Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans
Summary
This Federal Register page, Vol. 86, No. 9, Thursday, January 14, 2021, includes a Small Business Administration interim final rule, Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans. The summary says the rule announces the implementation of section 311 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which authorizes SBA to guarantee additional loans under the temporary Paycheck Protection Program. It says the Act was signed on December 27, 2020 and gives a comment date of February 16, 2021. The page also carries a Regulatory Flexibility Act discussion and an authority line citing 15 U.S.C. 636(a)(36) and the CARES Act.
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- Issuer
- Congressional materials
- Document type
- Department Of The Treasury Interim Final Rule On Second Draw Loans Home Treasury Gov Syste
- Case
- Department Of The Treasury Interim Final Rule On Second Draw Loans Home Treasury Gov System Files 13 Fdcdf6Cb7F
Cite this document
“Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans.”
Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/department-of-the-treasury-interim-final-rule-on-second-draw-loans-home-treasury-gov-system-files-13-fdcdf6cb7f/
, SHA-256 d2b407a11704ca95b8f73a831d39f58c83fe5848a023c1bf7f35ba2cc512c4c6.Full text
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
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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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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3713
businesses. Second Draw PPP Loans These comments must be submitted on generally provides that a borrower is
generally are guaranteed by SBA under or before February 16, 2021. SBA will eligible for a Second Draw PPP Loan
the same terms, conditions, and consider these comments and the need only if it has 300 or fewer employees
processes as First Draw PPP Loans. SBA for making any revisions as a result of and experienced a revenue reduction in
guarantees 100 percent of Second Draw these comments. 2020 relative to 2019 (described further
PPP Loans and SBA may forgive up to below).4 In addition, the Economic Aid
the full principal loan amount. Second III. Summary of Key Terms of PPP Act provides that a Second Draw PPP
Draw PPP Loans are subject to SBA’s Second Draw Loans Loan may only be made to an eligible
and the Department of the Treasury’s The rules applicable to Second Draw borrower that (i) has received a First
(Treasury’s) consolidated interim final PPP Loans are published in section IV Draw PPP Loan, and (ii) has used, or
rules implementing updates to the of this IFR. This summary provides will use, the full amount of the First
Paycheck Protection Program for First additional information and explains the Draw PPP Loan on or before the
Draw PPP Loans (‘‘Consolidated First key terms in the IFR. All references to expected date on which the Second
Draw PPP IFR’’) issued concurrently subsections refer to section IV. Draw PPP Loan is disbursed to the
with this interim final rule (IFR) 1 and Second Draw PPP Loans are generally borrower.5 Accordingly, subsections
all PPP loan program requirements, subject to the same terms, conditions (c)(1)(i) through (c)(1)(iv) of this IFR
except as specified in this IFR. The key and requirements as First Draw PPP implement these criteria. Subsection
differences between First Draw PPP Loans. These include, but are not (c)(1)(ii) of the IFR clarifies that ‘‘the full
Loans and Second Draw PPP Loans are limited to the following terms: amount’’ of the borrower’s First Draw
described in this IFR, which explains • The guarantee percentage is 100 PPP Loan includes the amount of any
the loan terms, eligibility requirements, percent. increase on such First Draw PPP Loan
and application process for Second • No collateral will be required. made pursuant to the Economic Aid
Draw PPP Loans. • No personal guarantees will be Act. In addition, subsection (c)(1)(ii) of
required. the IFR clarifies that the borrower must
II. Comments and Immediate Effective • The interest rate will be 100 basis have spent the full amount of its First
Date
points or one percent, calculated on a Draw PPP Loan on eligible expenses
This interim final rule is being issued non-compounding, non-adjustable under the PPP rules to be eligible for a
without advance notice and public basis.2 Second Draw PPP Loan. This
comment because section 303 of the • The maturity is five years. clarification will help ensure program
Economic Aid Act authorizes SBA to • All loans will be processed by all integrity by preventing a borrower from
issue regulations to implement the lenders under delegated authority and receiving a Second Draw PPP Loan if
Economic Aid Act without regard to lenders will be permitted to rely on the borrower has not complied with PPP
notice requirements. In addition, this certifications of the borrower to loan program requirements.6
rule is being issued to allow for determine the borrower’s eligibility and
immediate implementation of this use of loan proceeds. 2. Revenue Reduction Requirement
program. The intent of the Economic Subsection (b) of this IFR confirms The Economic Aid Act provides that,
Aid Act is that SBA provide relief to that these terms apply to Second Draw to be eligible for a Second Draw PPP
America’s small businesses PPP Loans. Subsection (b) also confirms Loan, the borrower must have
expeditiously. The last day to apply for that SBA’s Consolidated First Draw PPP experienced a revenue reduction of 25%
and receive a PPP loan is March 31, IFR, Frequently Asked Questions or greater in 2020 relative to 2019.7 A
2021. Given the short duration of this (FAQs), and other guidance about PPP borrower must calculate this revenue
program, and the urgent need to issue loans under section 7(a)(36) of the Small reduction by comparing the borrower’s
loans quickly, the Administrator in Business Act (15 U.S.C. 636(a)(36)) quarterly gross receipts for one quarter
consultation with the Secretary has apply to Second Draw PPP Loans, in 2020 with the borrower’s gross
determined that it is impractical and not except as specified in this IFR.3 receipts for the corresponding quarter of
in the public interest to provide a 30- The Economic Aid Act includes terms 2019. For example, a borrower with
day delayed effective date. An and conditions, including but not gross receipts of $50,000 in the second
immediate effective date will give small limited to terms relating to eligibility quarter of 2019 and gross receipts of
businesses the maximum amount of and a borrower’s maximum loan $30,000 in the second quarter of 2020
time to apply for loans and lenders the amount, that apply only to Second Draw has experienced a revenue reduction of
maximum amount of time to process PPP Loans and do not apply to First 40 percent between the quarters, and is
applications before the program ends. Draw PPP Loans, regardless of when the therefore eligible for a Second Draw PPP
This good cause justification also First Draw PPP Loan is made. These loan (assuming all other eligibility
supports waiver of the 60-day delayed terms and conditions specific to Second criteria are met). Subsection (c)(1)(iv)(A)
effective date for major rules under the Draw PPP Loans are summarized below. of the IFR reflects this methodology.
Congressional Review Act at 5 U.S.C. Subsection (c)(1)(iv)(B) of the IFR
808(2). Although this IFR is effective A. Eligibility Requirements
provides that a borrower that was in
immediately, comments are solicited 1. General Eligibility Requirements operation in all four quarters of 2019 is
from interested members of the public deemed to have experienced the
on all aspects of the interim final rule. In general, the Economic Aid Act
made the eligibility requirements for required revenue reduction if it
1 The Consolidated First Draw PPP IFR titled Second Draw PPP Loans narrower than
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4 See paragraph 7(a)(37)(A)(iv) of the Small
‘‘Business Loan Program Temporary Changes: the eligibility requirements for First Business Act.
Extension of and Changes to Paycheck Protection Draw PPP Loans. The Economic Aid Act 5 See paragraph 7(a)(37)(O) of the Small Business
Program’’ restates existing regulatory provisions to
provide lenders and new PPP borrowers a single Act.
2 Section 339 of the Economic Aid Act added 6 Subsection (B)(11) of the Consolidated First
regulation to consult on borrower eligibility, lender
eligibility, and loan application and origination ‘‘calculated on a non-compounding, non-adjustable Draw PPP IFR specifies that the proceeds of a PPP
requirements issues for new First Draw PPP loans, basis’’ to the maximum interest rate for a PPP loan. loan may be spent only on certain eligible expenses.
as well as general rules relating to First Draw PPP 3 SBA will be revising the FAQs to conform to the 7 See paragraph 7(a)(37)(A)(iv) of the Small
Loan increases and loan forgiveness. Economic Aid Act as quickly as feasible. Business Act.
