Interim Final Rule on Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures Interim Final Rule
Summary
An interim final rule of the Small Business Administration and the Treasury on revisions to the Loan Forgiveness Interim Final Rule and the SBA Loan Review Procedures Interim Final Rule for the Paycheck Protection Program, published in the Federal Register, Vol. 85, No. 124, on Friday, June 26, 2020, under docket number SBA–2020–0038. It revises the earlier rules on loan forgiveness and on SBA loan review procedures and related borrower and lender responsibilities. It states that the rule is effective March 27, 2020, except for the provision on the maturity date of PPP loans, effective June 5, 2020, and that conforming changes will be made to SBA Forms 2483 and 2484.
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38304 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations
the current economic conditions arising Register. 5 U.S.C. 603, 604. Specifically, SMALL BUSINESS ADMINISTRATION
from the COVID–19 emergency. This the RFA normally requires agencies to
rule’s designation under Executive describe the impact of a rulemaking on 13 CFR Part 120
Order 13771 will be informed by public small entities by providing a regulatory
[Docket No. SBA–2020–0038]
comment. impact analysis. Such analysis must
This rule is necessary to implement address the consideration of regulatory RIN 3245–AH52
Sections 1102 and 1106 of the CARES options that would lessen the economic
Act and the Flexibility Act in order to effect of the rule on small entities. The DEPARTMENT OF THE TREASURY
provide economic relief to small RFA defines a ‘‘small entity’’ as (1) a
RIN 1505–AC70
businesses nationwide adversely proprietary firm meeting the size
impacted under the COVID–19 standards of the Small Business Business Loan Program Temporary
Emergency Declaration. We anticipate Administration (SBA); (2) a nonprofit Changes; Paycheck Protection
that this rule will result in substantial organization that is not dominant in its Program—Revisions to Loan
benefits to small businesses, their field; or (3) a small government Forgiveness and Loan Review
employees, and the communities they jurisdiction with a population of less Procedures Interim Final Rules
serve. However, we lack data to estimate than 50,000. 5 U.S.C. 601(3)–(6). Except
the effects of this rule. for such small government jurisdictions, AGENCY: U.S. Small Business
neither State nor local governments are Administration; Department of the
Executive Order 12988
‘‘small entities.’’ Similarly, for purposes Treasury.
SBA has drafted this rule, to the of the RFA, individual persons are not ACTION: Interim final rule.
extent practicable, in accordance with small entities.
the standards set forth in section 3(a) The requirement to conduct a SUMMARY: On April 2, 2020, the U.S.
and 3(b)(2) of Executive Order 12988, to regulatory impact analysis does not Small Business Administration (SBA)
minimize litigation, eliminate apply if the head of the agency ‘‘certifies posted on its website an interim final
ambiguity, and reduce burden. The rule that the rule will not, if promulgated, rule relating to the implementation of
has no preemptive effect but does have have a significant economic impact on sections 1102 and 1106 of the
a limited retroactive effect consistent a substantial number of small entities.’’ Coronavirus Aid, Relief, and Economic
with section 3(d) of the Flexibility Act. 5 U.S.C. 605(b). The agency must, Security Act (CARES Act or the Act)
Executive Order 13132 however, publish the certification in the (published in the Federal Register on
Federal Register at the time of April 15, 2020). Section 1102 of the Act
SBA has determined that this rule temporarily adds a new product, titled
will not have substantial direct effects publication of the rule, ‘‘along with a
statement providing the factual basis for the ‘‘Paycheck Protection Program,’’ to
on the States, on the relationship the SBA’s 7(a) Loan Program.
between the National Government and such certification.’’ If the agency head
has not waived the requirements for a Subsequently, SBA and Treasury issued
the States, or on the distribution of additional interim final rules
power and responsibilities among the regulatory flexibility analysis in
accordance with the RFA’s waiver implementing the Paycheck Protection
various layers of government. Therefore, Program. On June 5, 2020, the Paycheck
SBA has determined that this rule has provision, and no other RFA exception
applies, the agency must prepare the Protection Program Flexibility Act of
no federalism implications warranting 2020 (Flexibility Act) was signed into
preparation of a federalism assessment. regulatory flexibility analysis and
publish it in the Federal Register at the law, amending the CARES Act. This
Paperwork Reduction Act, 44 U.S.C. time of promulgation or, if the rule is interim final rule revises interim final
Chapter 35 promulgated in response to an rules posted on SBA’s and the
emergency that makes timely Department of the Treasury’s websites
SBA has determined that this rule on May 22, 2020 (published on June 1,
will require modification to the existing compliance impracticable, within 180
days of publication of the final rule. 5 2020, in the Federal Register), by
PPP information collection that is changing key provisions to conform to
approved under OMB Control Number U.S.C. 604(a), 608(b).
the Flexibility Act. Several of these
3245–0407 as an emergency request Rules that are exempt from notice and
amendments are retroactive to the date
until October 31, 2020. As discussed comment are also exempt from the RFA
of enactment of the CARES Act, as
above, this rule amends the PPP requirements, including conducting a
required by section 3(d) of the
eligibility requirements regarding regulatory flexibility analysis, when
Flexibility Act.
certain criminal activity. As a result of among other things the agency for good
cause finds that notice and public DATES:
these amendments, conforming changes
will be made to Questions 5 and 6 of procedure are impracticable, Effective Date: This interim final rule
Form 2483, Borrower Application Form, unnecessary, or contrary to the public is effective March 27, 2020, except for
and Section H of Form 2484, Lender interest. Small Business the provision relating to the maturity
Application Form. SBA will submit the Administration’s Office of Advocacy date of PPP loans, which is effective
revisions to these forms to the Office of guide: How to Comply with the June 5, 2020, and the provision relating
Management and Budget for approval. Regulatory Flexibility Act, Ch.1. p.9. to the cap on the amount of loan
Accordingly, SBA is not required to forgiveness for owner-employees and
Regulatory Flexibility Act (RFA) conduct a regulatory flexibility analysis. self-employed individuals, which is
The Regulatory Flexibility Act (RFA) effective on June 24, 2020.
Authority: 15 U.S.C. 636(a)(36); Comment Date: Comments must be
generally requires that when an agency Coronavirus Aid, Relief, and Economic
received on or before July 27, 2020.
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issues a proposed rule, or a final rule Security Act, Pub. L. 116–136, Section 1114.
pursuant to section 553(b) of the APA or ADDRESSES: You may submit comments,
another law, the agency must prepare a Jovita Carranza, identified by number SBA–2020–0038,
regulatory flexibility analysis that meets Administrator. through the Federal eRulemaking Portal:
the requirements of the RFA and [FR Doc. 2020–13942 Filed 6–24–20; 4:15 pm] http://www.regulations.gov. Follow the
publish such analysis in the Federal BILLING CODE 8026–03–P instructions for submitting comments.
