Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act (January 14, 2021)
Summary
This is a Small Business Administration and Department of the Treasury interim final rule, Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act, published in the Federal Register, Vol. 86, No. 9, on Thursday, January 14, 2021. The summary says it is intended to govern new PPP loans made under the Economic Aid Act, as well as applications for loan forgiveness on existing PPP loans where the forgiveness payment has not been remitted. It says that in the rule Treasury exercises its authority under section 1109 of the CARES Act to allow borrowers of first draw PPP loans to use 2019 or 2020 to calculate their maximum loan amount. The text also says SBA intends to issue a consolidated rule governing all aspects of loan forgiveness and the loan review process.
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Cite this document
“Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act (January 14, 2021).”
Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/department-of-the-treasury-interim-final-rule-on-paycheck-protection-program-as-amended-by-economic-490491bb05/
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3692 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
SMALL BUSINESS ADMINISTRATION published separately, and SBA intends www.sba.gov/tools/local-assistance/
to issue a consolidated rule governing districtoffices.
13 CFR Parts 113, 120, and 121 all aspects of loan forgiveness and the SUPPLEMENTARY INFORMATION:
[Docket No. SBA–2021–0001] loan review process as well. This
interim final rule is intended to govern I. Background Information
RIN 3245–AH62 new PPP loans made under the On March 13, 2020, President Trump
Economic Aid Act, as well as declared the ongoing Coronavirus
DEPARTMENT OF THE TREASURY applications for loan forgiveness on Disease 2019 (COVID–19) pandemic of
RIN 1505–AC74 existing PPP loans where the loan sufficient severity and magnitude to
forgiveness payment has not been warrant an emergency declaration for all
Business Loan Program Temporary remitted, and should not be construed states, territories, and the District of
Changes; Paycheck Protection to alter or affect the requirements Columbia. With the COVID–19
Program as Amended by Economic applicable to PPP loans closed prior to emergency, many small businesses
Aid Act its enactment, unless the provisions nationwide continue to experience
AGENCY: U.S. Small Business
apply retroactively consistent with economic hardship as a direct result of
Administration; Department of the specific applicability provisions of the the Federal, State, and local public
Treasury. Economic Aid Act as identified in this health measures that continue to be
rule. In addition, in this interim final taken to minimize the public’s exposure
ACTION: Interim final rule.
rule, Treasury exercises its authority to the virus. In addition, based on the
SUMMARY: On April 2, 2020, the U.S. under section 1109 of the CARES Act to advice of public health officials, other
Small Business Administration (SBA) allow borrowers of first draw PPP loans voluntary measures continue to be
posted an interim final rule announcing to use 2019 or 2020 to calculate their observed, resulting in a decrease in
the implementation of sections 1102 maximum loan amount. economic activity as the public avoids
and 1106 of the Coronavirus Aid, Relief, DATES: malls, retail stores, and other
and Economic Security Act (CARES Effective date: Unless otherwise businesses.
Act). Section 1102 of the CARES Act specified in this interim final rule, the On March 27, 2020, the President
temporarily adds a new program, titled provisions of this interim final rule are signed the Coronavirus Aid, Relief, and
the ‘‘Paycheck Protection Program,’’ to effective January 12, 2021. Economic Security Act (the CARES Act
the SBA’s 7(a) Loan Program. Section Applicability date: This interim final or the Act) (Pub. L. 116–136) to provide
1106 of the CARES Act provides for rule applies to loan applications, emergency assistance and health care
forgiveness of up to the full principal including requests for increases, and response for individuals, families, and
amount of qualifying loans guaranteed applications for loan forgiveness businesses affected by the coronavirus
under the Paycheck Protection Program submitted under the Paycheck pandemic. The Small Business
(PPP). The PPP is intended to provide Protection Program following enactment Administration (SBA) received funding
economic relief to small businesses of the Economic Aid Act. This interim and authority through the Act to modify
nationwide adversely impacted by the final rule also applies to loan existing loan programs and establish a
Coronavirus Disease 2019 (COVID–19). forgiveness applications submitted new loan program to assist small
Subsequently, SBA published twenty- under the Paycheck Protection Program businesses nationwide adversely
three interim final rules providing before enactment of the Economic Aid impacted by the COVID–19 emergency.
additional guidance on the PPP (some of Act where SBA has not remitted the Section 1102 of the CARES Act
which were jointly issued with the forgiveness payment. temporarily permitted SBA to guarantee
Department of the Treasury) and Comment date: Comments must be 100 percent of 7(a) loans under a new
Treasury published one interim final received on or before February 16, 2021. program titled the ‘‘Paycheck Protection
rule. On December 27, 2020, the ADDRESSES: You may submit comments, Program,’’ pursuant to section 7(a)(36)
Economic Aid to Hard-Hit Small identified by number SBA–2021–0001 of the Small Business Act (15 U.S.C.
Businesses, Nonprofits, and Venues Act through the Federal eRulemaking Portal: 636(a)(36)). Section 1106 of the CARES
(Economic Aid Act) became law. The http://www.regulations.gov. Follow the Act provided for forgiveness of up to the
Economic Aid Act extends the authority instructions for submitting comments. full principal amount of qualifying
to make PPP loans through March 31, SBA will post all comments on loans guaranteed under the Paycheck
2021 and revises certain PPP www.regulations.gov. If you wish to Protection Program. A more detailed
requirements. This interim final rule submit confidential business discussion of sections 1102 and 1106 of
incorporates the Economic Aid Act information (CBI) as defined in the User the Act is found in section III.
amendments required to be Notice at www.regulations.gov, please On April 24, 2020, the President
implemented by regulation within 10 send an email to ppp-ifr@sba.gov. All signed the Paycheck Protection Program
days of enactment. For ease of borrower other comments must be submitted and Health Care Enhancement Act (Pub.
and lender reference, this interim final through the Federal eRulemaking Portal L. 116–139), which provided additional
rule also consolidates the interim final described above. Highlight the funding and authority for the PPP. On
rules (and important guidance) issued to information that you consider to be CBI June 5, 2020, the President signed the
date governing borrower eligibility, and explain why you believe SBA Paycheck Protection Program Flexibility
lender eligibility, and PPP application should hold this information as Act of 2020 (Flexibility Act) (Pub. L.
and origination requirements for new confidential. SBA will review the 116–142), which changed key
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PPP loans, as well as provides general information and make the final provisions of the Paycheck Protection
rules relating to loan increases and loan determination whether it will publish Program, including provisions relating
forgiveness. This rule is not intended to the information. to the maturity of PPP loans, the deferral
substantively alter or affect PPP rules FOR FURTHER INFORMATION CONTACT: Call of PPP loan payments, and the
that were not amended by the Economic Center Representative at 833–572–0502, forgiveness of PPP loans. Section 3(d) of
Aid Act. Additional rules related to or the local SBA Field Office; the list of the Flexibility Act provided that the
second draw PPP loans will be offices can be found at https:// amendments relating to PPP loan
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3693
forgiveness and extension of the deferral 85 FR 29847 (posted on May 14, 2020 criteria—the maximum interest rate,
period for PPP loans were effective as if and published on May 19, 2020); 85 FR maximum loan amount, and other
included in the CARES Act, which 30835 (posted on May 18, 2020 and specified terms—that are ‘‘consistent,’’
meant that they were retroactive to published on May 21, 2020); 85 FR to ‘‘the maximum extent practicable,’’
March 27, 2020. Section 2 of the 31357 (posted on May 20, 2020 and with comparable terms in paragraph 36
Flexibility Act provided that the published on May 26, 2020); 85 FR of section 7(a) of the Small Business Act
amendment relating to the extension of 35550 (posted on June 5, 2020 and (15 U.S.C. 636(a)). See section
the maturity date for PPP loans became published on June 11, 2020); 85 FR 1109(d)(2).
effective on the date of enactment (June 36308 (posted on June 11, 2020 and
published on June 16, 2020); 85 FR In this rulemaking, Treasury is
5, 2020). Under the Flexibility Act, the
extension of the maturity date for PPP 36717 (posted on June 12, 2020 and addressing the needs of new PPP
loans was applicable to PPP loans made published on June 18, 2020); 85 FR borrowers by allowing all new
on or after that date, and lenders and 36997 (posted on June 17, 2020 and borrowers to use 2019 or 2020 for
borrowers were able to mutually agree published on June 19, 2020); 85 FR purposes of calculating their maximum
to modify PPP loans made before such 38301 (posted on June 24, 2020 and loan amount. Section 1102 of the
date to reflect the longer maturity. On published on June 26, 2020); and 85 FR CARES Act states that borrowers are to
July 4, 2020, Public Law 116–147 39066 (posted on June 25, 2020 and calculate their maximum loan amount
extended the authority for SBA to published on June 30, 2020). This rule by using ‘‘payroll costs incurred during
guarantee PPP loans to August 8, 2020. should be interpreted consistently with the 1-year period before the date on
On December 27, 2020, the Economic the sets of Frequently Asked Questions which the loan is made . . . .’’ For PPP
Aid to Hard-Hit Small Businesses, (FAQs) regarding the PPP that are loans made in 2020, most borrowers
Nonprofits, and Venues Act (Economic posted on SBA’s and Treasury’s used 2019. The Economic Aid Act did
Aid Act) (Pub. L. 116–260) was enacted, websites and the interim final rules not change this language for borrowers
which reauthorizes lending under the posted separately providing guidance on that are not farmers and ranchers and
PPP through March 31, 2021, and second draw PPP loans and the would require most new PPP borrowers
among other things, modifies provisions consolidated guidance on loan who obtain a loan in 2021 to use 2020
related to making PPP loans and forgiveness and the loan review process; as their base period. Using authority
forgiveness of PPP loans, and authorizes however, the Economic Aid Act granted by section 1109 of the CARES
second draw PPP loans under new overrides any conflicting guidance in Act, this rulemaking allows new
section 7(a)(37) of the Small Business the FAQs, and SBA will be revising the borrowers to choose 2019 or 2020 as the
Act for PPP borrowers that previously FAQs to fully conform to the Economic base period, thereby ensuring that they
received a PPP loan (rules for second Aid Act as quickly as feasible.
Most of this document restates are able to obtain funding on terms
draw loans will be published commensurate with existing PPP
separately). The Economic Aid Act also existing regulatory provisions to provide
lenders and new PPP borrowers a single borrowers. Separately, section 313 of the
redesignates section 1106 of the CARES Economic Aid Act states that farmers
Act as section 7A and transfers that regulation to consult on borrower
eligibility, lender eligibility, and loan and ranchers are to calculate their
section to the Small Business Act, to maximum loan amount using 2019 as
appear after section 7 of the Small application and origination
requirements, as well as general rules on their base period. This rulemaking
Business Act.1 allows farmers and ranchers to elect
increases and loan forgiveness for PPP
In addition to incorporating the either 2019 or 2020 as their base period,
loans. To enhance the readability of this
changes to PPP requirements made by in order to ensure that they can obtain
document, SBA has not reproduced the
the Economic Aid Act, this interim final funding on terms commensurate with
policy and legal justifications for
rule consolidates and restates the those available to other new PPP
existing regulatory provisions restated
following interim final rules: 85 FR borrowers.
here, except to the extent that those
20811 (posted on April 2, 2020 and
justifications may be helpful to the As required by section 1109(d)(2)(B)
published in the Federal Register on
borrower or lender. However, those of the CARES Act, Treasury has
April 15, 2020); 85 FR 20817 (posted on
justifications from the original interim determined that providing new PPP
April 3, 2020 and published on April final rules are incorporated by reference
15, 2020); 85 FR 21747 (posted on April borrowers with flexibility in choosing a
here. base period is consistent, to the
14, 2020 and published on April 20, In addition, section 1109(b) of the
2020); 85 FR 23450 (posted on April 24, ‘‘maximum extent practicable,’’ with the
CARES Act authorizes Treasury to
2020 and published on April 28, 2020); terms applicable to existing PPP
establish criteria for certain other
85 FR 23917 (posted on April 27, 2020 lenders to participate in the PPP. The borrowers. This enhanced flexibility
and published on April 30, 2020); 85 FR SBA is required to administer the will help ensure that new PPP
26321 (posted on April 28, 2020 and program that Treasury establishes under borrowers are treated even-handedly
published on May 4, 2020); 85 FR 26324 section 1109 of the Act, with guidance and do not see their permissible loan
(posted on April 30, 2020 and published from Treasury. The CARES Act amounts reduced due to financial
on May 4, 2020); 85 FR 27827 (posted authorizes Treasury to issue regulations distress experienced in 2020. Other than
on May 5, 2020 and published on May and guidance to implement section these adjustments, the terms and
8, 2020); 85 FR 29845 (posted on May 1109, including regulations that requirements applicable to PPP loans
8, 2020 and published on May 19, establish ‘‘terms and conditions’’ for under this rule are identical to the terms
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2020); 85 FR 29842 (posted on May 13, PPP loans. See section 1109(d)(2). The and requirements applicable to all other
2020 and published on May 19, 2020); terms and conditions established by PPP loans. As a result, a PPP borrower
Treasury under section 1109 are not that elects to use the flexibility in
1 Because section 1106 of the CARES Act is now
required to be identical to those selecting a base period under this
codified as section 7A of the Small Business Act, interim final rule may follow the same
any reference to section 1106 of the CARES Act in
provided elsewhere. Rather, the CARES
the rules that are being restated herein will refer to Act allows Treasury to set terms and processes and procedures applicable to
section 7A. conditions pertaining to certain other PPP loans.
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3694 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
II. Comments and Immediate Effective provisions of the PPP related to 8. Are lenders required to use a promissory
Date eligibility of applicants for PPP loans, note provided by SBA or may they use
which lenders are authorized to make their own?
This interim final rule is being issued 9. Are lenders required to use a separate
without advance notice and public PPP loans, the process for making PPP SBA Authorization document to issue
comment because section 303 of the loans, loan increases, and loan PPP loans?
Economic Aid Act authorizes SBA to forgiveness, as revised by the Economic 10. By when must a lender electronically
issue regulations to implement the Aid Act. Additional rules related to submit an SBA Form 1502 indicating
Economic Aid Act without regard to second draw PPP loans will be that PPP loan funds have been
published separately. While this interim disbursed?
notice requirements. In addition, this 11. How do lenders report disbursements
rule is being issued to allow for final rule fully implements the
on PPP loans that are approved for loan
immediate implementation of this Economic Aid Act’s changes to loan increases due to the Economic Aid Act?
program. The intent of both the CARES forgiveness, SBA also intends to issue a D. What do both borrowers and lenders need
Act and the Economic Aid Act is that consolidated rule governing all aspects to know and do?
SBA provides relief to America’s small of loan forgiveness and loan review as 1. What are the loan terms and conditions?
businesses expeditiously. Congress well to provide a single reference point 2. Do lenders have to apply the ‘‘credit
reauthorized PPP because of the current for lenders and borrowers. elsewhere test’’?
economic conditions affecting small 3. Are there any fee waivers?
Table of Contents 4. Who pays the fee to an agent who
businesses and intended for the loans to provides assistance in connection with a
be made quickly. The last day to apply A. General
PPP loan?
for and receive a PPP loan is March 31, B. What do borrowers need to know and do?
5. Can a borrower take multiple draws from
2021. Given the short duration of this 1. What businesses, organizations, and
a PPP loan and thereby delay the start of
individuals are eligible?
program, and the urgent need to issue the covered period?
2. What businesses, organizations, and 6. If a partnership received a PPP loan that
loans quickly, the Administrator in individuals are ineligible?
consultation with the Secretary has did not include any compensation for its
3. Affiliation Rules Generally partners, can the loan amount be
determined that it is impractical and not 4. I Have Determined That I Am Eligible. increased to include partner
in the public interest to provide a 30- How much can I borrow? compensation?
day delayed effective date. An 5. What is the interest rate on a PPP loan? 7. If a seasonal employer received a PPP
immediate effective date will give small 6. What will be the maturity date on a PPP loan before December 27, 2020, can the
businesses the maximum amount of loan? loan amount be increased based on a
time to apply for loans and lenders the 7. Can I apply for more than one First Draw revised calculation of the maximum loan
maximum amount of time to process PPP Loan? amount?
applications before the program ends. 8. Can I use e-signatures or e-consents if a 8. Which other PPP borrowers can reapply
This good cause justification also borrower has multiple owners? or request an increase in their PPP loan
supports waiver of the 60-day delayed 9. When will I have to begin paying amount?
principal and interest on my PPP loan? 9. If a borrower’s PPP loan has already
effective date for major rules under the 10. What forms do I need and how do I been fully disbursed, can the lender
Congressional Review Act at 5 U.S.C. submit an application for a PPP loan? make an additional disbursement for the
808(2). Although this interim final rule 11. How can PPP loans be used? increased loan proceeds?
is effective immediately, comments are 12. What certifications need to be made? 10. Are recipients of PPP loans entitled to
solicited from interested members of the 13. Limited Safe Harbor With Respect to exemptions on the grounds provided in
public on all aspects of the interim final Certification Concerning Need for PPP Federal nondiscrimination laws for sex-
rule, including section III. These Loan Request specific admissions practices, sex-
comments must be submitted on or 14. Can my PPP loan be forgiven in whole specific domestic violence shelters,
before February 16, 2021. The SBA will or in part? coreligionist housing, or Indian tribal
15. Do independent contractors count as preferences in connection with adoption
consider these comments and the need or foster care practices?
for making any revisions as a result of employees for purposes of PPP loan
forgiveness?
these comments. A. General
16. For loans made prior to December 27,
III. Paycheck Protection Program as 2020, what additional documentation SBA is authorized to guarantee loans
Amended by Economic Aid Act must a borrower submit when the under the PPP through March 31, 2021.