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3714 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
experienced a reduction in annual Moreover, this definition will enhance Draw PPP Loans by reducing the limit
receipts of 25 percent or greater in 2020 the administrability of Second Draw on employees per physical location to
compared to 2019 and the borrower PPP Loans because it is a definition 300. Accordingly, a single business
submits copies of its annual tax forms already used by the Administration and entity that is assigned a NAICS code
substantiating the revenue decline. This many small businesses. beginning with 72 is eligible to receive
provision will allow a borrower to The IFR specifies that any forgiveness a Second Draw PPP Loan if it employs
provide annual tax return forms to amount of a First Draw PPP Loan that no more than 300 employees per
substantiate its revenue reduction. The a borrower received in calendar year physical location and meets the revenue
Administrator, in consultation with the 2020 is excluded from a borrower’s reduction requirements and otherwise
Secretary of the Treasury (Secretary), gross receipts. Excluding the forgiveness satisfies the eligibility criteria described
has determined that this is necessary to amount from a borrower’s gross receipts in this IFR.13 Under section 317 of the
improve administrability of Second is consistent with section 7A(i) of the Economic Aid Act, the same standard
Draw PPP Loans by providing borrowers Small Business Act, which expressly applies to certain news organizations.14
an additional verifiable method for excludes PPP forgiveness amounts from Subsections (c)(3) and (c)(4) of the IFR
substantiating their revenue reduction. being taxed as income.10 This implement these statutory provisions.
This method will be particularly clarification ensures the effectiveness of Borrowers may consult PPP Frequently
important for small borrowers that may the second draw loan program by Asked Question (FAQ) 24 15 for
not have quarterly revenue information ensuring that a borrower is not guidance on these standards for
readily available. Moreover, this disqualified from receiving a Second business concerns with more than one
approach is appropriate because, if Draw PPP Loan because it received physical location, except that, for
annual filings show a 25 percent forgiveness on a First Draw PPP Loan. Second Draw PPP Loans, the number of
revenue reduction, then at least one This furthers the purpose of the second employees per physical location is
quarter in 2020 would have had at least draw loan provisions, which is to limited to 300 rather than 500.
a 25 percent revenue reduction. A deliver additional aid to small B. Affiliation Rules
borrower that did not experience a 25 businesses that previously received a
percent annual decline in revenues, or First Draw PPP Loan. The same affiliation rules that apply
that was not in operation in all four to First Draw PPP Loans apply to
quarters of 2019, may still meet the 3. Business Concerns With More Than Second Draw PPP Loans, except as
revenue reduction requirement under One Physical Location provided in this IFR. As with First Draw
one of the quarterly measurements Under the CARES Act, any single PPP Loans, in most cases, a borrower is
described above. business entity that is assigned a NAICS considered together with its affiliates to
The Economic Aid Act does not code beginning with 72 (including determine eligibility for the PPP.16
include a general definition of gross hotels and restaurants) and employs not However, the CARES Act waived the
receipts for purposes of determining a more than 500 employees per physical affiliation rules for certain categories of
borrower’s revenue reduction.8 location is eligible to receive a First borrowers.17 Paragraph 7(a)(37)(E) of the
Subsection (c)(2) of the IFR defines Draw PPP Loan.11 In addition, as Small Business Act, as amended by the
gross receipts consistent with the discussed below, under the Economic Aid Act, applies the same
definition of receipts in 13 CFR 121.104 Consolidated First Draw PPP IFR, SBA’s
of SBA’s size regulations because this affiliation rules (13 CFR 121.301) do not 13 Paragraph 7(a)(37)(D) of the Small Business
definition appropriately captures the Act.
apply to any business entity that is 14 Paragraph 7(a)(36)(D)(iii)(II) of the Small
type of income that is typically included assigned a NAICS code beginning with Business Act.
in a small business’s gross receipts.9 72 and that employs not more than a 15 See PPP FAQ #24 (posted April 13, 2020),
total of 500 employees.12 As a result, if available at https://www.sba.gov/sites/default/files/
8 For an eligible nonprofit organization, a veterans
each hotel or restaurant location owned 2020-12/Final%20PPP%20FAQs%20%28December
organization, an eligible nonprofit news %209%202020%29-508.pdf.
organization, eligible 501(c) organization, or eligible
by a parent business is a separate legal 16 Paragraph 7(a)(36)(D)(iv) of the Small Business
destination marketing organization, gross receipts business entity and employs not more Act (15 U.S.C. 636(a)(36)(D)(iv), as added by the
has the meaning in section 6033 of the Internal than 500 employees, each hotel or CARES Act and amended by the Economic Aid Act,
Revenue Code of 1986. See paragraph 7(a)(37)(I)(ii) restaurant location is permitted to apply waived the affiliation rules contained in § 121.103
of the Small Business Act. Subsection (c)(2) of the for (1) any business concern with not more than 500
IFR clarifies that this definition, which generally
for a separate PPP loan provided it uses employees that, as of the date on which the loan
relates to eligible nonprofit organizations, applies its unique EIN. is disbursed, is assigned a NAICS code beginning
only to eligible nonprofit news organizations rather Section 317 of the Economic Aid Act with 72; (2) any business concern operating as a
than to all eligible news organizations. modified this provision for Second franchise that is assigned a franchise identifier code
9 Subsection (c)(2) of the IFR generally defines by SBA; (3) any business concern that receives
gross receipts to include all revenue in whatever financial assistance from a company licensed under
form received or accrued (in accordance with the agent, advertising agent, conference management section 301 of the Small Business Investment Act
entity’s accounting method) from whatever source, service provider, freight forwarder or customs of 1958 (15 U.S.C. 681); and (4)(a) any business
including from the sales of products or services, broker. All other items, such as subcontractor costs, concern (including any station which broadcasts
interest, dividends, rents, royalties, fees, or reimbursements for purchases a contractor makes at pursuant to a license granted by the Federal
commissions, reduced by returns and allowances. a customer’s request, investment income, and Communications Commission under title III of the
Generally, receipts are considered ‘‘total income’’ employee-based costs such as payroll taxes, may Communications Act of 1934 (47 U.S.C. 301 et seq.)
(or in the case of a sole proprietorship, independent not be excluded from gross receipts. Subsection without regard for whether such a station is a
contractor, or self-employed individual ‘‘gross (c)(2) also adapts the methodology for calculating concern as defined in 13 CFR 121.105, or any
income’’) plus ‘‘cost of goods sold,’’ and excludes affiliate receipts from 13 CFR 121.104. successor thereto) that employs not more than 500
10 Section 1106 of the CARES Act (15 U.S.C.
net capital gains or losses as these terms are defined employees, or the size standard established by the
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and reported on IRS tax return forms. Gross receipts 9005) was redesignated as section 7A, transferred to Administrator for the NAICS code applicable to the
do not include the following: Taxes collected for the Small Business Act (15 U.S.C. 631 et seq.), and business concern, per physical location of such
and remitted to a taxing authority if included in inserted so as to appear after section 7 of the Small business concern and is majority owned or
gross or total income (such as sales or other taxes Business Act (15 U.S.C. 636) in section 304(b) of the controlled by a business concern that is assigned a
collected from customers and excluding taxes Economic Aid Act. NAICS code beginning with 511110 or 5151; or (b)
11 Paragraph 7(a)(36)(D)(iii)(I) of the Small any nonprofit organization that is assigned a NAICS
levied on the concern or its employees); proceeds
from transactions between a concern and its Business Act. code beginning with 5151.
domestic or foreign affiliates; and amounts 12 Paragraph 7(a)(36)(D)(iv) of the Small Business 17 Paragraph 7(a)(36)(D)(iv) of the Small Business
collected for another by a travel agent, real estate Act. Act.
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3715
waivers to Second Draw PPP Loans, Special Administrative Region of Hong Draw PPP Loans, the Economic Aid Act
adds a waiver for certain eligible news Kong; 22 provides that the relevant time period
organizations, and makes adjustments to • any person required to submit a for calculating a borrower’s payroll costs
reflect the reduced size requirement for registration statement under section 2 of for a Second Draw PPP Loan is either
Second Draw PPP Loans. Specifically, the Foreign Agents Registration Act of the twelve-month period prior to when
business concerns with a NAICS code 1938 (22 U.S.C. 612); 23 the loan is made or calendar year 2019.
beginning with 72 qualify for the • a person or entity that receives a The Act also provided tailored
affiliation waiver for Second Draw PPP grant for shuttered venue operators methodologies for certain categories of
Loans if they employ 300 or fewer under section 324 of the Economic Aid borrowers. These calculations are
employees. Eligible news organizations Act; 24 reflected in subsection (f) of this IFR.
with a NAICS code beginning with • entities in which the President, the Subsection (f) of the IFR uses ‘‘calendar
511110 or 5151 (or majority-owned or Vice President, the head of an Executive year 2020’’ to refer to ‘‘the twelve-month
controlled by a business concern with department, or a Member of Congress, or period prior to when the loan is made.’’
those NAICS codes) may qualify for the the spouse of such person owns, Calculating payroll costs based on
affiliation waiver for Second Draw PPP controls, or holds at least 20 percent of calendar year 2020 rather than the
Loans only if they employ 300 or fewer any class of equity; 25 or twelve months preceding the date the
employees per physical location.18 • a publicly traded company, defined loan is made will simplify the
as an issuer, the securities of which are calculations and documentation
Subsection (d)(2) implements these
listed on an exchange registered as a requirements for borrowers because
revised affiliation waivers. SBA also
national securities exchange under payroll records are more commonly
adopted a religious exemption to the
section 6 of the Securities Exchange Act created and retained on a calendar-year
affiliation rules by regulation,19 which
of 1934 (15 U.S.C. 78f).26 basis. Allowing borrowers to calculate
applies to Second Draw PPP loans.