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Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38305
SBA and Treasury will post all forgiveness of up to the full principal of PPP loans as soon as possible,
comments on www.regulations.gov. If amount of qualifying loans guaranteed because the last day on which a lender
you wish to submit confidential under the Paycheck Protection Program. can obtain an SBA loan number for a
business information (CBI) as defined in On April 24, 2020, the President PPP loan is June 30, 2020. Borrowers
the User Notice at www.regulations.gov, signed the Paycheck Protection Program that have already applied for and
please send an email to ppp-ifr@sba.gov. and Health Care Enhancement Act (Pub. received a PPP loan need certainty
Highlight the information that you L. 116–139), which provided additional regarding how loan proceeds must be
consider to be CBI and explain why you funding and authority for the PPP. On used during the covered period, as
believe SBA and Treasury should hold June 5, 2020, the President signed the amended by the Flexibility Act, so that
this information as confidential. SBA Paycheck Protection Program Flexibility they can maximize the amount of loan
and Treasury will review the Act of 2020 (Flexibility Act) (Pub. L. forgiveness. Additionally, because some
information and make the final 116–142), which changes key provisions borrowers can apply for loan forgiveness
determination whether it will publish of the Paycheck Protection Program, now, those borrowers need updated
the information. including provisions relating to the direction on how to do so. These same
FOR FURTHER INFORMATION CONTACT: A maturity of PPP loans, the deferral of reasons provide good cause for SBA to
Call Center Representative at 833–572– PPP loan payments, and the forgiveness dispense with the 30-day delayed
0502, or the local SBA Field Office; the of PPP loans. Section 3(d) of the effective date provided in the
list of offices can be found at https:// Flexibility Act provides that the Administrative Procedure Act. Although
www.sba.gov/tools/local-assistance/ amendments relating to PPP loan this interim final rule is effective on or
districtoffices. forgiveness and extension of the deferral before date of filing, comments are
period for PPP loans shall be effective solicited from interested members of the
SUPPLEMENTARY INFORMATION: as if included in the CARES Act, which public on all aspects of the interim final
I. Background Information means that they are retroactive to March rule, including section III below. These
27, 2020. Section 2 of the Flexibility Act comments must be submitted on or
On March 13, 2020, President Trump provides that the amendment relating to
declared the ongoing Coronavirus before July 27, 2020. The SBA and
the extension of the maturity date for Treasury will consider these comments,
Disease 2019 (COVID–19) pandemic of PPP loans shall take effect on the date
sufficient severity and magnitude to comments received on the two interim
of enactment (June 5, 2020). Under the final rules amended by this interim final
warrant an emergency declaration for all Flexibility Act, the extension of the
states, territories, and the District of rule, which were posted on SBA’s
maturity date for PPP loans is applicable website May 22, 2020 and published on
Columbia. With the COVID–19 to PPP loans made on or after that date,
emergency, many small businesses June 1, 2020, in the Federal Register,
and lenders and borrowers may and the need for making any revisions
nationwide are experiencing economic mutually agree to modify PPP loans
hardship as a direct result of the as a result of these comments.
made before such date to reflect the
Federal, State, and local public health longer maturity. III. Paycheck Protection Program—
measures that are being taken to Revisions to Loan Forgiveness Interim
minimize the public’s exposure to the II. Comments and Retroactive/ Final Rule and SBA Loan Review
virus. These measures, some of which Immediate Effective Date Procedures and Related Borrower and
are government-mandated, have been This interim final rule is effective Lender Responsibilities Interim Final
implemented nationwide and include without advance notice and public Rule
the closures of restaurants, bars, and comment because section 1114 of the
gyms. In addition, based on the advice CARES Act authorizes SBA to issue Overview
of public health officials, other regulations to implement Title I of the The CARES Act was enacted to
measures, such as keeping a safe Act without regard to notice provide immediate assistance to
distance from others or even stay-at- requirements. In addition, SBA has individuals, families, and businesses
home orders, have been implemented, determined that there is good cause for affected by the COVID–19 emergency.
resulting in a dramatic decrease in dispensing with advance public notice Among the provisions contained in the
economic activity as the public avoids and comment on the grounds that it CARES Act are provisions authorizing
malls, retail stores, and other would be contrary to the public interest. SBA to temporarily guarantee loans
businesses. Specifically, advance public notice and under a new 7(a) loan program titled the
On March 27, 2020, the President comment would defeat the purpose of ‘‘Paycheck Protection Program.’’ Loans
signed the Coronavirus Aid, Relief, and this interim final rule given that SBA’s guaranteed under the Paycheck
Economic Security Act (the CARES Act authority to guarantee PPP loans expires Protection Program (PPP) will be 100
or the Act) (Pub. L. 116–136) to provide on June 30, 2020, and that many PPP percent guaranteed by SBA, and the full
emergency assistance and health care borrowers can now apply for loan principal amount of the loans may
response for individuals, families, and forgiveness following the end of their qualify for loan forgiveness.
businesses affected by the coronavirus eight-week covered period. Providing SBA and Treasury have posted several
pandemic. The Small Business borrowers and lenders with certainty on documents on the loan forgiveness
Administration (SBA) received funding both loan requirements and loan provisions in the CARES Act on their
and authority through the Act to modify forgiveness requirements following the websites. On April 2, 2020, SBA posted
existing loan programs and establish a enactment of the Flexibility Act will its first PPP interim final rule (85 FR
new loan program to assist small enhance the ability of lenders to make 20811) covering in part loan forgiveness.
businesses nationwide adversely loans and process loan forgiveness On April 8, 2020 and April 26, 2020,
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impacted by the COVID–19 emergency. applications, particularly in light of the SBA also posted Frequently Asked
Section 1102 of the Act temporarily fact that most of the Flexibility Act’s Questions relating to loan forgiveness.
permits SBA to guarantee 100 percent of provisions are retroactive to March 27, On April 14, 2020, SBA posted an
7(a) loans under a new program titled 2020. Specifically, small businesses that interim final rule covering in part loan
the ‘‘Paycheck Protection Program.’’ have yet to apply for and receive a PPP forgiveness for individuals with self-
Section 1106 of the Act provides for loan need to be informed of the terms employment income. On May 22, 2020,
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38306 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations
SBA and Treasury jointly posted an loans to the date that SBA remits the applications and loan forgiveness
additional interim final rule on loan forgiveness amount to the lender. applications.
forgiveness (85 FR 33004) (First Loan Further, SBA has issued an alternative c. Deferral Period and Forgiveness
Forgiveness Rule). The SBA also posted Loan Forgiveness Application Form,
an interim final rule on May 22, 2020 SBA Form 3508EZ. Therefore, in Part Section 3(c) of the Flexibility Act
on SBA loan review procedures and III.2 of the First Loan Forgiveness Rule provides that if the borrower does not
related borrower and lender (85 FR 33004, 33005), the introductory apply for forgiveness of a loan within 10
responsibilities (85 FR 33010) (First question is redesignated as paragraph a. months after the last day of the covered
Loan Review Rule). On June 11, 2020, period, the PPP loan is no longer
and revised to read as follows:
SBA posted an interim final rule deferred and the borrower must begin
2. Loan Forgiveness Process paying principal and interest. Therefore,
revising the first PPP interim final rule a. What is the general process to obtain
to incorporate Flexibility Act the following text is added as a new
loan forgiveness?
amendments, including those relating to To receive loan forgiveness, a borrower
paragraph b. at the end of Part III.2:
loan forgiveness. On June 17, 2020, SBA must complete and submit the Loan b. When must a borrower apply for loan
posted an interim final rule revising the Forgiveness Application (SBA Form 3508, forgiveness or start making payments on a
interim final rule covering individuals 3508EZ, or lender equivalent) to its lender (or loan?
the lender servicing its loan). As a general A borrower may submit a loan forgiveness
with self-employment income to application any time on or before the
matter, the lender will review the application
incorporate Flexibility Act amendments, and make a decision regarding loan maturity date of the loan—including before
including those relating to loan forgiveness. The lender has 60 days from the end of the covered period—if the
forgiveness. receipt of a complete application to issue a borrower has used all of the loan proceeds for
The Flexibility Act amends the decision to SBA. If the lender determines that which the borrower is requesting forgiveness.