President of the United States, Vice Congress has authorized a total program
Overview President of the United States, the head level of $806,450,000,000 to provide
The CARES Act was enacted to of an Executive department, or a Member guaranteed loans under this temporary
provide immediate assistance to of Congress, or the spouse of any of the 7(a) program under sections 7(a)(36)
preceding, directly or indirectly holds a
individuals, families, and businesses controlling interest in the borrower?
(PPP loans or First Draw PPP Loans) and
affected by the COVID–19 emergency. C. What do lenders need to know and do? 7(a)(37) (Second Draw PPP Loans) of the
Among the provisions contained in the 1. Who is eligible to make PPP loans? Small Business Act, a portion of which
CARES Act are provisions authorizing 2. Do lenders have to register in SAM.gov is available for new First Draw and
SBA to temporarily guarantee loans to make PPP loans? Second Draw PPP Loans. Lenders have
under a new 7(a) loan program titled the 3. What do lenders have to do in terms of delegated authority to make PPP loans.
‘‘Paycheck Protection Program.’’ Loans loan underwriting? SBA will allow lenders to rely on
guaranteed under the Paycheck 4. Can lenders rely on borrower certifications of the borrower in order to
Protection Program (PPP) will be 100 documentation for loan forgiveness? determine eligibility of the borrower
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percent guaranteed by SBA, and the full 5. What fees will lenders be paid? and use of loan proceeds and to rely on
6. Can PPP loans be sold into the
principal amount of the loans may secondary market?
specified documents provided by the
qualify for loan forgiveness. The 7. Do the requirements for loan pledges borrower to determine qualifying loan
Economic Aid Act reauthorizes lending under 13 CFR 120.434 apply to PPP amount and eligibility for loan
under the PPP through March 31, 2021, loans pledged for borrowings from a forgiveness. Lenders must comply with
and revises certain PPP requirements. Federal Reserve Bank (FRB) or advances the applicable lender obligations set
The following outlines the key by a Federal Home Loan Bank (FHLB)? forth in this interim final rule, but will
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3695
be held harmless for borrowers’ failure eligible destination marketing with its domestic and foreign affiliates,
to comply with program criteria and organization,6 that employs no more does not meet the 500-employee, 300-
will not be subject to any enforcement than 300 employees; employee,9 or other applicable PPP size
action or penalty relating to loan • a news organization that is majority standard is therefore ineligible for a PPP
origination or forgiveness of the PPP owned or controlled by a NAICS code loan. Under no circumstances may PPP
loan if the lender acts in good faith 511110 or 5151 business or a nonprofit funds be used to support non-U.S.
relating to the origination or forgiveness public broadcasting entity with a trade workers or operations.
of the PPP loan and satisfies all other or business under NAICS 511110 or c. I have income from self-
applicable Federal, State, local, and 5151, that employs no more than 500 employment and file a Form 1040,
other statutory or regulatory employees (or, if applicable, the size Schedule C. Am I eligible for a PPP
requirements (as provided in section standard in number of employees Loan? 10
7A(h) of the Small Business Act, as established by SBA in 13 CFR 121.201 You are eligible for a PPP loan if: (i)
amended). Remedies for violations of for your industry) per location; or You were in operation on February 15,
PPP requirements or fraud are • another type of entity specifically 2020; (ii) you are an individual with
separately addressed in this interim provided for by PPP rules (as described self-employment income (such as an
final rule. The program requirements of below); and independent contractor or a sole
the PPP identified in this rule ii. you were in operation on February proprietor); (iii) your principal place of
temporarily supersede any conflicting 15, 2020, and either had employees for residence is in the United States; and
Loan Program Requirement (as defined whom you paid salaries and payroll (iv) you filed or will file a Form 1040
in 13 CFR 120.10). taxes or paid independent contractors, Schedule C for 2019 or meet the
as reported on a Form 1099–MISC or requirements below. However, if you are
B. What do borrowers need to know you were an eligible self-employed a partner in a partnership, you may not
and do? individual, independent contractor, or submit a separate PPP loan application
1. What businesses, organizations, and sole proprietorship with no employees. for yourself as a self-employed
individuals are eligible? You must submit documentation individual. Instead, the self-
sufficient to establish eligibility and to employment income of general active
a. Am I eligible? 2 3 demonstrate the qualifying payroll partners may be reported as a payroll
You are eligible for a PPP loan if: amount, which may include, as cost, up to $100,000 on an annualized
i. You, together with any affiliates (if applicable, payroll records, payroll tax basis, as prorated for the period during
applicable),4 are: filings, Form 1099–MISC, Schedule C or
• A small business concern under the which the payments are made or the
F, income and expenses from a sole obligation to make the payments is
applicable revenue-based size standard
proprietorship, or bank records. incurred on a PPP loan application filed
established by SBA in 13 CFR 121.201 b. Are employees of foreign affiliates
for your industry or under the SBA by or on behalf of the partnership.
included for purposes of determining Partnerships are eligible for PPP loans
alternative size standard; 5 whether a PPP borrower has more than
• an independent contractor, eligible under the CARES Act, as amended by
500 employees (or 300 employees, if the Economic Aid Act, and the
self-employed individual, or sole
applicable)? 7 Administrator has determined, in
proprietor; Yes. SBA’s affiliation regulations
• a business concern, a tax-exempt consultation with the Secretary of the
provide that to determine a concern’s
nonprofit organization described in
size, employees of the concern ‘‘and all franchise identifier code by the Administration; (3)
section 501(c)(3) of the Internal Revenue
of its domestic and foreign affiliates’’ are any business concern that receives financial
Code (IRC), a tax-exempt veterans assistance from a company licensed under section
included. 13 CFR 121.301(f). Therefore,
organization described in section 301 of the Small Business Investment Act of 1958
to calculate the number of employees of (15 U.S.C. 681); and (4)(a) any business concern
501(c)(19) of the IRC, a Tribal business
an entity for purposes of determining (including any station which broadcasts pursuant to
concern described in section 31(b)(2)(C)
eligibility for the PPP, an entity must a license granted by the Federal Communications
of the Small Business Act, and you Commission under title III of the Communications
include all employees of its domestic
employ no more than the greater of 500 Act of 1934 (47 U.S.C. 301 et seq.) without regard
and foreign affiliates, except in those for whether such a station is a concern as defined
employees or, if applicable, the size
limited circumstances where the in section 121.105 of title 13, Code of Federal
standard in number of employees Regulations, or any successor thereto) that employs
affiliation rules expressly do not apply
established by SBA in 13 CFR 121.201; not more than 500 employees, or the size standard
• a housing cooperative, an eligible to the entity.8 Any entity that, together established by the Administrator for the North
section 501(c)(6) organization, or an American Industry Classification System code
6 See subsections 1.j., 1.k., and 1.m. for additional
applicable to the business concern, per physical
information on the eligibility of housing location of such business concern and is majority
2 See interim final rule on Second Draw PPP
cooperatives, section 501(c)(6) organizations, and owned or controlled by a business concern that is
Loans for eligibility criteria for Second Draw PPP destination marketing organizations. The applicable assigned a North American Industry Classification
Loans, which is being published separately. size standard for these entities is not more than 300 System code beginning with 511110 or 5151; or (b)
3 This subsection was originally published at 85 employees. any nonprofit organization that is assigned a North
FR 20811, subsection III.2.a. (April 15, 2020), as 7 This subsection was originally published at 85 American Industry Classification System code
amended by 85 FR 36308 (June 16, 2020), 85 FR FR 30835, section III.1. (May 21, 2020) and has been beginning with 5151. SBA also applies affiliation
36717 (June 18, 2020), and 85 FR 38301 (June 26, modified for readability. Housing cooperatives, exceptions to certain categories of entities. 13 CFR
2020), and has been modified to reflect subsequent section 501(c)(6) organizations, and destination 121.103(b).
rules or guidance and the Economic Aid Act. marketing organizations, added by the Economic 9 For housing cooperatives, section 501(c)(6)
4 See section 3 regarding the applicability of Aid Act, must have no more than 300 employees organizations, and destination marketing
affiliation rules at 13 CFR 121.103 and 121.301 to to be eligible for PPP loans. organizations, the applicable size standard is not
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PPP loans. 8 Paragraph 7(a)(36)(D)(iv) of the Small Business more than 300 employees. See subsections 1.j. and
5 Under SBA’s alternative size standard, a Act (15 U.S.C. 636(a)(36)(D)(iv)), as added by the 1.m. For the applicable size standard for entities
business concern may qualify as a small business CARES Act and amended by the Economic Aid Act, eligible to apply for Second Draw PPP Loans, see
concern if it, together with any affiliates: (1) Has a waives SBA’s affiliation rules for (1) any business the interim final rule on Second Draw PPP Loans
maximum tangible net worth of not more than $15 concern with not more than 500 employees that, as that is being published separately.
million; and (2) the average net income after of the date on which the loan is disbursed, is 10 This subsection was originally published at 85
Federal income taxes (excluding any carry-over assigned a North American Industry Classification FR 21747, subsection III.1.a. (April 20, 2020) and
losses) for the two full fiscal years before the date System code beginning with 72; (2) any business has been modified to reflect subsequent interim
of application is not more than $5 million. concern operating as a franchise that is assigned a final rules or guidance and the Economic Aid Act.
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3696 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
Treasury (Secretary), that limiting a process as any similarly situated loan if it: (1) Is majority owned or
partnership and its partners (and an LLC customer or account holder of the controlled by a business concern that is
filing taxes as a partnership) to one PPP lender. Favoritism by the lender in assigned a NAICS code beginning with
loan is necessary to help ensure that as processing time or prioritization of the 511110 or 5151 or, with respect to a
many eligible borrowers as possible director’s or equity holder’s PPP public broadcasting entity (as defined in
obtain PPP loans before the statutory application is prohibited. Lenders section 397(11) of the Communications
deadline of March 31, 2021. This should comply with all other applicable Act of 1934 (47 U.S.C. 397(11))), has a
limitation will allow lenders to more state and federal regulations concerning trade or business that falls under such
quickly process applications and lower loans to associates of the lender. a code; and (2) makes a good faith
the burdens of applying for Lenders should also consult their own certification that proceeds of the loan
partnerships/partners. The internal policies concerning lending to will be used to support expenses at the
Administrator has further determined individuals or entities associated with component of the organization that
that permitting partners to apply as self- the lender. produces or distributes locally focused
employed individuals would create The foregoing paragraph does not or emergency information. See section 3
unnecessary confusion regarding which apply to a director or owner who is also for the applicability of SBA’s affiliation
entity, the partner or the partnership, an officer or key employee of the PPP rules to news organizations.
applies for partner and LLC member Lender. Officers and key employees of g. Industry-Specific Eligibility Issues
income, and would generate loan a PPP Lender may obtain a PPP Loan i. Is a hospital owned by
proceeds use coordination and from a different lender, but not from the governmental entities eligible for a PPP
allocation issues. Rent, mortgage PPP Lender with which they are loan? 15
interest, utilities, other debt service, associated. SBA also reminds Lenders Notwithstanding 13 CFR 120.110(j), a
operations expenditures, property that the ‘‘Authorized Lender Official’’ hospital that is otherwise eligible to
damage costs, supplier costs, and for each PPP Loan is subject to the receive a PPP loan as a business concern
worker protection expenditures are limitations described in the PPP Lender or nonprofit organization (described in
generally incurred at the partnership Application Form (SBA Form 2484), section 501(c)(3) of the Internal Revenue
level, not partner level, so it is most which states in relevant part: ‘‘Neither Code of 1986 and exempt from taxation
natural to provide the funds for these the undersigned Authorized Lender under section 501(a) of such Code) shall
expenses to the partnership, not Official, nor such individual’s spouse or not be rendered ineligible for a PPP loan
individual partners. In addition, you children, has a financial interest in the due to ownership by a state or local
should be aware that participation in Applicant [Borrower].’’ government if the hospital receives less
the PPP may affect your eligibility for e. If a seasonal business was dormant than 50% of its funding from state or
state-administered unemployment or not fully operating as of February 15, local government sources, exclusive of
compensation or unemployment 2020, is it still eligible? 13 Medicaid.
assistance programs, including the Yes, in evaluating eligibility, a ii. Are businesses that receive revenue
programs authorized by Title II, Subtitle seasonal business will be considered to from legal gaming eligible for a PPP
A of the CARES Act, or CARES Act have been in operation as of February Loan? 16
Employee Retention Credits. On June 15, 2020, if the business was in A business that is otherwise eligible
26, 2020, SBA issued additional operation for any 12-week period for a PPP Loan is not rendered ineligible
guidance for those individuals with self- between February 15, 2019 and due to its receipt of legal gaming
employment income who: (i) Were not February 15, 2020. This approach aligns revenues, and 13 CFR 120.110(g) is
in operation in 2019 but who were in the eligibility criteria for seasonal inapplicable to PPP loans. Businesses
operation on February 15, 2020, and (ii) businesses being in operation with the that received illegal gaming revenue
filed a Form 1040 Schedule C for 2020. time period for calculation of a seasonal remain categorically ineligible.
See ‘‘How To Calculate Maximum Loan employer’s maximum loan amount from iii. Are electric cooperatives that are
Amounts—By Business Type,’’ Question section 336 of the Economic Aid Act exempt from Federal income taxation
10 posted on SBA’s website.11 and makes PPP loans available to under section 501(c)(12) of the Internal
d. Are eligible businesses owned by Revenue Code eligible for a PPP loan? 17
seasonal businesses that operate outside
directors or shareholders of a PPP Yes. An electric cooperative that is
of the original, more limited time frame.
lender permitted to apply for a PPP loan exempt from Federal income taxation
through the lender with which they are f. How does the 500 employee limit
apply to news organizations with more under section 501(c)(12) of the Internal
associated? 12 Revenue Code will be considered to be
SBA regulations (including 13 CFR than one physical location? 14
A business concern, or any station ‘‘a business entity organized for profit’’
120.110 and 120.140) shall not apply to for purposes of 13 CFR 121.105(a)(1). As
prohibit an otherwise eligible business which broadcasts pursuant to a license
granted by the Federal Communications a result, such entities are eligible PPP
owned (in whole or part) by an outside borrowers, as long as other eligibility
director or holder of a less than 30 Commission under title III of the
Communications Act of 1934 (47 U.S.C. requirements are met. To be eligible, an
percent equity interest in a PPP lender electric cooperative must satisfy the
from obtaining a PPP loan from the PPP 301 et seq.), with more than one
physical location that employs not more employee-based size standard
lender on whose board the director established in the CARES Act, SBA’s
serves or in which the equity owner than 500 employees (or the size
standard established by the employee-based size standard
holds an interest, provided that the
eligible business owned by the director Administrator for the NAICS code
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15 This subsection was originally published at 85
or equity holder follows the same applicable to the business concern) per FR 23450, subsection III.2.c. (April 28, 2020) and
physical location, is eligible for a PPP has been modified for readability.
11 https://www.sba.gov/sites/default/files/2020- 16 This subsection was originally published at 85
13 This subsection was originally published at 85 FR 23450, subsection III.2.d. (April 28, 2020) and
12/How-to-Calculate-Loan-Amounts-508_6-26-
20.pdf (April 20, 2020). FR 23917, subsection III.4. (April 30, 2020) and has has been modified for readability.
12 This subsection was originally published at 85 been modified to reflect the Economic Aid Act. 17 This subsection was originally published at 85
FR 21747, subsection III.2.a. (April 20, 2020) and 14 This subsection has been added to conform to FR 29847, subsection III.1. (May 19, 2020) and has
has been modified for readability. section 317 of the Economic Aid Act. been modified for readability.
