U.S. Department of the Treasury, Paycheck Protection Program: "Interim Final Rule on Additional Eligibility Criteria and Requirements for Certain Pledges of Loans"
Summary
An interim final rule of the U.S. Small Business Administration in the Federal Register of Monday, April 20, 2020 (Docket Number SBA–2020–0020), on additional Paycheck Protection Program eligibility criteria and requirements for certain pledges of PPP loans. It is effective April 20, 2020, with comments due on or before May 20, 2020. The rule states that the Administrator, in consultation with the Secretary of the Treasury, determined that limiting a partnership and the partners to one PPP loan is necessary before the statutory deadline of June 30, 2020, and that letting partners apply as self-employed individuals would create unnecessary confusion. It explains how individuals with self-employment income who file a Form 1040 Schedule C calculate the maximum loan amount and closes with the signature block of Jovita Carranza, Administrator.
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Cite this document
“U.S. Department of the Treasury, Paycheck Protection Program: ‘Interim Final Rule on Additional Eligibility Criteria and Requirements for Certain Pledges of Loans.’”
Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/u-s-department-of-the-treasury-paycheck-protection-program-interim-fin-ac70525f12/
, SHA-256 b0769930e7fb2de271270f47de1f04494e05ce101c0395c5ca940075b9af9942.Full text
Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations 21747
Where: Tindoor = indoor chamber dry-bulb SMALL BUSINESS ADMINISTRATION
ṁSD = dry air mass flow rate of infiltration temperature, 80 °F.
air for single-duct portable air Tia_95 and Tia_83 = infiltration air dry-bulb 13 CFR Part 120
conditioners, in pounds per minute (lb/ temperatures for the two test conditions
[Docket Number SBA–2020–0020]
m). in Table 1 of this appendix, 95 °F and
ṁ95 and ṁ83 = dry air mass flow rate of 83 °F, respectively. RIN 3245–AH36
infiltration air for dual-duct portable air wia_95 and wia_83 = humidity ratios of the
conditioners, as calculated based on Business Loan Program Temporary
95 °F and 83 °F dry-bulb infiltration air,
testing according to the test conditions in Changes; Paycheck Protection
Table 1 of this appendix, in lb/m. 0.0141 and 0.01086 lbw/lbda,
Vco_SD, Vco_95, and Vco_83 = average respectively. Program—Additional Eligibility Criteria
volumetric flow rate of the condenser windoor = humidity ratio of the indoor chamber and Requirements for Certain Pledges
outlet air during cooling mode testing for air, 0.0112 lbw/lbda. of Loans
single-duct portable air conditioners; and 60 = conversion factor from minutes to hours.
AGENCY: U. S. Small Business
at the 95 °F and 83 °F dry-bulb outdoor Calculate the latent heat contribution of the
conditions for dual-duct portable air Administration.
infiltration air according to:
conditioners, respectively, in cubic feet ACTION: Interim final rule.
per minute (cfm). Ql_95 = ṁ × 60 × Hfg × (wia_95¥windoor)
Vci_95 and Vci_83 = average volumetric flow Ql_83 = ṁ × 60 × Hfg × (wia_83¥windoor) SUMMARY: On April 2, 2020, the U.S.
rate of the condenser inlet air during Where: Small Business Administration (SBA)
cooling mode testing at the 95 °F and Ql_95 and Ql_83 = latent heat added to the posted an interim final rule (the First
83 °F dry-bulb outdoor conditions for PPP Interim Final Rule) announcing the
room by infiltration air, calculated at the
dual-duct portable air conditioners, implementation of sections 1102 and
95 °F and 83 °F dry-bulb outdoor
respectively, in cfm. 1106 of the Coronavirus Aid, Relief, and
rco_SD, rco_95, and rco_83 = average density of conditions in Table 1 of this appendix,
in Btu/h. Economic Security Act (CARES Act or
the condenser outlet air during cooling
mode testing for single-duct portable air ṁ = mass flow rate of infiltration air, ṁSD or the Act). Section 1102 of the Act
conditioners, and at the 95 °F and 83 °F ṁ95 when calculating Ql_95 and ṁSD or temporarily adds a new program, titled
dry-bulb outdoor conditions for dual- ṁ83 when calculating Ql_83, in lb/m. the ‘‘Paycheck Protection Program,’’ to
duct portable air conditioners, Hfg = latent heat of vaporization for water the SBA’s 7(a) Loan Program. Section
respectively, in pounds mass per cubic vapor, 1061 Btu/lbm. 1106 of the Act provides for forgiveness
foot (lbm/ft3). wia_95 and wia_83 = humidity ratios of the of up to the full principal amount of
rci_95 and rci_83 = average density of the 95 °F and 83 °F dry-bulb infiltration air, qualifying loans guaranteed under the
condenser inlet air during cooling mode 0.0141 and 0.01086 lbw/lbda, Paycheck Protection Program (PPP). The
testing at the 95 °F and 83 °F dry-bulb PPP is intended to provide economic
respectively.
