[Federal Register Volume 85, Number 76 (Monday, April 20, 2020)]
[Rules and Regulations]
[Pages 21747-21752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08257]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket Number SBA-2020-0020]
RIN 3245-AH36
Business Loan Program Temporary Changes; Paycheck Protection
Program--Additional Eligibility Criteria and Requirements for Certain
Pledges of Loans
AGENCY: U. S. Small Business Administration.
ACTION: Interim final rule.
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SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA)
posted an interim final rule (the First PPP Interim Final Rule)
announcing the implementation of sections 1102 and 1106 of the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the
Act). Section 1102 of the Act temporarily adds a new program, titled
the ``Paycheck Protection Program,'' to the SBA's 7(a) Loan 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 (PPP). The PPP is intended to provide economic
relief to small businesses nationwide adversely impacted by the
Coronavirus Disease 2019 (COVID-19). This interim final rule
supplements the First PPP Interim Final Rule with guidance for
individuals with self-employment income who file a Form 1040, Schedule
C. This rule also addresses eligibility issues for certain business
concerns and requirements for certain pledges of PPP loans. This
interim final rule supplements SBA's implementation of sections 1102
and 1106 of the Act and requests public comment.
DATES:
Effective Date: This rule is effective April 20, 2020.
Applicability Date: This interim final rule applies to applications
submitted under the Paycheck Protection Program through June 30, 2020,
or until funds made available for this purpose are exhausted.
Comment Date: Comments must be received on or before May 20, 2020.
ADDRESSES: You may submit comments, identified by number SBA-2020-0020
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 [email protected].
[[Page 21748]]
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 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.
II. Comments and Immediate Effective Date
The intent of the Act is that SBA provide relief to America's small
businesses expeditiously. This intent, along with the dramatic decrease
in economic activity nationwide, provides good cause for SBA to
dispense with the 30-day delayed effective date provided in the
Administrative Procedure Act. Specifically, small businesses need to be
informed on whether they are eligible to apply for a loan, how to apply
for a loan, and the terms of the loan under section 1102 of the Act as
soon as possible 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 small businesses so that they can immediately
determine their eligibility and apply for the loan with a full
understanding of loan terms and conditions. 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. This rule is being
issued to allow for immediate implementation of this program. 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 May 20, 2020. SBA will consider these comments
and the need for making any revisions as a result of these comments.
III. Additional Paycheck Protection Program Eligibility Criteria and
Requirements for Certain Pledges of Loans
Overview
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 will be 100
percent guaranteed by SBA, and the full principal amount of the loans
and any accrued interest may qualify for loan forgiveness. Additional
information about the PPP is available in the First PPP Interim Final
Rule (85 FR 20811) and a second interim final rule (85 FR 20817) posted
April 3, 2020.
1. Individuals With Self-Employment Income Who File a Form 1040,
Schedule C
a. I have income from self-employment and file a Form 1040,
Schedule C. Am I eligible for a PPP Loan?
You are eligible for a PPP loan if: (i) You were in operation on
February 15, 2020; (ii) you are an individual with self-employment
income (such as an independent contractor or a sole proprietor); (iii)
your principal place of residence is in the United States; and (iv) you
filed or will file a Form 1040 Schedule C for 2019. However, if you are
a partner in a partnership, you may not submit a separate PPP loan
application for yourself as a self-employed individual. Instead, the
self-employment income of general active partners may be reported as a
payroll cost, up to $100,000 annualized, on a PPP loan application
filed by or on behalf of the partnership. Partnerships are eligible for
PPP loans under the Act, and the Administrator has determined, in
consultation with the Secretary of the Treasury (Secretary), that
limiting a partnership and its partners (and an LLC filing taxes as a
partnership) to one PPP loan is necessary to help ensure that as many
eligible borrowers as possible obtain PPP loans before the statutory
deadline of June 30, 2020. This limitation will allow lenders to more
quickly process applications and lower the burdens of applying for
partnerships/partners. The Administrator has further determined that
permitting partners to apply as self-employed individuals would create
unnecessary confusion regarding which entity, the partner or the
partnership, applies for partner and LLC member income, and would
generate loan proceeds use coordination and allocation issues. Rent,
mortgage interest, utilities, and other debt service are generally
incurred at the partnership level, not partner level, so it is most
natural to provide the funds for these expenses to the partnership, not
individual partners. In addition, you should be aware that
participation in the PPP may affect your eligibility for state-
administered unemployment compensation or unemployment assistance
programs, including the programs authorized by Title II, Subtitle A of
the CARES Act, or CARES Act Employee Retention Credits. SBA will issue
additional guidance for those individuals with self-employment income
who: (i) Were not in operation in 2019 but who were in operation on
February 15, 2020, and (ii) will file a Form 1040 Schedule C for 2020.