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3697
corresponding to its primary industry, if Yes. A public broadcasting entity (as destination marketing organization does
higher, or both tests in SBA’s defined in section 397(11) of the not receive more than 15 percent of its
‘‘alternative size standard.’’ 18 Communications Act of 1934 (47 U.S.C. receipts from lobbying activities; (2) the
iv. Are telephone cooperatives that 397(11)) that is a nonprofit organization lobbying activities of the destination
are exempt from federal income or any organization otherwise subject to marketing organization do not comprise
taxation under section 501(c)(12) of the section 511(a)(2)(B) of the Internal more than 15 percent of the total
Internal Revenue Code eligible for a PPP Revenue Code of 1986, and employs no activities of the organization; (3) the cost
loan? 19 more than 500 employees (or, if of the lobbying activities of the
Yes. A telephone cooperative that is applicable, the size standard in number destination marketing organization did
exempt from federal income taxation of employees established by SBA in 13 not exceed $1,000,000 during the most
under section 501(c)(12) of the Internal CFR 121.201 for the entity’s industry) recent tax year of the destination
Revenue Code will be considered to be per location is eligible for a PPP loan if marketing organization that ended prior
‘‘a business entity organized for profit’’ the organization has a trade or business to February 15, 2020; (4) the destination
for purposes of 13 CFR 121.105(a)(1). As that is assigned a NAICS code beginning marketing organization employs not
a result, such entities are eligible PPP with 511110 or 5151, and makes a good more than 300 employees; and (5) the
borrowers, as long as other eligibility faith certification that proceeds of the destination marketing organization: (a)
requirements are met. To be eligible, a loan will be used to support expenses at Is described in section 501(c) of the
telephone cooperative must satisfy the the component of the organization that Internal Revenue Code and is exempt
employee-based size standard produces or distributes locally focused from taxation under section 501(a) of
established in the CARES Act, SBA’s or emergency information.23 See such Code; or (b) is a quasi-
employee-based size standard subsection B.1.f. for information on how governmental entity or is a political
corresponding to its primary industry, if the 500 employee limit applies to news subdivision of a State or local
higher, or both tests in SBA’s organizations with more than one government, including any
‘‘alternative size standard.’’ 20 physical location. See section 3 for the instrumentality of those entities.26
v. Are housing cooperatives as applicability of SBA’s affiliation rules to viii. Are 501(c)(6) organizations
defined in section 216(b) of the Internal news organizations. eligible for PPP loans? 27
Revenue Code eligible for PPP loans? 21 vii. Are destination marketing Yes. Any organization that is
Yes. Housing cooperatives (as defined organizations eligible for PPP loans? 24 described in section 501(c)(6) of the
in section 216(b) of the Internal Revenue Yes. Under the Economic Aid Act, Internal Revenue Code and that is
Code of 1986) that employ not more any destination marketing exempt from taxation under section
than 300 employees are eligible to apply organization 25 is eligible to receive a 501(a) of such Code (excluding
for PPP loans as long as other eligibility PPP loan as long as other eligibility professional sports leagues and
requirements are met. In addition, the requirements are met and if: (1) The organizations with the purpose of
provisions applicable to affiliation,
promoting or participating in a political
described in section 3, apply to housing 23 This subsection provides that an eligible
campaign or other activity) shall be
cooperatives in the same manner as nonprofit news organization under section 317 of
the Economic Aid Act must have no more than 500 eligible to receive a PPP loan as long as
with respect to a small business
employees. (For those nonprofit news organizations other eligibility requirements are met
concern. with more than one physical location, they must
vi. Are nonprofit and tax-exempt and if: (1) The organization does not
have no more than 500 employees per location.)
news organizations eligible for PPP This will make PPP loans available to nonprofit
receive more than 15 percent of its
loans? 22 news organizations, regardless of whether the receipts from lobbying activities; (2) the
organization would be a business concern under lobbying activities of the organization
SBA regulations, if the nonprofit news organization do not comprise more than 15 percent
18 Under the alternative size standard, a business
satisfies the same general size standard applicable
concern, including an electric cooperative, can under the PPP rules to other borrowers that are of the total activities of the organization;
qualify for the PPP as a small business concern if, nonprofit or tax-exempt organizations. The (3) the cost of the lobbying activities of
as of March 27, 2020: (1) The maximum tangible net Administrator, in consultation with the Secretary, the organization did not exceed
worth of the business was not more than $15 has determined this requirement appropriately
million; and (2) the average net income after $1,000,000 during the most recent tax
implements section 317 of the Economic Aid Act
Federal income taxes (excluding any carry-over by making PPP loans available to nonprofit news year of the organization that ended prior
losses) of the business for the two full fiscal years organizations on the same terms as other nonprofit to February 15, 2020; and (4) the
before the date of the application is not more than organizations that have been made eligible for PPP organization employs not more than 300
$5 million. For an electric cooperative that does not loans.
have net income, the cooperative’s savings employees.
24 This subsection has been added to conform to
distributed to its owner-members will be
considered its net income.
section 318 of the Economic Aid Act. 2. What businesses, organizations, and
25 Section 318 of the Economic Aid Act added the
19 This subsection was originally published at 85 individuals are ineligible?
following definition to paragraph 7(a)(36)(A) of the
FR 35550, subsection III.1. (June 11, 2020) and has Small Business Act (15 U.S.C. 636(a)(36)(A)): ‘‘(xv) a. Could I be ineligible even if I meet
been modified for readability.
20 Under the alternative size standard, a business
the term ’destination marketing organization’ means the eligibility requirements in section
a nonprofit entity that is—(I) an organization 1? 28
concern, including a telephone cooperative, can described in section 501(c) of the Internal Revenue
qualify for the PPP as a small business concern if, Code of 1986 and exempt from tax under section
as of March 27, 2020: (1) The maximum tangible net 26 A destination marketing organization that is a
501(a) of such Code; or (II) a State, or a political
worth of the business was not more than $15 subdivision of a State (including any quasi-governmental entity or is a political
million; and (2) the average net income after instrumentality of such entities)—(aa) engaged in subdivision of a State or local government,
Federal income taxes (excluding any carry-over marketing and promoting communities and including any instrumentality of those entities, is
losses) of the business for the two full fiscal years facilities to businesses and leisure travelers through eligible for a PPP loan notwithstanding the SBA
khammond on DSKJM1Z7X2PROD with RULES6
before the date of the application is not more than a range of activities, including—(AA) assisting with regulation at 13 CFR 120.110(j), which states that
$5 million. For a telephone cooperative that does the location of meeting and convention sites; (BB) government-owned entities (except for businesses
not have net income, the telephone cooperative’s providing travel information on area attractions, owned or controlled by a Native American tribe) are
capital credits distributed to its owner-members lodging accommodations, and restaurants; (CC) not eligible for SBA financial assistance.
will be considered its net income. providing maps; and (DD) organizing group tours of 27 This subsection has been added to conform to
21 This subsection has been added to conform to section 318 of the Economic Aid Act.
local historical, recreational, and cultural
section 316 of the Economic Aid Act. attractions; or (bb) that is engaged in, and derives 28 This subsection was originally published at 85
22 This subsection has been added to conform to the majority of the operating budget of the entity FR 20811, subsection III.2.a. (April 15, 2020), as
section 317 of the Economic Aid Act. from revenue attributable to, providing live events. Continued
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3698 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
You are ineligible for a PPP loan if, for securities exchange under section 6 of No. If the applicant or the owner of
example: the Securities Exchange Act of 1934 (15 the applicant is the debtor in a
i. You are engaged in any activity that U.S.C. 78f) 32 (SBA will not consider bankruptcy proceeding, either at the
is illegal under Federal, state, or local whether a news organization that is time it submits the application or at any
law; eligible under the conditions described time before the loan is disbursed, the
ii. You are a household employer in subsection 1.f. and 1.g.vi. is affiliated applicant is ineligible to receive a PPP
(individuals who employ household with an entity, which includes any loan. If the applicant or the owner of the
employees such as nannies or entity that owns or controls such news applicant becomes the debtor in a
housekeepers); organization, that is an issuer 33); or bankruptcy proceeding after submitting
iii. An owner of 20 percent or more ix. Your business has permanently a PPP application but before the loan is
of the equity of the applicant is closed.34 disbursed, it is the applicant’s
presently incarcerated or, for any felony, b. Are businesses that are generally obligation to notify the lender and
presently subject to an indictment, ineligible for 7(a) loans under 13 CFR request cancellation of the application.
criminal information, arraignment, or 120.110 eligible for a PPP loan? 35 Failure by the applicant to do so will be
other means by which formal criminal Paragraphs (a), (g), and (k), of 13 CFR regarded as a use of PPP funds for
charges are brought in any jurisdiction; 120.110 do not apply to PPP loans. For unauthorized purposes.
or has been convicted of, pleaded guilty PPP loans, the ineligibility restriction in The Borrower Application Form for
or nolo contendere to, or commenced 13 CFR 120.110(n) is superseded by PPP loans (SBA Form 2483), which
any form of parole or probation subsection B.2.a.iii. of this interim final reflects this restriction in the form of a
(including probation before judgment) rule. Otherwise, a business is not borrower certification, is a loan program
for, a felony involving fraud, bribery, eligible for a PPP loan if it is a type of requirement. Lenders may rely on an
embezzlement, or a false statement in a business concern (or would be, if the applicant’s representation concerning
loan application or an application for entity were a business concern) the applicant’s or an owner of the
federal financial assistance within the described in 13 CFR 120.110, except as applicant’s involvement in a bankruptcy
last five years or any other felony within permitted by subsections B.1.d and proceeding.
the last year; B.1.g of this rule or otherwise permitted d. Is a hedge fund or private equity
iv. You, or any business owned or by PPP rules. Businesses that are not firm eligible for a PPP loan? 38
controlled by you or any of your generally eligible for a 7(a) loan under No. Hedge funds and private equity
owners, has ever obtained a direct or 13 CFR 120.110 are described further in firms are primarily engaged in
guaranteed loan from SBA or any other SBA’s Standard Operating Procedure investment or speculation, and such
Federal agency that is currently (SOP) 50 10 6, Part 2, Section A, businesses are therefore ineligible to
delinquent or has defaulted within the Chapter 3.36 receive a PPP loan.
last seven years and caused a loss to the c. Will I be approved for a PPP loan
3. Affiliation Rules Generally
government; if my business is in bankruptcy? 37
v. Your business or organization was a. Are affiliates considered together
not in operation on February 15, 32 Added to conform to section 342 of the for purposes of determining
2020; 29 Economic Aid Act, which also added the following eligibility? 39
definitions to paragraph 7(a)(36)(A) of the Small In most cases, a borrower will be
vi. You or your business received or Business Act (15 U.S.C. 636(a)(36)(A)): ‘‘(xvi) the
will receive a grant under the Shuttered terms ‘exchange’, ‘issuer’, and ‘security’ have the
considered together with its affiliates for
Venue Operator Grant program under meanings given those terms in section 3(a) of the purposes of determining eligibility for
section 324 of the Economic Aid Act; 30 Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).’’ the PPP.40 Under SBA rules, entities
This provision applies to loans made on or after
vii. The President, the Vice President, December 27, 2020. 38 This subsection was originally published at 85
the head of an Executive Department, or 33 See section 317 of the Economic Aid Act.
FR 23450, subsection III.2.a. (April 28, 2020) and
a Member of Congress, or the spouse of 34 This provision prohibits an entity that has gone
has been modified for readability.
such person as determined under out of business and has no intention of reopening 39 The text of this subsection was originally
applicable common law, directly or from receiving a PPP loan. The Administrator, in published at 85 FR 20817 (April 15, 2020).
consultation with the Secretary, has determined 40 Paragraph 7(a)(36)(D)(iv) of the Small Business
indirectly holds a controlling interest in this provision is necessary to maintain program Act (15 U.S.C. 636(a)(36)(D)(iv), as added by the
your business; 31 integrity, prevent abuse, and prevent PPP loans CARES Act and amended by the Economic Aid Act,
viii. Your business is an issuer, the being made to businesses that have permanently waives the affiliation rules contained in § 121.103
securities of which are listed on an closed. Preserving funds for businesses in operation for (1) any business concern with not more than 500
is necessary because only businesses that are still employees that, as of the date on which the loan
exchange registered as a national in operation will retain employees, which is a is disbursed, is assigned a North American Industry
primary purposes of the PPP. PPP was not intended Classification System code beginning with 72; (2)
amended by 85 FR 36308 (June 16, 2020), 85 FR to support businesses that have permanently closed. any business concern operating as a franchise that
36717 (June 18, 2020), and 85 FR 38301 (June 26, A borrower that has temporarily closed or is assigned a franchise identifier code by the
2020), and has been modified to conform to temporarily suspended its business but intends to Administration; (3) any business concern that
subsequent interim final rules or guidance and the reopen remains eligible for a PPP loan. receives financial assistance from a company
Economic Aid Act and for readability. 35 This subsection replaces the subsection
licensed under section 301 of the Small Business
29 Added to conform to section 310 of the originally published at 85 FR 20811, subsection Investment Act of 1958 (15 U.S.C. 681); and (4)(a)
Economic Aid Act. This provision is effective as if III.2.c. (‘‘How do I determine if I am ineligible’’) any business concern (including any station which
included in the CARES Act and applies to any loan (April 15, 2020) and modified to conform to the broadcasts pursuant to a license granted by the
made pursuant to section 7(a)(36) of the Small Economic Aid Act. Federal Communications Commission under title III
Business Act before, on, or after December 27, 2020, 36 SOP 50 10 6 can be found at https://
of the Communications Act of 1934 (47 U.S.C. 301
including forgiveness of such a loan. www.sba.gov/document/sop-50-10-lender- et seq.) without regard for whether such a station
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30 Added to conform to section 310 of the development-company-loan-programs-0. For PPP is a concern as defined in section 121.105 of title
Economic Aid Act. This provision applies to PPP loans approved before December 27, 2020, see SOP 13, Code of Federal Regulations, or any successor
loans made on or after December 27, 2020. 50 10 5(K), Subpart B, Chapter 2 for ineligible types thereto) that employs not more than 500 employees,
31 Added to conform to section 322 of the of businesses. SOP 50 10 5(K) can be found at or the size standard established by the
Economic Aid Act. This provision applies to any https://www.sba.gov/document/sop-50-10-5-lender- Administrator for the North American Industry
loan made on or after December 27, 2020. For any development-company-loan-programs. Classification System code applicable to the
loan made under section 7(a)(36) to a covered entity 37 This subsection was originally published at 85 business concern, per physical location of such
before December 27, 2020, see subsection B.16 of FR 23450, subsection III.4. (April 28, 2020) and has business concern and is majority owned or
this interim final rule. been modified for readability. controlled by a business concern that is assigned a
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3699
may be considered affiliates based on nonprofit organizations listed above as set forth in the Second PPP Interim
factors including but not limited to were not eligible for SBA Business Loan Final Rule (85 FR 20817). The affiliation
stock ownership, overlapping Programs under section 7(a) of the Small rules apply to private equity-owned
management,41 and identity of interest. Business Act; only for-profit small businesses in the same manner as any
See 13 CFR 121.301(f). business concerns were eligible. The other business subject to outside
b. How do SBA’s affiliation rules CARES Act made such nonprofit ownership or control.46 However, in
affect my eligibility and apply to me organizations not only eligible for the addition to applying any applicable
under the PPP? 42 PPP, but also subjected them to SBA’s affiliation rules, all borrowers should
An entity generally is eligible for the affiliation rules. As amended, section carefully review the required
PPP if it, combined with its affiliates, (i) 7(a) of the Small Business Act (15 U.S.C.
is a small business as defined in section certification on the Paycheck Protection
636(a)) now provides that the provisions Program Borrower Application Form
3 of the Small Business Act (15 U.S.C. applicable to affiliations under 13 CFR
632), (ii)(1) has 500 or fewer (SBA Form 2483) stating that ‘‘[c]urrent
121.103 apply with respect to nonprofit
employees 43 or is a business that economic uncertainty makes this loan
organizations, housing cooperatives,
operates in a certain industry and meets request necessary to support the
and veterans organizations in the same
applicable SBA employee-based size manner as with respect to small ongoing operations of the Applicant.’’
standards for that industry, if higher, business concerns. However, the e. Does participation in an employee
and (2) is a tax-exempt nonprofit detailed affiliation standards contained stock ownership plan (ESOP) trigger
organization described in section in § 121.103 currently do not apply to application of the affiliation rules? 47
501(c)(3) of the Internal Revenue Code PPP borrowers, because § 121.103(a)(8)
(IRC), a housing cooperative, a tax- No. For purposes of the PPP, a
provides that applicants in SBA’s business’s participation in an ESOP (as
exempt veterans organization described Business Loan Programs (which include
in section 501(c)(19) of the IRC, a Tribal defined in 15 U.S.C. 632(q)(6)) does not
the PPP) are subject to the affiliation result in an affiliation between the
business concern described in section rules contained in 13 CFR 121.301.
