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SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
Docket Number SBA-2020-0026
RIN 3245-AH41
Business Loan Program Temporary Changes; Paycheck Protection Program –
Requirements – Extension of Limited Safe Harbor with Respect to Certification
Concerning Need for PPP Loan Request
AGENCY: U. S. Small Business Administration.
ACTION: Interim final rule.
SUMMARY: On April 24, 2020, the U.S. Small Business Administration (SBA) posted
an interim final rule relating to promissory notes, authorizations, affiliation, and
eligibility in connection with the implementation of a temporary new program, titled the
“Paycheck Protection Program.” The Paycheck Protection Program was established
under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act).
This interim final rule revises the interim final rule posted on April 24, 2020, by
extending the date by which certain Paycheck Protection Program borrowers may repay
their loans from May 7, 2020 to May 14, 2020, in order to avail themselves of a safe
harbor with respect to a certification required by the Act, and makes other conforming
changes. This interim final rule supplements SBA’s implementation of the Act and
requests public comment.
DATES: Effective date: This rule is effective [INSERT DATE OF PUBLICATION IN
THE FEDERAL REGISTER].
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Applicability date: This interim final rule applies to borrowers who applied for loans
under the Paycheck Protection Program.
Comment date: Comments must be received on or before [INSERT DATE 30 DAYS
AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].
ADDRESSES: You may submit comments, identified by number SBA-2020-0026
through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions for submitting comments. SBA will post all comments on
www.regulations.gov. If you wish to submit confidential business information (CBI) as
defined in the User Notice at www.regulations.gov, please send an email to ppp-
ifr@sba.gov. Highlight the information that you consider to be CBI and explain why you
believe SBA should hold this information as confidential. SBA will review the
information and make the final determination whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833-
572-0502, or the local SBA Field Office; the list of offices can be found at
https://www.sba.gov/tools/local-assistance/districtoffices.
SUPPLEMENTARY INFORMATION:
I. Background Information
On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019
(COVID-19) pandemic of sufficient severity and magnitude to warrant an emergency
declaration for all States, territories, and the District of Columbia. With the COVID-19
emergency, many small businesses nationwide are experiencing economic hardship as a
direct result of the Federal, State, tribal, and local public health measures that are being
taken to minimize the public’s exposure to the virus. These measures, some of which are
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government-mandated, are being implemented nationwide and include the closures of
restaurants, bars, and gyms. In addition, based on the advice of public health officials,
other measures, such as keeping a safe distance from others or even stay-at-home orders,
are being implemented, resulting in a dramatic decrease in economic activity as the
public avoids malls, retail stores, and other businesses.
On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic
Security Act (the CARES Act or the Act) (Pub. L. 116-136) to provide emergency
assistance and health care response for individuals, families, and businesses affected by
the coronavirus pandemic. The Small Business Administration (SBA) received funding
and authority through the Act to modify existing loan programs and establish a new loan
program to assist small businesses nationwide adversely impacted by the COVID-19
emergency. Section 1102 of the Act temporarily permits SBA to guarantee 100 percent
of 7(a) loans under a new program titled the “Paycheck Protection Program.” Section
1106 of the Act provides for forgiveness of up to the full principal amount of qualifying
loans guaranteed under the Paycheck Protection Program. On April 24, 2020, the
President signed the Paycheck Protection Program and Health Care Enhancement Act
(Pub. L. 116-139), which provided additional funding and authority for the PPP.
II. Comments and Immediate Effective Date
This interim final rule is effective without advance notice and public comment
because section 1114 of the Act authorizes SBA to issue regulations to implement Title I
of the Act without regard to notice requirements. In addition, SBA has determined that
there is good cause for dispensing with advance public notice and comment on the
ground that it would be contrary to the public interest. Specifically, SBA, in consultation
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with the Department of the Treasury, intends to issue additional guidance with regard to
the safe harbor and extending the safe harbor deadline from May 7 to May 14 will afford
Paycheck Protection Program borrowers time to review the forthcoming SBA guidance
and decide whether to avail themselves of the safe harbor. SBA previously announced
this intended extension in nonbinding guidance published on May 5, 2020. Advance
notice and public comment would defeat the purpose of this interim final rule given the
timeline for the existing safe harbor and short-term, temporary nature of this program.
These same reasons provide good cause for SBA to dispense with the 30-day delayed
effective date provided in the Administrative Procedure Act.
Although this interim final rule is effective immediately, comments are solicited from
interested members of the public on all aspects of the interim final rule, including section
III below. These comments must be submitted on or before [INSERT DATE 30 DAYS
AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. SBA will
consider these comments and the need for making any revisions as a result of these
comments.
III. Paycheck Protection Program Requirements for Extension of Safe Harbor
with Respect to Certification Concerning Need for PPP Loan Request
The CARES Act was enacted to provide immediate assistance to individuals,
families, and organizations affected by the COVID-19 emergency. Among the
provisions contained in the CARES Act are provisions authorizing SBA to temporarily
guarantee loans under the Paycheck Protection Program (PPP). Loans under the PPP are
100 percent guaranteed by SBA, and the full principal amount of the loans and any
accrued interest may qualify for loan forgiveness. The Act requires each applicant
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applying for a PPP loan to certify “that the uncertainty of current economic conditions
makes necessary the loan request to support the ongoing obligations” of the applicant.
