covered period, e.g., for deductible on Form 1040 Schedule C or
indoor, outdoor, or combined business an 8-week covered period a maximum F; 22
space; of $15,385 and for a 24-week covered vii. any covered property damage
(V) an onsite or offsite health period a maximum of $46,154),18 as costs to the extent they are deductible
screening capability; or well as covered benefits for employees on Form 1040 Schedule C or F; 23
(VI) other assets relating to the (but not owners), including health care viii. Any covered supplier costs to the
compliance with the requirements or expenses, retirement contributions, and extent they are deductible on Form 1040
guidance described in subsection (A), as state taxes imposed on employee payroll Schedule C or F; 24 and
determined by the Administrator in ix. any covered worker protection
paid by the employer (such as
consultation with the Secretary of expenditures to the extent they are
unemployment insurance premiums),
Health and Human Services and the deductible on Form 1040 Schedule C or
but excluding any qualified wages taken
Secretary of Labor; and F.25
into account in determining the A borrower may receive forgiveness
(ii) the purchase of— Employer Retention Credit;
(I) covered materials described in for the new nonpayroll costs described
ii. owner compensation replacement, in vi., vii., viii., and ix. only if SBA had
§ 328.103(a) of title 44, Code of Federal calculated based on 2019 or 2020 19 net
Regulations, or any successor not yet remitted a forgiveness payment
profit 20 as described in subsection 3.c. on the borrower’s loan to the borrower’s
regulation; below; forgiveness of such amounts is
(II) particulate filtering facepiece PPP lender as of December 27, 2020.
limited to either (a) the prorated portion
respirators approved by the National of 2019 or 2020 net profit for a covered 2. Loan Forgiveness Process
Institute for Occupational Safety and period up to 2.5 months, or (b) 2.5
Health, including those approved only a. What is the general process to obtain
months’ worth (2.5/12) of 2019 or 2020 loan forgiveness? 26
for emergency use authorization; or net profit (up to $20,833) for a covered
(III) other kinds of personal protective period greater than 2.5 months,21 To receive loan forgiveness on either
equipment, as determined by the excluding any qualified sick leave a First Draw PPP Loan or a Second Draw
Administrator in consultation with the equivalent amount for which a credit is PPP Loan, a borrower must complete
Secretary of Health and Human Services claimed under section 7002 of the and submit the Loan Forgiveness
and the Secretary of Labor; and Families First Coronavirus Response Application 27 to its lender (or to the
(C) does not include residential real Act (FFCRA) (Pub. L. 116–127) or lender servicing its loan). For Second
property or intangible property.14 qualified family leave equivalent Draw PPP Loans in excess of $150,000,
This interim final rule uses the term amount for which a credit is claimed the borrower must submit its loan
‘‘nonpayroll costs’’ to refer to the under section 7004 of FFCRA; forgiveness application for the First
payments described in (2)–(8) above. iii. payments of interest on mortgage Draw PPP Loan before or
Eligible nonpayroll costs cannot exceed obligations on real or personal property simultaneously with the loan
40 percent of the loan forgiveness incurred before February 15, 2020, to forgiveness application for the Second
amount.15 A borrower may receive the extent they are deductible on Form Draw PPP Loan, even if the calculated
forgiveness for the nonpayroll costs 1040 Schedule C or F (business amount of forgiveness on the First Draw
described in (5), (6), (7) and (8) only if mortgage payments); PPP Loan is zero.28
SBA had not yet remitted a forgiveness iv. rent payments on lease agreements
payment on the borrower’s loan to the in force before February 15, 2020, to the
22 This eligible nonpayroll cost was added by
borrower’s PPP lender as of December section 304 of the Economic Aid Act.
extent they are deductible on Form 1040 23 This eligible nonpayroll cost was added by
27, 2020 (the date of the Economic Aid
section 304 of the Economic Aid Act.
Act’s enactment). 17 The Economic Aid Act amended the definition 24 This eligible nonpayroll cost was added by
b. For borrowers that are individuals of the forgiveness covered period. section 304 of the Economic Aid Act.
18 Due to the amended definition of forgiveness 25 This eligible nonpayroll cost was added by
with self-employment income who file covered period in the Economic Aid Act, this section 304 of the Economic Aid Act.
a Form 1040, Schedule C or F, what calculated amount has changed. 26 This subsection was originally published at 85
amounts are eligible for forgiveness? 16 19 For First Draw PPP loans made in 2020, FR 33004, section III.2. (June 1, 2020) and was
borrowers use 2019. For First Draw PPP loans made amended by 85 FR 38304, subsection III.2.a. (June
The amount of loan forgiveness can be in 2021 and Second Draw PPP Loans, borrowers use 26, 2020) and 85 FR 66214, subsections III.2.a. and
up to the full principal amount of the the year (2019 or 2020) that was used to calculate b. (Oct. 19, 2020) and has been modified to conform
loan plus accrued interest. The actual the borrower’s loan amount. to section 307 of the Economic Aid Act.
20 For self-employed borrowers that file Form 27 SBA Form 3508, 3508EZ, 3508S, as applicable,
amount of loan forgiveness will depend,
1040, Schedule F and have no employees, gross or lender equivalent. Loan Forgiveness Application
in part, on the total amount spent income may be used instead of net profit forms were amended to conform to the Economic
throughout this calculation. For self-employed Aid Act, including section 307, which requires a
14 This eligible nonpayroll cost was added by
borrowers that file Schedule F and have employees, simplified forgiveness application for loans of not
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section 304 of the Economic Aid Act. the difference between gross income and employee more than $150,000. The Simplified Forgiveness
15 See section 7A(d)(8) of the Small Business Act. payroll costs may be used instead of net profit Application is SBA Form 3508S (as amended).
16 This subsection was originally published at 85 throughout this calculation. See section 313 of the 28 This requirement is necessary to provide
FR 21747, subsection III.1.f. (Apr. 20, 2020) and has Economic Aid Act. information relevant to the borrower’s eligibility for
been modified to conform to subsequent rules or 21 Section 306 of the Economic Aid Act allows the the Second Draw PPP Loan and loan forgiveness.
guidance and sections 306, 313, and 344 of the borrower to select a covered period between 8 A borrower is eligible for a Second Draw PPP Loan
Economic Aid Act. weeks and 24 weeks. Continued
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8288 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations
As a general matter, the lender will must mark the PPP loan note as ‘‘paid 3. Payroll Costs Eligible for Loan
review the application and make a in full’’ and report the status of the loan Forgiveness
decision regarding loan forgiveness. The as ‘‘paid in full’’ on the next monthly a. When must payroll costs be incurred
lender has 60 days from receipt of a 1502 report filed by the lender.30 and/or paid to be eligible for
complete application to issue a decision
The general loan forgiveness process forgiveness? 34
to SBA. If the lender determines that the
described above applies only to loan In general, payroll costs paid or
borrower is entitled to forgiveness of
some or all of the amount applied for forgiveness applications that are not incurred during the covered period are
under the statute and applicable reviewed by SBA prior to the lender’s eligible for forgiveness. For purposes of
regulations, the lender must request decision on the forgiveness application. loan forgiveness, the covered period is
payment from SBA at the time the Part V of this interim final rule the period beginning on the date the
lender issues its decision to SBA. SBA describes SBA’s procedures for lender disburses the PPP loan and
will, subject to any SBA review of the reviewing PPP loan applications and ending on a date selected by the
borrower’s loan(s) or loan application(s), loan forgiveness applications. borrower that occurs during the period
remit the appropriate forgiveness (i) beginning on the date that is 8 weeks
b. When must a borrower apply for loan after the date of disbursement, and (ii)
amount to the lender, plus any interest
forgiveness or start making payments on ending on the date that is 24 weeks after
accrued through the date of payment,
not later than 90 days after the lender a loan? 31 the date of disbursement.35 The covered
issues its decision to SBA. The EIDL periods for a First Draw PPP Loan and
A borrower may submit a loan
Advance Amount received by the a Second Draw PPP Loan cannot
forgiveness application any time on or overlap; the borrower must use all
borrower will not reduce the amount of before the maturity date of the loan if
forgiveness to which the borrower is proceeds of the First Draw PPP Loan for
the borrower has used all of the loan eligible expenses before disbursement of
entitled and will not be deducted from
proceeds for which the borrower is the Second Draw PPP Loan.
the forgiveness payment amount that
SBA remits to the Lender.29 If SBA requesting forgiveness, except that a Payroll costs are considered paid on
determines in the course of its review borrower applying for forgiveness of a the day that paychecks are distributed
that the borrower was ineligible for the Second Draw PPP Loan that is more or the borrower originates an ACH
PPP loan under the statute, the SBA than $150,000 must submit the loan credit transaction. Payroll costs incurred
rules or guidance available at the time forgiveness application for its First during the borrower’s last pay period of
of the borrower’s loan application, or Draw PPP Loan before or the covered period are eligible for
the terms of the borrower’s PPP loan simultaneously with the loan forgiveness if paid on or before the next
application (for example, because the forgiveness application for its Second regular payroll date; otherwise, payroll
borrower lacked an adequate basis for Draw PPP Loan.32 If the borrower does costs must be paid during the covered
the certifications that it made in its PPP not apply for loan forgiveness within 10 period to be eligible for forgiveness.
loan application), the loan will not be months after the last day of the Payroll costs generally are incurred on
eligible for loan forgiveness. The lender maximum covered period of 24 weeks,33 the day the employee’s pay is earned
must notify the borrower of the or if SBA determines that the loan is not (i.e., on the day the employee worked).
forgiveness amount. If only a portion of For employees who are not performing
eligible for forgiveness (in whole or in
the loan is forgiven, or if the forgiveness work but are still on the borrower’s
part), the PPP loan is no longer deferred
request is denied, any remaining payroll, payroll costs are incurred based
and the borrower must begin paying on the schedule established by the
balance due on the loan must be repaid principal and interest. If this occurs, the
by the borrower on or before the borrower (typically, each day that the
lender must notify the borrower of the employee would have performed work).
maturity date of the loan. The lender
date the first payment is due. The lender
must notify the borrower of remittance b. Are salary, wages, or commission
must report that the loan is no longer
by SBA of (i) the loan forgiveness payments to furloughed employees;
amount (or that SBA determined that no deferred to SBA on the next monthly
SBA Form 1502 report filed by the bonuses; or hazard pay during the
amount of the loan is eligible for covered period eligible for loan
forgiveness), and (ii) the date on which lender.
forgiveness? 36
the borrower’s first payment is due, if
applicable. If SBA determines that the Yes. The CARES Act defines the term
‘‘payroll costs’’ broadly to include
full amount of the loan is eligible for
compensation in the form of salary,
forgiveness and remits the full amount
wages, commissions, or similar
of the loan to the lender, the lender 30 Although the note is marked ‘‘Paid in Full,’’ the
compensation. If a borrower pays
forgiven amount is considered canceled furloughed employees their salary,
if they have used, or will use, the full amount of indebtedness under section 7A(c)(1) of the Small
its First Draw PPP Loan (including the amount of Business Act. 34 This subsection was originally published at 85
any increase on such First Draw PPP Loan) on 31 This subsection was originally published at 85
authorized uses on or before the expected date on FR 33004, subsection III.3.a. (June 1, 2020) and
which the Second Draw PPP Loan will be FR 38304, section III.1.c. (June 26, 2020) and has amended by 85 FR 38304, subsection III.1.d. (June
disbursed. See interim final rule on Second Draw been modified to conform to sections 306 and 307 26, 2020) and has been modified to conform to
PPP Loans. 86 FR 3712, 3717 (Jan. 14, 2021). This of the Economic Aid Act. section 306 of the Economic Aid Act and for
requirement does not apply to Second Draw PPP 32 Because section 306 of the Economic Aid Act readability.