31(b)(2)(C) of the Small Business Act, a business and the ESOP.
c. Faith-Based Organizations 44
section 501(c)(6) organization, a This rule exempts otherwise qualified 4. I Have Determined That I Am Eligible.
destination marketing organization, or faith-based organizations from the How much can I borrow? 48
any other business concern, or (iii) has SBA’s affiliation rules, including those
500 or fewer employees per location (or set forth in 13 CFR part 121, where the Under the PPP, the maximum loan
an applicable SBA employee-based size application of the affiliation rules would amount for First Draw PPP Loans is the
standard for that industry, if higher) and substantially burden those lesser of $10 million or an amount that
is either majority owned or controlled organizations’ religious exercise. For the you will calculate using a payroll-based
by a NAICS code 511110 or 5151 formula authorized by the Act, as
reasons described in 85 FR 20817, the
business or is a nonprofit public
SBA’s affiliation rules, including those explained below.49 PPP loans approved
broadcasting entity with a trade or
set forth in 13 CFR part 121, do not in 2020 used 2019 or the 1-year before
business under NAICS code 511110 or
apply to the relationship of any church, the date on which the loan is made to
5151. Prior to the CARES Act, the
convention or association of churches, calculate payroll costs for purposes of
North American Industry Classification System
or other faith-based organization or calculating the maximum loan amount.
code beginning with 511110 or 5151; or (b) any entity to any other person, group, Borrowers who apply for PPP loans
nonprofit organization that is assigned a North organization, or entity that is based on 2021 and who are not self-employed
American Industry Classification System code a sincere religious teaching or belief or
beginning with 5151. This interim final rule has no (including sole proprietorships and
effect on these statutory waivers, which remain in
otherwise constitutes a part of the independent contractors) are also
full force and effect. As a result, the affiliation rules exercise of religion. This includes any permitted to use the precise 1-year
contained in section 121.301 also do not apply to relationship to a parent or subsidiary period before the date on which the loan
these types of entities. In addition, paragraph and other applicable aspects of
7(a)(36)(D) of the Small Business Act (15 U.S.C. is made to calculate payroll costs if they
organizational structure or form. A faith-
636(a)(36)(D)), as amended by section 342 of the choose not to use 2019 or 2020. Since
Economic Aid Act states that, with respect to a based organization seeking loans under
most borrowers will use 2019 or 2020
business concern made eligible under paragraph this program may rely on a reasonable,
7(a)(36)(D)(iii)(II) or (iv)(IV) (certain news the rule text refers only to 2019 or 2020
good faith interpretation in determining
organizations), the Administrator shall not consider
whether its relationship to any other for simplicity and readability.
whether any affiliated entity, which for purposes of
this subclause shall include any entity that owns or person, group, organization, or entity is 46 However, the CARES Act waives the affiliation
controls such business concern, is an issuer. exempt from the affiliation rules under rules if the borrower receives financial assistance
41 In order to help potential borrowers identify from an SBA-licensed Small Business Investment
this provision, and SBA will not assess,
other businesses with which they may be deemed Company (SBIC) in any amount. This includes any
to be affiliated under the common management
and will not require participating
type of financing listed in 13 CFR 107.50, such as
standard, the Borrower Application Form, SBA lenders to assess, the reasonableness of loans, debt with equity features, equity, and
Form 2483, released on April 2, 2020, requires the faith-based organization’s guarantees. Affiliation is waived even if the
applicants to list other businesses with which they determination. borrower has investment from other non-SBIC
have common management (including under a
management agreement). The information supplied
d. Do the SBA affiliation rules investors.
47 This subsection was originally published at 85
by the applicant in response to that information prohibit a portfolio company of a
request should be used by applicants as they assess private equity fund from being eligible FR 23450, section III.3. (April 28, 2020) and has
whether they have affiliates that should be included been modified for readability.
for a PPP loan? 45
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48 This subsection was originally published at 85
in their number of employees reported on SBA
Form 2483.
Borrowers must apply the affiliation FR 20811, subsection III.2.d. (April 15, 2020) and
42 The text of this subsection was originally rules that appear in 13 CFR 121.301(f), has been modified to conform to additional interim
published at 85 FR 20817 (April 15, 2020) and has final rules or guidance and the Economic Aid Act.
been modified to conform to the Economic Aid Act. 44 The text of this subsection was originally 49 See subsection 4.d. for maximum loan amount
43 For housing cooperatives, section 501(c)(6) published at 85 FR 20817 (April 15, 2020) and has applicable to certain farmers and ranchers. For the
organizations, and destination marketing been modified for readability. maximum loan amount for Second Draw PPP
organizations, the applicable size standard is not 45 This subsection was originally published at 85 Loans, see the the interim final rule on Second
more than 300 employees. FR 23450, subsection III.2.b. (April 28, 2020). Draw PPP Loans that is being published separately.
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3700 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
a. How do I calculate the maximum excess of an annual salary of your PPP loan application to
amount I can borrow? 50 $100,000: $1,200,000 substantiate the applied-for PPP loan
The following methodology, which is Average monthly qualifying payroll: amount and a 2019 or 2020 (whichever
one of the methodologies authorized by $100,000 you used to calculate loan amount) IRS
the Act, will be most useful for many Multiply by 2.5 = $250,000 Form 1099–MISC detailing
applicants. Add EIDL loan of $10,000 = $260,000 nonemployee compensation received
i. Step 1: Aggregate payroll costs Maximum loan amount is $260,000 (box 7), invoice, bank statement, or book
(defined in detail below in subsections You must provide your Form 941 (or of record that establishes you are self-
4.g. and 4.h.) from 2019 or 2020 for other tax forms containing similar employed. If using 2020 to calculate
employees whose principal place of information) and state quarterly wage loan amount, this is required regardless
residence is the United States. unemployment insurance tax reporting of whether you have filed a 2020 tax
ii. Step 2: Subtract any compensation forms from each quarter in 2019 or 2020 return with the IRS. You must provide
paid to an employee in excess of (whichever you used to calculate loan a 2020 invoice, bank statement, or book
$100,000 on an annualized basis, as amount), or equivalent payroll processor of record to establish you were in
prorated for the period during which the records, along with evidence of any operation on or around February 15,
payments are made or the obligation to retirement and health insurance 2020.
make the payments is incurred.51 contributions. A payroll statement or If you have employees, the following
iii. Step 3: Calculate average monthly similar documentation from the pay methodology should be used to
payroll costs (divide the amount from period that covered February 15, 2020 calculate your maximum loan amount:
Step 2 by 12). must be provided to establish you were i. Step 1: Compute 2019 or 2020
iv. Step 4: Multiply the average in operation on February 15, 2020.52 payroll (using the same year for all
monthly payroll costs from Step 3 by b. I have income from self- items) by adding the following:
2.5. employment and file a Form 1040, a. Your 2019 or 2020 Form 1040
v. Step 5: Add the outstanding Schedule C, how do I calculate the Schedule C line 31 net profit amount (if
maximum amount I can borrow and you are using 2020 and have not yet
amount of an Economic Injury Disaster
what documentation is required?53 filed a 2020 return, fill it out and
Loan (EIDL) made between January 31,
How you calculate your maximum compute the value), up to $100,000 on
2020 and April 3, 2020 that you seek to
loan amount depends upon whether or an annualized basis, as prorated for the
refinance. Do not include the amount of
not you employ other individuals. If you period during which the payments are
any ‘‘advance’’ under an EIDL COVID–
have no employees, the following made or the obligation to make the
19 loan (because it does not have to be
methodology should be used to payments is incurred, if this amount is
repaid).
calculate your maximum loan amount: over $100,000, reduce it to $100,000, if
The examples below illustrate this
i. Step 1: Find your 2019 or 2020 IRS this amount is less than zero, set this
methodology.
Form 1040 Schedule C line 31 net profit amount at zero;
i. Example 1—No employees make more amount (if you are using 2020 to b. 2019 or 2020 gross wages and tips
than $100,000 calculate payroll costs and have not yet paid to your employees whose principal
Annual payroll: $120,000 filed a 2020 return, fill it out and place of residence is in the United
Average monthly payroll: $10,000 compute the value). If this amount is States computed using 2019 or 2020 IRS
Multiply by 2.5 = $25,000 over $100,000, reduce it to $100,000. If Form 941 Taxable Medicare wages &
Maximum loan amount is $25,000 this amount is zero or less, you are not tips (line 5c—column 1) from each
ii. Example 2—Some employees make eligible for a PPP loan. quarter plus any pre-tax employee
more than $100,000 ii. Step 2: Calculate the average contributions for health insurance or
Annual payroll: $1,500,000 monthly net profit amount (divide the other fringe benefits excluded from
Subtract compensation amounts in amount from Step 1 by 12). Taxable Medicare wages & tips; subtract
excess of an annual salary of iii. Step 3: Multiply the average any amounts paid to any individual
$100,000: $1,200,000 monthly net profit amount from Step 2 employee in excess of $100,000 on an
Average monthly qualifying payroll: by 2.5. annualized basis, as prorated for the
$100,000 iv. Step 4: Add the outstanding period during which the payments are
Multiply by 2.5 = $250,000 amount of any Economic Injury Disaster made or the obligation to make the
Maximum loan amount is $250,000 Loan (EIDL) made between January 31, payments is incurred and any amounts
iii. Example 3—No employees make 2020 and April 3, 2020 that you seek to paid to any employee whose principal
more than $100,000, outstanding refinance. Do not include the amount of place of residence is outside the United
EIDL loan of $10,000. any advance under an EIDL COVID–19 States; and
Annual payroll: $120,000 loan (because it does not have to be c. 2019 or 2020 employer
Average monthly payroll: $10,000 repaid). contributions to employee group health,
Multiply by 2.5 = $25,000 You must provide the 2019 or 2020 life, disability, vision and dental
Add EIDL loan of $10,000 = $35,000 (whichever you used to calculate loan insurance (portion of IRS Form 1040
Maximum loan amount is $35,000 amount) Form 1040 Schedule C with Schedule C line 14 attributable to those
iv. Example 4—Some employees make contributions); retirement contributions
more than $100,000, outstanding 52 This subsection clarifies the documentation (Form 1040 Schedule C line 19), and
EIDL loan of $10,000 that must be submitted with an applicant’s loan state and local taxes assessed on
Annual payroll: $1,500,000 application to substantiate the borrower’s payroll
employee compensation (primarily
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costs. This requirement applies to loans made after
Subtract compensation amounts in December 27, 2020. For documentation under state laws commonly referred to
requirements for PPP loans made before December as the State Unemployment Tax Act or
50 This subsection was originally published at 85 27, 2020, see 85 FR 20811, subsection III.1.e. (April SUTA from state quarterly wage
FR 20811, subsection III.2.d. (April 15, 2020) and 15, 2020).
has been modified to conform to additional rules or 53 This subsection was originally published at 85
reporting forms).
guidance and the Economic Aid Act. FR 21747, subsection III.1.b. (April 20, 2020) and
ii. Step 2: Calculate the average
51 See subsection 4.j for treatment of amounts has been modified to conform to additional rules or monthly amount (divide the amount
paid to independent contractors. guidance and the Economic Aid Act. from Step 1 by 12).
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3701
iii. Step 3: Multiply the average d. How do farmers and ranchers value), and the sum of Schedule F lines
monthly amount from Step 2 by 2.5. calculate the maximum PPP loan 15, 22 and 23, up to $100,000 on an
iv. Step 4: Add the outstanding amount? 55 annualized basis, as prorated for the
amount of any EIDL made between How you calculate your maximum period during which the payments are
January 31, 2020 and April 3, 2020 that loan amount depends upon whether you made or the obligation to make the
you seek to refinance. Do not include employ other individuals. If you have payments is incurred, if this amount is
the amount of any advance under an no employees, the following over $100,000, reduce it to $100,000, if
EIDL COVID–19 loan (because it does methodology should be used to this amount is less than zero, set this
not have to be repaid). calculate your maximum loan amount: amount at zero; 56
You must supply your 2019 or 2020 i. Step 1: Find your 2019 or 2020 IRS b. 2019 or 2020 gross wages and tips
(whichever you used to calculate loan Form 1040 Schedule F line 9 gross paid to your employees whose principal
amount) Form 1040 Schedule C, Form income (if you are using 2020 and you place of residence is in the United
941 (or other tax forms or equivalent have not yet filed a 2020 return, fill it States computed using 2019 or 2020 IRS
payroll processor records containing out and compute the value). If this Form 941 Taxable Medicare wages &
similar information) and state quarterly amount is over $100,000, reduce it to tips (line 5c—column 1) from each
wage unemployment insurance tax $100,000. If this amount is zero or less, quarter plus any pre-tax employee
reporting forms from each quarter in you are not eligible for a PPP loan. contributions for health insurance or
2019 or 2020 (whichever you used to ii. Step 2: Divide the amount from other fringe benefits excluded from
calculate loan amount) or equivalent Step 1 by 12. Taxable Medicare wages & tips; subtract
payroll processor records, along with iii. Step 3: Multiply the average any amounts paid to any individual
evidence of any retirement and health monthly gross income amount from employee in excess of $100,000 on an
insurance contributions, if applicable. A Step 2 by 2.5. annualized basis, as prorated for the
payroll statement or similar iv. Step 4: Add the outstanding period during which the payments are
documentation from the pay period that amount of any Economic Injury Disaster made or the obligation to make the
covered February 15, 2020 must be Loan (EIDL) made between January 31, payments is incurred and any amounts
provided to establish you were in 2020 and ending on April 3, 2020 that paid to any employee whose principal
operation on February 15, 2020. you seek to refinance. Do not include place of residence is outside the United
c. How does a seasonal employer the amount of any advance under an States; and
calculate the maximum PPP loan EIDL COVID–19 loan (because it does c. 2019 or 2020 employer
amount? 54 not have to be repaid). contributions for employee group
As defined by section 315 of the You must provide the 2019 or 2020 health, life, disability, vision and dental
Economic Aid Act, a borrower is a (whichever you used to calculate loan insurance (portion of IRS Form 1040
seasonal employer if it does not operate amount) Form 1040 Schedule F with Schedule F line 15 attributable to those
for more than 7 months in any calendar your PPP loan application to contributions), employer contributions
year or, during the preceding calendar substantiate the applied-for PPP loan for employee retirement contributions
year, it had gross receipts for any 6 amount and a 2019 or 2020 (whichever (Form 1040 Schedule F line 23, and
months of that year that were not more you used to calculate loan amount) IRS state and local taxes assessed on
than 33.33 percent of the gross receipts Form 1099–MISC detailing employers for employee compensation
for the other 6 months of that year. nonemployee compensation received (primarily under state laws commonly
Under section 336 of the Economic Aid (box 7), invoice, bank statement, or book referred to as the State Unemployment
Act, a seasonal employer must of record that establishes you are self- Tax Act or SUTA from state quarterly
determine its maximum loan amount for employed. You must provide a 2020 wage reporting forms).
invoice, bank statement, or book of ii. Step 2: Calculate the average
purposes of the PPP by using the
record to establish you were in monthly amount (divide the amount
employer’s average total monthly
operation on or around February 15, from Step 1 by 12).
payments for payroll for any 12-week iii. Step 3: Multiply the average
period selected by the seasonal 2020.
monthly amount from Step 2 by 2.5.
employer beginning February 15, 2019, If you have employees, the following
iv. Step 4: Add the outstanding
and ending February 15, 2020. methodology should be used to
amount of any EIDL made between
calculate your maximum loan amount: January 31, 2020 and April 3, 2020 that
54 This subsection has been added to conform to i. Step 1: Compute 2019 or 2020
you seek to refinance. Do not include
section 336 of the Economic Aid Act. Except for payroll (using the same year for all
loans made pursuant to section 7(a)(36) of the Small the amount of any advance under an
items) by adding the following:
Business Act for which SBA has remitted a loan EIDL COVID–19 loan (because it does
a. The difference between your 2019
forgiveness payment to the lender before December not have to be repaid).
27, 2020, it is effective as if included in the CARES or 2020 Form 1040 Schedule F line 9 You must supply your 2019 or 2020
Act and applies to any loan made before, on, or gross income amount (if you are using (whichever you used to calculate loan
after December 27, 2020, including forgiveness of 2020 and you have not yet filed a 2020
such a loan. Previous guidance issued for seasonal amount) Form 1040 Schedule F, Form
employers stated as follows: ‘‘Under section 1102 return, fill it out and compute the 941 (or other tax forms or equivalent
of the CARES Act, a seasonal employer may payroll processor records containing
determine its maximum loan amount for purposes 55 This subsection has been added to conform to
of the PPP by reference to the employer’ average section 313 of the Economic Aid Act. This similar information) and state quarterly
total monthly payments for payroll ‘the 12-week provision applies to a farmer or rancher who (1) wage unemployment insurance tax
period beginning February 15, 2019, or at the operates as a sole proprietorship, an independent reporting forms from each quarter in
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election of the eligible [borrower], March 1, 2019, contractor, or is an eligible self-employed 2019 or 2020 (whichever you used to
and ending June 30, 2019.’ Under this interim final individual; (2) reports farm income or expenses on
rule issued pursuant to section 1109 of the Act, a a Schedule F (or any equivalent successor calculate loan amount) or equivalent
seasonal employer may alternatively elect to schedule); and (3) was in business as of February
determine its maximum loan amount as the average 15, 2020. This provision is effective as if included 56 Any employee payroll costs should be
total monthly payments for payroll during any in the CARES Act and applies to any loan made subtracted from the farmer’s or rancher’s gross
consecutive 12-week period between May 1, 2019 before, on, or after December 27, 2020, unless SBA income to avoid double-counting amounts that
and September 15, 2019.’’ 85 FR 23917 (April 30, has remitted a loan forgiveness payment to the represent pay to the employees of the farmer or
2020). lender on the PPP loan. rancher.