In addition, subsection (e)(9) of this IFR payroll costs based on calendar year
C. Excluded Entities provides that an entity that has 2020 is also not expected to result in a
previously received a Second Draw PPP significant difference in payroll costs
An entity that is ineligible to receive Loan may not receive another Second compared to the twelve months
a First Draw PPP Loan under the CARES Draw PPP Loan, as required by the preceding the date the loan is made
Act or Consolidated First Draw PPP IFR Economic Aid Act.27 Subsection (e)(9) because all Second Draw PPP Loans will
is also ineligible for a Second Draw PPP also prohibits an entity that has be made in the first quarter of 2021.
Loan.20 Subsection (e)(1) of the IFR permanently closed from receiving a However, the rule notes that Second
implements this restriction. Subsection Second Draw PPP Loan because Draw PPP Loan borrowers who are not
(e)(1) ensures that a borrower that paragraph 7(a)(37)(A)(iv) of the Small self-employed (including sole
received a First Draw PPP Loan despite Business Act is best understood to proprietorships and independent
being ineligible to receive the loan is not describe existing businesses. The contractors) are also permitted to use
eligible to receive a Second Draw PPP Administrator, in consultation with the the precise 1-year period before the date
Loan. Secretary, has determined this provision on which the loan is made to calculate
The Economic Aid Act also prohibits is also necessary to maintain program payroll costs if they choose not to use
several additional categories of integrity, prevent abuse, and preserve 2019 or 2020 to calculate payroll costs.
borrowers from receiving a Second the availability of Second Draw PPP Consistent with the Economic Aid
Draw PPP Loan under section 7(a)(37) of Loan funds for businesses still in Act, subsections (f)(3) and (f)(4) of the
the Small Business Act. These operation. Preserving funds for such IFR include tailored calculation
categories of prohibited borrowers are businesses is necessary because only methodologies for seasonal businesses,
listed in subsection (e) of the IFR: businesses that are still in operation will new entities that did not exist for the
• A business concern or entity retain employees, which is a primary full twelve-month period preceding the
primarily engaged in political activities purpose of the PPP. A borrower that has Second Draw PPP Loan, and borrowers
or lobbying activities, including any temporarily closed or temporarily assigned a NAICS code beginning with
entity that is organized for research or suspended its business remains eligible 72 at the time of disbursement. For
for engaging in advocacy in areas such for a Second Draw PPP Loan. borrowers assigned a NAICS code
as public policy or political strategy or beginning with 72 at the time of
D. Payroll Cost Calculation disbursement, the Economic Aid Act
that describes itself as a think tank in
In general, section 307 of the provides that the maximum loan
any public documents; 21
Economic Aid Act provides that the amount is equal to three-and-a-half (3.5)
• certain entities organized under the maximum loan amount for a Second months of payroll costs rather than two-
laws of the People’s Republic of China Draw PPP Loan is equal to the lesser of and-a-half (2.5) months.28 These
or the Special Administrative Region of two and half months of the borrower’s subsections also provide that, for a
Hong Kong, or with other specified ties average monthly payroll costs or $2 borrower with a NAICS code beginning
to the People’s Republic of China or the million. Relative to First Draw PPP with 72 that would fall into more than
loans, the Economic Aid Act adjusted one category listed in subsection (f) (for
18 Paragraph 7(a)(37)(E) of the Small Business Act.
the methodology for calculating a example, a business with a NAICS code
19 See section (B)(3)(c) of the Consolidated First
borrower’s payroll costs. Unlike First beginning with 72 that is also a seasonal
Draw PPP IFR.
20 Paragraph 7(a)(37)(O) of the Small Business Act
business or is also a new entity without
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22 Paragraph 7(a)(37)(A)(iv)(III)(cc) of the Small
provides that a Second Draw PPP Loan may be 12 months of payroll costs), the
Business Act.
made only to a borrower that received a First Draw 23 Paragraph 7(a)(37)(A)(iv)(III)(dd) of the Small
borrower may calculate its average
PPP Loan under paragraph 7(a)(36). In addition, monthly payroll costs based on the
section 7(a)(37)(B) provides that the Administrator Business Act.
may guarantee covered loans to eligible entities
24 Paragraph 7(a)(37)(A)(iv)(III)(ee) of the Small methodology that applies to the entity
under the same terms, conditions, and processes as Business Act. but may use the 3.5 multiplier
25 Section 322 of the Economic Aid Act.
First Draw PPP Loans.
21 Paragraph 7(a)(37)(A)(iv)(III)(bb) of the Small 26 Section 342 of the Economic Aid Act. 28 Paragraph 7(a)(37)(C)(iv) of the Small Business
Business Act. 27 Paragraph 7(a)(37)(F) of the Small Business Act. Act.
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3716 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
applicable to businesses with a NAICS and Economic Aid Act. The F. Lender Requirements
code beginning with 72. The Administrator has concluded that a Subsection (g) of this IFR contains the
Administrator, in consultation with the limitation of $4,000,000 is appropriate provisions specific to lenders for
Secretary, has determined that this because it is proportional to the Second Draw PPP Loans. Paragraph
methodology is necessary to provide $20,000,000 maximum amount for 7(a)(37)(K) of the Small Business Act,
small businesses in the accommodation corporate groups that is provided under added by the Economic Aid Act, states
and food services sector the full amount the Consolidated First Draw PPP IFR that a lender approved to make First
of relief provided in the Economic Aid when the maximum loan amount for a Draw PPP loans may make Second Draw
Act while allowing these borrowers to single PPP loan is $10,000,000. PPP Loans under the same terms and
calculate their average monthly payroll conditions as new First Draw PPP
costs accurately. E. Second Draw PPP Loan Application
and Documentation Requirements Loans. Subsection (g)(2) of this IFR
The Economic Aid Act included a provides that lenders are subject to the
new payroll cost calculation for farmers Subsection (g) of this IFR includes the same requirements when making
and ranchers receiving First Draw PPP application and documentation Second Draw PPP Loans as when they
Loans. However, it did not specify how requirements for Second Draw PPP are making First Draw PPP Loans. These
payroll costs should be calculated for Loans. The documentation required to provisions allow a lender approved to
Second Draw PPP Loans to farmers and substantiate an applicant’s payroll cost make Second Draw PPP Loans to use
ranchers. This IFR clarifies that the calculations is generally the same as existing program guidance and standard
same general calculation for farmers and documentation required for First Draw operating procedures to the maximum
ranchers applicable to First Draw PPP PPP Loans. However, no additional extent practicable.31 The requirements
Loans applies to Second Draw PPP documentation to substantiate payroll applicable to PPP lenders are in sections
Loans, with adjustments that (i) costs will be required if the applicant (i) (C) and (D) of the Consolidated First
eliminate the provision for refinancing used calendar year 2019 figures to Draw PPP IFR. If a borrower has not
of an Economic Injury Disaster Loan determine its First Draw PPP Loan submitted new payroll documentation
(EIDL), which does not apply to Second amount, (ii) used calendar year 2019 with its Second Draw PPP Loan
Draw PPP Loans, and (ii) apply the figures to determine its Second Draw application because it previously
choice of time period for calculating a PPP Loan amount (instead of calendar submitted 2019 payroll information to
farmer’s or rancher’s payroll costs for year 2020), and (iii) the lender for the the same lender when it applied for its
Second Draw PPP Loans, consistent applicant’s Second Draw PPP Loan is First Draw PPP Loan, then the lender
with other Second Draw PPP Loans. must confirm the borrower’s average
the same as the lender that made the
This IFR also specifies that, in monthly payroll costs based on that
applicant’s First Draw PPP Loan. In
calculating a farmer’s or rancher’s prior documentation.
such cases, additional documentation is
maximum loan amount, any employee In addition, for a Second Draw PPP
not required because the lender already
payroll costs should be subtracted from Loan greater than $150,000, the lender
has the relevant documentation
the farmer’s or rancher’s gross income to must confirm the dollar amount and
supporting the borrower’s payroll costs.