CARES Act, including its provisions the borrower is entitled to forgiveness of If the borrower applies for forgiveness before
relating to loan terms and loan some or all of the amount applied for under the end of the covered period and has
forgiveness. The purpose of this interim the statute and applicable regulations, the reduced any employee’s salaries or wages in
lender must request payment from SBA at the excess of 25 percent, the borrower must
final rule is to update the First Loan account for the excess salary reduction for
time the lender issues its decision to SBA.
Forgiveness Rule and the First Loan SBA will, subject to any SBA review of the the full 8-week or 24-week covered period, as
Review Rule in light of the amendments loan or loan application, remit the described in Part III.5. If the borrower does
under the Flexibility Act. The First Loan appropriate forgiveness amount to the lender, not apply for loan forgiveness within 10
Forgiveness Rule and First Loan Review plus any interest accrued through the date of months after the last day of the covered
Rule, as amended by this interim final payment, not later than 90 days after the period, or if SBA determines that the loan is
rule, should be interpreted consistent lender issues its decision to SBA. If not eligible for forgiveness (in whole or in
applicable, SBA will deduct EIDL Advance part), the PPP loan is no longer deferred and
with the frequently asked questions the borrower must begin paying principal
(FAQs) regarding the PPP that are Amounts from the forgiveness amount
remitted to the Lender as required by section and interest. If this occurs, the lender must
posted on SBA’s website 1 and the other 1110(e)(6) of the CARES Act. If SBA notify the borrower of the date the first
interim final rules issued regarding the determines in the course of its review that payment is due. The lender must report that
PPP.2 the borrower was ineligible for the PPP loan the loan is no longer deferred to SBA on the
based on the provisions of the CARES Act, next monthly SBA Form 1502 report filed by
1. Changes to the First Loan Forgiveness the lender.
SBA rules or guidance available at the time
Rule of the borrower’s loan application, or the d. Payroll Costs Eligible for Loan
a. General terms of the borrower’s PPP loan application Forgiveness
(for example, because the borrower lacked an
Section 3(b) of the Flexibility Act adequate basis for the certifications that it Under section 1106 of the CARES Act,
amended the requirements regarding made in its PPP loan application), the loan certain provisions regarding the
forgiveness of PPP loans to reduce, from will not be eligible for loan forgiveness. The forgiveness of PPP loans are limited to
75 percent to 60 percent, the portion of lender is responsible for notifying the the ‘‘covered period.’’ ‘‘Covered
PPP loan proceeds that must be used for borrower of the forgiveness amount. If only period,’’ as that term is used in section
payroll costs for the full amount of the a portion of the loan is forgiven, or if the
forgiveness request is denied, any remaining
1106 of the CARES Act, was originally
PPP loan to be eligible for forgiveness. defined as the eight-week period
balance due on the loan must be repaid by
Therefore, Part III.1 of the First Loan the borrower on or before the maturity date beginning on the date of the origination
Forgiveness Rule (85 FR 33004, 33005) of the loan. The lender is responsible for of a covered loan. However, section 3(b)
is revised by striking ‘‘25 percent’’ in notifying the borrower of remittance by SBA of the Flexibility Act extended the
the last sentence and replacing it with of the loan forgiveness amount (or that SBA length of the covered period as defined
‘‘40 percent’’. determined that no amount of the loan is in section 1106 of the CARES Act from
eligible for forgiveness) and the date on eight to 24 weeks, while allowing
b. Maturity which the borrower’s first payment is due, if
applicable. If SBA determines that the full
borrowers that received PPP loans
Section 2(a) of the Flexibility Act before June 5, 2020 to elect to use the
provides a minimum maturity of five amount of the loan is eligible for forgiveness
and remits the full amount of the loan to the original eight-week covered period. As
years for all PPP loans made on or after set forth below, several provisions in
lender, the lender must mark the PPP loan
the date of enactment of the Flexibility note as ‘‘paid in full’’ and report the status Part III.3 of the First Loan Forgiveness
Act (June 5, 2020), and permits lenders of the loan as ‘‘paid in full’’ on the next Rule require revisions to conform to
and borrowers to extend the maturity monthly 1502 report filed by the lender. these amendments under Flexibility
date of earlier PPP loans by mutual The general loan forgiveness process Act.
agreement. Section 3(c) of the Flexibility described above applies only to loan Part III.3.a of the First Loan
Act extended the deferral period for PPP forgiveness applications that are not
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reviewed by SBA prior to the lender’s Forgiveness Rule (85 FR 33004, 33006)
1 See https://www.sba.gov/document/support-- decision on the forgiveness application. A is revised to read as follows:
faq-lenders-borrowers. separate interim final rule on SBA Loan a. When must payroll costs be incurred
2 See https://www.sba.gov/funding-programs/ Review Procedures and Related Borrower and/or paid to be eligible for forgiveness?
loans/coronavirus-relief-options/paycheck- and Lender Responsibilities describes SBA’s In general, payroll costs paid or incurred
protection-program. procedures for reviewing PPP loan during the covered period are eligible for
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Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38307
forgiveness. For purposes of loan forgiveness, Administrator does not expect to materially unreimbursed partnership expenses, and
the covered period is the 24-week period differ from the actual covered period, while depletion from oil and gas properties)
beginning on the date the lender disburses avoiding unnecessary administrative burdens multiplied by 0.9235. For self-employed
the PPP loan.3 Alternatively, a borrower that and enhancing auditability. individuals, including Schedule C or F filers
received a PPP loan before June 5, 2020 may Example: A borrower that received a PPP and general partners, retirement and health
elect for the covered period to end eight loan before June 5, 2020 and elects to use an insurance contributions are included in their
weeks after the date of disbursement of the eight-week covered period has a bi-weekly net self-employment income and therefore
PPP loan. Borrowers may seek forgiveness for payroll schedule (with payments made every cannot be separately added to their payroll
payroll costs for the applicable covered other week). The borrower’s eight-week calculation.
period beginning on either: covered period begins on June 1 and ends on The Administrator, in consultation with
i. the date of disbursement of the July 26. The first day of the borrower’s first the Secretary, determined that it is
borrower’s PPP loan proceeds from the payroll cycle that starts in the covered period appropriate to limit the forgiveness of owner
Lender (i.e., the start of the covered period); is June 7. The borrower may elect an compensation to either eight weeks’ worth
or alternative payroll covered period for payroll (8/52) of their 2019 compensation (up to
ii. the first day of the first payroll cycle in cost purposes that starts on June 7 and ends $15,385) for an eight-week covered period or
the covered period (the ‘‘alternative payroll 55 days later (for a total of 56 days), on 2.5 months’ worth (2.5/12) of their 2019
covered period’’). August 1. Payroll costs paid during this compensation (up to $20,833) for a 24-week
Payroll costs are considered paid on the alternative payroll covered period are eligible covered period per owner in total across all
day that paychecks are distributed or the for forgiveness. In addition, payroll costs businesses. This approach is consistent with
borrower originates an ACH credit incurred during this alternative payroll the structure of the CARES Act and its
transaction. Payroll costs incurred during the covered period are eligible for forgiveness if overarching focus on keeping workers paid,
borrower’s last pay period of the covered they are paid on or before the first regular and will prevent windfalls that Congress did
period or the alternative payroll covered payroll date occurring after August 1. Payroll not intend. Specifically, Congress determined
period are eligible for forgiveness if paid on costs that were both paid and incurred that the maximum loan amount is generally
or before the next regular payroll date; during the covered period (or alternative based on 2.5 months of a borrower’s average
otherwise, payroll costs must be paid during payroll covered period) may only be counted monthly payroll costs during the one-year
the covered period (or alternative payroll once. period preceding the loan. 15 U.S.C.