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3702 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
payroll processor records, along with (ii) Step 2: Calculate the average owned, directly or indirectly, by a
evidence of any retirement and health monthly payroll costs (divide the common parent.
insurance contributions, if applicable. A amount from Step 1 by 12). It is the responsibility of an applicant
payroll statement or similar (iii) Step 3: Multiply the average for a PPP loan to notify the lender if the
documentation from the pay period that monthly payroll costs from Step 2 by applicant has applied for or received
covered February 15, 2020 must be 2.5. PPP loans in excess of the amount
provided to establish you were in (iv) Step 4: Add any outstanding permitted by this interim final rule and
operation on February 15, 2020. amount of any EIDL made between withdraw or request cancellation of any
January 31, 2020 and April 3, 2020 that pending PPP loan application or
A farmer or rancher who received a
you seek to refinance. Do not include approved PPP loan not in compliance
PPP loan before December 27, 2020 may
the amount of any advance under an with the limitation set forth in this rule.
request a recalculation of the maximum
EIDL COVID–19 loan (because it does Failure by the applicant to do so will be
loan amount based on the formula
not have to be repaid). regarded as a use of PPP funds for
described above regarding gross income, You must supply 2019 or 2020 unauthorized purposes, and the loan
if doing so would result in a larger (whichever you used to calculate loan will not be eligible for forgiveness. A
covered loan amount and may receive amount) IRS Form 1065 (including K– lender may rely on an applicant’s
an increase in its PPP loan based on the 1s) and other relevant supporting representation concerning the
recalculation. documentation if the partnership has applicant’s compliance with this
e. How do partnerships calculate the employees, including the 2019 or 2020 limitation.
maximum loan amount? (whichever you used to calculate loan The Administrator, in consultation
The following methodology should be amount) IRS Form 941 and state with the Secretary, determined that
used to calculate the maximum amount quarterly wage unemployment limiting the amount of PPP loans that a
that partnerships can borrow: insurance tax reporting form from each single corporate group may receive will
quarter (or equivalent payroll processor promote the availability of PPP loans to
(i) Step 1: Compute 2019 or 2020 records or IRS Wage and Tax
payroll (using the same year for all the largest possible number of
Statements) along with records of any borrowers, consistent with the CARES
items) by adding (1) net earnings from retirement or health insurance
self-employment of individual general Act. The Administrator has concluded
contributions. If the partnership has that a limitation of $20,000,000 strikes
partners in 2019 or 2020, as reported on employees, a payroll statement or
IRS Form 1065 K–1, reduced by section an appropriate balance between broad
similar documentation from the pay availability of PPP loans and program
179 expense deduction claimed, period that covered February 15, 2020
unreimbursed partnership expenses resource constraints.
must be provided to establish the SBA’s affiliation rules, which relate to
claimed, and depletion claimed on oil partnership was in operation and had an applicant’s eligibility for PPP loans,
and gas properties, multiplied by employees on that date. If the and any waiver of those rules under the
0.9235,57 that is not more than $100,000 partnership has no employees, an CARES Act, continue to apply
per partner; (2) 2019 or 2020 gross invoice, bank statement, or book of independent of this limitation.
wages and tips paid to your employees record establishing the partnership was Businesses are subject to this limitation
whose principal place of residence is in in operation on February 15, 2020 must even if the businesses are eligible for the
the United States, if any, which can be instead be provided. waiver-of-affiliation provision under the
computed using 2019 or 2020 IRS Form f. Can a single corporate group receive CARES Act or are otherwise not
941 Taxable Medicare wages and tips unlimited PPP loans? 58 considered to be affiliates under SBA’s
(line 5c—column 1) from each quarter No. To preserve the limited resources affiliation rules.60
plus any pre-tax employee contributions available to the PPP program, and in This rule has no effect on lender
for health insurance or other fringe light of the previous lapse of PPP obligations required to obtain an SBA
benefits excluded from Taxable appropriations and the high demand for guarantee for PPP loans.
Medicare wages and tips, subtracting PPP loans, businesses that are part of a g. What qualifies as ‘‘payroll
any amounts paid to any individual single corporate group shall in no event costs? ’’ 61
employee in excess of $100,000 and any receive more than $20,000,000 of PPP Payroll costs consist of compensation
amounts paid to any employee whose loans in the aggregate.59 For purposes of to employees (whose principal place of
principal place of residence is outside this limit, businesses are part of a single residence is the United States) in the
the U.S.; (3) 2019 or 2020 employer corporate group if they are majority form of salary, wages, commissions, or
contributions for employee group similar compensation; cash tips or the
health, life, disability, vision and dental 58 This subsection was originally published at 85
equivalent (based on employer records
insurance, if any (portion of IRS Form FR 26324, subsection III.1. (May 4, 2020).
59 The Administrator has authority to issue ‘‘such
of past tips or, in the absence of such
1065 line 19 attributable to those records, a reasonable, good-faith
rules and regulations as [the Administrator] deems
contributions); (4) 2019 or 2020 necessary to carry out the authority vested in [her] employer estimate of such tips);
employer contributions to employee by or pursuant to’’ 15 U.S.C. Chapter 14A, payment for vacation, parental, family,
retirement plans, if any (IRS Form 1065 including authorities established under section
medical, or sick leave; allowance for
line 18); and (5) 2019 or 2020 employer 1102 of the CARES Act. Section 1102 provides that
the Administrator ‘‘may’’ guarantee loans under the separation or dismissal; payment for the
state and local taxes assessed on terms and conditions set forth in section 7(a) of the provision of employee benefits
employee compensation, primarily state Small Business Act, and those conditions specify a consisting of group health care or group
unemployment insurance tax (from state ‘‘maximum’’—but not a minimum—loan amount.
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See 15 U.S.C. 636(a)(36)(B), (E); see also CARES Act
life, disability, vision, or dental
quarterly wage reporting forms), if any.
section 1106(k) (authorizing SBA to issue
60 See Section 7(a)(36)(D)(iv) of the Small
regulations to govern loan forgiveness). To preserve
57 This treatment follows the computation of self- finite appropriations for PPP loans and ensure Business Act (15 U.S.C. 636(a)(36)(D)(iv), as added
employment tax from IRS Form 1040 Schedule SE broad access for eligible borrowers, the by the CARES Act; 13 CFR 121.103(b).
Section A line 4 and removes the ‘‘employer’’ share Administrator, in consultation with the Secretary, 61 This subsection was originally published at 85
of self-employment tax, consistent with how payroll has determined that an aggregate limitation on FR 20811, subsection III.2.f. (April 15, 2020) and
costs for employees in the partnership are loans to a single corporate group is necessary and has been modified to conform to the Economic Aid
determined. appropriate. Act.
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3703
insurance,62 including insurance No, independent contractors have the 7. Can I apply for more than one First
premiums, and retirement; payment of ability to apply for a PPP loan on their Draw PPP Loan? 72
state and local taxes assessed on own so they do not count for purposes No. Except as set forth in subsection
compensation of employees; and for an of a borrower’s PPP loan calculation.66 D.8, the Administrator, in consultation
independent contractor or sole k. Do student workers count when with the Secretary, determined that no
proprietor, wages, commissions, eligible borrower may receive more than
determining the number of employees
income, or net earnings from self- one First Draw PPP Loan. This means
for PPP loan eligibility? 67
employment, or similar compensation. that if you apply for a PPP loan you
h. Is there anything that is expressly Yes. Student workers generally count should consider applying for the
excluded from the definition of payroll as employees, unless (a) the applicant is maximum amount. Any borrower who
costs? 63 an institution of higher education, as received a PPP loan in 2020 received a
Yes. The Act expressly excludes the defined in the Department of First Draw PPP Loan and is not eligible
following: Education’s Federal Work-Study to receive another First Draw PPP Loan,
i. Any compensation of an employee regulations, 34 CFR 675.2, and (b) the but may be eligible for a second draw
whose principal place of residence is student worker’s services are performed PPP loan.73
outside of the United States; as part of a Federal Work-Study Program
ii. The compensation of an individual 8. Can I use e-signatures or e-consents
(as defined in those regulations 68) or a
employee in excess of $100,000 on an if a borrower has multiple owners? 74
substantially similar program of a State
annualized basis, as prorated for the or political subdivision thereof. Yes, e-signature or e-consents can be
period during which the payments are Institutions of higher education must used regardless of the number of
made or the obligation to make the exclude work study students when owners.
payments is incurred; determining the number of employees 9. When will I have to begin paying
iii. Federal employment taxes for PPP loan eligibility, and must also principal and interest on my PPP
imposed or withheld during the exclude payroll costs for work study loan? 75
applicable period, including the
students from the calculation of payroll If you submit to your lender a loan
employee’s and employer’s share of
costs used to determine their PPP loan forgiveness application within 10
FICA (Federal Insurance Contributions
Act) and Railroad Retirement Act taxes, amount. months after the end of your loan
and income taxes required to be 5. What is the interest rate on a PPP forgiveness covered period, you will not
withheld from employees; and have to make any payments of principal
loan? 69
iv. Qualified sick and family leave or interest on your loan before the date
wages for which a credit is allowed The interest rate will be 100 basis on which SBA remits the loan
under sections 7001 and 7003 of the points or one percent, calculated on a forgiveness amount on your loan to your
Families First Coronavirus Response non-compounding, non-adjustable lender (or notifies your lender that no
Act (Pub. L. 116–127). basis.70 loan forgiveness is allowed).
i. May fishing boat owners include Your ‘‘loan forgiveness covered
payroll costs in their PPP loan 6. What will be the maturity date on a period’’ is the period beginning on the
applications that are attributable to PPP loan? 71 date the lender disburses the PPP loan
and ending on any date selected by the
crewmembers described in section The maturity is five years. borrower that occurs during the period
3121(b)(20) of the Internal Revenue
(i) beginning on the date that is 8 weeks
Code? 64 66 See subsection 4.i. regarding fishing boat
after the date of disbursement and (ii)
Yes. A fishing boat owner may owners including payroll costs for their ending on the date that is 24 weeks after
include compensation reported on Box crewmembers in the calculation of the PPP loan the date of disbursement. Your lender
5 of IRS Form 1099–MISC and paid to amount.
must notify you of remittance by SBA of
a crewmember described in section 67 This subsection was originally published at 85
the loan forgiveness amount (or notify
3121(b)(20) of the Code, up to $100,000 FR 27287, section III.2. (May 8, 2020) and has been
modified for readability.
you that SBA determined that no loan
on an annualized basis, as prorated for
68 The Department of Education’s Federal Work- forgiveness is allowed) and the date
the period during which the payments your first payment is due. Interest
are made or the obligation to make the Study Programs described at 34 CFR part 675 are
(1) the Federal Work-Study Program, (2) the Job continues to accrue during the
payments is incurred, as a payroll cost deferment period.
Location and Development Program, and (3) Work
in its PPP loan application. Colleges Program. If you do not submit to your lender a
j. Do independent contractors count 69 This subsection was originally published at 85 loan forgiveness application within 10
as employees for purposes of PPP loan FR 20811, subsection III.2.i. (April 15, 2020) and
calculations? 65 has been modified to conform to additional interim 72 This subsection was originally published at 85
final rules or guidance and the Economic Aid Act. FR 20811, subsection III.2.i. (‘‘Can I apply for more
62 This provision has been modified to conform 70 Revised to conform to section 339 of the than one PPP loan?’’) (April 15, 2020) and has been
to section 308 of the Economic Aid Act. This Economic Aid Act. The revision applies to PPP modified to conform to the Economic Aid Act and
revision is effective as if included in the CARES Act loans made on or after December 27, 2020, but may for readability. PPP borrowers may be eligible for
and applies to any loan made before, on, or after apply with respect to a PPP loan made before that a loan under section 7(a)(37) of the Small Business
December 27, 2020, including forgiveness of such date upon the mutual agreement of the lender and Act, ‘‘Paycheck Protection Program Second Draw
a loan. Loans,’’ see interim final rule on Second Draw PPP
the borrower. A one percent interest rate provides
63 This subsection was originally published at 85 Loans that is being published separately.
low cost funds to borrowers to meet eligible payroll
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FR 20811, subsection III.2.g. (April 15, 2020) and 73 See interim final rule on Second Draw PPP
costs and other eligible expenses during this
has been modified to conform to section 344 the Loans for eligibility criteria for Second Draw PPP
Economic Aid Act. temporary period of economic dislocation caused Loans, which is being published separately.
64 This subsection was originally published at 85 by the coronavirus. Second, for lenders, the 100 74 This subsection was originally published at 85
FR 39066, subsection III.1. (June 30, 2020) and has basis points offers an attractive interest rate relative FR 20811, subsection III.2.l. (April 15, 2020).
been modified to conform to section 344 the to the cost of funding for comparable maturities. 75 This subsection was originally published at 85
Economic Aid Act and for readability. 71 This subsection was originally published at 85
FR 20811, subsection III.2.n. (April 15, 2020), as
65 This subsection was originally published at 85 FR 36308, subsection III.1.b. (June 16, 2020) and has amended by 85 FR 36038 (June 16, 2020), and has
FR 20811, subsection III.2.h. (April 15, 2020). been modified for readability. been modified to conform to the Economic Aid Act.
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3704 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
months after the end of your loan accounting or tracking of supplies, Health and Human Services and the
forgiveness covered period, you must inventory, records and expenses); 79 Secretary of Labor; and (ii) the purchase
begin paying principal and interest after ix. covered property damage costs of—(I) covered materials described in
that period. For example, if a borrower’s (costs related to property damage and section 328.103(a) of title 44, Code of
PPP loan is disbursed on January 25, vandalism or looting due to public Federal Regulations, or any successor
2021, the 24-week period ends on July disturbances that occurred during 2020 regulation; (II) particulate filtering
12, 2021. If the borrower does not that was not covered by insurance or facepiece respirators approved by the
submit a loan forgiveness application to other compensation); National Institute for Occupational
its lender by May 12, 2022, the borrower x. covered supplier costs Safety and Health, including those
must begin making payments on or after (expenditures made by a borrower to a approved only for emergency use
May 12, 2022. supplier of goods for the supply of authorization; or (III) other kinds of
goods that—(A) are essential to the personal protective equipment, as
10. What forms do I need and how do operations of the borrower at the time at determined by the Administrator in
I submit an application for a PPP which the expenditure is made; and (B) consultation with the Secretary of
loan? 76 is made pursuant to a contract, order, or Health and Human Services and the
The applicant must submit Paycheck purchase order—(i) in effect at any time Secretary of Labor; and (C) such
Protection Program Borrower before the covered period with respect expenditures do not include residential
Application Form (SBA Form 2483), or to the applicable covered loan; or (ii) real property or intangible property).
lender’s equivalent form, and payroll with respect to perishable goods, in At least 60 percent of the PPP loan
documentation, as described above. The effect before or at any time during the proceeds shall be used for payroll costs.
lender must submit SBA Form 2484, covered period with respect to the For purposes of determining the
Paycheck Protection Program Lender’s applicable covered loan); and percentage of use of proceeds for payroll
Application for 7(a) Loan Guaranty, xi. covered worker protection costs, the amount of any EIDL
electronically in accordance with expenditures ((A) operating or a capital refinanced will be included. For
program requirements and maintain the expenditures to facilitate the adaptation purposes of loan forgiveness, however,
forms and supporting documentation in of the business activities of an entity to the borrower will have to document the
its files. comply with requirements established proceeds used for payroll costs in order
or guidance issued by the Department of to determine the amount of forgiveness.
11. How can PPP loans be used? 77 Health and Human Services, the Centers While the Act provides that PPP loan
a. The proceeds of a PPP loan are to for Disease Control, or the Occupational proceeds may be used for the purposes
be used for: Safety and Health Administration, or listed above and for other allowable
i. Payroll costs (as defined in the any equivalent requirements established uses described in section 7(a) of the
CARES Act, Economic Aid Act and this or guidance issued by a State or local Small Business Act (15 U.S.C. 636(a)),
interim final rule); government, during the period the Administrator believes that finite
ii. costs related to the continuation of beginning on March 1, 2020 and ending appropriations and the structure of the
group health care, life, disability, vision, the date on which the national Act warrant a requirement that
or dental benefits during periods of paid emergency with respect to the COVID– borrowers use a substantial portion of
sick, medical, or family leave, and group 19 expires related to the maintenance of the loan proceeds for payroll costs,
health care, life, disability, vision, or standards for sanitation, social consistent with Congress’ overarching
dental insurance premiums; distancing, or any other worker or goal of keeping workers paid and
iii. mortgage interest payments (but customer safety requirement related to employed. This percentage is consistent
not mortgage prepayments or principal COVID–19; (B) such expenditures may with the limitation on the forgiveness
payments); include—(i) the purchase, maintenance, amount set forth in the Flexibility Act.
iv. rent payments; or renovation of assets that create or
v. utility payments; This limitation on use of the loan funds
expand—(I) a drive-through window will help to ensure that the finite
vi. interest payments on any other facility; (II) an indoor, outdoor, or
debt obligations that were incurred appropriations available for these loans
combined air or air pressure ventilation are directed toward payroll protection,
before February 15, 2020; or filtration system; (III) a physical
vii. refinancing an SBA EIDL loan as each loan that is issued depletes the
barrier such as a sneeze guard; (IV) an appropriation, regardless of whether
made between January 31, 2020 and expansion of additional indoor, outdoor,
April 3, 2020; 78 portions of the loan are later forgiven.
or combined business space; (V) an b. How can PPP loans be used by
viii. covered operations expenditures onsite or offsite health screening
(payments for any business software or individuals with income from self-
capability; or (VI) other assets relating to employment who file a Form 1040,
cloud computing service that facilitates the compliance with the requirements
business operations, product or service Schedule C? 80
or guidance described in subparagraph The proceeds of a PPP loan are to be
delivery, the processing, payment, or (A), as determined by the Administrator
tracking of payroll expenses, human used for the following.
in consultation with the Secretary of i. Owner compensation replacement,
resources, sales and billing functions, or
calculated based on 2019 or 2020 (using
79 Items viii. through xi. were added to conform
76 This subsection was originally published at 85 the same year that was used to calculate
to section 304 of the Economic Aid Act. These
FR 20811, subsection III.2.q. (April 15, 2020). provisions are effective as if included in the CARES the loan amount) net profit as described
77 This subsection was originally published at 85
Act and apply to any loan made before, on, or after in subsection 4.b.