outdoor conditions for dual-duct
portable air conditioners, respectively, in windoor = humidity ratio of the indoor chamber relief to small businesses nationwide
lbm/ft3. air, 0.0112 lbw/lbda. adversely impacted by the Coronavirus
wco_SD, wco_95, and wco_83 = average humidity 60 = conversion factor from minutes to hours. Disease 2019 (COVID–19). This interim
ratio of condenser outlet air during The total heat contribution of the final rule supplements the First PPP
cooling mode testing for single-duct infiltration air is the sum of the sensible and Interim Final Rule with guidance for
portable air conditioners, and at the 95 °F latent heat: individuals with self-employment
and 83 °F dry-bulb outdoor conditions income who file a Form 1040, Schedule
for dual-duct portable air conditioners, Qinfiltration_95 = Qs_95 + Ql_95
Qinfiltration_83 = Qs_83 + Ql_83 C. This rule also addresses eligibility
respectively, in pounds mass of water issues for certain business concerns and
vapor per pounds mass of dry air (lbw/ Where:
lbda).
requirements for certain pledges of PPP
Qinfiltration_95 and Qinfiltration_83 = total loans. This interim final rule
wci_95 and wci_83 = average humidity ratio of infiltration air heat in cooling mode,
condenser inlet air during cooling mode supplements SBA’s implementation of
calculated at the 95 °F and 83 °F dry-bulb
testing at the 95 °F and 83 °F dry-bulb sections 1102 and 1106 of the Act and
outdoor conditions for dual-duct outdoor conditions in Table 1 of this requests public comment.
portable air conditioners, respectively, in appendix, in Btu/h.
DATES:
lbw/lbda. Qs_95 and Qs_83 = sensible heat added to the
room by infiltration air, calculated at the
Effective Date: This rule is effective
For single-duct and dual-duct portable air
95 °F and 83 °F dry-bulb outdoor
April 20, 2020.
conditioners, calculate the sensible
component of infiltration air heat conditions in Table 1 of this appendix,
Applicability Date: This interim final
contribution according to: in Btu/h.
rule applies to applications submitted
Qs_95 = ṁ × 60 × [(cp_da × (Tia_95¥Tindoor)) + Ql_95 and Ql_83 = latent heat added to the
under the Paycheck Protection Program
(cp_wv × (wia_95 × Tia_95¥windoor × Tindoor))] room by infiltration air, calculated at the through June 30, 2020, or until funds
Qs_83 = ṁ × 60 × [(cp_da × (Tia_83¥Tindoor)) + 95 °F and 83 °F dry-bulb outdoor made available for this purpose are
(cp_wv × (wia_83 × Tia_83¥windoor × Tindoor))] conditions in Table 1 of this appendix, exhausted.
Where: in Btu/h. Comment Date: Comments must be
Qs_95 and Qs_83 = sensible heat added to the received on or before May 20, 2020.
* * * * *
room by infiltration air, calculated at the ADDRESSES: You may submit comments,
[FR Doc. 2020–07733 Filed 4–17–20; 8:45 am]
95 °F and 83 °F dry-bulb outdoor identified by number SBA–2020–0020
BILLING CODE 6450–01–P
conditions in Table 1 of this appendix, through the Federal eRulemaking Portal:
in Btu/h. http://www.regulations.gov. Follow the
ṁ = dry air mass flow rate of infiltration air, instructions for submitting comments.
ṁSD or ṁ95 when calculating Qs_95 and
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SBA will post all comments on
ṁSD or ṁ83 when calculating Qs_83, in lb/
m.
www.regulations.gov. If you wish to
cp_da = specific heat of dry air, 0.24 Btu/lbm- submit confidential business
°F. information (CBI) as defined in the User
cp_wv = specific heat of water vapor, 0.444 Notice at www.regulations.gov, please
Btu/lbm-°F. send an email to ppp-ifr@sba.gov.
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21748 Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations
Highlight the information that you II. Comments and Immediate Effective 1. Individuals With Self-Employment
consider to be CBI and explain why you Date Income Who File a Form 1040,
believe SBA should hold this Schedule C
information as confidential. SBA will The intent of the Act is that SBA
a. I have income from self-
review the information and make the provide relief to America’s small
employment and file a Form 1040,
final determination whether it will businesses expeditiously. This intent,
Schedule C. Am I eligible for a PPP
publish the information. along with the dramatic decrease in Loan?