[[Page 21749]]
b. How do I calculate the maximum amount I can borrow and what
documentation is required?
How you calculate your maximum loan amount depends upon whether or
not you employ other individuals. If you have no employees, the
following methodology should be used to calculate your maximum loan
amount:
i. Step 1: Find your 2019 IRS Form 1040 Schedule C line 31 net
profit amount (if you have not yet filed a 2019 return, fill it out and
compute the value). If this amount is over $100,000, reduce it to
$100,000. If this amount is zero or less, you are not eligible for a
PPP loan.
ii. Step 2: Calculate the average monthly net profit amount (divide
the amount from Step 1 by 12).
iii. Step 3: Multiply the average monthly net profit amount from
Step 2 by 2.5.
iv. Step 4: Add the outstanding amount of any Economic Injury
Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020
that you seek to refinance, less the amount of any advance under an
EIDL COVID-19 loan (because it does not have to be repaid).
Regardless of whether you have filed a 2019 tax return with the
IRS, you must provide the 2019 Form 1040 Schedule C with your PPP loan
application to substantiate the applied-for PPP loan amount and a 2019
IRS Form 1099-MISC detailing nonemployee compensation received (box 7),
invoice, bank statement, or book of record that establishes you are
self-employed. You must provide a 2020 invoice, bank statement, or book
of record to establish you were in operation on or around February 15,
2020.
If you have employees, the following methodology should be used to
calculate your maximum loan amount:
i. Step 1: Compute 2019 payroll by adding the following:
a. Your 2019 Form 1040 Schedule C line 31 net profit amount (if you
have not yet filed a 2019 return, fill it out and compute the value),
up to $100,000 annualized, if this amount is over $100,000, reduce it
to $100,000, if this amount is less than zero, set this amount at zero;
b. 2019 gross wages and tips paid to your employees whose principal
place of residence is in the United States computed using 2019 IRS Form
941 Taxable Medicare wages & tips (line 5c--column 1) from each quarter
plus any pre-tax employee contributions for health insurance or other
fringe benefits excluded from Taxable Medicare wages & tips; subtract
any amounts paid to any individual employee in excess of $100,000
annualized and any amounts paid to any employee whose principal place
of residence is outside the United States; and
c. 2019 employer health insurance contributions (health insurance
component of Form 1040 Schedule C line 14), retirement contributions
(Form 1040 Schedule C line 19), and state and local taxes assessed on
employee compensation (primarily under state laws commonly referred to
as the State Unemployment Tax Act or SUTA from state quarterly wage
reporting forms).
ii. Step 2: Calculate the average monthly amount (divide the amount
from Step 1 by 12).
iii. Step 3: Multiply the average monthly amount from Step 2 by
2.5.
iv. Step 4: Add the outstanding amount of any EIDL made between
January 31, 2020 and April 3, 2020 that you seek to refinance, less the
amount of any advance under an EIDL COVID-19 loan (because it does not
have to be repaid).
You must supply your 2019 Form 1040 Schedule C, Form 941 (or other
tax forms or equivalent payroll processor records containing similar
information) and state quarterly wage unemployment insurance tax
reporting forms from each quarter in 2019 or equivalent payroll
processor records, along with evidence of any retirement and health
insurance contributions, if applicable. A payroll statement or similar
documentation from the pay period that covered February 15, 2020 must
be provided to establish you were in operation on February 15, 2020.
d. How can PPP loans be used by individuals with income from self-
employment who file a 2019 Form 1040, Schedule C?