Loans of $150,000 or less that use the simplified 35 Amended to conform to the section 306 of
allows the borrower to select a covered period
forgiveness application (SBA Form 3508S). between 8 weeks and 24 weeks, there is no longer Economic Aid Act change to definition of covered
29 Section 333 of the Economic Aid Act repealed
a need to allow a borrower to apply for forgiveness period. The option to elect an alternative covered
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the CARES Act provision requiring SBA to deduct period has been removed because the Economic Aid
‘‘before the end of the covered period’’ and that text
EIDL Advance Amounts received by borrowers from Act provided borrowers flexibility to choose the
has been deleted. end of their covered period.
the forgiveness payment amounts remitted by SBA
33 The Economic Aid Act is silent on what
to the lender. Any EIDL Advance Amounts 36 This subsection was originally published at 85
previously deducted from a borrower’s forgiveness covered period applies for a borrower who does not FR 33004, subsection III.3.b. (June 1, 2020) and has
amount will be remitted to the lender, together with apply for forgiveness, so SBA will apply the longest been modified to conform to section 344 of the
interest through the remittance date. available covered period to such borrowers. Economic Aid Act.
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8289
wages, or commissions during the compensation (up to $20,833) in total e. May a fishing boat owner include as
covered period, those payments are across all businesses. payroll costs in its application for loan
eligible for forgiveness as long as they In particular, C-corporation owner- forgiveness any compensation paid to a
do not exceed an annual salary of employees are capped by the prorated crewmember who received his or her
$100,000, as prorated for the period amount of their 2019 or 2020 39 own PPP loan and is seeking forgiveness
during which the payments are made or employee cash compensation and for amounts of compensation the
the obligation to make the payments is employer retirement and health, life, crewmember received for performing
incurred. The Administrator, in disability, vision and dental insurance services described in Section
consultation with the Secretary, has also contributions made on their behalf. S- 3121(b)(20) of the Internal Revenue
determined that, if an employee’s total corporation owner-employees are Code with respect to that owner’s
compensation does not exceed $100,000 capped by the prorated amount of their fishing boat? 43
on an annualized basis, as prorated for 2019 or 2020 40 employee cash No. If a fishing boat crewmember
the period during which the payments compensation and employer retirement obtains his or her own PPP loan during
are made or the obligation to make the contributions made on their behalf. the fishing boat owner’s covered period
payments is incurred, the employee’s However, employer health, life, and seeks forgiveness of that loan based
hazard pay and bonuses are eligible for disability, vision and dental insurance in part on compensation from a
loan forgiveness because they constitute contributions made on their behalf particular fishing boat owner, the
a supplement to salary or wages, and are cannot be separately added; those fishing boat owner cannot also obtain
thus a similar form of compensation. payments are already included in their PPP loan forgiveness based on
c. Are there caps on the amount of loan employee cash compensation. Schedule compensation paid to that same
forgiveness available for owner- C or F filers are capped by the prorated crewmember. This restriction applies
employees and self-employed amount of their owner compensation only if the crewmember is performing
individuals’ own payroll replacement, calculated based on 2019 services described in section 3121(b)(20)
compensation? 37 or 2020 net profit.41 General partners are of the Internal Revenue Code for the
Yes. Forgiveness is capped at 2.5 capped by the prorated amount of their particular fishing boat owner. The
months’ worth (2.5/12) of an owner- 2019 or 2020 net earnings from self- fishing boat owner is responsible for
employee or self-employed individual’s employment (reduced by claimed determining whether any of its
2019 or 2020 38 compensation (up to a section 179 expense deduction, crewmembers received their own PPP
maximum $20,833 per individual in unreimbursed partnership expenses, loans during the fishing boat owner’s
total across all businesses). The and depletion from oil and gas loan forgiveness covered period.
individual’s total compensation may not properties) multiplied by 0.9235. For
self-employed individuals, including 4. Nonpayroll Costs Eligible for Loan
exceed $100,000 on an annualized basis, Forgiveness
as prorated for the period during which Schedule C or F filers and general
the payments are made or the obligation partners, retirement and health, life, a. When must nonpayroll costs be
to make the payments is incurred. For disability, vision or dental insurance incurred and/or paid to be eligible for
example, for borrowers that elect to use contributions are included in their net forgiveness? 44
an eight-week covered period, the self-employment income and therefore
A nonpayroll cost is eligible for
amount of loan forgiveness requested for cannot be separately added to their
forgiveness if it was:
owner-employees and self-employed payroll calculation. LLC members are i. Paid during the covered period; or
individuals’ payroll compensation is subject to the rules based on their LLC’s ii. incurred during the covered period
capped at eight weeks’ worth (8/52) of tax filing status in the reference year and paid on or before the next regular
2019 or 2020 compensation (i.e., used to determine their loan amount. billing date, even if the billing date is
approximately 15.38 percent of 2019 or d. Are any individuals with an after the covered period.
2020 compensation) or $15,385 per ownership stake in a PPP borrower Example: A borrower that received a
individual, whichever is less, in total exempt from application of the PPP loan before June 5, 2020 uses a 24-week
across all businesses. For borrowers that owner-employee compensation rule covered period that begins on June 1
elect to use a ten-week covered period, when determining the amount of their and ends on November 15. The
the cap is ten weeks’ worth (10/52) of compensation that is eligible for loan borrower pays its electricity bills for
2019 or 2020 compensation forgiveness? 42 June through October during the
(approximately 19.23 percent) or covered period and pays its November
$19,231 per individual, whichever is Yes, owner-employees with less than electricity bill on December 10, which is
less, in total across all businesses. For a 5 percent ownership stake in a C- or the next regular billing date. The
a covered period longer than 2.5 S-corporation are not subject to the borrower may seek loan forgiveness for
months, the amount of loan forgiveness owner-employee compensation rule in its June through October electricity bills,
requested for owner-employees and self- subsection IV.3.c. above. because they were paid during the
employed individuals’ payroll covered period. In addition, the
compensation is capped at 2.5 months’ 39 Use whichever year was used to calculate the
borrower may seek loan forgiveness for
worth (2.5/12) of 2019 or 2020 borrower’s loan amount. the portion of its November electricity
40 Use whichever year was used to calculate the
borrower’s loan amount.
bill through November 15 (the end of
37 This subsection was originally published at 85
FR 33004, subsection III.3.c. (June 1, 2020) and 41 For self-employed borrowers that file Form the covered period), because it was
amended by 85 FR 38304, subsection III.1.d (June 1040, Schedule F and have no employees, gross
income may be used instead of net profit. For self- 43 This subsection was originally published at 85
26, 2020) and has been modified to conform to
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sections 308 and 344 of the Economic Aid Act and employed borrowers that file Schedule F and have FR 39066, subsection III.2. (June 30, 2020) and has
for readability. employees, the difference between gross income been modified for consistency with the Economic
38 For First Draw PPP loans made in 2020, and employee payroll costs may be used instead of Aid Act.
borrowers use 2019. For First Draw PPP loans made net profit. See section 313 of the Economic Aid Act. 44 This subsection was originally published at 85
in 2021 and Second Draw PPP loans, borrowers use 42 This subsection was originally published at 85 FR 33004, subsection III.4.a. (June 1, 2020) and
the year (2019 or 2020) that was used to calculate FR 52881, section III.1. (Aug. 27, 2020) and has amended by 85 FR 38304, subsection III.1.e (June
the borrower’s loan amount. been modified for readability. 26, 2020) and has been modified for readability.
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8290 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations
incurred during the covered period and on the borrower’s 2019 tax filings, or if loan’s covered period, or (4) have a PPP
paid on the next regular billing date. a new business, the borrower’s expected loan of $50,000 or less. The instructions
2020 tax filings. to the loan forgiveness applications and
b. Are advance payments of interest on
the guidance below explain how the
mortgage obligations eligible for loan d. Are rent payments to a related party
statutory forgiveness reduction formulas
forgiveness? 45 eligible for loan forgiveness? 47
work.