avoid double-counting amounts that percentage of the borrower’s revenue
The lender may request additional
represent pay to the employees of the reduction by performing a good faith
documentation, however, if on further
farmer or rancher. review, in a reasonable time, of the
Subsections (f)(7) and (f)(8) of the IFR review the lender concludes that it
would be useful in conducting the borrower’s calculations and supporting
include tailored calculation documents concerning the borrower’s
methodologies for self-employed lender’s good-faith review of the
borrower’s loan amount calculation. revenue reduction. If the lender
individuals and partnerships. These identifies errors in the borrower’s
methodologies are based on the For loans with a principal amount
calculation or a material lack of
corresponding methodologies for self- greater than $150,000, the applicant
substantiation in the borrower’s
employed individuals and partnerships must also submit documentation
supporting documents, the lender
that are used for First Draw PPP adequate to establish that the applicant
should work with the borrower to
Loans.29 These methodologies have experienced a revenue reduction of 25%
remedy the issue.
been adjusted to eliminate the provision or greater in 2020 relative to 2019. (The
for refinancing of an EIDL loan, which revenue reduction requirement is G. Loans to Borrowers With Unresolved
does not apply to Second Draw PPP addressed in subsection (c)(1)(iv) of this First Draw PPP Loans
loans and to apply the choice of time IFR.) Such documentation may include As described in SBA’s interim final
period for calculating payroll costs, relevant tax forms, including annual tax rule on SBA Loan Review Procedures
consistent with other Second Draw PPP forms, or, if relevant tax forms are not and Related Borrower and Lender
loans. available, quarterly financial statements Responsibilities, SBA may review any
Finally, subsection (f)(9) provides that or bank statements. For loans with a PPP loan, as the Administrator deems
businesses that are part of a single principal amount of $150,000 or less, appropriate.32 Subsection (i) of the IFR
corporate group shall in no event such documentation is not required at establishes procedures relating to the
receive more than $4,000,000 of Second the time the borrower submits its handling of a Second Draw PPP Loan
Draw PPP Loans in the aggregate. The application for a loan, but must be application by a borrower whose First
Administrator, in consultation with the submitted on or before the date the Draw PPP Loan is under review by SBA
Secretary, determined that limiting the borrower applies for loan forgiveness, as (‘‘unresolved borrower’’). If a borrower’s
required under the Economic Aid Act.30
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amount of Second Draw PPP Loans that First Draw PPP loan is under review by
a single corporate group may receive If a borrower does not submit an SBA and/or information in SBA’s
will promote the availability of PPP application for loan forgiveness, such possession indicates that the borrower
loans to the largest possible number of documentation must be provided upon may have been ineligible for the First
borrowers, consistent with the CARES SBA’s request.
31 Paragraph 7(a)(37)(N) of the Small Business
29 See subsections (B)(4)(b) and (B)(4)(e) of the 30 See paragraph 7(a)(37)(I)(i) of the Small Act.
Consolidated First Draw PPP IFR. Business Act. 32 85 FR 33010, 33012.
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3717
Draw PPP Loan it received or for the unresolved issues regarding the marketing organization, or an eligible
loan amount it received, the lender will applicant’s First Draw PPP Loan? nonprofit news organization 33 that:
receive notification from SBA when the (j) Are Second Draw PPP Loans eligible for (i) Previously received a First Draw
lender submits an application for a loan forgiveness? PPP loan in accordance with the
guaranty of a Second Draw PPP Loan IV. Paycheck Protection Program eligibility criteria in the Consolidated
and will not receive an SBA loan Second Draw Loans First Draw PPP IFR;
number until the issue related to the (ii) has used, or will use, the full
unresolved borrower’s First Draw PPP (a) Second Draw PPP Loan Program amount of its First Draw PPP Loan
Loan is resolved. SBA will resolve Under section 7(a)(37) of the Small (including the amount of any increase
issues related to unresolved borrowers Business Act (15 U.S.C. 636(a)(37)), SBA on such First Draw PPP Loan) on
expeditiously. These procedures are is authorized to guarantee Paycheck authorized uses under subsection
designed to promote compliance with Protection Program Second Draw Loans (B)(11) of the Consolidated First Draw
the eligibility requirements for Second (‘‘Second Draw PPP Loans’’). PPP IFR on or before the expected date
Draw PPP Loans by preventing on which the Second Draw PPP Loan
additional loans from being made to (b) What requirements apply to Second will be disbursed; 34
borrowers that were not eligible for a Draw PPP Loans? (iii) employs not more than 300
First Draw PPP Loan or received an (1) Second Draw PPP Loans are employees, unless it satisfies the
impermissible loan amount. At the same subject to SBA’s and the Department of alternative criteria for businesses with a
time, these procedures do not disqualify the Treasury’s (‘‘Treasury’s’’) North American Industry Classification
an eligible unresolved borrower from consolidated interim final rule System (‘‘NAICS’’) code beginning with
receiving a Second Draw PPP Loan, in implementing the Paycheck Protection 72 and eligible news organizations with
recognition that many flags will be Program (‘‘Consolidated First Draw PPP more than one physical location
resolved in the borrower’s favor. The IFR’’) and all PPP loan program described in subsection (c)(3) or (c)(4) of
Administrator, in consultation with the requirements, except as otherwise this section; and
Secretary, has determined that these provided in this section, including but (iv) (A) experienced a reduction in
procedures strike an appropriate not limited to the following terms: revenue in calendar year 2020,
balance between promoting program measured as follows:
(i) The guarantee percentage is 100 (1) the applicant had gross receipts
integrity and preventing abuse, while
percent. during the first, second, third, or fourth
making Second Draw PPP Loans
available to all eligible borrowers as (ii) No collateral will be required. quarter in 2020 that demonstrate at least
expeditiously as possible. SBA will set (iii) No personal guarantees will be a 25 percent reduction from the
aside available appropriations to fund required. applicant’s gross receipts during the
Second Draw PPP Loans applied for by (iv) The interest rate will be 100 basis same quarter in 2019 (for example, an
unresolved borrowers in the event they points or one percent, calculated on a applicant that had gross receipts of
are approved. non-compounding, non-adjustable basis. $50,000 in the second quarter of 2019
(v) The maturity is five years. and had gross receipts of $30,000 in the
H. Loan Forgiveness
(vi) All loans will be processed by all second quarter of 2020 experienced a 40
Loan forgiveness of Second Draw PPP lenders under delegated authority and percent revenue reduction between
Loans and the loan review process for lenders will be permitted to rely on these two quarters);
Second Draw PPP Loans are generally certifications of the borrower in order to (2) if the applicant was not in
subject to the interim final rules determine eligibility of the borrower business during the first or second
regarding Loan Forgiveness and SBA and the use of loan proceeds. quarter of 2019, but was in business
Loan Review Procedures and Related (2) Frequently Asked Questions and during the third and fourth quarters of
Borrower and Lender Responsibilities, other guidance issued by SBA or by 2019, the applicant had gross receipts
as modified to conform to the Economic SBA in consultation with the during the first, second, third, or fourth
Aid Act by the Consolidated First Draw Department of the Treasury with respect quarter of 2020 that demonstrate at least
PPP IFR, which is being published to PPP loans under section 7(a)(36) of a 25 percent reduction from the
concurrently with this IFR. Subsection the Small Business Act (15 U.S.C. applicant’s gross receipts during the
(j) contains forgiveness provisions 636(a)(36)) (‘‘First Draw PPP Loans’’) third or fourth quarter of 2019 (for
specific to Second Draw PPP loans. apply to Second Draw PPP Loans, example, an applicant that had gross
Table of Contents except as otherwise provided in this receipts of $50,000 in the third quarter
section. of 2019 and had gross receipts of
(a) Second Draw PPP Loan Program $30,000 in the third quarter of 2020–
(b) What requirements apply to Second Draw (c) Who is eligible for a Second Draw demonstrating a reduction of 40 percent
PPP Loans? PPP Loan?