economic activity nationwide, provides You are eligible for a PPP loan if: (i)
FOR FURTHER INFORMATION CONTACT: A good cause for SBA to dispense with the You were in operation on February 15,
Call Center Representative at 833–572– 30-day delayed effective date provided 2020; (ii) you are an individual with
0502, or the local SBA Field Office; the in the Administrative Procedure Act. self-employment income (such as an
list of offices can be found at https:// Specifically, small businesses need to be independent contractor or a sole
www.sba.gov/tools/local-assistance/ informed on whether they are eligible to proprietor); (iii) your principal place of
districtoffices. apply for a loan, how to apply for a residence is in the United States; and
loan, and the terms of the loan under (iv) you filed or will file a Form 1040
SUPPLEMENTARY INFORMATION:
section 1102 of the Act as soon as Schedule C for 2019. However, if you
I. Background Information possible because the last day to apply are a partner in a partnership, you may
for and receive a loan is June 30, 2020. not submit a separate PPP loan
On March 13, 2020, President Trump The immediate effective date of this application for yourself as a self-
declared the ongoing Coronavirus interim final rule will benefit small employed individual. Instead, the self-
Disease 2019 (COVID–19) pandemic of businesses so that they can immediately employment income of general active
sufficient severity and magnitude to determine their eligibility and apply for partners may be reported as a payroll
warrant an emergency declaration for all the loan with a full understanding of cost, up to $100,000 annualized, on a
States, territories, and the District of loan terms and conditions. This interim PPP loan application filed by or on
Columbia. With the COVID–19 final rule is effective without advance behalf of the partnership. Partnerships
emergency, many small businesses notice and public comment because are eligible for PPP loans under the Act,
nationwide are experiencing economic and the Administrator has determined,
section 1114 of the Act authorizes SBA
hardship as a direct result of the in consultation with the Secretary of the
to issue regulations to implement Title
Federal, State, tribal, and local public Treasury (Secretary), that limiting a
I of the Act without regard to notice
health measures that are being taken to partnership and its partners (and an LLC
requirements. This rule is being issued filing taxes as a partnership) to one PPP
minimize the public’s exposure to the to allow for immediate implementation
virus. These measures, some of which loan is necessary to help ensure that as
of this program. Although this interim many eligible borrowers as possible
are government-mandated, are being final rule is effective immediately,
implemented nationwide and include obtain PPP loans before the statutory
comments are solicited from interested deadline of June 30, 2020. This
the closures of restaurants, bars, and members of the public on all aspects of
gyms. In addition, based on the advice limitation will allow lenders to more
the interim final rule, including section quickly process applications and lower
of public health officials, other III below. These comments must be the burdens of applying for
measures, such as keeping a safe submitted on or before May 20, 2020. partnerships/partners. The
distance from others or even stay-at- SBA will consider these comments and Administrator has further determined
home orders, are being implemented, the need for making any revisions as a that permitting partners to apply as self-
resulting in a dramatic decrease in result of these comments. employed individuals would create
economic activity as the public avoids unnecessary confusion regarding which
malls, retail stores, and other III. Additional Paycheck Protection entity, the partner or the partnership,
businesses. Program Eligibility Criteria and applies for partner and LLC member
On March 27, 2020, the President Requirements for Certain Pledges of income, and would generate loan
signed the Coronavirus Aid, Relief, and Loans proceeds use coordination and
Economic Security Act (the CARES Act Overview allocation issues. Rent, mortgage
or the Act) (Pub. L. 116–136) to provide interest, utilities, and other debt service
emergency assistance and health care The CARES Act was enacted to are generally incurred at the partnership
response for individuals, families, and provide immediate assistance to level, not partner level, so it is most
businesses affected by the coronavirus individuals, families, and organizations natural to provide the funds for these
pandemic. The Small Business affected by the COVID–19 emergency. expenses to the partnership, not
Administration (SBA) received funding Among the provisions contained in the individual partners. In addition, you
and authority through the Act to modify CARES Act are provisions authorizing should be aware that participation in
SBA to temporarily guarantee loans the PPP may affect your eligibility for
existing loan programs and establish a
under the Paycheck Protection Program state-administered unemployment
new loan program to assist small
(PPP). Loans under the PPP will be 100 compensation or unemployment
businesses nationwide adversely assistance programs, including the
impacted by the COVID–19 emergency. percent guaranteed by SBA, and the full
principal amount of the loans and any programs authorized by Title II, Subtitle
Section 1102 of the Act temporarily A of the CARES Act, or CARES Act
permits SBA to guarantee 100 percent of accrued interest may qualify for loan
Employee Retention Credits. SBA will
7(a) loans under a new program titled forgiveness. Additional information
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issue additional guidance for those
the ‘‘Paycheck Protection Program.’’ about the PPP is available in the First individuals with self-employment
Section 1106 of the Act provides for PPP Interim Final Rule (85 FR 20811) income who: (i) Were not in operation
forgiveness of up to the full principal and a second interim final rule (85 FR in 2019 but who were in operation on
amount of qualifying loans guaranteed 20817) posted April 3, 2020. February 15, 2020, and (ii) will file a
under the Paycheck Protection Program. Form 1040 Schedule C for 2020.