No. Advance payments of interest on Yes, as long as (1) the amount of loan
forgiveness requested for rent or lease a. Will a borrower’s loan forgiveness
a covered mortgage obligation are not
payments to a related party is no more amount be reduced if the borrower
eligible for loan forgiveness because the
than the amount of mortgage interest reduced the hours of an employee, then
CARES Act’s loan forgiveness
owed on the property during the offered to restore the reduction in hours,
provisions regarding mortgage
covered period that is attributable to the but the employee declined the offer? 50
obligations specifically exclude
‘‘prepayments.’’ Principal on mortgage space being rented by the business, and No. In calculating the loan forgiveness
obligations is not eligible for forgiveness (2) the lease and the mortgage were amount, a borrower may exclude any
under any circumstances. entered into prior to February 15, reduction in full-time equivalent
2020.48 Any ownership in common employee headcount that is attributable
c. Are amounts attributable to the between the business and the property to an individual employee if:
business operation of a tenant or sub- owner is a related party for these i. The borrower made a good faith,
tenant of the PPP borrower or, in the purposes. The borrower must provide written offer to restore the reduced
context of home-based businesses, its lender with mortgage interest hours of such employee;
household expenses, eligible for documentation to substantiate these ii. the offer was for the same salary or
forgiveness? 46 payments. While rent or lease payments wages and same number of hours as
No, the amount of loan forgiveness to a related party may be eligible for earned by such employee in the last pay
requested for nonpayroll costs may not forgiveness, mortgage interest payments period prior to the reduction in hours;
include any amount attributable to the to a related party are not eligible for iii. the offer was rejected by such
business operation of a tenant or sub- forgiveness. employee; and
iv. the borrower has maintained
tenant of the PPP borrower or, for home- 5. Reductions to Loan Forgiveness records documenting the offer and its
based businesses, household expenses. Amount rejection.
The examples below illustrate this rule.
Example 1: A borrower rents an office Section 7A of the Small Business Act b. What effect does a reduction in a
building for $10,000 per month and sub- specifically requires certain reductions borrower’s number of full-time
leases out a portion of the space to other in a borrower’s loan forgiveness amount equivalent (FTE) employees have on the
based on reductions in full-time loan forgiveness amount? 51
businesses for $2,500 per month. Only
equivalent employees or in employee
$7,500 per month is eligible for loan In general, a reduction in FTE
salary and wages. It includes an
forgiveness. employees during the covered period
important statutory exemption for
Example 2: A borrower has a reduces the loan forgiveness amount by
borrowers that have eliminated the
mortgage on an office building it the same percentage as the percentage
reduction on or before December 31,
operates out of, and it leases out a reduction in FTE employees. For both
2020 (or, for a PPP loan made on or after
portion of the space to other businesses. First Draw PPP Loans and Second Draw
December 27, 2020, not later than the
The portion of mortgage interest that is PPP Loans, the borrower must first
last day of the loan’s covered period).49
eligible for loan forgiveness is limited to select a reference period: (i) February
Section 7A(d)(7) of the Small Business
the percent share of the fair market 15, 2019 through June 30, 2019; (ii)
Act also allows exemptions from
value of the space that is not leased out January 1, 2020 through February 29,
reductions in loan forgiveness amounts
to other businesses. As an illustration, if 2020; or (iii) in the case of a seasonal
based on employee availability and
the leased space represents 25% of the employer,52 either of the two preceding
business activity. In addition, SBA and
fair market value of the office building, methods or a consecutive 12-week
Treasury have adopted regulatory
then the borrower may only claim period between February 15, 2019 and
exemptions to the reduction rules for
forgiveness on 75% of the mortgage February 15, 2020.53 If the average
borrowers that (1) have offered to restore
interest. number of FTE employees during the
employee hours at the same salary or
Example 3: A borrower shares a covered period is less than during the
wages, even if the employees have not
rented space with another business.
accepted, (2) fired an employee for
When determining the amount that is 50 This subsection was originally published at 85
cause or have an employee that
eligible for loan forgiveness, the FR 33004, subsection III.5.a. (June 1, 2020) and
voluntarily resigns or voluntarily amended by 85 FR 38304, section III.5. (June 26,
borrower must prorate rent and utility
requests a schedule reduction, (3) 2020) and has been modified for readability.
payments in the same manner as on the
eliminate reductions by December 31, 51 This subsection was originally published at 85
borrower’s 2019 tax filings, or if a new FR 33004, subsection III.5.b. (June 1, 2020) and
2020 or, for a PPP loan made after
business, the borrower’s expected 2020 amended by 85 FR 38304, section III.1.f. (June 26,
December 27, 2020, the last day of the 2020) and has been modified to conform to sections
tax filings.
306, 311 and 336 of the Economic Aid Act and for
Example 4: A borrower works out of 47 This subsection was originally published at 85 readability.
his or her home. When determining the FR 52881, subsection III.2.b. (Aug. 27, 2020) and 52 The term ‘‘seasonal employer’’ is defined in
amount of nonpayroll costs that are has been modified for readability. section 7(a)(36)(A)(xiii) of the Small Business Act.
eligible for loan forgiveness, the 48 In this context, the related party itself would 53 This decision to permit seasonal employers to
borrower may include only the share of not also be eligible to request forgiveness for this use, as a reference period, any consecutive 12-week
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amount. period between February 15, 2019 and February 15,
covered expenses that were deductible 49 This subsection was originally published at 85 2020 is an exercise of the Secretary’s rulemaking
FR 33004, subsection III.5. (June 1, 2020) and authority under section 1109 of the CARES Act.
45 This subsection was originally published at 85
amended by 85 FR 38304, subsection III.1.f. (June This reference period is consistent with section 336
FR 33004, subsection III.4.b. (June 1, 2020). 26, 2020), and has been modified to conform to of the Economic Aid Act, which amends the
46 This subsection was originally published at 85 subsequent rules or guidance and section 311 of the calculation of the maximum loan amount for
FR 52881, subsection III.2.a. (Aug. 27, 2020). Economic Aid Act. seasonal employers.
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8291
reference period, the total eligible customer safety requirement related to For purposes of this calculation,
expenses available for forgiveness is COVID–19 (COVID Requirements or borrowers must divide the average
reduced proportionally by the Guidance). Specifically, borrowers that number of hours paid for each employee
percentage reduction in FTE employees. can certify that they have documented per week by 40, capping this quotient at
For example, if a borrower had 10.0 FTE in good faith that their reduction in 1.0. For example, an employee who was
employees during the reference period business activity during the covered paid 48 hours per week during the
and this declined to 8.0 FTE employees period stems directly or indirectly from covered period would be considered to
during the covered period, the compliance with such COVID be an FTE employee of 1.0.
percentage of FTE employees declined Requirements or Guidance are exempt For employees who were paid for less
by 20 percent and thus only 80 percent from any reduction in their forgiveness than 40 hours per week, borrowers may
of otherwise eligible expenses are amount stemming from a reduction in choose to calculate the full-time
available for forgiveness. FTE employees during the covered equivalency in one of two ways. First,
Borrowers are exempted from the loan period. Such documentation must the borrower may calculate the average
forgiveness reduction arising from a include copies of applicable COVID number of hours a part-time employee
proportional reduction in FTE Requirements or Guidance for each was paid per week during the covered
employees during the covered period if business location and relevant borrower period. For example, if an employee was
the borrower is able to document in financial records. paid for 30 hours per week on average
good faith the following: (1) An inability Example: A PPP borrower is in the during the covered period, the employee
to rehire individuals who were business of selling beauty products both could be considered to be an FTE
employees of the borrower on February online and at its physical store. During employee of 0.75. Similarly, if an
15, 2020; and (2) an inability to hire the covered period, the local employee was paid for ten hours per
similarly qualified individuals for government where the borrower’s store week on average during the covered
unfilled positions on or before is located orders all non-essential period, the employee could be
December 31, 2020 (or, for a PPP loan businesses, including the borrower’s considered to be an FTE employee of
made on or after December 27, 2020, not business, to shut down their stores, 0.25. Second, for administrative
later than the last day of the loan’s based in part on COVID–19 guidance convenience, borrowers may elect to use
covered period).54 Borrowers are issued by the CDC in March 2020. a full-time equivalency of 0.5 for each
required to inform the applicable state Because the borrower’s business activity part-time employee. The Administrator
unemployment insurance office of any during the covered period was reduced recognizes that not all borrowers
employee’s rejected rehire offer within compared to its activity before February maintain hours-worked data, and has
30 days of the employee’s rejection of 15, 2020 due to compliance with COVID decided to afford such borrowers this
the offer. The documents that borrowers Requirements or Guidance, the borrower flexibility in calculating the full-time
should maintain to show compliance satisfies the exemption and will not equivalency of their part-time
with this exemption include, but are not have its forgiveness amount reduced employees.
limited to, the written offer to rehire an because of a reduction in FTEs during Borrowers may select only one of
individual, a written record of the the covered period, if the borrower in these two methods, and must apply that
offer’s rejection, and a written record of good faith maintains records regarding method consistently to all of their part-
efforts to hire a similarly qualified the reduction in business activity and time employees for the covered period
individual. the local government’s shutdown orders and the selected reference period. In
Borrowers are also exempted from the that reference a COVID Requirement or either case, the borrower shall provide
loan forgiveness reduction arising from Guidance as described above. the aggregate total of FTE employees for
a reduction in the number of FTE both the selected reference period and
employees during the covered period if c. What does ‘‘full-time equivalent
employee’’ mean? 56 the covered period by adding together
the borrower is able to document in all of the employee-level FTE employee
good faith an inability to return to the Full-time equivalent employee means calculations. The borrower must then
same level of business activity as the an employee who works 40 hours or divide the average FTE employees
borrower was operating at before more, on average, each week. The hours during the covered period by the
February 15, 2020, due to compliance of employees who work less than 40 average FTE employees during the
with requirements established or hours are calculated as proportions of a selected reference period, resulting in
guidance issued between March 1, 2020 single full-time equivalent employee the reduction quotient.
and December 31, 2020 (or, for a PPP and aggregated, as explained further
loan made on or after December 27, below in subsection IV.5.d. e. What effect does a borrower’s
2020, not later than the last day of the reduction in employees’ salary or wages
d. How should a borrower calculate its
loan’s covered period) 55 by the have on the loan forgiveness amount? 58
number of FTE employees? 57
Secretary of Health and Human Under section 7A(d)(3) of the Small
Services, the Director of the Centers for Borrowers seeking forgiveness must
document their average number of FTE Business Act, a reduction in an
Disease Control and Prevention (CDC), employee’s salary or wages in excess of
or the Occupational Safety and Health employees during the covered period
and their selected reference period. If 25 percent will generally result in a
Administration related to the reduction in the loan forgiveness
maintenance of standards for sanitation, applicable, a borrower must perform
this calculation for both its First Draw amount, unless an exception applies.
social distancing, or any other worker or Specifically, for each new employee in
PPP Loan and Second Draw PPP Loan.
54 This text was originally published at 85 FR
2020 and 2021, as well as each existing
employee who was not paid more than
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38304, subsection III.1.f. (June 26, 2020) and has 56 This subsection was originally published at 85
been modified to conform to section 311 of the FR 33004, subsection III.5.c. (June 1, 2020) and has the annualized equivalent of $100,000
Economic Aid Act. been modified for readability.