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FR 20811, subsection III.2.r. (April 15, 2020), as December 27, 2020, including forgiveness of such ii. Employee payroll costs (as defined
amended by 85 FR 36308 (June 16, 2020) and has loan, unless SBA has remitted a loan forgiveness
been modified to conform to the Economic Aid Act.
in this interim final rule) for employees
payment to the lender on the PPP loan. Section
78 Under paragraph 7(a)(36)(Q) of the Small 1106 of the CARES Act (15 U.S.C. 9005) was whose principal place of residence is in
Business Act, as amended by section 341 of the redesignated as section 7A, transferred to the Small
Economic Aid Act, an EIDL loan used for purposes Business Act (15 U.S.C. 631 et seq.), and inserted 80 This subsection was originally published at 85
other than paying payroll costs and other eligible so as to appear after section 7 of the Small Business FR 21747, subsection III.1.d. (April 20, 2020) and
PPP expenditures is not considered a duplication of Act (15 U.S.C. 636) in section 304(b) of the has been modified to conform to the Economic Aid
the assistance available under the PPP. Economic Aid Act. Act.
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3705
the United States, if you have The Administrator, in consultation 12. What certifications need to be
employees. with the Secretary, determined that it is made? 85
iii. Mortgage interest payments (but appropriate to limit self-employed On the PPP borrower application, an
not mortgage prepayments or principal individuals’ (who file a Form 1040 authorized representative of the
payments) on any business mortgage Schedule C) use of loan proceeds to applicant must certify in good faith to
obligation on real or personal property those types of allowable uses for which all of the below: 86
(e.g., the interest on your mortgage for the borrower made expenditures in 2019 i. The Applicant was in operation on
the warehouse you purchased to store or 2020 or that were used on covered February 15, 2020, has not permanently
business equipment or the interest on an property damage, as defined in section closed, and was either an eligible self-
auto loan for a vehicle you use to 7A(a). The Administrator has employed individual, independent
perform your business), business rent determined that this limitation on self- contractor, or sole proprietorship with
payments (e.g., the warehouse where no employees, or had employees for
employed individuals who file a Form
you store business equipment or the whom it paid salaries and payroll taxes
1040 Schedule C is consistent with the
vehicle you use to perform your or paid independent contractors, as
business), and business utility payments borrower certification required by the
Act; specifically, that the PPP loan is reported on a Form 1099–MISC.
(e.g., the cost of electricity in the ii. Current economic uncertainty
warehouse you rent or gas you use necessary ‘‘to support the ongoing
operations’’ of the borrower. The makes this loan request necessary to
driving your business vehicle). You support the ongoing operations of the
must have claimed or be entitled to Administrator and the Secretary thus
believe that this limitation is consistent applicant.
claim a deduction for such expenses on iii. The funds will be used to retain
your 2019 or 2020 (whichever you used with the structure of the Act to maintain
existing operations and payroll and not workers and maintain payroll; or make
to calculate loan amount) Form 1040 payments for mortgage interest, rent,
Schedule C for them to be a permissible for business expansion. This limitation
utilities, covered operations
use. For example, if you did not claim on the use of PPP loan proceeds will
expenditures, covered property damage
or are not entitled to claim utilities also help to ensure that the finite
costs, covered supplier costs, and
expenses on your 2019 or 2020 Form appropriations available for these loans covered worker protection expenditures
1040 Schedule C, you cannot use the are directed toward maintaining existing as specified under the Paycheck
proceeds for utilities. operations and payroll, as each loan that Protection Program Rules; I understand
iv. Interest payments on any other is made depletes the appropriation. that if the funds are knowingly used for
debt obligations that were incurred
c. Can PPP proceeds be used for unauthorized purposes, the federal
before February 15, 2020 (such amounts
lobbying activities or expenditures? 83 government may hold me legally liable
are not eligible for PPP loan
No. None of the proceeds of a PPP such as for charges of fraud. (As
forgiveness).
loan may be used for (1) lobbying explained above, not more than 40
v. Refinancing an SBA EIDL loan
activities, as defined in section 3 of the percent of loan proceeds may be used
made between January 31, 2020 and
for nonpayroll costs.)
April 3, 2020 (maturity will be reset to Lobbying Disclosure Act of 1995 (2
iv. I understand that loan forgiveness
PPP’s maturity of two years for PPP U.S.C. 1602); (2) lobbying expenditures
will be provided for the sum of
loans made before June 5, 2020 unless related to a State or local election; or (3) documented payroll costs, covered
the borrower and lender mutually agree expenditures designed to influence the mortgage interest payments, covered
to extend the maturity of such loans to enactment of legislation, appropriations, rent payments, covered utilities,
five years, or PPP’s maturity of five regulation, administrative action, or covered operations expenditures,
years for PPP loans made on or after Executive order proposed or pending covered property damage costs, covered
June 5).81 before Congress or any State supplier costs, and covered worker
vi. Covered operations expenditures, government, State legislature, or local protection expenditures, and not more
as defined in section 7A(a) of the Small legislature or legislative body. than 40% of the forgiven amount may
Business Act, to the extent they is
d. What happens if PPP loan funds be for non-payroll costs. If required, the
deductible on Form 1040 Schedule C.
are misused? 84 Applicant will provide to the Lender
vii. Covered property damage costs, as
and/or SBA documentation verifying
defined in section 7A(a) of the Small If you use PPP funds for unauthorized
the number of full-time equivalent
Business Act, to the extent they is purposes, SBA will direct you to repay employees on the Applicant’s payroll as
deductible on Form 1040 Schedule C. those amounts. If you knowingly use the
viii. Covered supplier costs, as well as the dollar amounts of eligible
funds for unauthorized purposes, you expenses for the covered period
defined in section 7A(a) of the Small will be subject to additional liability
Business Act, to the extent they is following this loan.
such as charges for fraud. If one of your v. The Applicant has not and will not
deductible on Form 1040 Schedule C. shareholders, members, or partners uses
ix. Covered worker protection receive another loan under the Paycheck
PPP funds for unauthorized purposes, Protection Program, section 7(a)(36) of
expenditures, as defined in section SBA will have recourse against the
7A(a) of the Small Business Act, to the the Small Business Act (15 U.S.C.
shareholder, member, or partner for the
extent they is deductible on Form 1040
unauthorized use. 85 This subsection was originally published at 85
Schedule C.82 FR 20811, subsection III.2.s. (April 15, 2020), as
amended by 85 FR 36308 (June 16, 2020) and has
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81 Under section 7(a)(36)(Q) of the Small Business been modified to conform to the Economic Aid Act
Act and apply to any loan made before, on, or after
Act, as amended by section 341 of the Economic December 27, 2020, including forgiveness of such and the revised PPP Borrower Application Form
Aid Act, an EIDL loan used for purposes other than loan, unless SBA has remitted a loan forgiveness (SBA Form 2483).
paying payroll costs and other eligible PPP 86 A representative of the applicant can certify for
payment to the lender on the PPP loan.
expenditures is not considered a duplication of the the business as a whole if the representative is
83 This subsection has been added to conform to
assistance available under the PPP. legally authorized to do so. The certifications have
82 Items vi. through ix. were added to conform to section 319 of the Economic Aid Act. been revised to conform to the Economic Aid Act
84 This subsection was originally published at 85
section 304 of the Economic Aid Act. These and the revised PPP Borrower Application Form
provisions are effective as if included in the CARES FR 20811, subsection III.2.s. (April 15, 2020). (SBA Form 2483).
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3706 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
636(a)(36)) (this does not include consultation with the Department of the the PPP loan for payroll costs, and not
Paycheck Protection Program second Treasury, issued additional guidance on more than 40 percent of the loan
draw loans, section 7(a)(37) of the Small May 13, 2020 concerning how SBA will forgiveness amount may be attributable
Business Act (15 U.S.C. 636(a)(37)). review the required good-faith to nonpayroll costs. For example, if a
vi. The Applicant has not and will not certification. See FAQ 46 (posted May borrower uses 59 percent of its PPP loan
receive a Shuttered Venue Operator 13, 2020). This guidance included a safe for payroll costs, it will not receive the
grant from SBA. harbor providing that any PPP borrower, full amount of loan forgiveness it might
vii. The President, the Vice President, together with its affiliates, that received otherwise be eligible to receive. Instead,
the head of an Executive department, or PPP loans with an original principal the borrower will receive partial loan
a Member of Congress, or the spouse of amount of less than $2 million will be forgiveness, based on the requirement
such person as determined under deemed to have made the required that 60 percent of the forgiveness
applicable common law, does not certification concerning the necessity of amount must be attributable to payroll
directly or indirectly hold a controlling the loan request in good faith. costs. For example, if a borrower
interest in the Applicant, with such receives a $100,000 PPP loan, and
14. Can my PPP loan be forgiven in
terms having the meanings provided in during the covered period the borrower
whole or in part? 88
section 322 of the Economic Aid to spends $54,000 (or 54 percent) of its
Hard-Hit Small Businesses, Nonprofits, Yes. The amount of loan forgiveness loan on payroll costs, then because the
and Venues Act. can be up to the full principal amount borrower used less than 60 percent of its
viii. The Applicant is not an issuer, of the loan and any accrued interest. An loan on payroll costs, the maximum
the securities of which are listed on an eligible borrower will not be responsible amount of loan forgiveness the borrower
exchange registered as a national for any loan payment if the borrower may receive is $90,000 (with $54,000 in
securities exchange under section 6 of uses all of the loan proceeds for payroll costs constituting 60 percent of
the Securities Exchange Act of 1934 (15 forgivable purposes and employee and the forgiveness amount and $36,000 in
U.S.C. 78f). compensation levels are maintained or, nonpayroll costs constituting 40 percent
ix. I further certify that the if not, an applicable safe harbor or of the forgiveness amount). Because the
information provided in this application exemption applies. The actual amount Economic Aid Act changed the loan
and the information provided in all of loan forgiveness will depend, in part, forgiveness covered period from either
supporting documents and forms is true on the total amount of payroll costs an 8- or 24-week period to a covered
and accurate in all material respects. I (including employer contributions for period between 8 and 24 weeks at the
understand that knowingly making a group health, life, disability, vision and election of the borrower, SBA is
false statement to obtain a guaranteed dental insurance), payments of interest eliminating the ‘‘alternative covered
loan from SBA is punishable under the on mortgage obligations incurred before period’’ as defined in the interim final
law, including under 18 U.S.C. 1001 February 15, 2020, rent payments on rule published at 85 FR 33004, 33006
and 3571 by imprisonment of not more leases dated before February 15, 2020, (June 1, 2020), as amended.
than five years and/or a fine of up to utility payments for service that began Additionally, an eligible borrower
$250,000; under 15 U.S.C. 645 by before February 15, 2020, covered that received a loan of $150,000 or less
imprisonment of not more than two operations expenditures, covered shall not, at the time of its application
years and/or a fine of not more than property damage costs, covered supplier for loan forgiveness, be required to
$5,000; and, if submitted to a federally costs, and covered worker protection submit any application or
insured institution, under 18 U.S.C. expenditures over the loan forgiveness documentation in addition to the
1014 by imprisonment of not more than covered period.89 Payroll costs that are certification and information required
thirty years and/or a fine of not more qualified wages taken into account in by paragraph 7A(l)(1)(A) of the Small
than $1,000,000. determining the Employer Retention Business Act. Such borrowers must
x. I acknowledge that the Lender will Credit are not eligible for loan retain records relevant to the form that
confirm the eligible loan amount using forgiveness. The ‘‘loan forgiveness prove compliance with the PPP
required documents submitted. I covered period’’ is the period beginning requirements—with respect to
understand, acknowledge, and agree on the date the lender disburses the PPP employment records, for the 4-year
that the Lender can share the tax loan and ending on any date selected by period following submission of the loan
information with SBA’s authorized the borrower that occurs during the forgiveness application, and with
representatives, including authorized period (i) beginning on the date that is respect to other records, for the 3-year
8 weeks after the date of disbursement period following submission of the loan
representatives of the SBA Office of
and (ii) ending on the date that is 24 forgiveness application. All other
Inspector General, for the purpose of
weeks after the date of disbursement. borrowers must follow the existing
compliance with SBA Loan Program To receive full loan forgiveness, a
Requirements and all SBA reviews. requirements for loan forgiveness
borrower must use at least 60 percent of applications and records retention. SBA
13. Limited Safe Harbor With Respect to may review and audit PPP loans of
Certification Concerning Need for PPP 88 This subsection replaces the rule originally
$150,000 or less and access any records
Loan Request 87 published at 85 FR 20811, subsection III.2.o (April
15, 2020), as amended by 85 FR 36308 (June 16,
the borrower is required to retain. All
The CARES Act requires each 2020) and has been modified to conform to the borrowers with loans of any size must
applicant applying for a PPP loan to Economic Aid Act. provide documentation independently
certify in good faith ‘‘that the
89 Covered operations expenditures, covered
to a lender to satisfy relevant Federal,
property damage costs, covered supplier costs, and State, local or other statutory or
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uncertainty of current economic covered worker protection expenditures were added
conditions makes necessary the loan as eligible expenses in section 304 of the Economic regulatory requirements or in
request to support the ongoing Aid Act. Except for loans made pursuant to section connection with an SBA loan review.
obligations’’ of the applicant. SBA, in
7(a)(36) of the Small Business Act for which SBA The Economic Aid Act repealed the
has remitted a loan forgiveness payment to the CARES Act provision requiring SBA to
lender before December 27, 2020, these eligible
87 This subsection has been added to codify the expenses apply to any loan made before, on, or after
deduct EIDL Advance Amounts
safe harbor contained in FAQ 46 (posted May 13, December 27, 2020, including forgiveness of such received by borrowers from the
2020). a loan. forgiveness payment amounts remitted
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3707
by SBA to the lender. The EIDL authorized to make PPP loans (and is in good standing with the appropriate
Advance Amount received by the loans under section 7(a)(37) of the Small Federal banking agency.93
borrower will not reduce the amount of Business Act) up to $806.45 billion by d. Qualified institutions described in
forgiveness to which the borrower is March 31, 2021, the Adminstrator and 1.c.i. and ii. will be automatically
entitled and will not be deducted from the Secretary have jointly determined qualified under delegated authority by
the forgiveness payment amount that that authorizing additional lenders is the SBA upon transmission of CARES
SBA remits to the lender. Any EIDL necessary to achieve the purpose of Act Section 1102 Lender Agreement
Advance Amounts previously deducted allowing as many eligible borrowers as (SBA Form 3506) unless they currently
from a borrower’s forgiveness amount possible to receive loans by the March are designated in Troubled Condition by
will be remitted to the lender, together 31, 2021 deadline. their primary Federal regulator or are
with interest to the remittance date. c. The following types of lenders have subject to a formal enforcement action
by their primary Federal regulator that
15. Do independent contractors count as been determined to meet the criteria and
addresses unsafe or unsound lending
employees for purposes of PPP loan are eligible to make PPP loans unless
practices.
forgiveness? 90 they currently are designated in e. A non-bank lender may be
No, independent contractors have the Troubled Condition by their primary approved to make PPP loans if it has
ability to apply for a PPP loan on their Federal regulator or are subject to a originated, maintained, or serviced more
own so they do not count for purposes formal enforcement action with their than $10 million in business loans or
of a borrower’s PPP loan forgiveness. primary Federal regulator that addresses other commercial financial receivables
unsafe or unsound lending practices: during a 12-month period in the past 36
16. For loans made prior to December i. Any federally insured depository
27, 2020, what additional months, if the non-bank lender is (1) a
institution or any federally insured community development financial
documentation must a borrower submit credit union;
when the President of the United States, institution (other than a federally
Vice President of the United States, the ii. Any Farm Credit System insured bank or federally insured credit
head of an Executive department, or a institution 92 (other than the Federal union) or (2) a majority minority-,
Member of Congress, or the spouse of Agricultural Mortgage Corporation) as women-, or veteran/military-owned
any of the preceding, directly or defined in 12 U.S.C. 2002(a) that applies lender.94
indirectly holds a controlling interest in the requirements under the Bank 2. Do lenders have to register in
the borrower? Secrecy Act and its implementing SAM.gov to make PPP loans? 95
regulations (collectively, BSA) as a
For PPP loans made before December Yes. Given the exigent circumstances
federally regulated financial institution,
27, 2020, if the President of the United in which small businesses and lenders
or functionally equivalent requirements
States, Vice President of the United currently find themselves due to the
that are not altered by this rule; and
States, the head of an Executive COVID–19 pandemic, PPP lenders will
department, or a Member of Congress, or iii. Any depository or non-depository have thirty (30) days from the date of
the spouse of such person as determined financing provider that originates, the first PPP loan disbursement made by
under applicable common law, directly maintains, and services business loans them after December 27, 2020 to
or indirectly holds a controlling interest or other commercial financial complete SAM registration and provide
in the borrower, the principal executive receivables and participation interests; SBA with the lender’s unique entity
officer, or individual performing a has a formalized compliance program; identifier.
similar function, of the borrower must applies the requirements under the BSA
disclose that information to SBA. Such as a federally regulated financial 3. What do lenders have to do in terms
disclosure must be made not later than institution, or the BSA requirements of of loan underwriting? 96
January 26, 2021, if the borrower an equivalent federally regulated Each lender shall:
submitted an application for forgiveness financial institution; has been operating a. Confirm receipt of borrower
before December 27, 2020, or not later since at least February 15, 2019, and has certifications contained in Paycheck
than 30 days after submitting an originated, maintained, or serviced more Protection Program Borrower
application for forgiveness. than $50 million in business loans or Application Form (SBA Form 2483)
other commercial financial receivables issued by the Administration or lender’s
C. What do lenders need to know and during a consecutive 12 month period
do? equivalent form;
in the past 36 months, or is a service b. Confirm receipt of information
1. Who is eligible to make PPP loans? 91 provider to any insured depository demonstrating that a borrower was
a. All SBA 7(a) lenders are institution that has a contract to support either an eligible self-employed
automatically approved to make PPP such institution’s lending activities in individual, independent contractor, or
loans on a delegated basis. accordance with 12 U.S.C. 1867(c) and
93 This subsection c.iii. was modified to
b. The Act provides that the authority
92 Section 314 of the Economic Aid Act contains implement the rule originally published at 85 FR
to make PPP loans can be extended to 26324, subsection III.2.a. (May 4, 2020).
the following information related to Farm Credit
additional lenders determined by the System Institutions: ‘‘(1) APPLICABLE RULES.—
94 Lenders described in this subsection (e.) should
Administrator and the Secretary to have Solely with respect to loans under paragraphs (36) follow the special instructions in footnote 1 of the
the necessary qualifications to process, and (37) of section 7(a) of the Small Business Act 1102 Lender Agreement—Non-Bank and Non-
(15 U.S.C. 636(a)), Farm Credit Administration Insured Depository Institution Lenders (SBA Form
close, disburse, and service loans made 3507). This subsection (e.) was adapted from the
regulations and guidance issued as of July 14, 2020,
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with the SBA guarantee. Since SBA is and compliance with such regulations and rule originally published at 85 FR 26324, subsection
guidance, shall be deemed functionally equivalent III.2.b. (May 4, 2020).