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Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations 21749
b. How do I calculate the maximum paid to any employee whose principal driving your business vehicle). You
amount I can borrow and what place of residence is outside the United must have claimed or be entitled to
documentation is required? States; and claim a deduction for such expenses on
How you calculate your maximum c. 2019 employer health insurance your 2019 Form 1040 Schedule C for
loan amount depends upon whether or contributions (health insurance them to be a permissible use during the
not you employ other individuals. If you component of Form 1040 Schedule C eight-week period following the first
have no employees, the following line 14), retirement contributions (Form disbursement of the loan (the ‘‘covered
methodology should be used to 1040 Schedule C line 19), and state and period’’). For example, if you did not
calculate your maximum loan amount: local taxes assessed on employee claim or are not entitled to claim
i. Step 1: Find your 2019 IRS Form compensation (primarily under state utilities expenses on your 2019 Form
1040 Schedule C line 31 net profit laws commonly referred to as the State 1040 Schedule C, you cannot use the
amount (if you have not yet filed a 2019 Unemployment Tax Act or SUTA from proceeds for utilities during the covered
return, fill it out and compute the state quarterly wage reporting forms). period.
value). If this amount is over $100,000, ii. Step 2: Calculate the average iv. Interest payments on any other
reduce it to $100,000. If this amount is monthly amount (divide the amount debt obligations that were incurred
zero or less, you are not eligible for a from Step 1 by 12). before February 15, 2020 (such amounts
PPP loan. iii. Step 3: Multiply the average are not eligible for PPP loan
ii. Step 2: Calculate the average monthly amount from Step 2 by 2.5. forgiveness).
monthly net profit amount (divide the iv. Step 4: Add the outstanding v. Refinancing an SBA EIDL loan
amount from Step 1 by 12). amount of any EIDL made between made between January 31, 2020 and
iii. Step 3: Multiply the average January 31, 2020 and April 3, 2020 that April 3, 2020 (maturity will be reset to
monthly net profit amount from Step 2 you seek to refinance, less the amount PPP’s maturity of two years). If you
by 2.5. of any advance under an EIDL COVID– received an SBA EIDL loan from January
iv. Step 4: Add the outstanding 19 loan (because it does not have to be 31, 2020 through April 3, 2020, you can
amount of any Economic Injury Disaster repaid). apply for a PPP loan. If your EIDL loan
Loan (EIDL) made between January 31, You must supply your 2019 Form was not used for payroll costs, it does
2020 and April 3, 2020 that you seek to 1040 Schedule C, Form 941 (or other tax not affect your eligibility for a PPP loan.
refinance, less the amount of any forms or equivalent payroll processor If your EIDL loan was used for payroll
advance under an EIDL COVID–19 loan records containing similar information) costs, your PPP loan must be used to
(because it does not have to be repaid). and state quarterly wage unemployment refinance your EIDL loan. Proceeds from
Regardless of whether you have filed insurance tax reporting forms from each any advance up to $10,000 on the EIDL
a 2019 tax return with the IRS, you must quarter in 2019 or equivalent payroll loan will be deducted from the loan
provide the 2019 Form 1040 Schedule C processor records, along with evidence forgiveness amount on the PPP loan.
with your PPP loan application to of any retirement and health insurance The Administrator, in consultation
substantiate the applied-for PPP loan contributions, if applicable. A payroll with the Secretary, determined that it is
amount and a 2019 IRS Form 1099– statement or similar documentation appropriate to limit self-employed
MISC detailing nonemployee from the pay period that covered individuals’ (who file a Form 1040
compensation received (box 7), invoice, February 15, 2020 must be provided to Schedule C) use of loan proceeds to
bank statement, or book of record that establish you were in operation on those types of allowable uses for which
establishes you are self-employed. You February 15, 2020. the borrower made expenditures in
must provide a 2020 invoice, bank d. How can PPP loans be used by 2019. The Administrator has
statement, or book of record to establish individuals with income from self- determined that this limitation on self-
you were in operation on or around employment who file a 2019 Form 1040, employed individuals who file a Form
February 15, 2020. Schedule C? 1040 Schedule C is consistent with the
If you have employees, the following The proceeds of a PPP loan are to be borrower certification required by the
methodology should be used to used for the following. Act; specifically, that the PPP loan is
calculate your maximum loan amount: i. Owner compensation replacement, necessary ‘‘to support the ongoing
i. Step 1: Compute 2019 payroll by calculated based on 2019 net profit as operations’’ of the borrower. The
adding the following: described in Paragraph 1.b. above. Administrator and the Secretary thus
a. Your 2019 Form 1040 Schedule C ii. Employee payroll costs (as defined believe that this limitation is consistent
line 31 net profit amount (if you have in the First PPP Interim Final Rule) for with the structure of the Act to maintain
not yet filed a 2019 return, fill it out and employees whose principal place of existing operations and payroll and not
compute the value), up to $100,000 residence is in the United States, if you for business expansion. This limitation
annualized, if this amount is over have employees. on the use of PPP loan proceeds will
$100,000, reduce it to $100,000, if this iii. Mortgage interest payments (but also help to ensure that the finite
amount is less than zero, set this not mortgage prepayments or principal appropriations available for these loans
amount at zero; payments) on any business mortgage are directed toward maintaining existing
b. 2019 gross wages and tips paid to obligation on real or personal property operations and payroll, as each loan that
your employees whose principal place (e.g., the interest on your mortgage for is made depletes the appropriation.