55 This text was originally published at 85 FR 57 This subsection was originally published at 85 58 This subsection was originally published at 85
38304, subsection III.1.f. (June 26, 2020) and has FR 33004, subsection III.5.d. (June 1, 2020) and has FR 33004, subsection III.5.e. (June 1, 2020) and has
been modified to conform to section 311 the been modified to conform to section 311 of the been modified to conform to section 306 of the
Economic Aid Act. Economic Aid Act and for readability. Economic Aid Act and for readability.
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8292 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations
in any pay period in 2019, the borrower f. How should borrowers seeking loan This provision implements section
must reduce the total forgiveness forgiveness account for the reduction 7A(d)(5) of the Small Business Act,
amount by the total dollar amount of the based on a reduction in the number of which gives borrowers an opportunity
salary or wage reductions that are in employees (section 7A(d)(2)) relative to to cure reductions in FTEs, salary/wage
excess of 25 percent of base salary or the reduction relating to salary and reductions in excess of 25 percent, or
wages of the employee during the most wages (section 7A(d)(3))? 60 both, using the applicable methodology
recent full quarter during which the To ensure that borrowers are not set forth in section 7A(d)(5). The Small
employee was employed before the doubly penalized, the salary/wage Business Act provides that the
covered period (the reference period), reduction applies only to the portion of reduction in FTEs or the reduction in
subject to exceptions for borrowers who the decline in employee salary and salary/hourly wages must be eliminated
restore reduced wages or salaries (see g. wages that is not attributable to the FTE not later than December 31, 2020 (or, for
below). This reduction calculation is reduction. a PPP loan made on or after December
Example: An hourly wage employee 27, 2020, not later than the last day of
performed on a per employee basis, not
had been working 40 hours per week the loan’s covered period). This does
in the aggregate. Additionally, this
during the borrower selected reference not change or affect the requirement that
reduction is performed based on the at least 60 percent of the loan
period (FTE employee of 1.0) and the
covered period and reference period forgiveness amount must be attributable
borrower reduced the employee’s hours
applicable to the First Draw Loan or to payroll costs.
to 20 hours per week during the covered
Second Draw Loan. period (FTE employee of 0.5). There was h. Will a borrower’s loan forgiveness
Example: A borrower is using a 24- no change to the employee’s hourly amount be reduced if an employee is
week covered period. This borrower wage during the covered period. fired for cause, voluntarily resigns, or
reduced a full-time employee’s weekly Because the hourly wage did not voluntarily requests a schedule
salary from $1,000 per week during the change, the reduction in the employee’s reduction? 63
reference period to $700 per week total wages is entirely attributable to the
during the covered period. The FTE employee reduction and the No. When an employee of the
employee continued to work on a full- borrower is not required to conduct a borrower is fired for cause, voluntarily
time basis during the covered period, salary/wage reduction calculation for resigns, or voluntarily requests a
that employee. reduced schedule during the covered
with an FTE of 1.0. In this case, the first
period (FTE reduction event), the
$250 (25 percent of $1,000) is exempted g. If a borrower restores reductions borrower may count such employee at
from the loan forgiveness reduction. The made to employee salaries and wages or the same full-time equivalency level
borrower seeking forgiveness would list FTE employees, can the borrower avoid before the FTE reduction event when
$1,200 as the salary/hourly wage a reduction in its loan forgiveness calculating the section 7A(d)(2) FTE
reduction for that employee (the extra amount? 61 employee reduction penalty. Borrowers
$50 weekly reduction multiplied by 24 Yes. Section 7A(d)(5) of the Small that avail themselves of this de minimis
weeks).59 Business Act provides that if certain exemption shall maintain records
Example: A borrower has elected to employee salaries and wages were demonstrating that each such employee
use an eight-week covered period. This reduced between February 15, 2020 and was fired for cause, voluntarily
borrower reduced a full-time employee’s April 26, 2020 (the safe harbor period) resigned, or voluntarily requested a
weekly salary from $1,000 per week but the borrower eliminates those schedule reduction. The borrower shall
during the reference period to $700 per reductions by December 31, 2020 (or, for provide such documentation upon
week during the covered period. The a PPP loan made on or after December request.
employee continued to work on a full- 27, 2020, by the last day of the loan’s i. Is a borrower with a loan of $50,000
time basis during the covered period, covered period), the borrower is exempt or less exempt from any reductions to
with an FTE of 1.0. In this case, the first from any reduction in loan forgiveness the loan forgiveness amount? 64
$250 (25 percent of $1,000) is exempted amount that would otherwise be
required due to reductions in salaries Yes. A borrower with a loan of
from the loan forgiveness reduction. The $50,000 or less, other than any borrower
and wages under section 7A(d)(3) of the
borrower seeking forgiveness would list
Small Business Act. Similarly, if a
$400 as the salary/hourly wage reduction in loan forgiveness, and the statutory
borrower eliminates any reductions in
reduction for that employee (the extra authority for SBA and the Treasury to grant de
FTE employees occurring during the minimis exemptions from this requirement, if the
$50 weekly reduction multiplied by safe harbor period by December 31, borrower meets the requirements for the FTE
eight weeks). 2020 (or, for a PPP loan made on or after reduction safe harbor, it will not be subject to any
December 27, 2020, by last day of the loan forgiveness reduction based on a reduction in
FTE employees.
loan’s covered period), the borrower is 63 This subsection was originally published at 85
exempt from any reduction in loan FR 33004, subsection III.5.h. (June 1, 2020) and has
forgiveness amount that would been modified to conform to section 304 of the
otherwise be required due to reductions Economic Aid Act and for readability.
64 This subsection was originally published at 85
in FTE employees.62
FR 66214, subsection III.1.b. (Oct. 19, 2020) and has
59 This subsection previously provided that a been modified to conform to sections 304 and 307
60 This subsection was originally published at 85
borrower must account for the salary reduction for the Economic Aid Act and for readability. As
FR 33004, subsection III.5.e. (June 1, 2020) and has described further below in subsection 6.a and 6.b,
the full 24-week covered period if the borrower
been modified for readability. borrowers with loans up to $150,000 may use SBA
applies for forgiveness before the end of the covered
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61 This subsection was originally published at 85
Form 3508S. However, only borrowers with loans
period. 85 FR 38304, 38308 (June 26, 2020). This FR 33004, subsection III.5.g. (June 1, 2020) and has of $50,000 or less, other than any borrower that
text has been removed because section 306 of the been modified to conform to section 311 of the together with its affiliates received First Draw Loans
Economic Aid Act allows the borrower to select a Economic Aid Act. totaling $2 million or more or Second Draw Loans
covered period between 8 and 24 weeks and there 62 In light of the flexibility the Small Business Act totaling $2 million or more, are exempt from any
is no need to apply for forgiveness before the end provides to borrowers with respect to their selection reductions to the loan forgiveness amount.
of the covered period. of the reference time period for any potential Accordingly, the exemptions in this subsection are
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8293
that together with its affiliates received may include relevant tax forms, receipts, transcripts of accounts,
First Draw PPP Loans totaling $2 including annual tax forms, or, if purchase orders, orders, invoices, or
million or more or Second Draw PPP relevant tax forms are not available, a other documents verifying payments on
Loans totaling $2 million or more, is copy of the applicant’s quarterly income nonpayroll costs.
exempt from any reductions in the statements or bank statements. For all loans, the 2019 or 2020 Form
borrower’s loan forgiveness amount For Second Draw PPP Loans, all 1040 Schedule C or F that the borrower
based on reductions in FTE employees borrowers must certify on their loan provided at the time of the PPP loan
(section 7A(d)(2) of the Small Business forgiveness application that the application must be used to determine
Act) or reductions in employee salary or borrower used all First Draw PPP Loan the amount of net profit allocated to the
wages (section 7A(d)(3) of the Small amounts on eligible expense prior to owner for the covered period.69
Business Act) that would otherwise disbursement of the Second Draw PPP
apply. As such, subsections IV.5.a. Loan. For Second Draw PPP Loans in c. What additional documentation must
through IV.5.h. above do not apply to excess of $150,000, the borrower must a borrower submit when the President
qualifying borrowers with loans of submit its loan forgiveness application of the United States, Vice President of
$50,000 or less. for the First Draw PPP Loan before or the United States, the head of an
simultaneously with the loan Executive department, or a Member of
6. Documentation Requirements forgiveness application for the Second Congress, or the spouse of any of the
a. What must borrowers submit for Draw PPP Loan, even if the calculated preceding, directly or indirectly holds a
forgiveness of their PPP loans? 65 forgiveness amount for the First Draw controlling interest in the borrower? 70
The loan forgiveness application form PPP Loan is zero.
For any First Draw PPP loan made
details the documentation requirements; b. What documentation are borrowers before December 27, 2020, if the
specifically, documentation each who are individuals with self- President of the United States, Vice
borrower must submit with its Loan employment income who file a Form President of the United States, the head
Forgiveness Application (SBA Form 1040, Schedule C or F required to of an Executive department, or a
3508, 3508EZ, 3508S as applicable, or submit to their lender with their request Member of Congress, or the spouse of
lender equivalent), documentation each for loan forgiveness? 67 any such person as determined under
borrower is required to maintain and applicable common law, directly or
For borrowers that received loans of
make available upon request, and indirectly held a controlling interest in
$150,000 or less that use the SBA Form
documentation each borrower may the borrower on the date of the loan
3508S, the borrower must submit the
voluntarily submit with its loan application, the borrower is required to
certification and information required
forgiveness application. An eligible make certain disclosures following
by section 7A(l)(1)(A) of the Small
borrower that received a loan of submission of the borrower’s
Business Act and, for a Second Draw
$150,000 or less should use the SBA application for loan forgiveness.