covered period) to be eligible for forgiveness. Part III.3.c of the First Loan 636(a)(36)(E). For example, a borrower with
Payroll costs are generally incurred on the Forgiveness Rule (85 FR 33004, 33006) one other employee would receive a
day the employee’s pay is earned (i.e., on the maximum loan amount equal to 5 months of
is revised to read as follows: payroll (2.5 months of payroll for the owner
day the employee worked). For employees
who are not performing work but are still on c. Are there caps on the amount of loan plus 2.5 months of payroll for the employee).
the borrower’s payroll, payroll costs are forgiveness available for owner-employees If the owner laid off the employee and
incurred based on the schedule established and self-employed individuals’ own payroll availed itself of the exemption in the
by the borrower (typically, each day that the compensation? Paycheck Protection Program Flexibility Act
employee would have performed work). Yes. For borrowers that received a PPP of 2020 (Flexibility Act) related to reductions
The Administrator of the Small Business loan before June 5, 2020 and elect to use an in business activity described in e. below, the
Administration (Administrator), in eight-week covered period, the amount of owner could treat the entire amount of the
consultation with the Secretary of the loan forgiveness requested for owner- PPP loan as payroll, with the entire loan
Treasury (Secretary), recognizes that the employees and self-employed individuals’ being forgiven. This would not only result in
covered period will not always align with a payroll compensation is capped at eight a windfall for the owner, by providing the
borrower’s payroll cycle. For administrative weeks’ worth (8/52) of 2019 compensation owner with five months of payroll instead of
convenience of the borrower, a borrower with (i.e., approximately 15.38 percent of 2019 2.5 months, but also defeat the purpose of the
a bi-weekly (or more frequent) payroll cycle compensation) or $15,385 per individual, CARES Act of protecting the paycheck of the
may elect to use an alternative payroll whichever is less, in total across all employee. For owners with no employees,
covered period that begins on the first day of businesses. For all other borrowers, the this limitation will have no effect, because
the first payroll cycle in the covered period amount of loan forgiveness requested for the maximum loan amount for such
and continues for either (a) eight weeks, in owner-employees and self-employed borrowers already includes only 2.5 months
the case of a borrower that received its PPP individuals’ payroll compensation is capped of their payroll.
loan before June 5, 2020 and elects to use an at 2.5 months’ worth (2.5/12) of 2019
eight-week covered period, or (b) 24 weeks, compensation (i.e., approximately 20.83 e. Nonpayroll Costs Eligible for Loan
in the case of all other borrowers. If payroll percent of 2019 compensation) or $20,833 Forgiveness
costs are incurred during this alternative per individual, whichever is less, in total
across all businesses.
Part III.4.a of the First Loan
payroll covered period, but paid after the end Forgiveness Rule (85 FR 33004, 33007)
of the alternative payroll covered period, In particular, C-corporation owner-
employees are capped by the amount of their is revised to read as follows:
such payroll costs will be eligible for
forgiveness if they are paid no later than the 2019 employee cash compensation and a. When must nonpayroll costs be incurred
first regular payroll date thereafter. employer retirement and health insurance and/or paid to be eligible for forgiveness?
The Administrator, in consultation with contributions made on their behalf. S- A nonpayroll cost is eligible for forgiveness
the Secretary, determined that this corporation owner-employees are capped by if it was:
alternative computational method for payroll the amount of their 2019 employee cash i. Paid during the covered period; or
costs is justified by considerations of compensation and employer retirement ii. incurred during the covered period and
administrative feasibility for borrowers, as it contributions made on their behalf, but paid on or before the next regular billing
will reduce burdens on borrowers and their employer health insurance contributions date, even if the billing date is after the
payroll agents while achieving the paycheck made on their behalf cannot be separately covered period.
protection purposes manifest throughout the added because those payments are already Example: A borrower that received a loan
CARES Act, including section 1102. Because included in their employee cash before June 5, 2020 uses a 24-week covered
this alternative computational method is compensation. Schedule C or F filers are period that begins on June 1 and ends on
limited to payroll cycles that are bi-weekly or capped by the amount of their owner November 15. The borrower pays its
more frequent, this computational method compensation replacement, calculated based electricity bills for June through October
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will yield a calculation that the on 2019 net profit.4 General partners are during the covered period and pays its
capped by the amount of their 2019 net November electricity bill on December 10,
3 Under section 3(b)(1) of the Paycheck Protection
earnings from self-employment (reduced by which is the next regular billing date. The
Program Flexibility Act of 2020, the loan claimed section 179 expense deduction, borrower may seek loan forgiveness for its
forgiveness covered period of any borrower will end June through October electricity bills,
no later than December 31, 2020. 4 See 85 FR 21747, 21749 (April 20, 2020). because they were paid during the covered
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38308 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations
period. In addition, the borrower may seek Section 1106(d)(5) of the CARES Act it appears and replacing it with
loan forgiveness for the portion of its originally waived this reduction in the ‘‘December 31, 2020,’’ and by striking
November electricity bill through November forgiveness amount if the borrower ‘‘75 percent’’ and replacing it with ‘‘60
15 (the end of the covered period), because
eliminates the reduction in full-time percent.’’ Section 3(d) of the Flexibility
it was incurred during the covered period
and paid on the next regular billing date. The equivalent employees occurring during Act provides that these amendments
Administrator, in consultation with the a different statutory reference period by shall be effective as if included in the
Secretary, has determined that this not later than June 30, 2020. Section CARES Act, which was enacted on
interpretation provides an appropriate degree 3(b)(2) of the Flexibility Act amended March 27, 2020.
of borrower flexibility while remaining this provision to replace ‘‘June 30’’ with Lastly, section 3(b)(2)(B) of the
consistent with the text of section 1106(b). ‘‘December 31.’’ To conform the First Flexibility Act established two new
The Administrator believes that this exemptions based on employee
Loan Forgiveness Rule to this
simplified approach to calculation of availability and business activity,
forgivable nonpayroll costs is also supported amendment under the Flexibility Act,
by considerations of administrative Part III.5.a of the First Loan Forgiveness respectively, that would eliminate a
convenience for borrowers, and the Rule (85 FR 33004, 33007) is revised by reduction in the loan forgiveness
Administrator notes that the 40 percent cap striking ‘‘June 30, 2020’’ and replacing amount that would otherwise be
on nonpayroll costs as a portion of the total it with ‘‘December 31, 2020.’’ Section required due to a reduction in full-time
loan forgiveness amount will avoid excessive 3(d) of the Flexibility Act provides that equivalent (FTE) employees.