(c) Who is eligible for a Second Draw PPP from the applicant’s gross receipts
Loan? Subject to subsection (e) of this during the third quarter in 2019);
(d) How do SBA’s affiliation rules affect an section, below, the following applicants (3) if the applicant was not in
applicant’s eligibility for a Second Draw are eligible for Second Draw PPP Loans: business during the first, second, or
PPP Loan? third quarter of 2019, but was in
(e) Who is not eligible for a Second Draw PPP
(1) An applicant is eligible for a
business during the fourth quarter of
Loan? Second Draw PPP Loan if it is a
2019, the applicant had gross receipts
(f) What is the maximum loan amount for a business concern, independent
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Second Draw PPP Loan? contractor, eligible self-employed 33 All terms in this subsection have the same
(g) How do I submit an application for a individual, sole proprietor, nonprofit definitions as in sections 7(a)(36) and (37) of the
Second Draw PPP Loan and what organization eligible for a First Draw Small Business Act and the Consolidated First
documentation must I provide to PPP Loan, veterans organization, Tribal Draw PPP IFR, as applicable.
demonstrate eligibility? 34 A lender must make disbursement of the loan
(h) What do lenders need to know and do?
business concern, housing cooperative,
within ten calendar days of loan approval. See
(i) Will an applicant’s Second Draw PPP small agricultural cooperative, eligible subsection (D)(7) of the Consolidated First Draw
Loan application be affected if there are 501(c)(6) organization or destination PPP IFR.
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3718 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
during the first, second, third, or fourth taxes, may not be excluded from gross respect to a public broadcasting entity
quarter of 2020 that demonstrate at least receipts. (as defined in section 397(11) of the
a 25 percent reduction from the fourth (ii) Gross receipts of affiliates are Communications Act of 1934 (47 U.S.C.
quarter of 2019 (for example, an calculated as follows: 397(11))), has a trade or business that
applicant that had gross receipts of (A) Gross receipts of a borrower with falls under such a code; and (2) makes
$50,000 in the fourth quarter of 2019 affiliates is calculated by adding the a good faith certification that proceeds
and had gross receipts of $30,000 in the gross receipts of the business concern of the loan will be used to support
fourth quarter of 2020–demonstrating a with the gross receipts of each affiliate. expenses at the component of the
reduction of 40 percent from the (B) If a borrower has acquired an organization that produces or distributes
applicant’s gross receipts during the affiliate or been acquired as an affiliate locally focused or emergency
fourth quarter in 2019); or during 2020, gross receipts includes the information.
(4) if the applicant was not in receipts of the acquired or acquiring
business during 2019, but was in concern. This aggregation applies for the (d) How do SBA’s affiliation rules affect
operation on February 15, 2020, the entire period of measurement, not just an applicant’s eligibility for a Second
applicant had gross receipts during the the period after the affiliation arose. Draw PPP Loan?
second, third, or fourth quarter of 2020 However, if a concern acquired a (1) Eligibility for Second Draw PPP
that demonstrate at least a 25 percent segregable division of another business Loans is governed by the same
reduction from the gross receipts of the concern during 2020, gross receipts do affiliations rules (and waivers) as First
entity during the first quarter of 2020 not include the receipts of the acquired Draw PPP Loans, except as described in
(for example, an applicant that had division prior to the acquisition. subsection (d)(2).
gross receipts of $50,000 in the first (C) The gross receipts of a former (2) The affiliation rules under 13 CFR
quarter of 2020 and had gross receipts affiliate are not included. This exclusion 121.301(f) are waived with respect to
of $30,000 in the fourth quarter of of gross receipts of such former affiliate eligibility for a Second Draw PPP Loan
2020—demonstrating a reduction of 40 applies during the entire period of for:
percent from the applicant’s gross measurement, rather than only for the
(i) Any business concern with not
receipts during the first quarter in 2020). period after which affiliation ceased.
more than 300 employees that, as of the
(B) An applicant that was in operation However, if a borrower sold a segregable
date on which the covered loan is
in all four quarters of 2019 is deemed to division during 2020, the gross receipts
disbursed, is assigned a NAICS code
have experienced the revenue reduction will continue to include the receipts of
beginning with 72; and
in subsection (c)(1)(iv)(A)(1) if it the division that was sold.
experienced a reduction in annual (D) All terms in this subsection shall (ii) (A) any business concern
receipts of 25 percent or greater in 2020 have the meaning attributed to them by (including any station which broadcasts
compared to 2019 and the borrower the IRS. pursuant to a license granted by the
submits copies of its annual tax forms (iii) For an eligible nonprofit Federal Communications Commission
substantiating the revenue decline. organization, a veterans organization, an under title III of the Communications
(2)(i) Gross receipts includes all eligible nonprofit news organization, an Act of 1934 (47 U.S.C. 301 et seq.)
revenue in whatever form received or eligible 501(c)(6) organization, or without regard for whether such a
accrued (in accordance with the entity’s eligible destination marketing station is a concern as defined in 13
accounting method) from whatever organization, gross receipts means gross CFR 121.105, or any successor thereto)
source, including from the sales of receipts within the meaning of section that employs not more than 300
products or services, interest, dividends, 6033 of the Internal Revenue Code of employees, per physical location of
rents, royalties, fees, or commissions, 1986. such business concern and is majority
reduced by returns and allowances. (iv) The amount of any forgiven First owned or controlled by a business
Generally, receipts are considered ‘‘total Draw PPP Loan shall not be included concern that is assigned a NAICS code
income’’ (or in the case of a sole toward any borrower’s gross receipts. beginning with 511110 or 5151; or
proprietorship, independent contractor, (3) Any business concern that has (B) any nonprofit organization that is
or self-employed individual ‘‘gross more than one physical location and assigned a NAICS code beginning with
income’’) plus ‘‘cost of goods sold,’’ and that employs not more than 300 5151.
excludes net capital gains or losses as employees per physical location is (e) Who is not eligible for a Second
these terms are defined and reported on eligible to receive a Second Draw PPP Draw PPP Loan?
IRS tax return forms. Gross receipts do Loan if it is assigned a NAICS code
not include the following: Taxes beginning with 72 at the time of loan An applicant is not eligible for a
collected for and remitted to a taxing disbursement and otherwise meets the Second Draw PPP Loan, even if it meets
authority if included in gross or total eligibility criteria in subsection (c)(1). the eligibility requirements of
income (such as sales or other taxes (4) Any business concern, or any subsection (c) of this section, if the
collected from customers and excluding station which broadcasts pursuant to a applicant is:
taxes levied on the concern or its license granted by the Federal (1) Excluded from eligibility under
employees); proceeds from transactions Communications Commission under the Consolidated First Draw PPP IFR; 35
between a concern and its domestic or title III of the Communications Act of (2) a business concern or entity
foreign affiliates; and amounts collected 1934 (47 U.S.C. 301 et seq.), that has primarily engaged in political activities
for another by a travel agent, real estate more than one physical location and or lobbying activities, as defined in
agent, advertising agent, conference that employs not more than 300 section 3 of the Lobbying Disclosure Act
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management service provider, freight employees per physical location is of 1995 (2 U.S.C. 1602), including any
forwarder or customs broker. All other eligible to receive a Second Draw PPP entity that is organized for research or
items, such as subcontractor costs, Loan if it meets the eligibility criteria in for engaging in advocacy in areas such
reimbursements for purchases a subsection (c)(1) and: (1) Is majority as public policy or political strategy or
contractor makes at a customer’s owned or controlled by a business
request, investment income, and concern that is assigned a NAICS code 35 See generally section (B)(2) of the Consolidated
employee-based costs such as payroll beginning with 511110 or 5151 or, with First Draw PPP IFR.
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3719
otherwise describes itself as a think tank Member of Congress, shall be aggregated (3) The maximum amount of a Second
in any public documents; with the securities held by his or her Draw PPP Loan to a borrower that is a
(3) any business concern or entity: spouse as determined under applicable seasonal employer (meaning an
(i) For which an entity created in or common law; employer that does not operate for more
organized under the laws of the People’s (7) any issuer, the securities of which than 7 months in any calendar year or
Republic of China or the Special are listed on an exchange registered as that during the preceding calendar year,
Administrative Region of Hong Kong, or a national securities exchange under had gross receipts for any 6 months of
that has significant operations in the section 6 of the Securities Exchange Act that year that were not more than 33.33
People’s Republic of China or the of 1934 (15 U.S.C. 78f), where the terms percent of the gross receipts of the
Special Administrative Region of Hong ‘‘exchange,’’ ‘‘issuer,’’ and ‘‘security’’ employer for the other 6 months of that
Kong, owns or holds, directly or have the meanings given those terms in year) is calculated as the lesser of:
indirectly, not less than 20 percent of section 3(a) of the Securities Exchange (i) The product obtained by
the economic interest of the business Act of 1934 (15 U.S.C. 78c(a)) (except multiplying:
concern or entity, including as equity SBA will not consider whether a news (A) At the election of the borrower,
shares or a capital or profit interest in organization that is eligible under the average total monthly payments for
a limited liability company or subsection (c)(4) is affiliated with an payroll costs incurred or paid by the
partnership; or entity, which includes any entity that borrower for any 12-week period
(ii) that retains, as a member of the owns or controls such news between February 15, 2019 and
board of directors of the business organization, that is an issuer); February 15, 2020; by
concern, a person who is a resident of (8) an entity that has previously (B) 2.5 (or, only for a borrower
the People’s Republic of China; received a Second Draw PPP Loan; or assigned a NAICS code beginning with
(4) any person required to submit a (9) an entity that has permanently 72 at the time of disbursement as
registration statement under section 2 of closed. defined in subsection (f)(10), 3.5); or
the Foreign Agents Registration Act of (ii) $2,000,000.