Form 3508S and shall not, at the time PPP Loan, revenue reduction
of its application for loan forgiveness, be documentation if such documentation For purposes of this section, the term
required to submit any application or was not provided at the time of ‘‘controlling interest’’ means owning,
documentation in addition to the application.68 All other borrowers must controlling, or holding not less than 20
certification and information required submit the certification required by percent, by vote or value, of the
by section 7A(l)(1)(A) of the Small section 7A(e)(3) of the Small Business outstanding amount of any class of
Business Act. However, an eligible Act, and (if the borrower has employees) equity interest in a borrower. For
borrower that received a Second Draw Form 941 and state quarterly business purposes of making this determination,
loan of $150,000 or less and is using the and individual employee wage reporting the securities owned, controlled or held
SBA Form 3508S must, before or at the and unemployment insurance tax forms by the individual and spouse shall be
time of its application for loan or equivalent payroll processor records aggregated. The term ‘‘equity interest’’
forgiveness, submit documentation that best correspond to the covered means (1) a share in a borrower, without
sufficient to establish that the borrower period (with evidence of any retirement regard to whether the share is
experienced a reduction in revenue as and group health, life, disability, vision, transferable or classified as stock or
provided in subsection (g)(2)(v) of the and dental insurance contributions). anything similar, (2) a capital or profit
interim final rule on Second Draw PPP Whether or not the borrower has interest in a limited liability company or
Loans, unless the borrower already employees, the borrower must submit partnership, or (3) a warrant or right,
provided such documentation at the evidence of business rent, business other than a right to convert, to
time of its application for the Second mortgage interest payments on real or purchase, sell, or subscribe to a share of
Draw PPP Loan.66 Such documentation personal property, business utility interest described in (1) or (2),
payments, or payments for a covered respectively. The term ‘‘Executive
limited to qualifying borrowers with loans of operations expenditure, covered department’’ has the meaning given the
$50,000 or less. A borrower with a loan greater than property damage cost, covered supplier term in section 101 of title 5, United
$50,000 and up to $150,000 must comply with the cost, or covered worker protection States Code. The term ‘‘Member of
requirements under the Paycheck Protection
Program, including calculating any reduction in expenditure during the covered period Congress’’ means a Member of the
forgiveness amounts based on reductions in FTEs if the borrower used loan proceeds for Senate or House of Representatives, a
or employee salary or wages. those purposes. This documentation Delegate to the House of
65 This subsection was originally published at 85
may include cancelled checks, payment
FR 33004, section III.6. (June 1, 2020) and amended
69 For self-employed borrowers that file Form
at 85 FR 38304, subsection III.1.g. (June 26, 2020)
67 This subsection was originally published at 85 1040, Schedule F and have no employees, gross
and has been modified to conform to sections 304
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and 307 of the Economic Aid Act and for FR 21747, subsection III.1.g. (Apr. 20, 2020) and has income may be used instead of net profit. For self-
readability. been modified to conform to sections 304, 307, 308, employed borrowers that file Schedule F and have
66 See interim final rule on Second Draw PPP and 313 of the Economic Aid Act and for employees, the difference between gross income
Loans. 86 FR 3712, 3721 (Jan. 14, 2021). Subsection readability. and employee payroll costs may be used instead of
(g)(2)(v) of the interim final rule on Second Draw 68 See subsection (g)(2)(v) of the interim final rule net profit.
PPP Loans implements section 7(a)(37)(J)(v) of the on Second Draw PPP Loans. 86 FR 3712, 3721 (Jan. 70 This subsection has been added to conform to
Small Business Act. 14, 2021). section 322 of the Economic Aid Act.
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8294 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations
Representatives, and the Resident requirements, regulations, and guidance Form 3508, 3508EZ, 3508S, or lender’s
Commissioner from Puerto Rico. described in (a). With respect to a lender equivalent form). With respect to a
If the borrower submitted a loan that relies on a borrower certification or Second Draw PPP Loan, this may
forgiveness application to its PPP lender documentation meeting the include a review of whether the
before December 27, 2020, then the requirements of this subsection, an borrower experienced the 25 percent
principal executive officer, or enforcement action may not be taken revenue reduction required under the
individual performing a similar against the lender related to the PPP Economic Aid Act.
function, of the borrower shall submit to loan, and the lender shall not be subject Loan Amounts and Use of Proceeds:
its PPP lender an SBA Form 3508D to any penalties relating to loan The Administrator may review whether
disclosing the controlling interest(s) not origination or forgiveness of the PPP a borrower calculated the loan amount
later than January 26, 2021. If the PPP loan, if: correctly and used loan proceeds for the
lender has already submitted a (i) The lender acts in good faith allowable uses specified in the CARES
forgiveness decision to SBA, the lender relating to loan origination or Act and the Economic Aid Act.
shall promptly transmit the SBA Form forgiveness of the PPP loan based on Loan Forgiveness Amounts: The
3508D to SBA. Otherwise, the PPP that reliance; and Administrator may review whether a
lender shall transmit the SBA Form (ii) all other relevant Federal, State, borrower is entitled to loan forgiveness
3508D to SBA at the time the lender local, and other statutory and regulatory in the amount claimed on the
issues its forgiveness decision to SBA. If requirements applicable to the lender borrower’s Loan Forgiveness
the borrower submits a loan forgiveness are satisfied with respect to the PPP Application (SBA Form 3508, 3508EZ,
application to its PPP lender on or after loan.73 3508S, or lender’s equivalent form).
December 27, 2020, then the principal V. Paycheck Protection Program SBA c. When will SBA undertake a loan
executive officer, or individual Loan Review Procedures and Related review? 77
performing a similar function, of the Borrower and Lender Responsibilities
borrower shall submit to its PPP lender For a PPP loan of any size, SBA may
an SBA Form 3508D disclosing the 1. SBA Reviews of Individual PPP Loans undertake a review at any time in SBA’s
controlling interest(s) not later than 30 discretion. For example, SBA may
a. Will SBA review individual PPP review a loan if the loan documentation
days after submitting the application. loans? 74
The PPP lender shall transmit the SBA submitted to SBA by the lender or any
Form 3508D to SBA with the PPP Yes. SBA may review any PPP loan, other information indicates that the
lender’s forgiveness decision. as the Administrator deems appropriate, borrower may be ineligible for a PPP
Alternatively, the PPP lender may as described below. loan, or may be ineligible to receive the
transmit the completed Form 3508D to loan amount or loan forgiveness amount
b. What borrower representations and
SBA when received. claimed by the borrower.78
statements will SBA review? 75
An entity is prohibited from receiving Additionally, section 7A(l)(1)(E) of the
a PPP loan after December 27, 2020 if The Administrator is authorized to Small Business Act expressly provides
a controlling interest is held directly or review the following: that SBA may review and audit PPP
indirectly by the President of the United Borrower Eligibility: The loans of $150,000 or less and access any
States, Vice President of the United Administrator may review whether a records the borrower is required to
States, the head of an Executive borrower is eligible for the PPP loan retain. SBA may, in its discretion,
department, or a Member of Congress, or based on the provisions of the CARES review a borrower’s First Draw PPP
the spouse of any of the preceding.71 Act, the Economic Aid Act, the rules Loan and Second Draw PPP Loan at the
and guidance available at the time of the same time or at different times. For
7. Lender Hold Harmless 72 borrower’s PPP loan application, and loans of more than $150,000, as noted
Under what circumstances may a lender the terms of the borrower’s loan on the loan forgiveness application
rely on a certification or documentation application. See FAQ 17 (posted April forms, the borrower must retain PPP
submitted by an eligible PPP borrower 6, 2020).76 These include, but are not documentation in its files for six years
that received a PPP loan? limited to, SBA’s regulations under 13 after the date the loan is forgiven or
CFR 120.110 (as modified and clarified repaid in full. For loans of $150,000 and
A lender may rely on any certification by the PPP Interim Final Rules) and 13 under, the borrower must retain records
or documentation submitted by a PPP CFR 121.301(f) and the information, relevant to the form that prove
applicant or an eligible PPP borrower certifications, and representations on compliance with the requirements of
that received a PPP loan that—(a) is the Borrower Application Form (SBA section 7(a)(36) or 7(a)(37), as
submitted pursuant to all applicable Form 2483, 2483–SD, or lender’s applicable, of the Small Business Act—
statutory requirements, regulations, and equivalent form) and the Loan for employment records, for the 4-year
guidance related to a PPP loan, Forgiveness Application Form (SBA period following submission of the loan
including sections 7(a)(36), 7(a)(37), and
forgiveness application, and for other
7A of the Small Business Act; and (b) 73 This provision is effective as if included in the
records, for the 3-year period following
attests that the PPP applicant or eligible CARES Act and shall apply to any loan made
submission of the loan forgiveness
PPP borrower, as applicable, has pursuant to section 7(a)(36) or 7(a)(37) of the Small
Business Act before, on, or after the date of application. All borrowers must permit
accurately provided the certification or
enactment of the Economic Aid Act, including authorized representatives of SBA,
documentation to the lender in forgiveness of such a loan. including representatives of its Office of
accordance with the statutory 74 This subsection was originally published at 85
Inspector General, to access such files
FR 33010, subsection III.1.a. (June 1, 2020).
71 See subsection III.B.2.a. of the consolidated 75 This subsection was originally published at 85
upon request. Additionally, all
borrowers must provide documentation
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interim final rule implementing updates to the FR 33010, subsection III.1.b. (June 1, 2020) and
Paycheck Protection Program, 86 FR 3692, 3698 amended by 85 FR 38304, subsection III.2.a. (June
(Jan. 14, 2021); subsection III.e.6. of the interim 26, 2020) and 85 FR 66214, subsection III.2.a. (Oct. 77 This subsection was originally published at 85
final rule for Second Draw PPP loans, 86 FR 3712, 19, 2020) and has been modified to conform to FR 33010, subsection III.1.c. (June 1, 2020) and has
3719 (Jan. 14, 2021). section 311 of the Economic Aid Act. been modified to conform to sections 307 and 311
72 This section has been added to conform to 76 https://www.sba.gov/document/support—faq- of the Economic Aid Act.
section 305 of the Economic Aid Act. lenders-borrowers. 78 13 CFR 120.524(c).