inclusion of nonpayroll costs. this amendment shall be effective as if Specifically, that section of the
f. Reductions to Loan Forgiveness included in the CARES Act, which was Flexibility Act states that the amount of
Amount enacted on March 27, 2020. loan forgiveness ‘‘shall be determined
As described above, section 3(b) of the without regard to a proportional
As described above, section 3(b) of the Flexibility Act extended the length of reduction in the number of full-time
Flexibility Act amended provisions of the covered period as defined in section equivalent employees’’ if an eligible
the CARES Act regarding the covered 1106 of the CARES Act from eight to 24 recipient, in good faith, (A) is able to
period and the portion of PPP loan weeks, while allowing borrowers that document (i) an inability to rehire
proceeds that must be used for payroll received PPP loans before June 5, 2020 individuals who were employees of the
costs for the full amount of the PPP loan to elect to use the original eight-week eligible recipient on February 15, 2020;
to be eligible for forgiveness. As set covered period. For consistency with and (ii) an inability to hire similarly
forth below, these amendments this amendment, the paragraph qualified employees for unfilled
necessitate several revisions to Part III.5 consisting of the example in Part III.5.e positions on or before December 31,
of the First Loan Forgiveness Rule. First, of the First Loan Forgiveness Rule (85 2020; or (B) is able to document an
the introductory paragraph in Part III.5 FR 33004, 33008) is revised to provide inability to return to the same level of
of the First Loan Forgiveness Rule (85 two examples that read as follows: business activity as such business was
FR 33004, 33007) is revised to read as operating at before February 15, 2020,
follows: Example: A borrower is using a 24-week due to compliance with requirements
covered period. This borrower reduced a full-
5. Reductions to Loan Forgiveness time employee’s weekly salary from $1,000
established or guidance issued by the
Amount per week during the reference period to $700 Secretary of Health and Human
per week during the covered period. The Services, the Director of the Centers for
Section 1106 of the CARES Act, as employee continued to work on a full-time Disease Control and Prevention, or the
amended by Section 3(b)(2) of the basis during the covered period, with an FTE Occupational Safety and Health
Flexibility Act, specifically requires of 1.0. In this case, the first $250 (25 percent Administration during the period
certain reductions in a borrower’s loan of $1,000) is exempted from the loan beginning on March 1, 2020, and ending
forgiveness amount based on reductions forgiveness reduction. The borrower seeking December 31, 2020, related to the
in full-time equivalent employees or in forgiveness would list $1,200 as the salary/ maintenance of standards for sanitation,
employee salary and wages, subject to hourly wage reduction for that employee (the
extra $50 weekly reduction multiplied by 24 social distancing, or any other worker or
an important statutory exemption for customer safety requirement related to
weeks). If the borrower applies for
borrowers that have eliminated the forgiveness before the end of the covered COVID–19. The new exemption
reduction on or before December 31, period, it must account for the salary pertaining to individuals who refuse an
2020. Section 3(b)(2) of the Flexibility reduction for the full 24-week covered period offer to be rehired is very similar, but
Act also adds exemptions from (totaling $1,200). not identical, to a de minimis exemption
reductions in loan forgiveness amounts Example: A borrower that received a PPP that was provided in the First Loan
based on employee availability and loan before June 5, 2020 has elected to use Forgiveness Rule; therefore, the
business activity. In addition, SBA and an eight-week covered period. This borrower Administrator and the Secretary have
Treasury have adopted a regulatory reduced a full-time employee’s weekly salary
determined that this new statutory
from $1,000 per week during the reference
exemption to the reduction rules for exemption should supersede the
period to $700 per week during the covered
borrowers that have offered to restore period. The employee continued to work on previous de minimis exemption relating
employee hours at the same salary or a full-time basis during the covered period, to reductions in FTE employees.
wages, even if the employees have not with an FTE of 1.0. In this case, the first $250 However, a related de minimis
accepted. The instructions to the loan (25 percent of $1,000) is exempted from the exemption in the First Loan Forgiveness
forgiveness applications and the loan forgiveness reduction. The borrower Rule for borrowers that have reduced
guidance below explains how the seeking forgiveness would list $400 as the the hours of an employee and offered to
statutory forgiveness reduction formulas salary/hourly wage reduction for that restore the reduction in hours, but the
work. employee (the extra $50 weekly reduction employee declined the offer, is not
multiplied by eight weeks).
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Section 1106(d)(2) of the CARES Act addressed in the Flexibility Act and is
reduces the amount of the PPP loan that In light of the amendments under the therefore being retained.
may be forgiven if the borrower reduces Flexibility Act described above, Part In order to implement these
full-time equivalent employees during III.5.g of the First Loan Forgiveness Rule exemptions, Part III.5.a of the First Loan
the covered period as compared to a (85 FR 33004, 33009) is revised by Forgiveness Rule (85 FR 33004, 33007)
base period selected by the borrower. striking ‘‘June 30, 2020’’ each place that is revised to read:
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Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38309
a. Will a borrower’s loan forgiveness able to document in good faith the following: activity before February 15, 2020 due to
amount be reduced if the borrower reduced (1) An inability to rehire individuals who compliance with COVID Requirements or
the hours of an employee, then offered to were employees of the borrower on February Guidance, the borrower satisfies the
restore the reduction in hours, but the 15, 2020; and (2) an inability to hire similarly Flexibility Act’s exemption and will not have
employee declined the offer? qualified individuals for unfilled positions its forgiveness amount reduced because of a
No. In calculating the loan forgiveness on or before December 31, 2020. Borrowers reduction in FTEs during the covered period,
amount, a borrower may exclude any are required to inform the applicable state if the borrower in good faith maintains
reduction in full-time equivalent employee unemployment insurance office of any records regarding the reduction in business
headcount that is attributable to an employee’s rejected rehire offer within 30 activity and the local government’s shutdown
individual employee if: days of the employee’s rejection of the offer.7 orders that reference a COVID Requirement
i. The borrower made a good faith, written The documents that borrowers should or Guidance as described above.
offer to restore the reduced hours of such maintain to show compliance with this
employee; exemption include, but are not limited to, the g. Documentation Requirements
ii. the offer was for the same salary or written offer to rehire an individual, a Because SBA has issued an alternative
wages and same number of hours as earned written record of the offer’s rejection, and a
by such employee in the last pay period prior loan forgiveness application, SBA Form
written record of efforts to hire a similarly 3508EZ, the parenthetical in the first
to the reduction in hours; qualified individual.
iii. the offer was rejected by such sentence of Part III.6 of the First Loan
Borrowers are also exempted from the loan
employee; and forgiveness reduction arising from a Forgiveness Rule (85 FR 33004, 33009)
iv. the borrower has maintained records reduction in the number of FTE employees is revised to read as follows: ‘‘(SBA
documenting the offer and its rejection. during the covered period if the borrower is Form 3508 or SBA Form 3508EZ, as
The Administrator and the Secretary able to document in good faith an inability applicable, or lender equivalent)’’.
determined that this exemption is an to return to the same level of business
appropriate exercise of their joint rulemaking activity as the borrower was operating at 2. Changes to the First Loan Review
authority to grant a de minimis exemption Rule
before February 15, 2020, due to compliance
under section 1106(d)(6).5 Section 1106(d)(2)
with requirements established or guidance a. Alternative Loan Forgiveness
of the CARES Act reduces the amount of the
issued between March 1, 2020 and December
PPP loan that may be forgiven if the borrower Application
31, 2020 by the Secretary of Health and
reduces full-time equivalent employees
Human Services, the Director of the Centers The First Loan Review Rule informs
during the covered period as compared to a
base period selected by the borrower. Section
for Disease Control and Prevention (CDC), or borrowers and lenders of SBA’s process
the Occupational Safety and Health for reviewing PPP loan applications and
1106(d)(5) of the CARES Act waives this
Administration related to the maintenance of loan forgiveness applications. Because
reduction in the forgiveness amount if the
standards for sanitation, social distancing, or SBA has issued an alternative Loan
borrower eliminates the reduction in full-
any other worker or customer safety
time equivalent employees occurring during
requirement related to COVID–19 (COVID
Forgiveness Application, SBA Form
a different statutory reference period 6 by not 3508EZ, the following changes are
later than December 31, 2020. The Requirements or Guidance). Specifically,
borrowers that can certify that they have necessary.