The proceeds of a PPP loan are to be used for the following.
i. Owner compensation replacement, calculated based on 2019 net
profit as described in Paragraph 1.b. above.
ii. Employee payroll costs (as defined in the First PPP Interim
Final Rule) for employees whose principal place of residence is in the
United States, if you have employees.
iii. Mortgage interest payments (but not mortgage prepayments or
principal payments) on any business mortgage obligation on real or
personal property (e.g., the interest on your mortgage for the
warehouse you purchased to store business equipment or the interest on
an auto loan for a vehicle you use to perform your business), business
rent payments (e.g., the warehouse where you store business equipment
or the vehicle you use to perform your business), and business utility
payments (e.g., the cost of electricity in the warehouse you rent or
gas you use driving your business vehicle). You must have claimed or be
entitled to claim a deduction for such expenses on your 2019 Form 1040
Schedule C for them to be a permissible use during the eight-week
period following the first disbursement of the loan (the ``covered
period''). For example, if you did not claim or are not entitled to
claim utilities expenses on your 2019 Form 1040 Schedule C, you cannot
use the proceeds for utilities during the covered period.
iv. Interest payments on any other debt obligations that were
incurred before February 15, 2020 (such amounts are not eligible for
PPP loan forgiveness).
v. Refinancing an SBA EIDL loan made between January 31, 2020 and
April 3, 2020 (maturity will be reset to PPP's maturity of two years).
If you received an SBA EIDL loan from January 31, 2020 through April 3,
2020, you can apply for a PPP loan. If your EIDL loan was not used for
payroll costs, it does not affect your eligibility for a PPP loan. If
your EIDL loan was used for payroll costs, your PPP loan must be used
to refinance your EIDL loan. Proceeds from any advance up to $10,000 on
the EIDL loan will be deducted from the loan forgiveness amount on the
PPP loan.
The Administrator, in consultation with the Secretary, determined
that it is appropriate to limit self-employed individuals' (who file a
Form 1040 Schedule C) use of loan proceeds to those types of allowable
uses for which the borrower made expenditures in 2019. The
Administrator has determined that this limitation on self-employed
individuals who file a Form 1040 Schedule C is consistent with the
borrower certification required by the Act; specifically, that the PPP
loan is necessary ``to support the ongoing operations'' of the
borrower. The Administrator and the Secretary thus believe that this
limitation is consistent with the structure of the Act to maintain
existing operations and payroll and not for business expansion. This
limitation on the use of PPP loan proceeds will also help to ensure
that the finite appropriations available for these loans are directed
toward maintaining existing operations and payroll, as each loan that
is made depletes the appropriation. Finally, although the Act makes
businesses in operation on February 15, 2020 eligible for PPP loans,
the Administrator, in consultation with the Secretary, has determined
that self-employed individuals will need to rely on their 2019 Form
1040 Schedule C, which provides verifiable documentation on expenses
between January 1, 2019 and December 31, 2019.
[[Page 21750]]
For individuals with income from self-employment from 2019 for which
they have filed or will file a 2019 Form 1040 Schedule C, expenses
incurred between January 1, 2020 and February 14, 2020 may not be
considered because of the lack of verifiable documentation on expenses
in this period. SBA will issue additional guidance for those
individuals with self-employment income who: (i) Were not in operation
in 2019 but who were in operation on February 15, 2020, and (ii) will
file a Form 1040 Schedule C for 2020.
e. Are there any other restrictions on how I can use PPP loan
proceeds?
Yes. At least 75 percent of the PPP loan proceeds shall be used for
payroll costs. For purposes of determining the percentage of use of
proceeds for payroll costs (but not for forgiveness purposes), the
amount of any refinanced EIDL will be included. The rationale for this
75 percent floor is contained in the First PPP Interim Final Rule.
f. What amounts shall be eligible for forgiveness?
The amount of loan forgiveness can be up to the full principal
amount of the loan plus accrued interest. The actual amount of loan
forgiveness will depend, in part, on the total amount spent over the
covered period on:
i. Payroll costs including salary, wages, and tips, up to $100,000
of annualized pay per employee (for eight weeks, a maximum of $15,385
per individual), as well as covered benefits for employees (but not
owners), including health care expenses, retirement contributions, and
state taxes imposed on employee payroll paid by the employer (such as
unemployment insurance premiums);
ii. owner compensation replacement, calculated based on 2019 net
profit as described in Paragraph 1.b. above, with forgiveness of such
amounts limited to eight weeks' worth (8/52) of 2019 net profit, but
excluding any qualified sick leave equivalent amount for which a credit
is claimed under section 7002 of the Families First Coronavirus
Response Act (FFCRA) (Pub. L. 116-127) or qualified family leave
equivalent amount for which a credit is claimed under section 7004 of
FFCRA;
iii. payments of interest on mortgage obligations on real or
personal property incurred before February 15, 2020, to the extent they
are deductible on Form 1040 Schedule C (business mortgage payments);
iv. rent payments on lease agreements in force before February 15,
2020, to the extent they are deductible on Form 1040 Schedule C
(business rent payments); and
v. utility payments under service agreements dated before February
15, 2020 to the extent they are deductible on Form 1040 Schedule C
(business utility payments).