1938 (22 U.S.C. 612); (f) What is the maximum loan amount (4) The maximum amount of a Second
(5) any person or entity that receives for a Second Draw PPP Loan? Draw PPP Loan to a borrower that did
a grant for shuttered venue operators (1) In general, the maximum loan not exist during the 1-year period
under section 324 of the Economic Aid amount for a Second Draw PPP Loan is preceding February 15, 2020, but was in
to Hard-Hit Small Businesses, equal to the lesser of two and half operation on February 15, 2020 (‘‘new
Nonprofits, and Venues Act; months of the borrower’s average entity’’), is calculated as the lesser of:
(6) any entity in which the President, (i) The product obtained by
monthly payroll costs or $2 million,
the Vice President, the head of an multiplying:
except as otherwise specified in this (A) The quotient obtained by
Executive department, or a Member of subsection (e). A borrower’s average dividing:
Congress, or the spouse of such person monthly payroll costs may be based on (1) The sum of the total monthly
as determined under applicable calendar year 2020, calendar year payments by the borrower for payroll
common law, directly or indirectly 2019,36 or as otherwise specified in costs paid or incurred by the borrower
holds a controlling interest in the entity, subsections (f)(2) through (f)(9) of this as of the date on which the borrower
where: section. ‘‘Payroll costs’’ has the same applies for the Second Draw PPP Loan;
(i) ‘‘controlling interest’’ means meaning as in subsections (B)(4)(g) and by
owning, controlling, or holding not less (B)(4)(h) of the Consolidated First Draw (2) the number of months in which
than 20 percent, by vote or value, of the PPP IFR and is calculated in the same those payroll costs were paid or
outstanding amount of any class of manner. In calculating a borrower’s incurred; by
equity interest in an entity; payroll costs, the borrower must (B) 2.5 (or, only for a borrower
(ii) ‘‘equity interest’’ means: subtract any compensation paid to an assigned a NAICS code beginning with
(A) A share in an entity, without employee in excess of $100,000 on an 72 at the time of disbursement as
regard to whether the share is annualized basis, as prorated for the defined in subsection (f)(10), 3.5); or
transferable or classified as stock or time period during which the payments (ii) $2,000,000.
anything similar; are made or the obligation to make the (5) The maximum amount of a Second
(B) a capital or profit interest in a payments is incurred. Draw PPP Loan made to a borrower
limited liability company or (2) Except as otherwise provided in assigned a NAICS code beginning with
partnership; or subsection (f)(3) through (f)(7), the 72 at the time of disbursement as
(C) a warrant or right, other than a maximum amount of a Second Draw defined in subsection (f)(10) (that is not
right to convert, to purchase, sell, or PPP Loan is calculated as the lesser of: a seasonal employer or new entity
subscribe to a share or interest described (i) The product obtained by addressed in subsection (f)(3) or (f)(4) or
in (A) or (B), respectively; multiplying: a borrower with self-employment
(iii) ‘‘Executive department’’ has the (A) The average total monthly income or a partnership addressed in
meaning given the term in section 101 payment for payroll costs incurred or subsection (f)(7) or (f)(8) of this section)
of title 5, United States Code; paid by the borrower during 2019 or is calculated as the lesser of:
(iv) ‘‘Member of Congress’’ means a 2020 (at the election of the borrower); by (i) The product obtained by
Member of the Senate or House of (B) 2.5; or multiplying:
Representatives, a Delegate to the House (ii) $2,000,000. (A) The average total monthly
of Representatives, and the Resident
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payment for payroll costs incurred or
Commissioner from Puerto Rico; and 36 Second Draw PPP Loan borrowers who are not paid by the borrower during either 2019
(v) For the purpose of determining self-employed, sole proprietorships, or independent or 2020 (at the borrower’s election) by
whether a person has a controlling contractors are also permitted to use the precise 1- (B) 3.5; or
interest in the entity, the securities year period before the date on which the loan is (ii) $2,000,000.
made to calculate payroll costs if they choose not
owned, controlled, or held by the to use 2019 or 2020. Since most borrowers will use
(6) (i) The maximum amount of a
President, the Vice President, the head 2019 or 2020 the rule text refers only to 2019 or Second Draw PPP Loan to a farmer or
of an Executive department, or a 2020 for simplicity and readability. rancher that:
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3720 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
(A) Operates as a sole proprietorship the average total monthly payment for (2) At the time an applicant submits
or as an independent contractor, or is an employee payroll costs incurred or paid its loan application form, it must submit
eligible self-employed individual; by the borrower during the same year the following unless the documentation
(B) reports farm income or expenses elected by the borrower; by was submitted to the lender for the First
on a Schedule F (IRS Form 1040); and (2) 2.5 (or, only for a borrower Draw PPP Loan (i.e., the applicant used
(C) was in business as of February 15, assigned a NAICS code beginning with calendar year 2019 figures to determine
2020; is calculated according to (ii) or 72 at the time of disbursement as both its First Draw PPP Loan amount
(iii) of this subsection(e)(6), depending defined in subsection (f)(10), 3.5); or and its Second Draw PPP Loan amount,
on whether the borrower has employees. (B) $2,000,000. and the lender for the applicant’s
(ii) If a borrower meeting the criteria (8) The maximum amount of a Second Second Draw PPP Loan is the same as
in subsection (6)(i) of this section does Draw PPP Loan to a borrower that files the lender that made the applicant’s
not have any employees, the maximum taxes as a partnership is calculated as First Draw PPP Loan):
loan amount is the product obtained by the lesser of: (i) If the applicant is not self-
multiplying: (i) The product obtained by employed, the applicant’s Form 941 (or
(A) The gross income of the borrower multiplying: other tax forms containing similar
in 2019 or 2020, as reported on a (A) The sum of (1) net earnings from information) and state quarterly wage
Schedule F (IRS Form 1040), that is not self-employment of individual general unemployment insurance tax reporting
more than $100,000, divided by 12; and partners in 2019 or 2020 (at the election forms from each quarter in 2019 or 2020
(B) 2.5. of the borrower), as reported on IRS (whichever was used to calculate
(iii) If a borrower meeting the criteria Form 1065 K–1, reduced by section 179 payroll), as applicable, or equivalent
in subsection (6)(i) of this section has expense deduction claimed, payroll processor records, along with
employees, the maximum loan amount unreimbursed partnership expenses evidence of any retirement and
is calculated as the lesser of: claimed, and depletion claimed on oil employee group health, life, disability,
(A) The product obtained by and gas properties, multiplied by vision and dental insurance
multiplying: 0.9235,37 that is not more than contributions, must be provided. A
(1) The sum of (i) the difference $100,000, divided by 12; (2) the average partnership must also include its IRS
between gross income and employee total monthly payment for employee Form 1065 K–1s.