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8295
independently to a lender to satisfy outstanding PPP loan balance or pursue iii. Confirm the borrower’s
relevant Federal, State, local or other other available remedies. calculations on the borrower’s SBA
statutory or regulatory requirements or Section 7A(b) of the Small Business Form 3508 or lender’s equivalent form,
in connection with an SBA loan review. Act provides for forgiveness of a PPP including the dollar amount of the (A)
Lenders must comply with applicable loan only if the borrower is an ‘‘eligible Cash Compensation, Non-Cash
SBA requirements for records retention, recipient.’’ The Administrator has Compensation, and Compensation to
which for Federally regulated lenders determined that to be an eligible Owners claimed on Lines 1, 4, 6, 7, 8,
means compliance with the recipient that is entitled to forgiveness and 9 on PPP Schedule A and (B)
requirements of their federal financial under section 7A(b), the borrower must Business Mortgage Interest Payments,
institution regulator and for SBA be an ‘‘eligible recipient’’ under section Business Rent or Lease Payments,
supervised lenders (as defined in 13 7(a)(36) and section 7(a)(37) of the Small Business Utility Payments, Covered
CFR 120.10 and including PPP lenders Business Act and rules and guidance Operations Expenditures, Covered
with authority under SBA Form 3507) available at the time of the borrower’s Property Damage Costs, Covered
means compliance with 13 CFR loan application. This requirement Supplier Costs, and Covered Worker
120.461. promotes the public interest, aligns Protection Expenditures claimed on
SBA’s functions with other Lines 2 through 8 on the PPP Loan
d. Will I have the opportunity to
governmental policies, and Forgiveness Calculation Form, by
respond to SBA’s questions in a
appropriately carries out the PPP reviewing the documentation submitted
review? 79
provisions of the CARES Act and the with the SBA Form 3508 or lender’s
Yes. If loan documentation submitted Economic Aid Act, including by equivalent form.
to SBA by the lender or any other preventing evasion of the requirements iv. Confirm that the borrower made
information indicates that the borrower for PPP loan eligibility and ensuring the calculation on Line 14 of the SBA
may be ineligible for a PPP loan or may program integrity with respect to this Form 3508 or lender’s equivalent form
be ineligible to receive the loan amount emergency financial assistance program. correctly, by dividing the borrower’s
or loan forgiveness amount claimed by It is also consistent with the CARES Eligible Payroll Costs claimed on Line 1
the borrower, SBA will require the Act’s nonrecourse provision, 15 U.S.C. by 0.60.
lender to contact the borrower in 636(a)(36)(F)(v), which limits SBA’s When the borrower submits SBA
writing to request additional recourse against individual Form 3508EZ or lender’s equivalent
information. SBA may also request shareholders, members, or partners of a form, the lender shall:
information directly from the borrower. PPP borrower for nonpayment of a PPP i. Confirm receipt of the borrower
The lender will provide any additional loan only if the borrower is an eligible certifications contained in the SBA
information provided to it by the recipient of the loan. Form 3508EZ or lender’s equivalent
borrower to SBA. SBA will consider all form.
information provided by the borrower in f. May a borrower appeal SBA’s ii. Confirm receipt of the
response to such an inquiry. determination that the borrower is documentation the borrower must
Failure to respond to SBA’s inquiry ineligible for a PPP loan or ineligible for submit to aid in verifying payroll and
may result in a determination that the the loan amount or the loan forgiveness nonpayroll costs, as specified in the
borrower was ineligible for a PPP loan amount claimed by the borrower? 81 instructions to the SBA Form 3508EZ or
or ineligible to receive the loan amount Yes. SBA has issued a separate lender’s equivalent form.
or loan forgiveness amount claimed by interim final rule addressing this iii. Confirm the borrower’s
the borrower. process.82 calculations on the borrower’s SBA
e. If SBA determines that a borrower is Form 3508EZ or lender’s equivalent
2. The Loan Forgiveness Process for
ineligible for a PPP loan, can the loan form, including the dollar amount of the
Lenders
be forgiven? 80 Payroll Costs, Business Mortgage
a. What should a lender review? 83 Interest Payments, Business Rent or
No. If SBA determines that a borrower Lease Payments, Business Utility
is ineligible for the PPP loan, SBA will When a borrower submits SBA Form
3508 or lender’s equivalent form, the Payments, Covered Operations
direct the lender to deny the loan Expenditures, Covered Property Damage
forgiveness application. An SBA lender shall:
i. Confirm receipt of the borrower Costs, Covered Supplier Costs, and
determination that a borrower is Covered Worker Protection
certifications contained in the SBA
ineligible for a First Draw PPP Loan may Expenditures claimed on Lines 1
Form 3508 or lender’s equivalent form.
also result in an SBA determination that ii. Confirm receipt of the through 8 of the SBA Form 3508EZ or
the borrower is ineligible for any documentation the borrower must lender’s equivalent form, by reviewing
Second Draw PPP Loan, and SBA may the documentation submitted with the
submit to aid in verifying payroll and
direct the lender to deny any loan SBA Form 3508EZ or lender’s
nonpayroll costs, as specified in the
forgiveness application submitted for equivalent form.
instructions to the SBA Form 3508 or
the Second Draw PPP Loan. Further, if iv. Confirm that the borrower made
lender’s equivalent form.
SBA determines that the borrower is the calculation on Line 11 of the SBA
ineligible for the loan amount or loan 81 This subsection was originally published at 85 Form 3508EZ or lender’s equivalent
forgiveness amount claimed by the FR 33010, subsection III.1.f. (June 1, 2020) and has form correctly, by dividing the
borrower, SBA will direct the lender to been modified to reflect the issuance of the interim borrower’s Eligible Payroll Costs
deny the loan forgiveness application in final rule on appeals of SBA loan review decisions
under the Paycheck Protection Program. 85 FR claimed on Line 1 by 0.60.
whole or in part, as appropriate. SBA 52883 (Aug. 27, 2020). Providing an accurate calculation of
may also seek repayment of the
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82 See 85 FR 52883 (Aug. 27, 2020). the loan forgiveness amount is the
83 This subsection was originally published at 85 responsibility of the borrower, and the
79 This subsection was originally published at 85
FR 33010, subsection III.2.a. (June 1, 2020) and borrower attests to the accuracy of its
FR 33010, subsection III.1.d. (June 1, 2020). amended by 85 FR 38304, subsection III.2.b. (June
80 This subsection was originally published at 85 26, 2020) and 85 FR 66214, subsection III.2.b. (Oct.
reported information and calculations
FR 33010, subsection III.1.e. (June 1, 2020) and has 19, 2020) and has been modified to conform to on the Loan Forgiveness Application
been modified for readability. sections 307 and 311 of the Economic Aid Act. Form. Lenders are expected to perform
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8296 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations
a good-faith review, in a reasonable The borrower shall not receive ii. For applications submitted using
time, of the borrower’s calculations and forgiveness without submitting all the SBA Form 3508EZ, 3508S, or
supporting documents concerning required documentation to the lender. lender’s equivalent form:
amounts eligible for loan forgiveness. As the First Interim Final Rule 86 and (1) The SBA Form 3508EZ, 3508S, or
For example, minimal review of section IV.7 above indicate, lenders may lender’s equivalent form;
calculations based on a payroll report by rely on borrower representations. As (2) the (optional) Borrower
a recognized third-party payroll stated in paragraph III.3.c of the First Demographic Information Form (if
processor would be reasonable. By Interim Final Rule, the lender does not submitted to the lender); and
contrast, if payroll costs are not need to independently verify the (3) the SBA Form 3508D, if
documented with such recognized borrower’s reported information if the applicable.
sources, more extensive review of borrower submits documentation The lender must confirm that the
calculations and data would be supporting its request for loan information provided by the lender to
appropriate. The borrower shall not forgiveness (if required) and attests that SBA accurately reflects lender’s records
receive forgiveness without submitting it accurately verified the payments for for the loan, that the lender has made its
all required documentation to the eligible costs. decision in accordance with the
lender. requirements set forth in subsection
As the First Interim Final Rule 84 and b. What is the timeline for the lender’s V.2.a., and for a Second Draw PPP Loan
section IV.7 above indicate, lenders may decision on a loan forgiveness of $150,000 or less, if applicable, the
rely on borrower representations. If the application? 87 lender has reviewed the revenue
lender identifies errors in the borrower’s The lender must issue a decision to reduction documentation provided by
calculation or material lack of SBA on a loan forgiveness application the borrower and confirmed the dollar
substantiation in the borrower’s not later than 60 days after receipt of a amount and percentage of the
supporting documents, the lender complete loan forgiveness application borrower’s revenue reduction. If the
should work with the borrower to from the borrower. That decision may lender determines that the borrower is
remedy the issue. As stated in paragraph take the form of an approval (in whole entitled to forgiveness of some or all of
III.3.c of the First Interim Final Rule, the or in part); denial; or (if directed by the amount applied for under the statute
lender does not need to independently SBA) a denial without prejudice due to and applicable regulations, the lender
verify the borrower’s reported a pending SBA review of the loan for must request payment from SBA at the
information if the borrower submits which forgiveness is sought. In the case time the lender issues its decision to
documentation supporting its request of a denial without prejudice, the SBA. SBA will, subject to any SBA
for loan forgiveness and attests that it borrower may subsequently request that review of the borrower’s loan(s) or loan
accurately verified the payments for the lender reconsider its application for application(s), remit the appropriate
eligible costs. loan forgiveness, unless SBA has forgiveness amount to the lender, plus
When a borrower submits SBA Form determined that the borrower is any interest accrued through the date of
3508S or lender’s equivalent form, the ineligible for a PPP loan. The payment, not later than 90 days after the
lender shall: Administrator has determined that this lender issues its decision to SBA. The
i. Confirm receipt of the borrower process appropriately balances the need EIDL Advance Amount received by the
certifications contained in the SBA for efficient processing of loan borrower will not reduce the amount of
Form 3508S or lender’s equivalent form. forgiveness applications with forgiveness to which the borrower is
ii. In the case of a Second Draw PPP considerations of program integrity, entitled and will not be deducted from
Loan for which the borrower did not including affording SBA the the forgiveness payment amount that
provide documentation of revenue opportunity to ensure that borrower SBA remits to the Lender.88 The lender
reduction with its application and the representations and certifications is responsible for notifying the borrower
lender did not conduct a review of the (including concerning eligibility for a of remittance by SBA of the loan
documentation at the time of PPP loan) were accurate. forgiveness amount (or that SBA
application, confirm the dollar amount When the lender issues its decision to determined that no amount of the loan
and percentage of the borrower’s SBA approving the application (in is eligible for forgiveness) and the date
revenue reduction by performing a good whole or in part), it must include the on which the borrower’s first payment
faith review, in a reasonable time, of the following: is due, if applicable.
borrower’s calculations and supporting i. For applications submitted using When the lender issues its decision to
documents concerning the borrower’s the SBA Form 3508 or lender’s SBA determining that the borrower is
revenue reduction.85 equivalent form: not entitled to forgiveness in any
If the lender identifies errors in the amount, the lender must provide SBA
(1) The PPP Loan Forgiveness
borrower’s calculation or material lack with the reason for its denial, together
Calculation Form;
of substantiation in the borrower’s with the following:
(2) PPP Schedule A;
supporting documents regarding i. For applications submitted using
revenue reduction, the lender should (3) the (optional) PPP Borrower the SBA Form 3508 or lender’s
work with the borrower to remedy the Demographic Information Form (if equivalent form:
issue. Providing an accurate calculation submitted to the lender); and (1) The PPP Loan Forgiveness
of the loan forgiveness amount is the (4) the SBA Form 3508D, if Calculation Form;
responsibility of the borrower, and the applicable. (2) PPP Schedule A;
borrower attests to the accuracy of its
86 85 FR 20811, 20815–20816 (Apr. 15, 2020). 88 Section 333 of the Economic Aid Act repealed
reported information and calculations
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87 This subsection was originally published at 85 the CARES Act provision requiring SBA to deduct
on the Loan Forgiveness Application. FR 33010, subsection III.2.b. (June 1, 2020) and EIDL Advance Amounts received by borrowers from
amended by 85 FR 38304, subsection III.2.b. (June the forgiveness payment amounts remitted by SBA
84 85 FR 20811, 20815–20816 (Apr. 15, 2020).