The Administrator, in consultation with the Secretary, has
determined that it is appropriate to limit the forgiveness of owner
compensation replacement for individuals with self-employment income
who file a Schedule C to eight weeks' worth (8/52) of 2019 net profit.
This is most consistent with the structure of the Act and its
overarching focus on keeping workers paid, and will prevent windfalls
that Congress did not intend.
Congress determined that the maximum loan amount is based on 2.5
months of the borrower's payroll during the one-year period preceding
the loan.
Congress also determined that the maximum amount of loan
forgiveness is based on the borrower's eligible payments--i.e., the sum
of payroll costs and certain overhead expenses--over the eight-week
period following the date of loan disbursement. For individuals with
self-employment income who file a Schedule C, the Administrator, in
consultation with the Secretary, has determined that it is appropriate
to limit loan forgiveness to a proportionate eight-week share of 2019
net profit, as reflected in the individual's 2019 Form 1040 Schedule C.
This is because many self-employed individuals have few of the overhead
expenses that qualify for forgiveness under the Act. For example, many
such individuals operate out of either their homes, vehicles, or sheds
and thus do not incur qualifying mortgage interest, rent, or utility
payments. As a result, most of their receipts will constitute net
income. Allowing such a self-employed individual to treat the full
amount of a PPP loan as net income would result in a windfall. The
entire amount of the PPP loan (a maximum of 2.5 times monthly payroll
costs) would be forgiven even though Congress designed this program to
limit forgiveness to certain eligible expenses incurred in an eight-
week covered period. Limiting forgiveness to eight weeks of net profit
from the owner's 2019 Form 1040 Schedule C is consistent with the
structure of the Act, which provides for loan forgiveness based on
eight weeks of expenditures. This limitation will also help to ensure
that the finite appropriations are directed toward payroll protection,
consistent with the Act's central objective. Finally, 75 percent of the
amount forgiven must be attributable to payroll costs for the reasons
specified in the First PPP Interim Final Rule.
g. What documentation will I be required to submit to my lender
with my request for loan forgiveness?
In addition to the borrower certification required by Section
1106(e)(3) of the Act, to substantiate your request for loan
forgiveness, if you have employees, you should submit Form 941 and
state quarterly wage unemployment insurance tax reporting forms or
equivalent payroll processor records that best correspond to the
covered period (with evidence of any retirement and health insurance
contributions). Whether or not you have employees, you must submit
evidence of business rent, business mortgage interest payments on real
or personal property, or business utility payments during the covered
period if you used loan proceeds for those purposes.
The 2019 Form 1040 Schedule C that was provided at the time of the
PPP loan application must be used to determine the amount of net profit
allocated to the owner for the eight-week covered period. The
Administrator, in consultation with the Secretary, determined that for
purposes of loan forgiveness it is appropriate to require self-employed
individuals to rely on the 2019 Form 1040 Schedule C to determine the
amount of net profit allocated to the owner during the covered period
for the reasons described in Paragraph 1.d. above.
2. Clarification Regarding Eligible Businesses
a. Are eligible businesses owned by directors or shareholders of a
PPP Lender permitted to apply for a PPP Loan through the Lender with
which they are associated?