payroll costs of the borrower in 2019 or payroll costs incurred or paid by the (ii) If the applicant is self-employed
2020 (at the election of the borrower), as borrower during the same year elected and has employees, the applicant’s 2019
reported on a Schedule F (IRS Form by the borrower; by or 2020 (whichever was used to
1040), that is not more than $100,000, (B) 2.5 (or, only for a borrower calculate loan amount) IRS Form 1040
divided by 12, and (ii) the average total assigned a NAICS code beginning with Schedule C, Form 941 (or other tax
monthly payment for employee payroll 72 as defined in subsection (f)(10) at the forms or equivalent payroll processor
costs incurred or paid by the borrower time of disbursal, 3.5); or records containing similar information)
during the same year elected by the (ii) $2,000,000. and state quarterly wage unemployment
borrower; by (9) Businesses that are part of a single insurance tax reporting forms from each
(2) 2.5; or corporate group shall in no event quarter in 2019 or 2020 (whichever was
(B) $2,000,000. receive more than $4,000,000 of Second used to calculate loan amount), as
(7) The maximum amount of a Second Draw PPP Loans in the aggregate. applicable, or equivalent payroll
Draw PPP Loan to a borrower that has Corporate group has the same meaning processor records, along with evidence
income from self-employment and files as in subsection (B)(4)(f) of the of any retirement and employee group
a Form 1040, Schedule C, is calculated Consolidated First Draw PPP IFR. health, life, disability, vision and dental
as follows, depending on whether the (10) For purposes of calculating a insurance contributions, if applicable,
borrower has employees: borrower’s maximum payroll costs, a must be provided. A payroll statement
(i) For a borrower that has income borrower may multiply its average or similar documentation from the pay
from self-employment and does not monthly payroll costs by 3.5 only if the period that covered February 15, 2020
have any employees, the maximum loan borrower is in the Accommodation and must be provided to establish the
amount is the lesser of: Food Services sector and has reported a applicant was in operation on February
(A) The product obtained by NAICS code beginning with 72 as its 15, 2020.
multiplying: business activity code on its most recent (iii) If the applicant is self-employed
(1) The net profit of the borrower in IRS income tax return. and does not have employees, the
2019 or 2020, as reported on IRS Form applicant must provide (a) its 2019 or
(g) How do I submit an application for 2020 (whichever was used to calculate
1040 Schedule C, that is not more than
a Second Draw PPP Loan and what loan amount) Form 1040 Schedule C, (b)
$100,000, divided by 12; and
(2) 2.5 (or, only for a borrower documentation must I provide to a 2019 or 2020 (whichever was used to
assigned a NAICS code beginning with demonstrate eligibility? calculate loan amount) IRS Form 1099–
72 as defined in subsection (f)(10) at the (1) The applicant must submit to the MISC detailing nonemployee
time of disbursement, 3.5). lender SBA Form 2483–SD (Paycheck compensation received (box 7), invoice,
(ii) For a borrower that has income Protection Program Second Draw bank statement, or book of record that
from self-employment and has Borrower Application Form) or the establishes that the applicant is self-
employees, the maximum loan amount lender’s equivalent form including the employed; and (c) a 2020 invoice, bank
is the lesser of: required certifications and the statement, or book of record to establish
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(A) The product obtained by documentation in subsection (g)(2). that the applicant was in operation on
multiplying: or around February 15, 2020.
(1) The sum of (i) the net profit of the 37 This treatment follows the computation of self- (iv) For loans with a principal amount
borrower in 2019 or 2020 (at the employment tax from IRS Form 1040 Schedule SE greater than $150,000, documentation
Section A line 4 and removes the ‘‘employer’’ share
election of the borrower), as reported on of self-employment tax, consistent with how payroll
sufficient to establish that the applicant
IRS Form 1040 Schedule C, that is not costs for employees in the partnership are experienced a reduction in revenue, as
more than $100,000, divided by 12; (ii) determined. provided in subsection(c)(1)(iv), must be
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3721
provided at the time of application, in the People’s Republic of China or the $150,000 or less where the borrower
which may include relevant tax forms, Special Administrative Region of Hong provides documentation of revenue
including annual tax forms, or, if Kong, owns or holds, directly or reduction, confirm the dollar amount
relevant tax forms are not available, a indirectly, not less than 20 percent of and percentage of the borrower’s
copy of the applicant’s quarterly income the economic interest of the business revenue reduction by performing a good
statements or bank statements. concern or entity, including as equity faith review, in a reasonable time, of the
(v) For loans with a principal amount shares or a capital or profit interest in borrower’s calculations and supporting
of $150,000 or less, the applicant must a limited liability company or documents concerning the borrower’s
submit documentation sufficient to partnership; or (b) that retains, as a revenue reduction. For a loan of
establish that the applicant experienced member of the board of directors of the $150,000 or less where the borrower
a reduction in revenue as provided in business concern, a person who is a does not provide documentation of
subsection (c)(1)(i) of this section at the resident of the People’s Republic of revenue reduction with its application,
time of application, on or before the China. the lender shall perform this review
date the borrower submits an (D) The Applicant is not required to when the borrower provides such
application for loan forgiveness, or, if submit a registration statement under documentation. If the lender identifies
the borrower does not apply for loan section 2 of the Foreign Agents errors in the borrower’s calculation or
forgiveness, at SBA’s request. Such Registration Act of 1938 (22 U.S.C. 612). material lack of substantiation in the
documentation may include relevant tax (E) The Applicant is not a business borrower’s supporting documents, the
forms, including annual tax forms, or, if concern or entity primarily engaged in lender should work with the borrower
relevant tax forms are not available, a political or lobbying activities, to remedy the issue.
copy of the applicant’s quarterly income including any entity that is organized (E) Follow applicable BSA
statements or bank statements. for research or for engaging in advocacy requirements (listed in subsection
(3) On the Second Draw PPP Loan in areas such as public policy or (C)(3)(d) of the Consolidated First Draw
borrower application, an authorized political strategy or otherwise describes PPP IFR); and
representative of the applicant 38 must itself as a think tank in any public
make the certifications listed in documents. (ii) Each lender’s underwriting
subsection (B)(12) of the Consolidated (4) A lender must submit SBA Form obligation under the Second Draw PPP
First Draw PPP IFR, except: 2484–SD (Paycheck Protection Program is limited to the items above and
(i) Instead of the certification in Lender’s Application—Second Draw reviewing the ‘‘Paycheck Protection
subsection (B)(12)(v) of the Loan Guaranty) electronically in Program Second Draw Borrower
Consolidated First Draw PPP IFR, the accordance with program requirements Application Form’’ (SBA Form 2483–
applicant must certify that the applicant and maintain the forms and supporting SD) or lender’s equivalent form.
has not and will not receive another documentation in its files. (iii) A lender may rely on any
Second Draw Paycheck Protection (h) What do lenders need to know and certification or documentation
Program Loan; and do? submitted by an applicant for a PPP
(ii) an authorized representative of the loan or an eligible recipient or eligible
applicant must also certify: (1) A lender approved to make First entity that (A) is submitted pursuant to
(A) The Applicant has realized a Draw PPP Loans may make Second all applicable statutory requirements,
reduction in gross receipts in excess of Draw PPP Loans under the same terms regulations, and guidance related to a
25% relative to the relevant comparison and conditions applicable to First Draw PPP loan, including under sections
time period. For loans greater than PPP Loans, including all requirements 7(a)(36) or (37) of the Small Business
$150,000, Applicant has provided under sections (C) and (D) of the Act (15 U.S.C. 636(a)(36) and (37)); and
documentation to the lender Consolidated First Draw PPP IFR, (B) attests that the applicant, eligible
substantiating the decline in gross except as otherwise provided in this recipient, or eligible entity, as
receipts. For loans of $150,000 or less, section. applicable, has accurately provided the
Applicant will provide documentation (2) What do lenders have to do in certification or documentation to the
substantiating the decline in gross terms of loan underwriting? lender in accordance with the statutory
receipts upon or before seeking loan (i) Each lender shall: requirements, regulations, and guidance
forgiveness for the Second Draw (A) Confirm receipt of borrower
related to PPP loans. With respect to a
Paycheck Protection Program Loan or certifications contained in Paycheck
lender that relies on such a certification
upon SBA request. Protection Program Second Draw
or documentation related to a Second
(B) The Applicant received a First Borrower Application Form (SBA Form
Draw PPP Loan, an enforcement action
Draw Paycheck Protection Program 2483–SD) or lender’s equivalent;
(B) Confirm receipt of information may not be taken against the lender, and
Loan and, before the Second Draw the lender shall not be subject to any
Paycheck Protection Program Loan is demonstrating that a borrower was
either an eligible self-employed penalties relating to loan origination or
disbursed, will have used the full loan forgiveness of the Second Draw PPP
amount (including any increase) of the individual, independent contractor, or
sole proprietorship with no employees Loan, if—(A) the lender acts in good
First Draw Paycheck Protection Program faith relating to loan origination or
Loan only for eligible expenses. or had employees for whom the
borrower paid salaries and payroll taxes forgiveness of the Second Draw PPP
(C) The Applicant is not a business Loan based on that reliance; and (B) all
concern or entity (a) for which an entity on or around February 15, 2020;
(C) Confirm the dollar amount of other relevant Federal, State, local, and
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created in or organized under the laws other statutory and regulatory
of the People’s Republic of China or the average monthly payroll costs for 2019
or 2020 (whichever was used to requirements applicable to the lender
Special Administrative Region of Hong are satisfied with respect to the Second
Kong, or that has significant operations calculate loan amount) by reviewing the
payroll documentation submitted with Draw PPP Loan.