26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. to the lender. Any EIDL Advance Amounts
85 See subsection (h)(2)(i)(D) of the interim final 19, 2020) and has been modified to conform to previously deducted from a borrower’s forgiveness
rule on Second Draw PPP Loans. 86 FR 3712, 3721 sections 311, 322, and 333 of the Economic Aid Act amount will be remitted to the lender, together with
(Jan. 14, 2021). and for readability. interest to the remittance date.
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8297
(3) the (optional) PPP Borrower responsible for notifying the borrower of reduction documentation, if not
Demographic Information Form (if the date on which the borrower’s first previously provided to the lender.
submitted to the lender); and payment is due. The lender must submit documents
(4) the SBA Form 3508D, if received from the borrower to SBA
applicable. c. What should a lender do if it receives
within five business days of receipt
ii. For applications submitted using notice that SBA is reviewing a loan? 91
from the borrower.
the SBA Form 3508EZ, 3508S, or SBA may begin a review of any PPP iii. A signed and certified transcript of
lender’s equivalent form: loan of any size at any time in SBA’s account.
(1) The SBA Form 3508EZ, 3508S, or discretion. SBA may, in its discretion, iv. A copy of the executed note
lender’s equivalent form; review the borrower’s First Draw PPP evidencing the PPP loan.
(2) the (optional) Borrower Loan and Second Draw PPP Loan at the v. Any memorandum or other analysis
Demographic Information Form (if same time or at different times. If SBA that the lender prepared in making its
submitted to the lender); and undertakes such a review, SBA will decision on the borrower’s loan
(3) the SBA Form 3508D, if notify the lender in writing and the forgiveness application, if applicable.
applicable. lender must notify the borrower in vi. Any other documents related to
The lender must confirm that the writing within five business days of the loan requested by SBA.
information provided by the lender to receipt. If SBA has notified the lender that
SBA accurately reflects lender’s records Within five business days of receipt of SBA has commenced a loan review, the
for the loan, and that the lender has such notice, the lender shall transmit to lender should issue a forgiveness
made its decision in accordance with SBA electronic copies of the following: decision to SBA not later than 60 days
the requirements set forth in subsection i. The Borrower Application Form after receipt of the complete loan
V.2.a., and for a Second Draw PPP Loan (SBA Form 2483, 2483–SD, or lender’s forgiveness application from the
of $150,000 or less, if applicable, the equivalent form) and all supporting borrower, unless otherwise directed by
lender has reviewed the revenue documentation provided by the SBA.
reduction documentation provided by borrower, including revenue reduction
the borrower and confirmed the dollar documentation provided by the d. What should a lender do if a borrower
amount and percentage of the borrower on a Second Draw PPP Loan. submits documentation of eligible costs
borrower’s revenue reduction. The ii. The Loan Forgiveness Application that exceed a borrower’s PPP Loan
lender must also notify the borrower in (SBA Form 3508, 3508EZ, 3508S, or Amount? 92
writing that the lender has issued a lender’s equivalent form), and all The amount of loan forgiveness that a
decision to SBA denying the loan supporting documentation provided by borrower may receive cannot exceed the
forgiveness application and provide the borrower (if the lender has received principal amount of the PPP loan.
SBA with a copy of the notice.89 The such application), including revenue Whether a borrower submits SBA Form
notice to the borrower must include the reduction documentation provided by 3508, 3508EZ, 3508S, or lender’s
reasons that the lender concluded that the borrower on a Second Draw PPP equivalent form, a lender should
the borrower is not entitled to loan Loan of $150,000 or less if not provided confirm receipt of the documentation
forgiveness in any amount and inform at the time of loan application. If the the borrower is required to submit to aid
the borrower that the borrower has 30 lender receives the borrower’s loan
calendar days from receipt of the in verifying payroll and nonpayroll
forgiveness application after it receives costs, and, if applicable (for SBA Form
notification to seek, through the lender, notice that SBA has commenced a loan
SBA review of the lender’s decision.90 3508, 3508EZ, or lender’s equivalent
review, the lender shall transmit form), confirm the borrower’s
SBA reserves the right to review the electronic copies of the application and
lender’s decision in its sole discretion. calculations on the borrower’s Loan
all supporting documentation provided Forgiveness Application, up to the
Within 30 days of notice from the by the borrower to SBA within five
lender, a borrower may notify the lender amount required to reach the requested
business days of receipt. Forgiveness Amount. Supporting
that it is requesting that SBA review the The lender must also request that the
lender’s decision in accordance with documentation regarding a borrower’s
borrower provide the lender with the payroll and nonpayroll costs is not
subsection V.2.c. below. Within 5 days applicable documentation that the
of receipt, the lender must notify SBA required to be submitted to the lender
instructions to the Loan Forgiveness with the SBA Form 3508S.
of the borrower’s request for review. Application Form (SBA Form 3508,
SBA will notify the lender if SBA 3508EZ, 3508S, or lender’s equivalent) 3. Lender Fees 93
decides to review the lender’s decision instruct the borrower to maintain but
or if SBA declines a request for review. Are lender processing fees subject to
not submit (documentation listed under clawback if a lender has not fulfilled its
If the borrower does not timely request ‘‘Documents that Each Borrower Must
SBA review or SBA declines the request obligations under PPP regulations?
Maintain but is Not Required to
for review, the lender is responsible for Submit’’). A lender is required to repay the
notifying the borrower of the date on For Second Draw PPP Loans of processing fee to SBA if a lender is
which the borrower’s first payment is $150,000 or less where a loan found guilty of an act of fraud in
due. If SBA accepts a borrower’s request forgiveness application has not been connection with the PPP loan. In such
for review, SBA will notify the borrower submitted by the borrower, the lender
and the lender of the results of the must also request that the borrower
92 This subsection was originally published at 85
review. If SBA denies forgiveness in FR 66214, subsection III.2.c. (Oct. 19, 2020) and has
provide the lender with revenue been modified to conform to section 307 of the
whole or in part, the lender is Economic Aid Act.
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91 This subsection was originally published at 85 93 This section was originally published at 85 FR
89 This change has been made so that SBA can
FR 33010, subsection III.2.c. (June 1, 2020) and 33010, subsection III.3. (June 1, 2020) and has been
determine whether the borrower requested review amended by 85 FR 38304, subsection III.2.b. (June modified to conform to section 340 of the Economic
within the appropriate time frame. 26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. Aid Act. Section 340 of the Economic Aid Act
90 This text has been added to clarify the 19, 2020) and has been modified to conform to provides that a lender may not be required to repay
information that will be provided to borrowers section 311 of the Economic Aid Act and updates a processing fee unless the lender is found guilty
regarding the lender’s forgiveness decision. to SBA loan review procedures. of an act of fraud in connection with the PPP loan.
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8298 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations
case, the loan is not eligible for a unnecessary, or contrary to the public recordkeeping or reporting requirements
guaranty.94 interest and the rule shall take effect at of the Paycheck Protection Program
such time as the agency promulgating (PPP) information collection (OMB
VI. Additional Information
the rule determines. 5 U.S.C. 808(2). Control Number 3245–0407) as a result
SBA may provide further guidance, if Pursuant to § 808(2), SBA for good cause of amendments made to the PPP by the
needed, through SBA notices that will finds that a 60-day delay to provide Economic Aid Act and implemented in
be posted on SBA’s website at public notice is impracticable and this interim final rule. The revisions
www.sba.gov. Questions on the contrary to the public interest. Likewise, will affect the PPP Loan Forgiveness
Paycheck Protection Program may be for the same reasons, SBA for good Application Form 3508, PPP Loan
directed to the Lender Relations cause finds that there are grounds to Forgiveness Application Form 3508EZ,
Specialist in the local SBA Field Office. waive the 30-day effective date delay and PPP Loan Forgiveness Application
The local SBA Field Office may be under the Administrative Procedure Form 3508S.
found at https://www.sba.gov/tools/ Act. 5 U.S.C. 553(d)(3). Further, to address the conflict of
local-assistance/districtoffices. As discussed elsewhere in this interest provisions in section 322 of the
interim final rule, the Economic Aid Act Economic Aid Act, SBA has developed
Compliance With Executive Orders provided that several of the changes a new form, Paycheck Protection
12866, 12988, 13132, 13563, and 13771, relating to loan forgiveness are effective Program—Borrower’s Disclosure of
the Congressional Review Act, the as if included in the CARES Act and Certain Controlling Interests Form
Administrative Procedure Act, the apply to any loan made pursuant to 3508D, which is required for certain
Paperwork Reduction Act (44 U.S.C. Ch. section 7(a)(36) of the Small Business borrowers who have disclosure
35), and the Regulatory Flexibility Act (5 Act before, on, or after December 27, requirements under the Economic Aid
U.S.C. 601–612) 2020, including forgiveness of such a Act.