Administrator and the Secretary believe that Parts III.1.b and III.1.e are revised by
the additional exemption set forth above is documented in good faith that their
reduction in business activity during the striking each reference in those sections
consistent with the purposes of the CARES
Act and provides borrowers appropriate covered period stems directly or indirectly to ‘‘SBA Form 3508 or lender’s
flexibility in the current economic climate. from compliance with such COVID equivalent form’’ and replacing it with
The Administrator, in consultation with the Requirements or Guidance are exempt from ‘‘SBA Form 3508, 3508EZ, or lender’s
Secretary, has determined that the exemption any reduction in their forgiveness amount equivalent form’’.
is de minimis for two reasons. First, it is stemming from a reduction in FTE employees
reasonable to anticipate that most employees during the covered period. Such b. The Loan Forgiveness Process for
will accept the offer of restored hours in light documentation must include copies of Lenders
of current labor market conditions. Second, applicable COVID Requirements or Guidance
for each business location and relevant As noted above, SBA has issued an
to the extent this exemption allows alternative Loan Forgiveness
employers to cure FTE reductions borrower financial records.
attributable to reductions in hours that The Administrator, in consultation with Application Form, SBA Form 3508EZ.
occurred before February 15, 2020 (the start the Secretary, is interpreting the above Further, Section 3(b)(2) of the Flexibility
of the statutory FTE reduction safe harbor statutory exemption to include both direct Act reduced, from 75 percent to 60
period), it is reasonable to anticipate those and indirect compliance with COVID percent, the portion of PPP loan
reductions will represent a relatively small Requirements or Guidance, because a proceeds that must be used for payroll
portion of aggregate employees given the significant amount of the reduction in costs for the full amount of the PPP loan
historically strong labor market conditions business activity stemming from COVID
to be eligible for forgiveness. As set
before the COVID–19 emergency. Requirements or Guidance is the result of
state and local government shutdown orders forth below, these developments
In addition, Part III.5.b of the First that are based in part on guidance from the necessitate several revisions to Part III.2
Loan Forgiveness Rule (85 FR 33004, three federal agencies. of the First Loan Review Rule.
33007–08) is revised by adding the Example: A PPP borrower is in the Part III.2.a. is revised to read as
following at the end thereof: business of selling beauty products both follows:
Borrowers are exempted from the loan online and at its physical store. During the
covered period, the local government where a. What should a lender review?
forgiveness reduction arising from a
proportional reduction in FTE employees the borrower’s store is located orders all non- When a borrower submits SBA Form
during the covered period if the borrower is essential businesses, including the 3508 or lender’s equivalent form, the
borrower’s business, to shut down their lender shall:
5 Section 1106(d)(6) is the sole joint rulemaking
stores, based in part on COVID–19 guidance
issued by the CDC in March 2020. Because i. Confirm receipt of the borrower
authority exercised in this interim final rule. All certifications contained in the SBA Form
the borrower’s business activity during the
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other provisions of this interim final rule are an
exercise of rulemaking authority by SBA, except as covered period was reduced compared to its 3508 or lender’s equivalent form.
expressly noted otherwise. ii. Confirm receipt of the documentation
6 Section 1106(d)(5) specifies that this reference 7 Further information regarding how borrowers the borrower must submit to aid in verifying
period is between February 15, 2020 and 30 days will report information concerning rejected rehire payroll and nonpayroll costs, as specified in
after the date of enactment of the CARES Act or offers to state unemployment insurance offices will the instructions to the SBA Form 3508 or
April 26, 2020 (the safe harbor period). be provided on SBA’s website. lender’s equivalent form.
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38310 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations
iii. Confirm the borrower’s calculations on representations. If the lender identifies review of the loan or loan application,
the borrower’s SBA Form 3508 or lender’s errors in the borrower’s calculation or remit the appropriate forgiveness
equivalent form, including the dollar amount material lack of substantiation in the amount to the lender, plus any interest
of the (A) Cash Compensation, Non-Cash
Compensation, and Compensation to Owners
borrower’s supporting documents, the accrued through the date of payment,
claimed on Lines 1, 4, 6, 7, 8, and 9 on PPP lender should work with the borrower not later than 90 days after the lender
Schedule A and (B) Business Mortgage to remedy the issue. As stated in issues its decision to SBA. If applicable,
Interest Payments, Business Rent or Lease paragraph III.3.c of the First Interim SBA will deduct EIDL Advance
Payments, and Business Utility Payments Final Rule, the lender does not need to Amounts from the forgiveness amount
claimed on Lines 2, 3, and 4 on the PPP Loan independently verify the borrower’s remitted to the Lender as required by
Forgiveness Calculation Form, by reviewing reported information if the borrower section 1110(e)(6) of the CARES Act.
the documentation submitted with the SBA
submits documentation supporting its The lender is responsible for notifying
Form 3508 or lender’s equivalent form.
iv. Confirm that the borrower made the request for loan forgiveness and attests the borrower of remittance by SBA of
calculation on Line 10 of the SBA Form 3508 that it accurately verified the payments the loan forgiveness amount (or that
or lender’s equivalent form correctly, by for eligible costs. SBA determined that no amount of the
dividing the borrower’s Eligible Payroll Costs Part III.2.b. is revised to read as loan is eligible for forgiveness) and the
claimed on Line 1 by 0.60. follows: date on which the borrower’s first
When the borrower submits SBA b. What is the timeline for the lender’s payment is due, if applicable.
Form 3508EZ or lender’s equivalent decision on a loan forgiveness application? When the lender issues its decision to
form, the lender shall: The lender must issue a decision to SBA SBA determining that the borrower is
on a loan forgiveness application not later not entitled to forgiveness in any
i. Confirm receipt of the borrower than 60 days after receipt of a complete loan
certifications contained in the SBA Form
amount, the lender must provide SBA
forgiveness application from the borrower. with the reason for its denial, together
3508EZ or lender’s equivalent form. That decision may take the form of an
ii. Confirm receipt of the documentation approval (in whole or in part); denial; or (if
with the following:
the borrower must submit to aid in verifying directed by SBA) a denial without prejudice i. For applications submitted using the
payroll and nonpayroll costs, as specified in due to a pending SBA review of the loan for SBA Form 3508 or lender’s equivalent form:
the instructions to the SBA Form 3508EZ or which forgiveness is sought. In the case of a (1) the PPP Loan Forgiveness Calculation
lender’s equivalent form. denial without prejudice, the borrower may Form;
iii. Confirm the borrower’s calculations on subsequently request that the lender (2) PPP Schedule A; and
the borrower’s SBA Form 3508EZ or lender’s reconsider its application for loan (3) the (optional) PPP Borrower
equivalent form, including the dollar amount forgiveness, unless SBA has determined that Demographic Information Form (if submitted
of the Payroll Costs, Business Mortgage the borrower is ineligible for a PPP loan. The to the lender).