90 This subsection was originally published at 85 95 This subsection adds a new requirement that
to requirements referenced in section 3(a)(iii)(II) of
FR 20811, subsection III.2.p. (April 15, 2020). the interim final rule of the Administration entitled all PPP lenders must register in SAM.gov. See 2 CFR
91 This subsection was originally published at 85 ‘Business Loan Program Temporary Changes; 25.110(c)(2)(iii).
FR 20811, subsection III.3.a. (April 15, 2020) and Paycheck Protection Program’ (85 FR 20811 (April 96 This subsection was originally published at 85
has been modified to conform to additional interim 15, 2020)) or any similar requirement referenced in FR 20811, subsection III.3.b. (April 15, 2020) and
final rules or guidance and sections 323 and 343 of that interim final rule in implementing such has been modified to conform to additional rules or
the Economic Aid Act. paragraph (37).’’ guidance and the Economic Aid Act.
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3708 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
sole proprietorship with no employees while adhering to their BSA obligations. reported information if the borrower
or had employees for whom the Entities that wish to communicate such submits documentation supporting its
borrower paid salaries and payroll taxes COVID–19-related concerns to FinCEN request for loan forgiveness and attests
on or around February 15, 2020; should go to www.FinCEN.gov, click on that it accurately verified the payments
c. Confirm the dollar amount of ‘‘Need Assistance,’’ and select for eligible costs.
average monthly payroll costs for 2019 ‘‘COVID19’’ in the subject drop-down
or 2020 by reviewing the payroll 5. What fees will lenders be paid? 100
list.
documentation submitted with the Each lender’s underwriting obligation For PPP loans made on or after
borrower’s application; 97 and under the PPP is limited to the items December 27, 2020, SBA will pay
d. Follow applicable BSA above and reviewing the ‘‘Paycheck lenders fees, based on the balance of the
requirements: Protection Borrower Application Form.’’ financing outstanding at the time of
i. Federally insured depository Borrowers must submit such disbursement of the loan, for processing
institutions and federally insured credit documentation as is necessary to PPP loans in the following amounts:
unions should continue to follow their establish eligibility such as payroll i. For loans of not more than $50,000,
existing BSA protocols when making records, payroll tax filings, or Form an amount equal to the lesser of fifty
PPP loans to either new or existing 1099–MISC, Schedule C or F, income (50) percent or $2,500;
customers who are eligible borrowers and expenses from a sole ii. Five (5) percent for loans of more
under the PPP. PPP loans for existing proprietorship, or bank records. For than $50,000 and not more than
customers will not require re- borrowers that do not have any such $350,000;
verification under applicable BSA documentation, the borrower must iii. Three (3) percent for loans of more
requirements, unless otherwise provide other supporting than $350,000 and less than $2,000,000;
indicated by the institution’s risk-based documentation, such as bank records, and
approach to BSA compliance. sufficient to demonstrate the qualifying iv. One (1) percent for loans of at least
ii. Entities that are not presently $2,000,000.
payroll amount.
subject to the requirements of the BSA, A lender may rely on any certification SBA will pay the fee not later than 5
should, prior to engaging in PPP lending days after the reported disbursement of
or documentation submitted by an
activities, including making PPP loans the PPP loan and, as required by the
applicant for a PPP loan or an eligible
to either new or existing customers who Economic Aid Act, may not require the
recipient or eligible entity that (A) is
are eligible borrowers under the PPP, fee to be repaid by the lender unless the
submitted pursuant to all applicable
establish an anti-money laundering lender is found guilty of an act of fraud
statutory requirements, regulations, and
(AML) compliance program equivalent in connection with the PPP loan.
guidance related to a PPP loan,
to that of a comparable federally
including under paragraph 7(a)(36) of 6. Can PPP loans be sold into the
regulated institution. Depending upon
the Small Business Act (15 U.S.C. secondary market? 101
the comparable federally regulated
636(a)(36)); and (B) attests that the
institution, such a program may include Yes. A PPP loan may be sold on the
applicant, eligible recipient, or eligible
a customer identification program (CIP), secondary market after the loan is fully
entity, as applicable, has accurately
which includes identifying and disbursed. A PPP loan may be sold on
provided the certification or
verifying their PPP borrowers’ identities the secondary market at a premium or
documentation to the lender in
(including e.g., date of birth, address, a discount to par value.
accordance with the statutory
and taxpayer identification number),
requirements, regulations, and guidance 7. Do the requirements for loan pledges
and, if that PPP borrower is a company,
related to PPP loans. With respect to a under 13 CFR 120.434 apply to PPP
following any applicable beneficial
lender that relies on such a certification loans pledged for borrowings from a
ownership information collection
or documentation related to a PPP loan, Federal Reserve Bank (FRB) or advances
requirements. Alternatively, if available,
an enforcement action may not be taken by a Federal Home Loan Bank
entities may rely on the CIP of a
against the lender, and the lender shall (FHLB)? 102
federally insured depository institution
not be subject to any penalties relating No. Pursuant to SBA regulations at 13
or federally insured credit union with
to loan origination or forgiveness of the CFR 120.435(d) and (e), a pledge of 7(a)
an established CIP as part of its AML
PPP loan, if—(A) the lender acts in good loans to a FRB or FHLB does not require
program. In either instance, entities
faith relating to loan origination or SBA’s prior written consent or notice to
should also understand the nature and
forgiveness of the PPP loan based on SBA. SBA, in consultation with
purpose of their PPP customer
that reliance; and (B) all other relevant Treasury, has determined that for
relationships to develop customer risk
Federal, State, local, and other statutory purposes of loans made under the PPP,
profiles. Such entities will also
and regulatory requirements applicable the additional requirements set forth in
generally have to identify and report
to the lender are satisfied with respect 120.434 shall also not apply. This
certain suspicious activity to the U.S.
to the PPP loan.98 would mean, for example, that SBA
Department of the Treasury’s Financial
Crimes Enforcement Network (FinCEN). 4. Can lenders rely on borrower would not have to approve loan
If such entities have questions with documentation for loan forgiveness? 99
regard to meeting these requirements, to issue a consolidated interim final rule governing
Yes. The lender does not need to all aspects of loan forgiveness and the loan review
they should contact the FinCEN independently verify the borrower’s process.
Regulatory Support Section at FRC@ 100 This subsection was originally published at 85
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fincen.gov. In addition, FinCEN has 98 This paragraph was added to conform to FR 20811, subsection III.3.d. (April 15, 2020) and
created a COVID–19-specific contact section 305 of the Economic Aid Act. This shall be has been modified to conform to section 340 of the
channel, via a specific drop-down effective as if included in the CARES Act and shall Economic Aid Act.
apply to any loan made before, on, or after 101 This subsection was originally published at 85
category, for entities to communicate to December 27, 2020, including forgiveness of such FR 20811, subsection III.4.d (April 15, 2020) and
FinCEN COVID–19-related concerns a loan. modified to reflect that advance purchases are not
99 This subsection was originally published at 85 available.
97 See PPP FAQ 1 (April 3, 2020) for further FR 20811, subsection III.3.c. (April 15, 2020) and 102 This subsection was originally published at 85
information on this step. has been modified for readability. SBA also intends FR 21747, subsection III.3. (April 20, 2020).
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3709
documents or require a multi-party terminated and repaid after e. All loans will be processed by all
agreement among SBA, the lender, and disbursement (including if a borrower lenders under delegated authority and
others. repays the PPP loan proceeds to lenders will be permitted to rely on
conform to the borrower’s certification certifications of the borrower in order to
8. Are lenders required to use a
regarding the necessity of the PPP loan determine eligibility of the borrower
promissory note provided by SBA or
may they use their own? 103 request). If the lender has received a and the use of loan proceeds.
processing fee on a loan that was
Lenders may use their own 2. Do lenders have to apply the ‘‘credit
cancelled or voluntarily terminated and
promissory note or an SBA form of elsewhere test’’? 110
repaid after disbursement (including if a
promissory note. borrower repaid the PPP loan proceeds No. When evaluating an applicant’s
9. Are lenders required to use a separate to conform to the borrower’s eligibility lenders will not be required to
SBA Authorization document to issue certification regarding the necessity of apply the ‘‘credit elsewhere test’’ (as set
PPP loans? 104 the PPP loan request), SBA will not forth in section 7(a)(1)(A) of the Small
require the lender to repay the Business Act (15 U.S.C. 636) and SBA
No. A lender does not need a separate regulations at 13 CFR 120.101).
processing fee unless the lender is
SBA Authorization for SBA to guarantee
found guilty of an act of fraud in 3. Are there any fee waivers? 111
a PPP loan. However, lenders must have
connection with the PPP loan. In
executed SBA Form 2484 (the Lender a. There will be no up-front guarantee
addition to providing ACH credit
Application Form—Paycheck Protection fee payable to SBA by the borrower;
information to direct payment of the
Program Loan Guaranty) 105 to issue PPP b. There will be no lender’s annual
requested processing fee, lenders will be
loans and receive a loan number for service fee (‘‘on-going guaranty fee’’)
required to confirm that all PPP loans
each originated PPP loan. Lenders may payable to SBA;
include in their promissory notes for for which the lender is requesting a
processing fee have been fully disbursed c. There will be no subsidy
PPP loans any terms and conditions, recoupment fee; and
including relating to amortization and on the disbursement dates and in the
loan amounts reported. A lender must d. There will be no fee payable to SBA
disclosure, that are not inconsistent for any guarantee sold into the
with section 1102 of the CARES Act and report through either E-Tran Servicing
or the SBA Form 1502 report any PPP secondary market.
section 7A of the Small Business Act,
the PPP Interim Final Rules and loans that have been cancelled before 4. Who pays the fee to an agent who
guidance, and SBA Form 2484. See FAQ disbursement or that have been provides assistance in connection with a
21 (posted April 13, 2020). The decision cancelled or voluntarily terminated and PPP loan? 112
not to require a separate SBA repaid after disbursement.
Agent fees may not be paid out of the
Authorization in order to ensure that 11. How do lenders report proceeds of a PPP loan. If a borrower
critical PPP loans are disbursed as disbursements on PPP loans that are has knowingly retained an agent, such
efficiently as practicable. approved for loan increases due to the fees will be paid by the borrower. A
10. By when must a lender electronically Economic Aid Act? 107 lender is only responsible for paying
submit an SBA Form 1502 indicating Lenders must submit the SBA Form fees to an agent for services for which
that PPP loan funds have been 1502 information within 20 calendar the lender directly contracts with the
disbursed? 106 days after a PPP loan increase is agent. The total amount that an agent
SBA has made available a specific approved following the SBA Form 1502 may collect from the lender for
SBA Form 1502 reporting process reporting process. See subsection C.10. assistance in preparing an application
through which PPP lenders report on for more information. for a PPP loan (including referral to the
PPP loans and collect the processing fee lender) may not exceed:
D. What do both borrowers and lenders a. One (1) percent for loans of not
on fully disbursed loans to which they need to know and do?
are entitled. Lenders must electronically more than $350,000;
upload SBA Form 1502 information 1. What are the loan terms and b. 0.50 percent for loans of more than
within 20 calendar days after a PPP loan conditions? 108 $350,000 and less than $2 million; and
is approved. The lender must report on c. 0.25 percent for loans of at least $2
Loans will be guaranteed under the million.
SBA Form 1502 whether it has fully PPP under the same terms, conditions
disbursed PPP loan proceeds. A lender The Act authorizes the Administrator
and processes as other 7(a) loans, with to establish limits on agent fees. The
will not receive a processing fee: (1) certain changes including but not
Prior to full disbursement of the PPP Administrator, in consultation with the
limited to: Secretary, determined that the agent fee
loan; (2) if the PPP loan is cancelled a. The guarantee percentage is 100
before disbursement; or (3) if the PPP limits set forth above are reasonable
percent. based upon the application
loan is cancelled or voluntarily b. No collateral will be required.
103 This subsection was originally published at 85
c. No personal guarantees will be applies to PPP loans made on or after December 27,
FR 23450, subsection III.1.a. (April 28, 2020).
required. 2020, but may apply with respect to a PPP loan
104 This subsection was originally published at 85 d. The interest rate will be 100 basis made before that date upon the mutual agreement
FR 23450, subsection III.1.b. (April 28, 2020) and points or one percent, calculated on a of the lender and the borrower.
110 This subsection was originally published at 85
has been modified to conform to the Economic Aid non-compounding, non-adjustable
Act. FR 20811, subsection III.3.e. (April 15, 2020).
basis.109
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105 This requirement is satisfied by a lender when 111 This subsection was originally published at 85
the lender completes the process of submitting a FR 20811, subsection III.4.a. (April 15, 2020).
107 This subsection was added to conform to the
loan through the E-Tran system; no transmission or 112 This subsection was originally published at 85
retention of a physical copy of Form 2484 is Economic Aid Act. FR 20811, subsection III.4.c. (April 15, 2020) and
required. 108 This subsection was originally published at 85
modified to conform to section 340 of the Economic
106 This subsection was originally published at 85 FR 20811, subsection III.4.a. (April 15, 2020) and Aid Act. This revision is effective as if included in
FR 26321, subsection III.1.b. (May 4, 2020) and has modified to conform to the Economic Aid Act. the CARES Act and applies to PPP loans made
been modified to conform to the Economic Aid Act 109 This subsection (d) was revised to conform to before, on, or after December 27, 2020, including
and for readability. section 339 of the Economic Aid Act. The revision forgiveness of such a loan.
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3710 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
requirements and the fees that lenders the PPP Program, which is $10 million 8. Which other PPP borrowers can
receive for making PPP loans. for an individual borrower or $20 reapply or request an increase in their
million for a corporate group. PPP loan amount? 118
5. Can a borrower take multiple draws
from a PPP loan and thereby delay the Additionally, the borrower must The following borrowers can reapply
start of the covered period? 113 provide the lender with required or request an increase in their PPP loan
documentation to support the amount:
No. The lender must make a one-time, calculation of the increase. Any request a. If a borrower returned all of a PPP
full disbursement of the PPP loan for an increase must be submitted loan, the borrower may reapply for a
within ten calendar days of loan electronically in E-Tran on or before PPP loan in an amount the borrower is
approval; for the purposes of this rule, March 31, 2021, and is subject to the eligible for under current PPP rules.
a loan is considered approved when the availability of funds. b. If a borrower returned part of a PPP
loan is assigned a loan number by loan, the borrower may reapply for an
SBA.114 As described in subsection B.1.c.,
partnerships, rather than individual amount equal to the difference between
Notwithstanding this limitation, the amount retained and the amount
lenders are not responsible for delays in partners, are eligible for a PPP loan. As
described in subsection B.4.e., self- previously approved.
disbursement attributable to a c. If a borrower did not accept the full
borrower’s failure to timely provide employment income of general active
partners could be reported as a payroll amount of a PPP loan for which it was
required loan documentation, including approved, the borrower may request an
a signed promissory note. Loans for cost, up to $100,000 on an annualized
increase in the amount of the PPP loan
which funds have not been disbursed basis, as prorated for the period during
up to the amount previously approved.
because a borrower has not submitted which the payments are made or the
Any request for an increase must be
required loan documentation within 20 obligation to make the payments is
submitted electronically in E-Tran on or
calendar days of loan approval shall be incurred, on a PPP loan application before March 31, 2021, and is subject to
cancelled by the lender. When filed by or on behalf of the partnership. the availability of funds. SBA will issue
disbursing loans, lenders must send any For guidance describing how to additional guidance on the process to
amount of loan proceeds designated for calculate partnership PPP loan amounts reapply or request a loan increase under
the refinance of an EIDL loan directly to and defining the self-employment subsections D.6, D.7, and D.8.