Executive Orders 12866, 13563, and loan. Accordingly, loans that were made SBA Form 3508S was amended to
13771 in 2020 but that have not yet received conform to section 307 of the Economic
forgiveness will be forgiven based on Aid Act, which requires a simplified
This interim final rule is forgiveness application for loans of not
changes made in the Economic Aid Act,
economically significant for the more than $150,000. SBA Forms 3508,
as implemented in this interim final
purposes of Executive Orders 12866 and 3508EZ and 3508S were also amended
rule. Given the urgent need to provide
13563. SBA, however, is proceeding to address the new Second Draw PPP
borrowers that are eligible for loan
under the emergency provision at Loan program under section 311 of the
forgiveness with timely relief, the
Executive Order 12866 section 6(a)(3)(D) Economic Aid Act, include the
Administrator in consultation with the
based on the need to move additional expenses that are eligible for
Secretary has determined that it is
expeditiously to mitigate the current forgiveness under section 304 of the
impractical and not in the public
economic conditions arising from the Economic Aid Act, address the changes
interest to provide a delayed effective
COVID–19 emergency. This rule’s to the covered period definition in
date. An immediate effective date will
designation under Executive Order section 306 of the Economic Aid Act,
allow SBA to continue remitting
13771 will be informed by public and implement the EIDL advance
forgiveness payments to lenders without
comment. deduction repeal in section 333 of the
disruption and in accordance with the
This rule is necessary to implement Economic Aid Act. SBA Form 3508D
amendments made by the Economic Aid
the Economic Aid Act in order to will be used by borrowers where a
Act.
provide economic relief to small covered individual, as defined in
businesses nationwide adversely Executive Order 12988 section 322 of the Economic Aid Act,
impacted under the COVID–19 SBA has drafted this rule, to the holds a controlling interest in the
Emergency Declaration. We anticipate extent practicable, in accordance with borrower.
that this rule will result in substantial the standards set forth in section 3(a) SBA has requested Office of
benefits to small businesses, their and 3(b)(2) of Executive Order 12988, to Management and Budget (OMB)
employees, and the communities they minimize litigation, eliminate emergency approval of the revisions to
serve. However, we lack data to estimate ambiguity, and reduce burden. The rule the information collection to enable
the effects of this rule. has no preemptive effect but does have borrowers to begin submitting loan
The Administrator of the Office of some retroactive effect consistent with forgiveness applications with the
Management and Budget’s Office of specific applicability provisions of the Economic Aid Act changes as quickly as
Information and Regulatory Affairs Economic Aid Act. possible and to enable borrowers with
(OIRA) has determined that this is a disclosure requirements to meet the
major rule for purposes of Subtitle E of Executive Order 13132 statutory deadline for disclosure.
the Small Business Regulatory SBA has determined that this rule
Enforcement and Fairness Act of 1996 will not have substantial direct effects Regulatory Flexibility Act (RFA)
(also known as the Congressional on the States, on the relationship The Regulatory Flexibility Act (RFA)
Review Act or CRA) (5 U.S.C. 804(2) et between the National Government and generally requires that when an agency
seq.). Under the CRA, a major rule takes the States, or on the distribution of issues a proposed rule, or a final rule
effect 60 days after the rule is published power and responsibilities among the pursuant to section 553(b) of the
in the Federal Register. 5 U.S.C. various layers of government. Therefore, Administrative Procedure Act or
801(a)(3). SBA has determined that this rule has another law, the agency must prepare a
Notwithstanding this requirement, the no federalism implications warranting regulatory flexibility analysis that meets
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CRA allows agencies to dispense with preparation of a federalism assessment. the requirements of the RFA and
the requirements of section 801 when publish such analysis in the Federal
the agency for good cause finds that Paperwork Reduction Act, 44 U.S.C. Register. 5 U.S.C. 603, 604.
such procedure would be impracticable, Chapter 35 Rules that are exempt from notice and
SBA has determined that this rule comment are also exempt from the RFA
94 See 13 CFR 120.524. will require revisions to existing requirements, including conducting a
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8299
regulatory flexibility analysis, when of certain documents listed in this AD (EASA AD 2020–0199), to correct an
among other things the agency for good as of February 22, 2021. unsafe condition for Hélicoptères
cause finds that notice and public The FAA must receive comments on Guimbal (HG) Model Cabri G2
procedure are impracticable, this AD by March 22, 2021. helicopters. EASA advises of a report of
unnecessary, or contrary to the public ADDRESSES: You may send comments, a crack in a rotating scissor fitting
interest. SBA Office of Advocacy guide: using the procedures found in 14 CFR discovered during maintenance.
How to Comply with the Regulatory 11.43 and 11.45, by any of the following According to EASA, the suspected root
Flexibility Act, Ch.1. p.9. Since this rule methods: cause of the crack was corrosion under
is exempt from notice and comment, • Federal eRulemaking Portal: Go to residual stress. This condition, if not
SBA is not required to conduct a https://www.regulations.gov. Follow the addressed, could result in failure of the
regulatory flexibility analysis. instructions for submitting comments. rotating or non-rotating scissor fitting on
Authority: 15 U.S.C. 636(a)(36); • Fax: (202) 493–2251. either the MRH or the swashplate guide,
Coronavirus Aid, Relief, and Economic • Mail: U.S. Department of and subsequent loss of control of the
Security Act, Pub. L. 116–136, section 1114 Transportation, Docket Operations, helicopter.
and Economic Aid to Hard-Hit Small M–30, West Building Ground Floor, Accordingly, EASA AD 2020–0199
Businesses, Nonprofits, and Venues Act (Pub. Room W12–140, 1200 New Jersey requires an initial and repetitive
L. 116–260), section 303. Avenue SE, Washington, DC 20590. inspections of the rotating and non-
Tami Perriello, • Hand Delivery: Deliver to Mail rotating scissor fittings part number (P/
Acting Administrator, Small Business address above between 9 a.m. and 5 N) G12–00–200 installed on the MRH or
Administration. p.m., Monday through Friday, except swashplate guide, respectively. If a
Andy P. Baukol, Federal holidays. crack is detected, the EASA AD requires
Principal Deputy Assistant Secretary for
For service information identified in replacing the affected MRH or
International Monetary Policy (performing the this final rule, contact Hélicoptères swashplate guide with a serviceable
delegable duties of the Deputy Secretary), Guimbal, Basile Ginel, 1070, rue du part. The EASA AD prohibits installing
Department of the Treasury. Lieutenant Parayre, Aérodrome d’Aix- certain MRHs and swashplate guides
[FR Doc. 2021–02314 Filed 2–3–21; 11:15 am] en-Provence, 13290 Les Milles, France; unless the initial inspection has been
BILLING CODE P
telephone 33–04–42–39–10–88; email accomplished. The EASA AD also
basile.ginel@guimbal.com; web https:// requires reporting certain information to
www.guimbal.com. You may view this HG.
service information at the FAA, Office
DEPARTMENT OF TRANSPORTATION of the Regional Counsel, Southwest FAA’s Determination
Region, 10101 Hillwood Pkwy., Room These helicopters have been approved
Federal Aviation Administration
6N–321, Fort Worth, TX 76177. For by EASA and are approved for operation
information on the availability of this in the United States. Pursuant to the
14 CFR Part 39
material at the FAA, call (817) 222– FAA’s bilateral agreement with the
[Docket No. FAA–2020–1177; Project 5110. It is also available at https:// European Union, EASA has notified the
Identifier MCAI–2020–01336–R; Amendment www.regulations.gov by searching for FAA about the unsafe condition
39–21403; AD 2021–02–20] and locating Docket No. FAA–2020– described in its AD. The FAA is
1177. proposing this AD after evaluating all
RIN 2120–AA64
Examining the AD Docket known relevant information and
Airworthiness Directives; Hélicoptères determining that the unsafe condition
You may examine the AD docket at described previously is likely to exist or
Guimbal Helicopters
https://www.regulations.gov by develop on other helicopters of the same
AGENCY: Federal Aviation searching for and locating Docket No. type design.
Administration (FAA), DOT. FAA–2020–1177; or in person at Docket
Operations between 9 a.m. and 5 p.m., Related Service Information Under 1
ACTION: Final rule; request for
Monday through Friday, except Federal CFR Part 51
comments.
holidays. The AD docket contains this The FAA reviewed Guimbal Service
SUMMARY: The FAA is adopting a new final rule, the European Union Aviation Bulletin SB 20–011, Revision C, and SB
airworthiness directive (AD) for all Safety Agency (EASA) AD, any 20–012, Revision B, each dated October
Hélicoptères Guimbal Model Cabri G2 comments received, and other 5, 2020 (SB 20–011 Rev C and SB 20–
helicopters. This AD was prompted by information. The street address for 012 Rev B). SB 20–012 Rev B specifies
a report of a crack in a rotating scissor Docket Operations is listed above. removing the bolts connecting the two
fitting. This AD requires an initial and FOR FURTHER INFORMATION CONTACT: Fred scissor fittings P/N G12–00–200 and
repetitive inspections of certain rotating Guerin, Aerospace Engineer, General accomplishing a one-time detailed
and non-rotating scissor fittings, and Aviation & Rotorcraft Section, inspection for a crack in certain areas.
depending on the results, replacing the International Validation Branch, FAA, SB 20–012 Rev B also specifies
affected assembly. This AD also 2200 South 216th St. Des Moines, WA reassembling the two scissor fittings
prohibits installing certain main rotor 98198; telephone (206) 231–3500; email using correct bolt torque limits,
hubs (MRHs) and swashplate guides fred.guerin@faa.gov. installing new cotter pins, and reporting
unless the initial inspection has been SUPPLEMENTARY INFORMATION: any findings to HG customer service. SB
accomplished. The FAA is issuing this 20–011 Rev C specifies procedures for a
AD to address the unsafe condition on Background
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recurring inspection after
these products. The EASA, which is the Technical accomplishment of SB 20–012 Rev B of
DATES: This AD becomes effective Agent for the Member States of the the same areas of the scissor fittings for
February 22, 2021. European Union, has issued EASA AD a crack as SB 20–012 Rev B, except
The Director of the Federal Register No. 2020–0199, dated September 21, without removing the bolts which
approved the incorporation by reference 2020, and corrected September 24, 2020 connect the two scissor fittings. SB 20–
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