Interest Payments, Business Rent or Lease Administrator has determined that this iii. For applications submitted using the
Payments, and Business Utility Payments process appropriately balances the need for SBA Form 3508EZ or lender’s equivalent
claimed on Lines 1, 2, 3, and 4 of the SBA efficient processing of loan forgiveness form:
Form 3508EZ or lender’s equivalent form, by applications with considerations of program (1) the SBA Form 3508EZ or lender’s
reviewing the documentation submitted with integrity, including affording SBA the equivalent form; and
the SBA Form 3508EZ or lender’s equivalent opportunity to ensure that borrower (2) the (optional) Borrower Demographic
form. representations and certifications (including Information Form (if submitted to the
iv. Confirm that the borrower made the concerning eligibility for a PPP loan) were lender).
calculation on Line 7 of the SBA Form accurate. When the lender issues its decision
3508EZ or lender’s equivalent form correctly, to SBA approving the application (in whole The lender must confirm that the
by dividing the borrower’s Eligible Payroll or in part), it must include the following: information provided by the lender to
Costs claimed on Line 1 by 0.60. i. For applications submitted using the SBA accurately reflects lender’s records
Providing an accurate calculation of SBA Form 3508 or lender’s equivalent form: for the loan, and that the lender has
the loan forgiveness amount is the (1) the PPP Loan Forgiveness Calculation made its decision in accordance with
responsibility of the borrower, and the Form; the requirements set forth in 2.a. The
borrower attests to the accuracy of its (2) PPP Schedule A; and lender must also notify the borrower in
(3) the (optional) PPP Borrower writing that the lender has issued a
reported information and calculations Demographic Information Form (if submitted
on the Loan Forgiveness Application decision to SBA denying the loan
to the lender).
Form. Lenders are expected to perform ii. For applications submitted using the forgiveness application. SBA reserves
a good-faith review, in a reasonable SBA Form 3508EZ or lender’s equivalent the right to review the lender’s decision
time, of the borrower’s calculations and form: in its sole discretion. Within 30 days of
supporting documents concerning (1) the SBA Form 3508EZ or lender’s notice from the lender, a borrower may
amounts eligible for loan forgiveness. equivalent form; and notify the lender that it is requesting
For example, minimal review of (2) the (optional) Borrower Demographic that SBA review the lender’s decision
calculations based on a payroll report by Information Form (if submitted to the by reviewing the loan in accordance
lender). with 2.c. below. Within 5 days of
a recognized third-party payroll
processor would be reasonable. By The lender must confirm that the receipt, the lender must notify SBA of
contrast, if payroll costs are not information provided by the lender to the borrower’s request for review. SBA
documented with such recognized SBA accurately reflects lender’s records will notify the lender if SBA declines a
sources, more extensive review of for the loan, and that the lender has request for review. If the borrower does
calculations and data would be made its decision in accordance with not request SBA review or SBA declines
appropriate. The borrower shall not the requirements set forth in 2.a. If the the request for review, the lender is
receive forgiveness without submitting lender determines that the borrower is responsible for notifying the borrower of
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all required documentation to the entitled to forgiveness of some or all of the date on which the borrower’s first
lender. the amount applied for under the statute payment is due. If SBA accepts a
As the First Interim Final Rule 8 and applicable regulations, the lender borrower’s request for review, SBA will
indicates, lenders may rely on borrower must request payment from SBA at the notify the borrower and the lender of
time the lender issues its decision to the results of the review. If SBA denies
8 85 FR 20811, 20815–20816 (April 15, 2020). SBA. SBA will, subject to any SBA forgiveness in whole or in part, the
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Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38311
lender is responsible for notifying the Compliance With Executive Orders currently approved as an emergency
borrower of the date on which the 12866, 12988, 13132, 13563, and 13771, request under OMB Control Number
borrower’s first payment is due. the Paperwork Reduction Act (44 3245–0407 until October 31, 2020.
Enabling SBA to use the statutory 90- U.S.C. Ch. 35), and the Regulatory
Regulatory Flexibility Act (RFA)
day period to review the PPP loan and Flexibility Act (5 U.S.C. 601–612)
The Regulatory Flexibility Act (RFA)
forgiveness documentation is an Executive Orders 12866, 13563, and generally requires that when an agency
appropriate procedural protection to 13771 issues a proposed rule, or a final rule
prevent fraud or misuse of PPP funds, This interim final rule is pursuant to section 553(b) of the APA or
ensure that recipients of PPP loans are economically significant for the another law, the agency must prepare a
within the scope of entities that the purposes of Executive Orders 12866 and regulatory flexibility analysis that meets
CARES Act is intended to assist, and 13563, and is considered a major rule the requirements of the RFA and
confirm compliance with the PPP under the Congressional Review Act. publish such analysis in the Federal
requirements set forth in the statute, SBA, however, is proceeding under the Register. 5 U.S.C. 603, 604. Specifically,
rules, and guidance. This protection is emergency provision at Executive Order the RFA normally requires agencies to
also important in light of the large 12866 Section 6(a)(3)(D), based on the describe the impact of a rulemaking on
number and diverse types of PPP need to move expeditiously to mitigate small entities by providing a regulatory
lenders, many of which were not the current economic conditions arising impact analysis. Such analysis must
previously SBA participating lenders from the COVID–19 emergency. This address the consideration of regulatory
and which were approved rapidly in rule’s designation under Executive options that would lessen the economic
order to enable financial assistance to be Order 13771 will be informed by public effect of the rule on small entities. The
comment. RFA defines a ‘‘small entity’’ as (1) a
provided as rapidly as feasible to
proprietary firm meeting the size
millions of small businesses. SBA will Executive Order 12988 standards of the Small Business
use the 90-day period to help ensure SBA and Treasury have drafted this Administration (SBA); (2) a nonprofit
that applicable legal requirements have rule, to the extent practicable, in organization that is not dominant in its
been satisfied. accordance with the standards set forth field; or (3) a small government
Part III.2.c.ii. is revised to read as in section 3(a) and 3(b)(2) of Executive jurisdiction with a population of less
follows: Order 12988, to minimize litigation, than 50,000. 5 U.S.C. 601(3)–(6). Except
ii. The Loan Forgiveness Application (SBA eliminate ambiguity, and reduce for such small government jurisdictions,
Form 3508, 3508EZ, or lender’s equivalent burden. The rule has no preemptive or neither State nor local governments are
form), and all supporting documentation retroactive effect. ‘‘small entities.’’ Similarly, for purposes
provided by the borrower (if the lender has
of the RFA, individual persons are not
Executive Order 13132 small entities. The requirement to
received such application). If the lender
SBA and Treasury have determined conduct a regulatory impact analysis
receives such application after it receives
that this rule will not have substantial does not apply if the head of the agency
notice that SBA has commenced a loan
review, the lender shall transmit electronic
direct effects on the States, on the ‘‘certifies that the rule will not, if
copies of the application and all supporting
relationship between the National promulgated, have a significant
documentation provided by the borrower to Government and the States, or on the economic impact on a substantial
SBA within five business days of receipt. distribution of power and number of small entities.’’ 5 U.S.C.
The lender must also request that the responsibilities among the various 605(b). The agency must, however,
borrower provide the lender with the layers of government. Therefore, SBA publish the certification in the Federal
applicable documentation that the has determined that this rule has no Register at the time of publication of the
instructions to the Loan Forgiveness federalism implications warranting rule, ‘‘along with a statement providing
Application Form (SBA Form 3508, 3508EZ, preparation of a federalism assessment. the factual basis for such certification.’’
or lender’s equivalent) instruct the borrower If the agency head has not waived the
Paperwork Reduction Act, 44 U.S.C.