of residence is in the United States the warehouse you purchased to store Finally, although the Act makes
computed using 2019 IRS Form 941 business equipment or the interest on an businesses in operation on February 15,
Taxable Medicare wages & tips (line auto loan for a vehicle you use to 2020 eligible for PPP loans, the
5c—column 1) from each quarter plus perform your business), business rent Administrator, in consultation with the
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any pre-tax employee contributions for payments (e.g., the warehouse where Secretary, has determined that self-
health insurance or other fringe benefits you store business equipment or the employed individuals will need to rely
excluded from Taxable Medicare wages vehicle you use to perform your on their 2019 Form 1040 Schedule C,
& tips; subtract any amounts paid to any business), and business utility payments which provides verifiable
individual employee in excess of (e.g., the cost of electricity in the documentation on expenses between
$100,000 annualized and any amounts warehouse you rent or gas you use January 1, 2019 and December 31, 2019.
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21750 Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations
For individuals with income from self- v. utility payments under service g. What documentation will I be
employment from 2019 for which they agreements dated before February 15, required to submit to my lender with my
have filed or will file a 2019 Form 1040 2020 to the extent they are deductible request for loan forgiveness?
Schedule C, expenses incurred between on Form 1040 Schedule C (business In addition to the borrower
January 1, 2020 and February 14, 2020 utility payments). certification required by Section
may not be considered because of the The Administrator, in consultation 1106(e)(3) of the Act, to substantiate
lack of verifiable documentation on with the Secretary, has determined that your request for loan forgiveness, if you
expenses in this period. SBA will issue it is appropriate to limit the forgiveness have employees, you should submit
additional guidance for those of owner compensation replacement for Form 941 and state quarterly wage
individuals with self-employment individuals with self-employment unemployment insurance tax reporting
income who: (i) Were not in operation income who file a Schedule C to eight forms or equivalent payroll processor
in 2019 but who were in operation on weeks’ worth (8/52) of 2019 net profit. records that best correspond to the
February 15, 2020, and (ii) will file a This is most consistent with the covered period (with evidence of any
Form 1040 Schedule C for 2020. structure of the Act and its overarching retirement and health insurance
e. Are there any other restrictions on focus on keeping workers paid, and will contributions). Whether or not you have
how I can use PPP loan proceeds? prevent windfalls that Congress did not employees, you must submit evidence
Yes. At least 75 percent of the PPP intend. of business rent, business mortgage
loan proceeds shall be used for payroll Congress determined that the interest payments on real or personal
costs. For purposes of determining the maximum loan amount is based on 2.5 property, or business utility payments
percentage of use of proceeds for payroll months of the borrower’s payroll during during the covered period if you used
costs (but not for forgiveness purposes), the one-year period preceding the loan. loan proceeds for those purposes.
Congress also determined that the The 2019 Form 1040 Schedule C that
the amount of any refinanced EIDL will
maximum amount of loan forgiveness is was provided at the time of the PPP loan
be included. The rationale for this 75
based on the borrower’s eligible application must be used to determine
percent floor is contained in the First
payments—i.e., the sum of payroll costs the amount of net profit allocated to the
PPP Interim Final Rule.
and certain overhead expenses—over owner for the eight-week covered
f. What amounts shall be eligible for the eight-week period following the date period. The Administrator, in
forgiveness? of loan disbursement. For individuals consultation with the Secretary,
The amount of loan forgiveness can be with self-employment income who file determined that for purposes of loan
up to the full principal amount of the a Schedule C, the Administrator, in forgiveness it is appropriate to require
loan plus accrued interest. The actual consultation with the Secretary, has self-employed individuals to rely on the
amount of loan forgiveness will depend, determined that it is appropriate to limit 2019 Form 1040 Schedule C to
in part, on the total amount spent over loan forgiveness to a proportionate determine the amount of net profit
the covered period on: eight-week share of 2019 net profit, as allocated to the owner during the
i. Payroll costs including salary, reflected in the individual’s 2019 Form covered period for the reasons described
wages, and tips, up to $100,000 of 1040 Schedule C. This is because many in Paragraph 1.d. above.
annualized pay per employee (for eight self-employed individuals have few of
weeks, a maximum of $15,385 per the overhead expenses that qualify for 2. Clarification Regarding Eligible
individual), as well as covered benefits forgiveness under the Act. For example, Businesses
for employees (but not owners), many such individuals operate out of a. Are eligible businesses owned by
including health care expenses, either their homes, vehicles, or sheds directors or shareholders of a PPP
retirement contributions, and state taxes and thus do not incur qualifying Lender permitted to apply for a PPP
imposed on employee payroll paid by mortgage interest, rent, or utility Loan through the Lender with which
the employer (such as unemployment payments. As a result, most of their they are associated?