SBA and not to the borrower. income of partners, see How to
Calculate Maximum Loan Amounts, 9. If a borrower’s PPP loan has already
6. If a partnership received a PPP loan been fully disbursed, can the lender
Question 4 at https://www.sba.gov/sites/
that did not include any compensation make an additional disbursement for
default/files/2020-04/How-to-Calculate-
for its partners, can the loan amount be the increased loan proceeds? 119
Loan-Amounts.pdf (April 20, 2020).
increased to include partner
compensation? 115 Yes. Notwithstanding the requirement
7. If a seasonal employer received a PPP
set forth in paragraph 1.a. of the interim
Yes. If a partnership received a PPP loan before December 27, 2020, can the
final rule on disbursements posted on
loan that only included amounts loan amount be increased based on a
April 28, 2020, i.e., that lenders make a
necessary for payroll costs of the revised calculation of the maximum
one-time, full disbursement of the PPP
partnership’s employees and other loan amount? 117 loan within ten calendar days of loan
eligible operating expenses, but did not approval, if a PPP loan is increased
Yes. If a seasonal employer received
include any amount for partner under subsections D.6., D.7., or D.8., the
a PPP loan before December 27, 2020,
compensation,116 the lender may lender may make a single additional
and such employer would be eligible for
electronically submit a request through disbursement of the increased loan
a higher maximum loan amount under
SBA’s E-Tran Servicing site to increase proceeds.
the PPP loan amount to include section 336 of the Economic Aid Act, as
appropriate partner compensation, even described in subsection B.4.c., the 10. Are recipients of PPP loans entitled
if the loan has been fully disbursed and lender may electronically submit a to exemptions on the grounds provided
even if the lender’s first SBA Form 1502 request through SBA’s E-Tran Servicing in Federal nondiscrimination laws for
report to SBA on the PPP loan has site to increase the PPP loan amount, sex-specific admissions practices, sex-
already been submitted. In no event can even if the loan has been fully disbursed specific domestic violence shelters,
the increased loan amount exceed the and even if the lender’s first SBA Form coreligionist housing, or Indian tribal
maximum loan amount allowed under 1502 report to SBA on the PPP loan has preferences in connection with adoption
already been submitted. In no event can or foster care practices? 120
113 This subsection was originally published at 85 the increased loan amount exceed the Yes. With respect to any loan or loan
FR 26321, subsection III.1.a. (May 4, 2020), as maximum PPP loan amount ($10 forgiveness under the PPP, the
amended by 85 FR 26321 (June 19, 2020), and has million for an individual borrower or
been modified for readability. nondiscrimination provisions in the
114 If the tenth calendar day is a Saturday, $20 million for a corporate group). applicable SBA regulations incorporate
Sunday, or legal holiday, the period continues to Additionally, the borrower must the limitations and exemptions
run until the end of the next business day. provide the lender with required provided in corresponding Federal
115 This subsection was originally published at 85
documentation to support the statutory or regulatory
FR 29842, subsection III.1.a. (May 19, 2020) and has
been revised to conform to sections 312 and 344 of
calculation of the increase. Any request
the Economic Aid Act. for an increase must be submitted 118 This subsection was added to conform to
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116 A partner in a partnership may not submit a electronically in E-Tran on or before section 312 of the Economic Aid Act. See also
separate PPP loan application as a self-employed March 31, 2021, and is subject to the recalculation available under subsection B.4.d.
individual. Instead, the self-employment income of above for farmers and ranchers.
availability of funds. 119 This subsection was originally published at 85
general active partners may be reported as a payroll
cost, up to $100,000 on an annualized basis, as FR 29842, subsection III.2.a. (May 19, 2020) and
prorated for the period during which the payments 117 This subsection was originally published at 85 revised to conform to section 312 of the Economic
are made or the obligation to make the payments FR 29842, subsection III.1.b. (May 19, 2020) and has Aid Act.
is incurred, on a PPP loan application filed by or been revised to conform to sections 312 and 336 of 120 This subsection was originally published at 85
on behalf of the partnership. the Economic Aid Act. FR 27287, section III.1. (May 8, 2020).
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3711
nondiscrimination provisions for sex- and Budget’s Office of Information and has no preemptive effect but does have
specific admissions practices at Regulatory Affairs (OIRA) has some retroactive effect consistent with
preschools, non-vocational elementary determined that this is a major rule specific applicability provisions of the
or secondary schools, and private under the Congressional Review Act (5 Economic Aid Act (such provisions are
undergraduate higher education U.S.C. 804(2)). SBA, however, is identified in the footnotes).
institutions under Title IX of the proceeding under the emergency
Executive Order 13132
Education Amendments of 1972 (20 provision at Executive Order 12866
U.S.C. 1681 et seq.), for sex-specific section 6(a)(3)(D) based on the need to SBA has determined that this rule
emergency shelters and coreligionist move expeditiously to mitigate the will not have substantial direct effects
housing under the Fair Housing Act of current economic conditions arising on the States, on the relationship
1968 (42 U.S.C. 3601 et seq.), and for from the COVID–19 emergency. This between the National Government and
adoption or foster care practices giving rule’s designation under Executive the States, or on the distribution of
child placement preferences to Indian Order 13771 will be informed by public power and responsibilities among the
tribes under the Indian Child Welfare comment. various layers of government. Therefore,
Act of 1978 (25 U.S.C. 1901 et seq.). This rule is necessary to implement SBA has determined that this rule has
In addition, for purposes of the PPP, the Economic Aid Act in order to no federalism implications warranting
SBA regulations do not bar a religious provide economic relief to small preparation of a federalism assessment.
nonprofit entity from making decisions businesses nationwide adversely Paperwork Reduction Act, 44 U.S.C.
with respect to the membership or the impacted under the COVID–19 Chapter 35
employment of individuals of a Emergency Declaration. We anticipate
that this rule will result in substantial SBA has determined that this rule
particular religion to perform work
benefits to small businesses, their requires revisions to existing
connected with the carrying on by such
employees, and the communities they recordkeeping or reporting requirements
nonprofit of its activities.
serve. However, we lack data to estimate of the Paycheck Protection Program
E. Additional Information the effects of this rule. (PPP) information collection (OMB
All loans guaranteed by the SBA The Administrator of OIRA has Control Number 3245–0407) as a result
pursuant to the CARES Act and the determined that this is a major rule for of amendments made to the PPP by the
Economic Aid Act will be made purposes of the Congressional Review Economic Aid Act and implemented in
consistent with constitutional, statutory, Act (5 U.S.C. 801 et seq.) (CRA). Under this interim final rule. The revisions
and regulatory protections for religious section 801(3) of the CRA, a major rule will affect the PPP Borrower
liberty, including the First Amendment takes effect 60 days after the rule is Application Form (SBA Form 2483), the
to the Constitution, the Religious published in the Federal Register. PPP Lender Application Form (SBA
Freedom Restoration Act, 42 U.S.C. Notwithstanding this requirement, Form 2484), the Lender Application
2000bb–1 and bb–3, and SBA regulation section 808(2) of the CRA allows Form for Federally Insured Depository
at 13 CFR 113.3–1h, which provides agencies to dispense with the Institutions, Federally Insured Credit
that nothing in SBA nondiscrimination requirements of section 801 when the Unions, and Farm Credit System
regulations shall apply to a religious agency for good cause finds that such Institutions (SBA Form 3506), and the
corporation, association, educational procedure would be impracticable, Lender Application Form for Non-Bank
institution or society with respect to the unnecessary, or contrary to the public and Non-Insured Depository Institution
membership or the employment of interest and the rule shall take effect at Lenders (SBA Form 3507).
such time as the agency promulgating SBA Form 2483 has been revised to
individuals of a particular religion to
the rule determines. Pursuant to section add housing cooperatives, section
perform work connected with the
808(2) of the CRA, SBA finds, for good 501(c)(6) organizations, destination
carrying on by such corporation,
cause, that a 60-day delay in the marketing organizations, and certain
association, educational institution or
effective date is unnecessary and news organizations to the categories of
society of its religious activities.
contrary to the public interest. eligible entities; to collect the NAICS
SBA may provide further guidance, if
As discussed elsewhere in this code of the applicant; to add additional
needed, through SBA notices and a
interim final rule, the last day to apply eligible use of proceeds; and to add or
program guide which will be posted on
for and receive a PPP loan is March 31, revise the certifications to incorporate
SBA’s website at www.sba.gov.
2021. Given the short duration of this the Economic Aid Act amendments.
Questions on the Paycheck Protection
program, and the urgent need to issue Changes were made to SBA Form 2484
Program 7(a) Loans may be directed to
loans quickly, the Administrator in to conform to the changes made to SBA
the Lender Relations Specialist in the
consultation with the Secretary has Form 2483. SBA Forms 3506 and 3507
local SBA Field Office. The local SBA
determined that it is impractical and not were revised to extend the term through
Field Office may be found at https://
in the public interest to provide a March 31, 2021; restate the way interest
www.sba.gov/tools/local-assistance/
delayed effective date. An immediate rate is calculated; and make clarifying
districtoffices.
effective date will give small businesses changes for consistency with program
Compliance With Executive Orders the maximum amount of time to apply requirements.
12866, 12988, 13132, 13563, and 13771, for loans and lenders the maximum SBA is developing a process to collect
the Paperwork Reduction Act (44 amount of time to process applications the information necessary for eligible
U.S.C. Ch. 35), and the Regulatory before the program ends. borrowers to reapply or request an
Flexibility Act (5 U.S.C. 601–612) increase in their PPP loan amount as
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Executive Order 12988 described in this interim final rule.
Executive Orders 12866, 13563, and SBA has drafted this rule, to the SBA has requested emergency
13771 extent practicable, in accordance with approval of the revisions to this PPP
This interim final rule is the standards set forth in section 3(a) information collection to enable the
economically significant for the and 3(b)(2) of Executive Order 12988, to Agency to resume the reauthorized PPP
purposes of Executive Orders 12866 and minimize litigation, eliminate as quickly as possible. Without such
13563, and the Office of Management ambiguity, and reduce burden. The rule emergency approval, the authority for
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3712 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
the program would expire before the Administration’s Office of Advocacy Comment Date: Comments must be
procedural steps, including the guide: How to Comply with the received on or before February 16, 2021.
comment periods generally required by Regulatory Flexibility Ac. Ch.1. p.9. ADDRESSES: You may submit comments,
the Paperwork Reduction Act, could be Since this rule is exempt from notice identified by number SBA–2021–0002
completed. and comment, SBA is not required to through the Federal eRulemaking Portal:
Regulatory Flexibility Act (RFA) conduct a regulatory flexibility analysis. http://www.regulations.gov. Follow the
Authority: 15 U.S.C. 636(a)(36); instructions for submitting comments.
The Regulatory Flexibility Act (RFA) Coronavirus Aid, Relief, and Economic SBA will post all comments on
generally requires that when an agency Security Act, Pub. L. 116–136, section 1114 www.regulations.gov. If you wish to
issues a proposed rule, or a final rule and Economic Aid to Hard-Hit Small submit confidential business
pursuant to section 553(b) of the APA or Businesses, Nonprofits, and Venues Act (Pub. information (CBI) as defined in the User
another law, the agency must prepare a L. 116–260), section 303. Notice at www.regulations.gov, please
regulatory flexibility analysis that meets send an email to ppp-ifr@sba.gov. All
the requirements of the RFA and Jovita Carranza, Michael Faulkender,
Assistant Secretary for Economic Policy. other comments must be submitted
publish such analysis in the Federal through the Federal eRulemaking Portal
Register. 5 U.S.C. 603, 604. Specifically, [FR Doc. 2021–00451 Filed 1–12–21; 4:15 pm]
described above. Highlight the
the RFA normally requires agencies to BILLING CODE 8026–03–P
information that you consider to be CBI
describe the impact of a rulemaking on and explain why you believe SBA
small entities by providing a regulatory should hold this information as
impact analysis. Such analysis must SMALL BUSINESS ADMINISTRATION
confidential. SBA will review the
address the consideration of regulatory information and make the final
options that would lessen the economic 13 CFR Parts 120 and 121
determination whether it will publish
effect of the rule on small entities. The [Docket No. SBA–2021–0002] the information.
RFA defines a ‘‘small entity’’ as (1) a
FOR FURTHER INFORMATION CONTACT: Call
proprietary firm meeting the size RIN 3245–AH63
standards of the Small Business Center Representative at 833–572–0502,
Administration (SBA); (2) a nonprofit Business Loan Program Temporary or the local SBA Field Office; the list of
organization that is not dominant in its Changes; Paycheck Protection offices can be found at https://
field; or (3) a small government Program Second Draw Loans www.sba.gov/tools/local-assistance/
jurisdiction with a population of less districtoffices.
AGENCY: U.S. Small Business
than 50,000. 5 U.S.C. 601(3)–(6). Except SUPPLEMENTARY INFORMATION:
Administration.
for small government jurisdictions with I. Background Information
a population of less than 50,000, neither ACTION: Interim final rule.
State nor local governments are ‘‘small On December 27, 2020, President
SUMMARY: This interim final rule Trump signed the Economic Aid to
entities.’’
The requirement to conduct a announces the implementation of Hard-Hit Small Businesses, Nonprofits,
regulatory impact analysis does not section 311 of the Economic Aid to and Venues Act (the Economic Aid Act)
apply if the head of the agency ‘‘certifies Hard-Hit Small Businesses, Nonprofits, (Pub. L. 116–260) into law to provide
that the rule will not, if promulgated, and Venues Act (the Economic Aid Act). continued assistance to individuals and
have a significant economic impact on The Economic Aid Act authorizes the businesses that have been financially
a substantial number of small entities.’’ U.S. Small Business Administration to impacted by the ongoing coronavirus
5 U.S.C. 605(b). The agency must, guarantee additional loans under the pandemic. Section 311 of the Economic
however, publish the certification in the temporary Paycheck Protection Aid Act added a new temporary section
Federal Register at the time of Program, which was originally 7(a)(37) to the Small Business Act (15
publication of the rule, ‘‘along with a established under the Coronavirus Aid, U.S.C. 636(a)(37)). This new section
statement providing the factual basis for Relief, and Economic Security Act to authorizes the U.S. Small Business
such certification.’’ If the agency head provide economic relief to small Administration (SBA or the
has not waived the requirements for a businesses nationwide adversely Administration) to guarantee Paycheck
regulatory flexibility analysis in impacted under the Coronavirus Disease Protection Program Second Draw Loans
accordance with the RFA’s waiver 2019 (COVID–19) Emergency (PPP Second Draw Program), under
provision, and no other RFA exception Declaration (COVID–19 Emergency generally the same terms and conditions
applies, the agency must prepare the Declaration) issued by President Trump available under the Paycheck Protection
regulatory flexibility analysis and on March 13, 2020. Section 311 of the Program (PPP) established under section
publish it in the Federal Register at the Economic Aid Act adds a second 7(a)(36) of the Small Business Act (15
time of promulgation or, if the rule is temporary program to SBA’s 7(a) Loan U.S.C. 636(a)(36)). Under section 311,
promulgated in response to an Program titled, ‘‘Paycheck Protection SBA may guarantee loans under the PPP
emergency that makes timely Program Second Draw Loans.’’ This Second Draw Program through March
compliance impracticable, within 180 interim final rule implements the key 31, 2021 (‘‘Second Draw PPP Loans’’) to
days of publication of the final rule. 5 provisions of section 311 of the borrowers that previously received a
U.S.C. 604(a), 608(b). Economic Aid Act and requests public PPP loan under section 7(a)(36) of the
Rules that are exempt from notice and comment. Small Business Act (‘‘First Draw PPP
comment are also exempt from the RFA DATES: Loans’’) and have used or will use the
khammond on DSKJM1Z7X2PROD with RULES6
requirements, including conducting a Effective Date: This interim final rule full amount of the initial PPP loan for
regulatory flexibility analysis, when is effective January 12, 2021. authorized purposes on or before the
among other things the agency for good Applicability Date: This interim final expected date of disbursement of the
cause finds that notice and public rule applies to loan applications and Second Draw PPP Loan.
procedure are impracticable, applications for loan forgiveness Like First Draw PPP Loans, Second
unnecessary, or contrary to the public submitted for Paycheck Protection Draw PPP Loans are intended to provide
interest. Small Business Program Second Draw Loans. expeditious relief to America’s small
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- Original
- home.treasury.gov