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DEPARTMENT OF THE TREASURY
13 CFR Part 120
[Docket Number TREAS-DO-2020-0009]
RIN 1505-AC67
Small Business Administration Business Loan Program Temporary Changes; Paycheck
Protection Program – Additional Criterion for Seasonal Employers
AGENCY: U.S. Department of the Treasury.
ACTION: Interim final rule.
SUMMARY: The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act or the
Act) authorizes the U.S. Department of the Treasury (Treasury) to issue regulations for the
Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA),
including regulations that allow additional lenders to originate loans and establish terms and
conditions. In this interim final rule, Treasury authorizes all lenders eligible to originate loans
under the PPP to use an alternative criterion for calculating the maximum loan amount for PPP
loans issued to seasonal employers.
DATES: Effective Date: This rule is effective [INSERT DATE OF PUBLICATION IN THE
FEDERAL REGISTER].
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 TREAS-DO-2020-0009
through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for
submitting comments. Treasury 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 highlight the information that you consider to be CBI and explain
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why you believe Treasury should hold this information as confidential. Treasury will review the
information and make the final determination whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: Jonathan Greenstein, Office of Domestic
Finance, 202-622-1408; Jonathan.Greenstein@Treasury.gov.
SUPPLEMENTARY INFORMATION:
I. Background Information
On March 27, 2020, the President signed the CARES Act, Pub. L. 116-136, to provide
emergency assistance and health care response for individuals, families, and businesses affected
by the coronavirus pandemic. Section 1102 of the Act establishes the PPP as a temporary
addition to the SBA’s 7(a) loan program. The PPP is designed to assist small businesses
nationwide adversely impacted by the coronavirus pandemic. SBA has published information
about the PPP in interim final rules available at 85 FR 20811 (April 15, 2020); 85 FR 20817
(April 15, 2020); 85 FR 21747 (April 20, 2020); and 85 FR 23450 (April 28, 2020).
Section 1109(b) of the Act authorizes Treasury to establish criteria for insured depository
institutions, insured credit unions, institutions of the Farm Credit System chartered under the
Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and other lenders to participate in the PPP.
The SBA is required to administer the program that Treasury establishes under section 1109 of
the Act, with guidance from Treasury.
The Act authorizes Treasury to issue regulations and guidance to implement section 1109,
including regulations that establish “terms and conditions” for PPP loans. See Section
1109(d)(2). The terms and conditions established by Treasury under section 1109 are not
required to be identical to those set forth in section 1102. However, the Act requires that terms
and conditions that Treasury establishes under section 1109 pertaining to certain criteria—the
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maximum interest rate, maximum loan amount, and other specified terms—must be “consistent,”
to “the maximum extent practicable,” with those set forth in section 1102. See Section
1109(d)(2).
In this rulemaking, Treasury is addressing the needs of certain potential borrowers that are
seasonal employers by allowing seasonal employers to use an alternative base period for
purposes of calculating the loan amount for which they are eligible under the PPP. Section 1102
of the Act permits seasonal employers to calculate their maximum loan amount by using their
monthly average payments for payroll during “the 12-week period beginning February 15, 2019,
or at the election of the eligible [borrower], March 1, 2019, and ending June 30, 2019.” Some
seasonal employers, however, have seasons that occur later in the year. Without the ability to
use an alternative base period, many summer seasonal businesses would be unable to obtain
funding on terms commensurate with those available to winter and spring seasonal businesses.
This interim final rule addresses that disparity and ensures consistency in program administration
by providing a seasonal employer the option of using any consecutive 12-week period between
May 1, 2019 and September 15, 2019 for determining its maximum loan amount.
As required by section 1109(d)(2)(B), Treasury has determined that this alternative period for
seasonal employers is, to the “maximum extent practicable,” consistent with the terms applicable
to the PPP in general. In section 1102, Congress gave seasonal employers the option to calculate
their maximum loan amount using alternative base periods. By permitting seasonal employers to
calculate the maximum loan amount using any consecutive 12 weeks within a specified 4.5-
month period, this interim final rule ensures that seasonal employers affected by the pandemic
are treated even-handedly.
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Other than this adjustment, the terms and requirements applicable to PPP loans under this
rule are identical to the terms and requirements that section 1102 and SBA regulations impose on
other PPP loans. As a result, a seasonal borrower that elects to use the alternative timing
criterion under this interim final rule may follow the same processes and procedures applicable
to other PPP loans.
II. Comments and Immediate Effective Date
Congress intended that the PPP provide relief to America’s small businesses expeditiously.
Given this intent and the dramatic decrease in economic activity nationwide, there is good cause
for Treasury to dispense with the 30-day delayed effective date provided in the Administrative
Procedure Act. This interim final rule provides an alternative criterion for calculating the
maximum loan amount for PPP loans issued to seasonal employers. Seasonal employers need
timely additional guidance concerning the maximum loan available under the interim final rule
because the last day to apply for and receive a loan is June 30, 2020. The immediate effective
date of this interim final rule will benefit seasonal employers by providing a full understanding
of loan terms and conditions. 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].