insurance premiums); receipts will constitute net income. The Administrator recognizes that,
ii. owner compensation replacement, Allowing such a self-employed unlike other SBA loan programs, the
calculated based on 2019 net profit as individual to treat the full amount of a financial terms for PPP Loans are
described in Paragraph 1.b. above, with PPP loan as net income would result in uniform for all borrowers, and the
forgiveness of such amounts limited to a windfall. The entire amount of the standard underwriting process does not
eight weeks’ worth (8/52) of 2019 net PPP loan (a maximum of 2.5 times apply because no creditworthiness
profit, but excluding any qualified sick monthly payroll costs) would be assessment is required for PPP Loans.
leave equivalent amount for which a forgiven even though Congress designed Consequently, there is no meaningful
credit is claimed under section 7002 of this program to limit forgiveness to risk of underwriting bias or below-
the Families First Coronavirus Response certain eligible expenses incurred in an market rates and terms. The
Act (FFCRA) (Pub. L. 116–127) or eight-week covered period. Limiting Administrator also recognizes that many
qualified family leave equivalent forgiveness to eight weeks of net profit directors and equity holders of PPP
amount for which a credit is claimed from the owner’s 2019 Form 1040 Lenders are owners of unrelated
under section 7004 of FFCRA; Schedule C is consistent with the businesses. For those reasons, the
iii. payments of interest on mortgage structure of the Act, which provides for Administrator, in consultation with the
obligations on real or personal property loan forgiveness based on eight weeks of Secretary, has determined that SBA
incurred before February 15, 2020, to expenditures. This limitation will also regulations (including 13 CFR 120.110
the extent they are deductible on Form help to ensure that the finite and 120.140) shall not apply to prohibit
1040 Schedule C (business mortgage appropriations are directed toward an otherwise eligible business owned
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payments); payroll protection, consistent with the (in whole or part) by an outside director
iv. rent payments on lease agreements Act’s central objective. Finally, 75 or holder of a less than 30 percent
in force before February 15, 2020, to the percent of the amount forgiven must be equity interest in a PPP Lender from
extent they are deductible on Form 1040 attributable to payroll costs for the obtaining a PPP loan from the PPP
Schedule C (business rent payments); reasons specified in the First PPP Lender on whose board the director
and Interim Final Rule. serves or in which the equity owner
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Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations 21751
holds an interest, provided that the No. Pursuant to SBA regulations at 13 Paperwork Reduction Act, 44 U.S.C.
eligible business owned by the director CFR 120.435(d) and (e), a pledge of 7(a) Chapter 35
or equity holder follows the same loans to a FRB or FHLB does not require SBA has determined that this rule
process as any similarly situated SBA’s prior written consent or notice to will not impose new or modify existing
customer or account holder of the SBA. SBA, in consultation with recordkeeping or reporting requirements
Lender. Favoritism by the Lender in Treasury, has determined that for under the Paperwork Reduction Act.
processing time or prioritization of the purposes of loans made under the PPP,
director’s or equity holder’s PPP the additional requirements set forth in Regulatory Flexibility Act (RFA)
application is prohibited. The 120.434 shall also not apply. This The Regulatory Flexibility Act (RFA)
Administrator cautions, however, that would mean, for example, that SBA generally requires that when an agency
Lenders should comply with all other would not have to approve loan issues a proposed rule, or a final rule
applicable state and federal regulations documents or require a multi-party pursuant to section 553(b) of the APA or
concerning loans to associates of the agreement among SBA, the lender, and another law, the agency must prepare a
Lender. Lenders should also consult others. regulatory flexibility analysis that meets
their own internal policies concerning 4. Additional Information the requirements of the RFA and
lending to individuals or entities publish such analysis in the Federal
associated with the Lender. SBA may provide further guidance, if
Register. 5 U.S.C. 603, 604. Specifically,
The foregoing paragraph does not needed, through SBA notices that will
the RFA normally requires agencies to
apply to a director or owner who is also be posted on SBA’s website at
www.sba.gov. Questions on the describe the impact of a rulemaking on
an officer or key employee of the PPP small entities by providing a regulatory
Paycheck Protection Program may be
Lender. Officers and key employees of impact analysis. Such analysis must
directed to the Lender Relations
a PPP Lender may obtain a PPP Loan address the consideration of regulatory
Specialist in the local SBA Field Office.
from a different lender, but not from the options that would lessen the economic
The local SBA Field Office may be
PPP Lender with which they are effect of the rule on small entities. The
found at https://www.sba.gov/tools/
associated. SBA also reminds Lenders RFA defines a ‘‘small entity’’ as (1) a
local-assistance/districtoffices.