On April 24, 2020, SBA posted on its website an interim final rule (the Fourth PPP
Interim Final Rule), which also was published in the Federal Register on April 28, 2020
(85 FR 23450), to provide relief to PPP borrowers who applied for and received PPP
loans based on a misunderstanding or misapplication of the required certification
standard. The Fourth PPP Interim Final Rule provides that any borrower that applied for
a PPP loan and repays the loan in full by May 7, 2020, will be deemed by SBA to have
made the required certification in good faith. SBA, in consultation with the Department
of the Treasury, will issue additional guidance before May 14, 2020 concerning how
SBA will review the required certification to help PPP borrowers evaluate whether they
may have misunderstood or misapplied the statutory certification standard. Based on this
upcoming guidance, SBA, in consultation with the Department of the Treasury,
determined that it is necessary and appropriate to extend the safe harbor deadline for
repaying PPP loans from May 7, 2020 to May 14, 2020.
Part III.5. of the Fourth PPP Interim Final Rule (85 FR 23450, 23451-23452) is
revised to read as follows:
Limited Safe Harbor with Respect to Certification Concerning Need for PPP
Loan Request.
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Consistent with section 1102 of the CARES Act, the Borrower Application Form
requires PPP applicants to certify that “[c]urrent economic uncertainty makes this
loan request necessary to support the ongoing operations of the Applicant.”
Any borrower that applied for a PPP loan and repays the loan in full by May 14,
2020 will be deemed by SBA to have made the required certification in good
faith.
The Administrator, in consultation with the Secretary, determined that this safe
harbor is necessary and appropriate to ensure that borrowers promptly repay PPP
loan funds that the borrower obtained based on a misunderstanding or
misapplication of the required certification standard.
The extension of the safe harbor requires a corresponding date change to the interim
final rule that SBA posted on its website on April 28, 2020, which was published in the
Federal Register on May 4, 2020 (85 FR 26321), regarding PPP loan disbursements.
Specifically, Part III.1.b. provides that Lenders must electronically upload SBA Form
1502 information within 20 calendar days after a PPP loan is approved or, for loans
approved before the availability of the updated SBA Form 1502 reporting process, by
May 18, 2020. 85 FR 26321, 26323. Because of the extension of the safe harbor
deadline, SBA is extending the deadline for the submission of the initial SBA Form 1502
from May 18, 2020 to May 22, 2020.
Additional Information
SBA may provide further guidance, if needed, through SBA notices that will be
posted on SBA’s website at www.sba.gov. Questions on the Paycheck Protection
Program may be directed to the Lender Relations Specialist in the local SBA Field
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Office. The local SBA Field Office may be found at https://www.sba.gov/tools/local-
assistance/districtoffices.
Compliance with Executive Orders 12866, 12988, 13132, 13563, and 13771, the
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5
U.S.C. 601-612).
Executive Orders 12866, 13563, and 13771
This interim final rule is economically significant for the purposes of Executive
Orders 12866 and 13563, and is considered a major rule under the Congressional Review
Act. SBA, however, is proceeding under the emergency provision at Executive Order
12866 Section 6(a)(3)(D) based on the need to move expeditiously to mitigate the current
economic conditions arising from the COVID-19 emergency. This rule’s designation
under Executive Order 13771 will be informed by public comment.
Executive Order 12988
SBA has drafted this rule, to the extent practicable, in accordance with the standards
set forth in section 3(a) and 3(b)(2) of Executive Order 12988, to minimize litigation,
eliminate ambiguity, and reduce burden. The rule has no preemptive or retroactive effect.
Executive Order 13132
SBA has determined that this rule will not have substantial direct effects on the
States, on the relationship between the National Government and the States, or on the
distribution of power and responsibilities among the various layers of government.
Therefore, SBA has determined that this rule has no federalism implications warranting
preparation of a federalism assessment.
Paperwork Reduction Act, 44 U.S.C. Chapter 35
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SBA has determined that this rule will not impose new or modify existing
recordkeeping or reporting requirements under the Paperwork Reduction Act.
Regulatory Flexibility Act (RFA)
The Regulatory Flexibility Act (RFA) generally requires that when an agency issues a
proposed rule, or a final rule pursuant to section 553(b) of the APA or another law, the
agency must prepare a regulatory flexibility analysis that meets the requirements of the
RFA and publish such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically,
the RFA normally requires agencies to describe the impact of a rulemaking on small
entities by providing a regulatory impact analysis. Such analysis must address the
consideration of regulatory options that would lessen the economic effect of the rule on
small entities. The RFA defines a “small entity” as (1) a proprietary firm meeting the
size standards of the Small Business Administration (SBA); (2) a nonprofit organization
that is not dominant in its field; or (3) a small government jurisdiction with a population
of less than 50,000. 5 U.S.C. 601(3)–(6). Except for such small government
jurisdictions, neither State nor local governments are “small entities.” Similarly, for
purposes of the RFA, individual persons are not small entities. The requirement to
conduct a regulatory impact analysis does not apply if the head of the agency “certifies
that the rule will not, if promulgated, have a significant economic impact on a substantial
number of small entities.” 5 U.S.C. 605(b). The agency must, however, publish the
certification in the Federal Register at the time of publication of the rule, “along with a
statement providing the factual basis for such certification.” If the agency head has not
waived the requirements for a regulatory flexibility analysis in accordance with the
RFA’s waiver provision, and no other RFA exception applies, the agency must prepare
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the regulatory flexibility analysis and publish it in the Federal Register at the time of
promulgation or, if the rule is promulgated in response to an emergency that makes
timely compliance impracticable, within 180 days of publication of the final rule. 5
U.S.C. 604(a), 608(b). Rules that are exempt from notice and comment are also exempt
from the RFA requirements, including conducting a regulatory flexibility analysis, when
among other things the agency for good cause finds that notice and public procedure are
impracticable, unnecessary, or contrary to the public interest. SBA Office of Advocacy
guide: How to Comply with the Regulatory Flexibility Act, Ch.1. p.9. Accordingly, SBA
is not required to conduct a regulatory flexibility analysis.
Jovita Carranza,
Administrator.
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