38 A representative of the applicant can certify for the borrower’s application; (3) SBA will pay lenders fees for
the business as a whole if the representative is (D) For a Second Draw PPP Loan processing Second Draw PPP Loans in
legally authorized to do so. greater than $150,000 or a loan of the following amounts:
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3722 Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
(i) for a Second Draw PPP Loan of up found at https://www.sba.gov/tools/ in the public interest to provide a
to (and including) $50,000, in an local-assistance/districtoffices. delayed effective date. An immediate
amount equal to the lesser of: effective date will give small businesses
Compliance With Executive Orders
(A) 50 percent of the balance of the the maximum amount of time to apply
12866, 12988, 13132, 13563, and 13771,
financing outstanding at the time of for loans and lenders the maximum
the Paperwork Reduction Act (44 U.S.C.
disbursement of the loan; or amount of time to process applications
(B) $2,500; and Ch. 35), and the Regulatory Flexibility
before the program ends.
(ii) for a Second Draw PPP Loan of Act (5 U.S.C. 601–612)
more than $50,000, in an amount that is: Executive Order 12988
Executive Orders 12866, 13563, and
(A) 5 percent of the balance of the 13771 SBA has drafted this rule, to the
financing outstanding at the time of extent practicable, in accordance with
disbursement of the loan for a loan up This interim final rule is the standards set forth in section 3(a)
to (and including) $350,000; and economically significant for the and 3(b)(2) of Executive Order 12988, to
(B) 3 percent of the balance of the purposes of Executive Orders 12866 and minimize litigation, eliminate
financing outstanding at the time of 13563, and the Office of Management ambiguity, and reduce burden. The rule
disbursement of the loan for a loan and Budget’s Office of Information and has no preemptive or retroactive effect.
above $350,000. Regulatory Affairs (OIRA) had
determined that this is a major rule Executive Order 13132
(i) Will an applicant’s Second Draw PPP under the Congressional Review Act (5 SBA has determined that this rule
Loan application be affected if there are U.S.C. 804(2)). SBA, however, is will not have substantial direct effects
unresolved issues regarding the proceeding under the emergency on the States, on the relationship
applicant’s First Draw PPP Loan? provision at Executive Order 12866 between the National Government and
(1) If a First Draw PPP Loan is under section 6(a)(3)(D) based on the need to the States, or on the distribution of
review pursuant to PPP rules and/or move expeditiously to mitigate the power and responsibilities among the
information in SBA’s possession current economic conditions arising various layers of government. Therefore,
indicates that the borrower may have from the COVID–19 emergency. This SBA has determined that this rule has
been ineligible for the First Draw PPP rule’s designation under Executive no federalism implications warranting
Loan it received or for the loan amount Order 13771 will be informed by public preparation of a federalism assessment.
received by the borrower, the lender comment.
This rule is necessary to implement Paperwork Reduction Act, 44 U.S.C.
will receive notification from SBA when
the Economic Aid Act in order to Chapter 35
the lender submits an application for
guaranty of a Second Draw PPP Loan provide economic relief to small SBA has determined that this rule
(‘‘unresolved borrower’’). businesses nationwide adversely will impose new recordkeeping or
(2) If the lender receives notification impacted under the COVID–19 reporting requirements under the
that the Applicant for a Second Draw Emergency Declaration. We anticipate Paperwork Reduction Act (‘‘PRA’’). This
PPP Loan is an unresolved borrower, the that this rule will result in substantial information collection (IC) consists of
lender will not receive an SBA loan benefits to small businesses, their SBA Form 2483–SD (Paycheck
number. SBA will resolve the issue employees, and the communities they Protection Program Second Draw
related to the unresolved borrower serve. However, we lack data to estimate Application Form) and SBA Form 2484–
expeditiously and will notify the lender the effects of this rule. SD (Paycheck Protection Program
of the process to obtain an SBA loan The Administrator of OIRA has Lender’s Application—Second Draw
number for the Second Draw PPP Loan, determined that this is a major rule for Loan Guaranty. SBA has requested
if appropriate. purposes of the Congressional Review emergency approval for the IC required
Act (5 U.S.C. 801 et seq.) (CRA). Under to implement the Second Draw PPP
(j) Are Second Draw PPP Loans eligible section 801(3) of the CRA, a major rule Program described above.
for loan forgiveness? takes effect 60 days after the rule is
published in the Federal Register. Regulatory Flexibility Act (RFA)
Second Draw PPP Loans are eligible
for loan forgiveness on the same terms Notwithstanding this requirement, The Regulatory Flexibility Act (RFA)
and conditions as First Draw PPP Loans, section 808(2) of the CRA allows generally requires that when an agency
except that Second Draw PPP Loan agencies to dispense with the issues a proposed rule, or a final rule
borrowers with a principal amount of requirements of section 801 when the pursuant to section 553(b) of the APA or
$150,000 or less are required to provide agency for good cause finds that such another law, the agency must prepare a
documentation of revenue reduction if procedure would be impracticable, regulatory flexibility analysis that meets
such documentation was not provided unnecessary, or contrary to the public the requirements of the RFA and
at the time of the loan application as interest and the rule shall take effect at publish such analysis in the Federal
specified in subsections (g)(2)(iv) and such time as the agency promulgating Register. 5 U.S.C. 603, 604. Specifically,
(v) of this section. the rule determines. Pursuant to section the RFA normally requires agencies to
808(2) of the CRA, SBA finds, for good describe the impact of a rulemaking on
V. Additional Information cause, that a 60-day delay in the small entities by providing a regulatory
SBA may provide further guidance, if effective date is unnecessary and impact analysis. Such analysis must
needed, through SBA notices and a contrary to the public interest. address the consideration of regulatory
program guide which will be posted on As discussed elsewhere in this options that would lessen the economic
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SBA’s website at www.sba.gov. interim final rule, the last day to apply effect of the rule on small entities. The
Questions on the Paycheck Protection for and receive a PPP loan is March 31, RFA defines a ‘‘small entity’’ as (1) a
Program 7(a) Loans (First Draw PPP 2021. Given the short duration of this proprietary firm meeting the size
Loans and Second Draw PPP Loans) program, and the urgent need to issue standards of the Small Business
may be directed to the Lender Relations loans quickly, the Administrator in Administration (SBA); (2) a nonprofit
Specialist in the local SBA Field Office. consultation with the Secretary has organization that is not dominant in its
The local SBA Field Office may be determined that it is impractical and not field; or (3) a small government
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations 3723
jurisdiction with a population of less regulatory flexibility analysis in unnecessary, or contrary to the public
than 50,000. 5 U.S.C. 601(3)–(6). Except accordance with the RFA’s waiver interest. Small Business
for small government jurisdictions with provision, and no other RFA exception Administration’s Office of Advocacy
a population of less than 50,000, neither applies, the agency must prepare the guide: How to Comply with the
State nor local governments are ‘‘small regulatory flexibility analysis and Regulatory Flexibility Ac. Ch.1. p.9.
entities.’’ publish it in the Federal Register at the Since this rule is exempt from notice
The requirement to conduct a time of promulgation or, if the rule is and comment, SBA is not required to
regulatory impact analysis does not promulgated in response to an conduct a regulatory flexibility analysis.
apply if the head of the agency ‘‘certifies emergency that makes timely Authority: 15 U.S.C. 636(a)(36);
that the rule will not, if promulgated, compliance impracticable, within 180 Coronavirus Aid, Relief, and Economic
have a significant economic impact on days of publication of the final rule. 5 Security Act, Pub. L. 116–136, section 1114;
a substantial number of small entities.’’ U.S.C. 604(a), 608(b). and Economic Aid to Hard-Hit Small
5 U.S.C. 605(b). The agency must, Rules that are exempt from notice and Businesses, Nonprofits, and Venues Act, Pub.
however, publish the certification in the comment are also exempt from the RFA L. 116–260, section 303.
Federal Register at the time of requirements, including conducting a
publication of the rule, ‘‘along with a regulatory flexibility analysis, when Jovita Carranza,
statement providing the factual basis for among other things the agency for good Administrator.
such certification.’’ If the agency head cause finds that notice and public [FR Doc. 2021–00452 Filed 1–12–21; 4:15 pm]
has not waived the requirements for a procedure are impracticable, BILLING CODE 8026–03–P
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