that the ‘‘Authorized Lender Official’’ proprietary firm meeting the size
for each PPP Loan is subject to the Compliance With Executive Orders standards of the Small Business
limitations described in the Lender 12866, 12988, 13132, 13563, and 13771, Administration (SBA); (2) a nonprofit
Application Form, which states in the Paperwork Reduction Act (44 organization that is not dominant in its
relevant part: ‘‘Neither the undersigned U.S.C. Ch. 35), and the Regulatory field; or (3) a small government
Authorized Lender Official, nor such Flexibility Act (5 U.S.C. 601–612) jurisdiction with a population of less
individual’s spouse or children, has a Executive Orders 12866, 13563, and than 50,000. 5 U.S.C. 601(3)–(6). Except
financial interest in the Applicant 13771 for such small government jurisdictions,
[Borrower].’’ neither State nor local governments are
b. Are businesses that receive revenue This interim final rule is ‘‘small entities.’’ Similarly, for purposes
from legal gaming eligible for a PPP economically significant for the of the RFA, individual persons are not
Loan? purposes of Executive Orders 12866 and small entities. The requirement to
13563, and is considered a major rule conduct a regulatory impact analysis
A business that is otherwise eligible
under the Congressional Review Act. does not apply if the head of the agency
for a PPP Loan is not rendered ineligible
SBA, however, is proceeding under the ‘‘certifies that the rule will not, if
due to its receipt of legal gaming
emergency provision at Executive Order promulgated, have a significant
revenues if the existing standard in 13
12866 Section 6(a)(3)(D) based on the
CFR 120.110(g) is met or the following economic impact on a substantial
need to move expeditiously to mitigate
two conditions are satisfied: (a) The number of small entities.’’ 5 U.S.C.
the current economic conditions arising
business’s legal gaming revenue (net of 605(b). The agency must, however,
from the COVID–19 emergency. This
payouts but not other expenses) did not publish the certification in the Federal
rule’s designation under Executive
exceed $1 million in 2019; and (b) legal Register at the time of publication of the
Order 13771 will be informed by public
gaming revenue (net of payouts but not rule, ‘‘along with a statement providing
comment.
other expenses) comprised less than 50 the factual basis for such certification.’’
percent of the business’s total revenue Executive Order 12988 If the agency head has not waived the
in 2019. Businesses that received illegal SBA has drafted this rule, to the requirements for a regulatory flexibility
gaming revenue are categorically extent practicable, in accordance with analysis in accordance with the RFA’s
ineligible. The Administrator, in the standards set forth in section 3(a) waiver provision, and no other RFA
consultation with the Secretary, believes and 3(b)(2) of Executive Order 12988, to exception applies, the agency must
this test appropriately balances the minimize litigation, eliminate prepare the regulatory flexibility
longstanding policy reasons for limiting ambiguity, and reduce burden. The rule analysis and publish it in the Federal
lending to businesses primarily and has no preemptive or retroactive effect. Register at the time of promulgation or,
substantially engaged in gaming activity if the rule is promulgated in response to
with the policy aim of making the PPP Executive Order 13132 an emergency that makes timely
Loan available to a broad segment of SBA has determined that this rule compliance impracticable, within 180
U.S. businesses and their employees. will not have substantial direct effects days of publication of the final rule. 5
on the States, on the relationship U.S.C. 604(a), 608(b). Rules that are
3. Requirements for Certain Pledges of
between the National Government and exempt from notice and comment are
PPP Loans
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the States, or on the distribution of also exempt from the RFA requirements,
Do the requirements for loan pledges power and responsibilities among the including conducting a regulatory
under 13 CFR 120.434 apply to PPP various layers of government. Therefore, flexibility analysis, when among other
loans pledged for borrowings from a SBA has determined that this rule has things the agency for good cause finds
Federal Reserve Bank (FRB) or advances no federalism implications warranting that notice and public procedure are
by a Federal Home Loan Bank (FHLB)? preparation of a federalism assessment. impracticable, unnecessary, or contrary
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21752 Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations
to the public interest. SBA Office of DEPARTMENT OF TRANSPORTATION the internet at https://
Advocacy guide: How to Comply with www.regulations.gov by searching for
the Regulatory Flexibility Act. Ch.1. p.9. Federal Aviation Administration and locating Docket No. FAA–2019–
Accordingly, SBA is not required to 1074.
conduct a regulatory flexibility analysis. 14 CFR Part 39
Examining the AD Docket
[Docket No. FAA–2019–1074; Product
List of Subjects in 13 CFR Part 120 You may examine the AD docket on
Identifier 2019–NM–191–AD; Amendment
39–19900; AD 2020–07–21] the internet at https://
Community development, www.regulations.gov by searching for
Environmental protection, Equal RIN 2120–AA64 and locating Docket No. FAA–2019–
employment opportunity, Exports, Loan 1074; or in person at Docket Operations
programs—business, Reporting and Airworthiness Directives; Yaborã
between 9 a.m. and 5 p.m., Monday
recordkeeping requirements, Small Indústria Aeronáutica S.A. (Type
through Friday, except Federal holidays.
businesses. Certificate Previously Held by Embraer
The AD docket contains this final rule,
S.A.) Airplanes
For the reasons stated above, the the regulatory evaluation, any
Small Business Administration amends AGENCY: Federal Aviation comments received, and other
13 CFR part 120 as set forth below. Administration (FAA), Department of information. The address for Docket
Transportation (DOT). Operations is U.S. Department of
PART 120—BUSINESS LOANS ACTION: Final rule. Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
SUMMARY: The FAA is adopting a new W12–140, 1200 New Jersey Avenue SE,
■ 1. The authority citation for part 120
airworthiness directive (AD) for certain Washington, DC 20590.