to maintain but not submit (documentation requirements for a regulatory flexibility
Chapter 35
listed under ‘‘Documents that Each Borrower analysis in accordance with the RFA’s
Must Maintain but is Not Required to
SBA and Treasury have determined waiver provision, and no other RFA
Submit’’). The lender must submit that this rule modifies existing exception applies, the agency must
documents received from the borrower to information collection. The prepare the regulatory flexibility
SBA within five business days of receipt amendments to the PPP made by the analysis and publish it in the Federal
from the borrower. Flexibility Act and implemented in this Register at the time of promulgation or,
interim final rule require conforming if the rule is promulgated in response to
3. Additional Information revisions to the Paycheck Protection an emergency that makes timely
Program—Loan Forgiveness Application compliance impracticable, within 180
SBA may provide further guidance, if (SBA Form 3508), for use in collecting days of publication of the final rule. 5
needed, through SBA notices which will the information required to determine U.S.C. 604(a), 608(b). Rules that are
be posted on SBA’s website at whether a borrower is eligible for loan exempt from notice and comment are
www.sba.gov. Questions on the forgiveness. In addition, SBA has also exempt from the RFA requirements,
Paycheck Protection Program may be developed a streamlined Paycheck including conducting a regulatory
directed to the Lender Relations Protection Program—PPP Loan flexibility analysis, when among other
Specialist in the local SBA Field Office. Forgiveness Application Form 3508EZ things the agency for good cause finds
The local SBA Field Office may be
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(SBA Form 3508 EZ), which is available that notice and public procedure are
found at https://www.sba.gov/tools/ for borrowers meeting criteria described impracticable, unnecessary, or contrary
local-assistance/districtoffices. in the instructions accompanying the to the public interest. SBA Office of
form. SBA has obtained OMB approval Advocacy guide: How to Comply with
of the modification to the existing the Regulatory Flexibility Act, Ch.1. p.9.
information collection, which is Accordingly, SBA and Treasury are not
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38312 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations
required to conduct a regulatory 30, West Building Ground Floor, Room instructions for replacement of the affected
flexibility analysis. W12–140, 1200 New Jersey Avenue SE, parts before exceeding reduced life limits.
Washington, DC 20590, between 9 a.m. For the reasons described above, this
Jovita Carranza, [EASA] AD requires removal from service of
and 5 p.m., Monday through Friday,
Administrator,Small Business the affected parts.
except Federal holidays.
Administration. You may obtain further information
For service information identified in
Michael Faulkender, this final rule, contact Rolls-Royce by examining the MCAI in the AD
Assistant Secretary for Economic Policy Deutschland Ltd & Co KG, Eschenweg docket on the internet at https://
Department of the Treasury. 11, 15827 Blankenfelde-Mahlow, www.regulations.gov by searching for
[FR Doc. 2020–13782 Filed 6–24–20; 8:45 am] Germany; phone: +49 (0) 33 708 6 0; and locating Docket No. FAA–2020–
BILLING CODE 8026–03–P email: https://www.rolls-royce.com/ 0612.
contact-us.aspx. You may view this Related Service Information
service information at the FAA,
DEPARTMENT OF TRANSPORTATION Airworthiness Products Section, The FAA reviewed Rolls-Royce plc
Operational Safety Branch, 1200 District (RR) Alert Non-Modification Service
Federal Aviation Administration Avenue, Burlington, MA 01803. For Bulletin (NMSB) Trent 1000 73–AK581,
information on the availability of this dated May 12, 2020. The Alert NMSB
14 CFR Part 39 material at the FAA, call 781–238–7759. introduces a reduced life limit for fuel
[Docket No. FAA–2020–0612; Project It is also available on the internet at pumps installed on affected engines.
Identifier MCAI–2020–00674–E; Amendment https://www.regulations.gov by FAA’s Determination
39–21152; AD 2020–13–07] searching for and locating Docket No.
FAA–2020–0612. This product has been approved by
RIN 2120–AA64 EASA and is approved for operation in
Examining the AD Docket the United States. Pursuant to our
Airworthiness Directives; Rolls-Royce bilateral agreement with the European
Deutschland Ltd & Co KG (Type You may examine the AD docket on
the internet at https:// Community, EASA has notified us of
Certificate Previously Held by Rolls- the unsafe condition described in the
Royce plc) Turbofan Engines www.regulations.gov by searching for
and locating Docket No. FAA–2020– MCAI. The FAA is issuing this AD
AGENCY: Federal Aviation 0612; or in person at Docket Operations because it evaluated all the relevant
Administration (FAA), DOT. between 9 a.m. and 5 p.m., Monday information provided by EASA and
ACTION: Final rule; request for through Friday, except Federal holidays. determined the unsafe condition
comments. The AD docket contains this final rule, described previously is likely to exist or
the mandatory continuing airworthiness develop in other products of the same
SUMMARY: The FAA is adopting a new information (MCAI), any comments type design.
airworthiness directive (AD) for all received, and other information. The AD Requirements
Rolls-Royce Deutschland Ltd. & Co KG street address for Docket Operations is
(RRD) Trent 1000–D2, Trent 1000–J2, listed above. Comments will be This AD requires removal of the
and Trent 1000–K2 model turbofan available in the AD docket shortly after affected fuel pump and its replacement
engines with fuel pump, part number receipt. with a part eligible for installation.
G5030FPU01, installed. This AD FOR FURTHER INFORMATION CONTACT: Differences Between This AD and the
requires removal and replacement of the Stephen Elwin, Aerospace Engineer, Service Information
fuel pump with a part eligible for ECO Branch, FAA, 1200 District
installation. This AD was prompted by RR Alert NMSB Trent 1000 73–
Avenue, Burlington, MA 01803; phone: AK581, dated May 12, 2020,
the manufacturer’s investigation into an 781–238–7236; fax: 781–238–7199;
unexpected reduction in fuel pump recommends removal of D2-rated engine
email: stephen.l.elwin@faa.gov. fuel pumps with more than 17,000
performance in certain high life fuel
SUPPLEMENTARY INFORMATION: hours (or 5,200 cycles) by May 31, 2020,
pumps. The FAA is issuing this AD to
address the unsafe condition on these Discussion and more than 16,000 hours (or 4,900
products. cycles) by June 30, 2020, or within 3
The European Union Aviation Safety engine flight cycles, whichever is later.
DATES: This AD is effective July 13, Agency (EASA), which is the Technical Since this AD will become effective
2020. Agent for the Member States of the after the RRD recommended compliance
The FAA must receive comments on European Community, has issued EASA date of June 30, 2020, this AD requires
this AD by August 10, 2020. AD 2020–0124, dated May 29, 2020 removal of D2-rated engine fuel pumps
ADDRESSES: You may send comments, (referred to after this as ‘‘the MCAI’’), to before exceeding 16,000 hours time in
using the procedures found in 14 CFR address an unsafe condition for the service or 4,900 engine cycles since new
11.43 and 11.45, by any of the following specified products. The MCAI states: or since last overhaul. This AD also
methods: An unexpected reduction in fuel pump provides a 30-day grace period for
• Federal eRulemaking Portal: Go to performance has been seen during testing of compliance.
https://www.regulations.gov. Follow the high life units. Strip examination of these
instructions for submitting comments. fuel pumps has identified that life related FAA’s Justification and Determination
• Fax: 202–493–2251. wear-out of the internal components is of the Effective Date
• Mail: U.S. Department of causing deterioration in pump efficiency. Section 553(b)(3)(B) of the
The effect of the loss of fuel pump efficiency
jbell on DSKJLSW7X2PROD with RULES
Transportation, Docket Operations, M– Administrative Procedure Act (APA) (5
is more pronounced on higher rated engines.
30, West Building Ground Floor, Room This condition, if not corrected, could lead
U.S.C.) authorizes agencies to dispense
W12–140, 1200 New Jersey Avenue SE, to reduced engine thrust, possibly resulting with notice and comment procedures
Washington, DC 20590. in reduced control of the aeroplane. for rules when the agency, for ‘‘good
• Hand Delivery: U.S. Department of To address this potential unsafe condition, cause,’’ finds that those procedures are
Transportation, Docket Operations, M– Rolls-Royce published the NMSB to provide ‘‘impracticable, unnecessary, or contrary
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