Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Revisions to First Interim Final Rule (Docket No. SBA-2020-0036)
Summary
SBA interim final rule, Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Revisions to First Interim Final Rule, 13 CFR Part 120, Docket No. SBA-2020-0036, RIN 3245-AH50, signed by Administrator Jovita Carranza. It revises the interim final rule published in the Federal Register on April 15, 2020 by changing the PPP eligibility requirement on felony convictions of applicants or owners. Under the revision, a loan is not approved if an owner of 20 percent or more of the equity has been convicted within the last five years of a felony involving fraud, bribery, embezzlement or a false statement in a loan or federal assistance application, or of any other felony within the last year. The rule says conforming changes will be made to Question 6 of Form 2483 and Section H of Form 2484.
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket No. SBA-2020-0036]
RIN 3245-AH50
Business Loan Program Temporary Changes; Paycheck Protection Program – Additional
Revisions to First Interim Final Rule
AGENCY: U.S. Small Business Administration.
ACTION: Interim final rule.
SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA) posted on its
website an interim final rule relating to the implementation of sections 1102 and 1106 of the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act) (published in the
Federal Register on April 15, 2020). Section 1102 of the Act temporarily adds a new product,
titled the “Paycheck Protection Program,” to the U.S. Small Business Administration’s (SBA’s)
7(a) Loan Program. Subsequently, SBA issued a number of interim final rules implementing the
Paycheck Protection Program. This interim final rule revises SBA’s interim final rule published
in the Federal Register on April 15, 2020 by changing the eligibility requirement related to
felony convictions of applicants or owners of the applicant.
DATES: Effective Dates: The provisions in this interim final rule are effective [INSERT DATE
OF FILING AT THE OFFICE OF 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 SBA-2020-0036, 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, and local public health measures that are being taken to minimize the public’s exposure to
the virus. These measures, some of which are government-mandated, have been 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, have been implemented, resulting in a dramatic decrease in economic
activity as the public avoids malls, retail stores, and other businesses.
2
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. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of
2020 (Flexibility Act) (Pub. L. 116-142).
II. Comments and Immediate Effective Date
This interim final rule is effective without advance notice and public comment because
section 1114 of the CARES 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 grounds that that it would
be contrary to the public interest. Specifically, advance public notice and comment would defeat
the purpose of this interim final rule given that SBA’s authority to guarantee PPP loans expires
on June 30, 2020. 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
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rule is effective on or before date of filing, 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]. The SBA will consider these comments, comments received
on the interim final rule posted on SBA’s website April 2, 2020 (the First Interim Final Rule) and
published in the Federal Register on April 15, 2020, and the need for making any revisions as a
result of these comments.
III. Paycheck Protection Program – Additional Revisions to First Interim Final Rule (85
FR 20811)
Overview
The CARES Act was enacted to provide immediate assistance to individuals, families, and
businesses affected by the COVID-19 emergency. Among the provisions contained in the
CARES Act are provisions authorizing SBA to temporarily guarantee loans under a new 7(a)
loan program titled the “Paycheck Protection Program.” Loans guaranteed under the Paycheck
Protection Program (PPP) will be 100 percent guaranteed by SBA, and the full principal amount
of the loans may qualify for loan forgiveness. The purpose of this interim final rule is to make
changes to the First Interim Final Rule, posted on SBA’s website on April 2, 2020, and published
in the Federal Register on April 15, 2020 (85 FR 20811). The First Interim Final Rule, as
amended, should be interpreted consistent with the frequently asked questions (FAQs) regarding
the PPP that are posted on SBA’s website1 and the other interim final rules issued regarding the
PPP.2
1. Changes to the First Interim Final Rule
1
See https://www.sba.gov/document/support--faq-lenders-borrowers.
2
See https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.
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Eligibility Requirements
The First Interim Final Rule provided, among other things, that a PPP loan will not be
approved if an owner of 20 percent or more of the equity of the applicant has been convicted
of a felony within the last five years. After further consideration, the Administrator, in
consultation with the Secretary of the Treasury (the Secretary), has determined that a shorter
timeframe for felonies that do not involve fraud, bribery, embezzlement, or a false statement
in a loan application or an application for federal financial assistance is more consistent with
Congressional intent to provide relief to small businesses and also promotes the important
policies underlying the First Step Act of 2018 (Pub. L. 115-391). Therefore, Part III.2.b.iii.
of the First Interim Final Rule (85 FR 20811, 20812) is revised to read as follows:
b. Could I be ineligible even if I meet the eligibility requirements in (a) above?
You are ineligible for a PPP loan if, for example:
***
iii. An owner of 20 percent or more of the equity of the applicant is incarcerated,
on probation, on parole; presently subject to an indictment, criminal information,
arraignment, or other means by which formal criminal charges are brought in any
jurisdiction; or has been convicted of a felony involving fraud, bribery,
embezzlement, or a false statement in a loan application or an application for
federal financial assistance within the last five years or any other felony within
the last year; or
***
2. Additional Information
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SBA may provide further guidance, if needed, through SBA notices which 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 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.
This rule is necessary to implement Sections 1102 and 1106 of the CARES Act and the
Flexibility Act in order to provide economic relief to small businesses nationwide adversely
impacted under the COVID-19 Emergency Declaration. We anticipate that this rule will result in
substantial benefits to small businesses, their employees, and the communities they
serve. However, we lack data to estimate the effects of this rule.
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 effect but does have a limited
retroactive effect consistent with section 3(d) of the Flexibility Act.
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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
SBA has determined that this rule will require modification to the existing PPP
information collection that is approved under OMB Control Number 3245-0407 as an emergency
request until October 31, 2020. As discussed above, this rule amends the PPP eligibility
requirements regarding certain felony charges. As a result of these amendments, conforming
changes will be made to Question 6 of Form 2483, Borrower Application Form, and Section H
of Form 2484, Lender Application Form. SBA will submit the revisions to these forms to the
Office of Management and Budget for approval.
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
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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 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. Small Business Administration’s 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.
Authority: 15 U.S.C. 636(a)(36); Coronavirus Aid, Relief, and Economic Security Act, Pub. L.
116-136, Section 1114.
Jovita Carranza,
Administrator
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