continues to read as follows:
Yaborã Indústria Aeronáutica S.A. FOR FURTHER INFORMATION CONTACT:
Authority: 15 U.S.C. 634(b)(6), (b)(7), Model ERJ–170 airplanes and Model ERJ Krista Greer, Aerospace Engineer,
(b)(14), (h), and note, 636(a), (h) and (m), and 190–100 STD, –100 LR, –100 ECJ, –100 International Section, Transport
note, 650, 657t, and note, 657u, and note, IGW, –200 STD, –200 LR, and –200 IGW Standards Branch, FAA, 2200 South
687(f), 696(3) and (7), and note, and 697(a) airplanes. This AD was prompted by a 216th St., Des Moines, WA 98198;
and (e), and note. determination that certain main landing telephone and fax 206–231–3221; email
gear (MLG) aft pintle pins repaired krista.greer@faa.gov.
■ 2. Revise § 120.435 to read as follows:
using a sulphamate nickel plating have
SUPPLEMENTARY INFORMATION:
§ 120.435 Which loan pledges do not a life limit that is less than the certified
require notice to or consent by SBA? life limit. This AD requires a one-time Discussion
records review or a general visual The ANAC, which is the aviation
(a) Notwithstanding the provisions of inspection (GVI) of the MLG aft pintle
§ 120.434(e), 7(a) loans may be pledged authority for Brazil, has issued Brazilian
pins to determine if certain repairs were AD 2019–11–07, effective November 18,
for the following purposes without done, and replacement of certain MLG
notice to or consent by SBA: 2019 (‘‘Brazilian AD 2019–11–07’’) (also
aft pintle pins with serviceable MLG aft referred to as the Mandatory Continuing
(1) Treasury tax and loan accounts; pintle pins, as specified in an Agência Airworthiness Information, or ‘‘the
(2) The deposit of public funds; Nacional de Aviação Civil (ANAC) MCAI’’), to correct an unsafe condition
Brazilian AD, which is incorporated by for certain Yaborã Indústria Aeronáutica
(3) Uninvested trust funds; reference. The FAA is issuing this AD S.A. Model ERJ 170–100 LR, –100 STD,
(4) Borrowings from a Federal Reserve to address the unsafe condition on these –100 SE, and –100 SU airplanes; Model
Bank; or products. ERJ 170–200 LR, –200 SU, –200 STD,
(5) Advances by a Federal Home Loan DATES: This AD is effective May 26, and –200 LL airplanes; and Model ERJ
Bank. 2020. 190–100 STD, –100 LR, –100 ECJ, –100
The Director of the Federal Register IGW, –100 SR, –200 STD, –200 LR, and
(b) For purposes of the Paycheck approved the incorporation by reference
Protection Program (PPP), the other –200 IGW airplanes. Model ERJ 190–100
of a certain publication listed in this AD SR airplanes are not certified by the
provisions of § 120.434 shall also not as of May 26, 2020. FAA and are not included on the U.S.
apply to PPP loans pledged under
ADDRESSES: For the material type certificate data sheet; this AD,
paragraph (a)(4) or (5) of this section.
incorporated by reference (IBR) in this therefore, does not include those
Jovita Carranza, AD contact National Civil Aviation airplanes in the applicability.
Administrator. Agency, Aeronautical Products The FAA issued a notice of proposed
[FR Doc. 2020–08257 Filed 4–17–20; 8:45 am]
Certification Branch (GGCP), Rua rulemaking (NPRM) to amend 14 CFR
Laurent Martins, n° 209, Jardim part 39 by adding an AD that would
BILLING CODE P
Esplanada, CEP 12242–431—São José apply to certain Yaborã Indústria
dos Campos—SP, Brazil; telephone 55 Aeronáutica S.A. Model ERJ 170–100
(12) 3203–6600; email pac@anac.gov.br; LR, –100 STD, –100 SE, and –100 SU
internet www.anac.gov.br/en/. You may airplanes; Model ERJ 170–200 LR, –200
find this IBR material on the ANAC SU, –200 STD, and –200 LL airplanes;
website at https://sistemas.anac.gov.br/ and Model ERJ 190–100 STD, –100 LR,
certificacao/DA/DAE.asp. You may –100 ECJ, –100 IGW, –200 STD, –200
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view this IBR material at the FAA, LR, and –200 IGW airplanes. The NPRM
Transport Standards Branch, 2200 published in the Federal Register on
South 216th St., Des Moines, WA. For January 17, 2020 (85 FR 2909). The
information on the availability of this NPRM was prompted by a
material at the FAA, call 206–231–3195. determination that certain MLG aft
It is also available in the AD docket on pintle pins repaired using a sulphamate
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