The Administrator recognizes that, unlike other SBA loan programs,
the financial terms for PPP Loans are uniform for all borrowers, and
the standard underwriting process does not apply because no
creditworthiness assessment is required for PPP Loans. Consequently,
there is no meaningful risk of underwriting bias or below-market rates
and terms. The Administrator also recognizes that many directors and
equity holders of PPP Lenders are owners of unrelated businesses. For
those reasons, the Administrator, in consultation with the Secretary,
has determined that SBA regulations (including 13 CFR 120.110 and
120.140) shall not apply to prohibit an otherwise eligible business
owned (in whole or part) by an outside director or holder of a less
than 30 percent equity interest in a PPP Lender from obtaining a PPP
loan from the PPP Lender on whose board the director serves or in which
the equity owner
[[Page 21751]]
holds an interest, provided that the eligible business owned by the
director or equity holder follows the same process as any similarly
situated customer or account holder of the Lender. Favoritism by the
Lender in processing time or prioritization of the director's or equity
holder's PPP application is prohibited. The Administrator cautions,
however, that Lenders should comply with all other applicable state and
federal regulations concerning loans to associates of the Lender.
Lenders should also consult their own internal policies concerning
lending to individuals or entities associated with the Lender.
The foregoing paragraph does not apply to a director or owner who
is also an officer or key employee of the PPP Lender. Officers and key
employees of a PPP Lender may obtain a PPP Loan from a different
lender, but not from the PPP Lender with which they are associated. SBA
also reminds Lenders that the ``Authorized Lender Official'' for each
PPP Loan is subject to the limitations described in the Lender
Application Form, which states in relevant part: ``Neither the
undersigned Authorized Lender Official, nor such individual's spouse or
children, has a financial interest in the Applicant [Borrower].''
b. Are businesses that receive revenue from legal gaming eligible
for a PPP Loan?
A business that is otherwise eligible for a PPP Loan is not
rendered ineligible due to its receipt of legal gaming revenues if the
existing standard in 13 CFR 120.110(g) is met or the following two
conditions are satisfied: (a) The business's legal gaming revenue (net
of payouts but not other expenses) did not exceed $1 million in 2019;
and (b) legal gaming revenue (net of payouts but not other expenses)
comprised less than 50 percent of the business's total revenue in 2019.
Businesses that received illegal gaming revenue are categorically
ineligible. The Administrator, in consultation with the Secretary,
believes this test appropriately balances the longstanding policy
reasons for limiting lending to businesses primarily and substantially
engaged in gaming activity with the policy aim of making the PPP Loan
available to a broad segment of U.S. businesses and their employees.
3. Requirements for Certain Pledges of PPP Loans
Do the requirements for loan pledges under 13 CFR 120.434 apply to
PPP loans pledged for borrowings from a Federal Reserve Bank (FRB) or
advances by a Federal Home Loan Bank (FHLB)?
No. Pursuant to SBA regulations at 13 CFR 120.435(d) and (e), a
pledge of 7(a) loans to a FRB or FHLB does not require SBA's prior
written consent or notice to SBA. SBA, in consultation with Treasury,
has determined that for purposes of loans made under the PPP, the
additional requirements set forth in 120.434 shall also not apply. This
would mean, for example, that SBA would not have to approve loan
documents or require a multi-party agreement among SBA, the lender, and
others.
4. 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 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
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
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
[[Page 21752]]
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.
List of Subjects in 13 CFR Part 120
Community development, Environmental protection, Equal employment
opportunity, Exports, Loan programs--business, Reporting and
recordkeeping requirements, Small businesses.
For the reasons stated above, the Small Business Administration
amends 13 CFR part 120 as set forth below.
PART 120--BUSINESS LOANS
0
1. The authority citation for part 120 continues to read as follows:
Authority: 15 U.S.C. 634(b)(6), (b)(7), (b)(14), (h), and note,
636(a), (h) and (m), and note, 650, 657t, and note, 657u, and note,
687(f), 696(3) and (7), and note, and 697(a) and (e), and note.
0
2. Revise Sec. 120.435 to read as follows:
Sec. 120.435 Which loan pledges do not require notice to or consent
by SBA?
(a) Notwithstanding the provisions of Sec. 120.434(e), 7(a) loans
may be pledged for the following purposes without notice to or consent
by SBA:
(1) Treasury tax and loan accounts;
(2) The deposit of public funds;
(3) Uninvested trust funds;
(4) Borrowings from a Federal Reserve Bank; or
(5) Advances by a Federal Home Loan Bank.
(b) For purposes of the Paycheck Protection Program (PPP), the
other provisions of Sec. 120.434 shall also not apply to PPP loans
pledged under paragraph (a)(4) or (5) of this section.
Jovita Carranza,
Administrator.
[FR Doc. 2020-08257 Filed 4-17-20; 8:45 am]
BILLING CODE P