Treasury will consider these comments and the need for any revisions as a result of these
comments.
III. Paycheck Protection Program – Alternative Criterion for Seasonal Employers
Overview
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The SBA administers the PPP to provide immediate assistance to small businesses
affected by the coronavirus pandemic. Under section 1109 of the CARES Act, Treasury is
authorized to issue regulations that allow lenders to originate PPP loans under terms and
conditions established by the Secretary. Through this interim final rule, Treasury is exercising
its section 1109 authority to address the needs of certain potential borrowers that are seasonal
employers. The SBA will administer this rule as part of the PPP, with guidance from Treasury,
until the date on which the national emergency declared by the President under the National
Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the Coronavirus Disease 2019
(COVID–19) expires. Except as modified in this interim final rule, PPP regulations, guidance,
forms, and processes apply fully to PPP loans for seasonal employers utilizing the base period
calculation option set forth in this rule.
1. General
This interim final rule supplements the SBA’s rules for the PPP by establishing an
alternative criterion for calculating the maximum loan amount for seasonal employers.
2. What does this interim final rule apply to?
This rule applies to PPP loans issued to seasonal employers.
3. How does this rule affect the calculation of the maximum loan amount for seasonal
employers?
Under section 1102 of the CARES Act, a seasonal employer may determine its maximum
loan amount for purposes of the PPP by reference to the employer’ average total monthly
payments for payroll “the 12-week period beginning February 15, 2019, or at the election of the
eligible [borrower], March 1, 2019, and ending June 30, 2019.” Under this interim final rule
issued pursuant to section 1109 of the Act, a seasonal employer may alternatively elect to
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determine its maximum loan amount as the average total monthly payments for payroll during
any consecutive 12-week period between May 1, 2019 and September 15, 2019.
4. If a seasonal business was dormant or not fully operating as of February 15, 2020,
is it still eligible?
Yes, in evaluating eligibility, a seasonal business will be considered to have been in
operation as of February 15, 2020, if the business was in operation for any 8-week period
between May 1, 2019 and September 15, 2019. This approach aligns with guidance previously
provided by the Small Business Administration concerning other seasonal businesses under
section 1102. See Treasury, Paycheck Protection Program Loans: Frequently Asked Questions
(FAQs), FAQ 9 (posted April 6, 2020) (https://home.treasury.gov/policy-issues/cares/assistance-
for-small-businesses).
6. Are any other SBA rules or guidance for the PPP affected by Treasury’s interim
final rule?
No. This interim final rule only provides certain employers with an alternative means of
calculating the maximum loan amount. All other terms and conditions in the PPP remain
unchanged. All PPP applicants, borrowers, and lenders should continue to use existing SBA
forms and follow all requirements set forth in the CARES Act and SBA regulations, except for
the alternative approach described above for calculating the maximum loan amount.
7. What lenders are authorized to offer terms in Treasury’s interim final rule to
seasonal employers?
All lenders authorized to originate PPP loans may offer the terms under this interim final
rule to eligible applicants and borrowers. PPP loans under this interim final rule are eligible for
an SBA guarantee to the same extent as PPP loans based on existing PPP rules.
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Compliance with Executive Orders 12866, 12988, 13132, 13563, and 13771, the
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Administrative Procedure Act (5
U.S.C. 553).
Executive Orders 12866, 13563, and 13771
The Office of Management and Budget has determined that 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. Treasury, 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
Treasury 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
Treasury 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, Treasury 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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Treasury has determined that this rule will not impose new or modify existing recordkeeping
or reporting requirements under the Paperwork Reduction Act.
Inapplicability of Notice and Delayed Effective Date
The Administrative Procedure Act (APA) requirements in 5 U.S.C. 553 govern agency
rulemaking procedures. Section 553(b) of the APA generally requires notice and public
comment before issuance of a final rule. In addition, section 553(d) of the APA requires that a
final rule have a 30-day delayed effective date. The APA, however, provides exceptions from
the prior notice and public comment requirement and the delayed effective date requirements,
when an agency for good cause finds that such procedures are impracticable, unnecessary, or
contrary to the public interest. 5 U.S.C. 553(b)(B), (d)(3). Treasury finds that prior notice and
comment are impracticable and contrary to the public interest and that good cause exists to issue
this interim final rule immediately.
The ongoing unprecedented situation related to COVID-19 is having a nationwide
impact, as demonstrated by the declaration of a national emergency by the President. See
Proclamation 9994 of March 13, 2020, 85 FR 15337 (Mar. 18, 2020). The interim final rule
supports seasonal employers affected by COVID-19 in obtaining PPP loans to maintain their
businesses and keep people employed. To protect our public interests during the ongoing
national emergency, Treasury concludes, pursuant to 5 U.S.C. 553(b)(B), that there is good cause
to dispense with prior public notice and the opportunity to comment on this rule before issuing
this interim final rule. For the same reasons, Treasury has determined, consistent with section
553(d)(3) of the APA, that there is good cause to make this temporary final rule effective
immediately.
Michael Faulkender,
Assistant Secretary for Economic Policy.
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