[Federal Register Volume 85, Number 97 (Tuesday, May 19, 2020)]
[Rules and Regulations]
[Pages 29842-29845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10658]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket Number SBA-2020-2028]
RIN 3245-AH42
Business Loan Program Temporary Changes; Paycheck Protection
Program--Loan Increases
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 announcing the implementation of the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The
CARES Act temporarily adds a new program, titled the ``Paycheck
Protection Program,'' to the SBA's 7(a) Loan Program. The CARES Act
also 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). SBA posted additional interim final rules on April 3,
2020, April 14, 2020, April 24, 2020, April 28, 2020, April 30, 2020,
May 5, 2020, and May 8, 2020, and the Department of the Treasury posted
an additional interim final rule on April 28, 2020. This interim final
rule supplements the previously posted interim final rules by providing
guidance on the ability to increase certain PPP loans, and requests
public comment.
[[Page 29843]]
DATES:
Effective date: This rule is effective May 19, 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 June 18, 2020.
ADDRESSES: You may submit comments, identified by number SBA-2020-2028
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]. 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 stay-at-
home orders, are being implemented, resulting in a dramatic decrease in
economic activity as the public limits activity at malls, retail
stores, and other businesses.
On March 27, 2020, the President signed the Coronavirus Aid,
Relief, and Economic Security Act (the CARES Act) (Pub. L. 116-136) to
provide emergency assistance and health care response for individuals,
families, and businesses affected by the coronavirus pandemic. The
Small Business Administration (SBA) received funding and authority
through the CARES 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 CARES 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 CARES Act provides for forgiveness of up to the full principal
amount of qualifying loans guaranteed under the Paycheck Protection
Program (PPP). On April 24, 2020, the President signed the Paycheck
Protection Program and Health Care Enhancement Act (Pub. L. 116-139),
which provided additional funding and authority for the PPP.
II. Comments and Immediate Effective Date
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, it is critical to meet
lenders' and borrowers' need for clarity concerning program
requirements as rapidly as possible because the last day eligible
borrowers can apply for and receive a loan is June 30, 2020.
This interim final rule supplements previous regulations and
guidance on an important, discrete issue. The immediate effective date
of this interim final rule will benefit lenders so that they can
swiftly close and disburse loans to small businesses. This interim
final rule is effective without advance notice and public comment
because section 1114 of the Act authorizes SBA to issue regulations to
implement Title I of the Act without regard to notice requirements. In
addition, SBA has determined that there is good cause for dispensing
with advance public notice and comment on the ground that it would be
contrary to the public interest. Specifically, SBA has determined that
advance public notice and comment would delay the ability of certain
businesses to obtain increases in their PPP loan amounts in order to
ensure they obtain the maximum amount that they are eligible for under
current guidance (guidance that was not available at the time their PPP
loans were approved). 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 June
18, 2020. SBA will consider these comments and the need for making any
revisions as a result of these comments.
III. Paycheck Protection Program Requirements for Loan Increases
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
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 interim final rules published by SBA and the Department of the
Treasury in the Federal Register (85 FR 20811, 85 FR 20817, 85 FR
21747, 85 FR 23450, 85 FR 23917, 85 FR 26321, 85 FR 26324, 85 FR
27287), and an additional SBA interim final rule entitled ``Business
Loan Program Temporary Changes; Paycheck Protection Program--
Requirements--Extension of Limited Safe Harbor with Respect to
Certification Concerning Need for PPP Loan Request,'' which SBA posted
on May 8, 2020, and is published elsewhere in this issue of the Federal
Register (collectively, the PPP Interim Final Rules).
On April 14, 2020, SBA posted an interim final rule that, among
other things, provided guidance for individuals with self-employment
income (85 FR 21747). The interim final rule stated, ``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.'' On April 28, 2020, the
Department of the Treasury posted an interim final rule that provided
an alternative criterion for calculating the maximum loan amount for
PPP loans issued to seasonal employers (85 FR 23917).
Some PPP loans were approved to partnerships or seasonal employers
before the additional guidance was
[[Page 29844]]
issued and, as a result, those businesses may not have received PPP
loans in the maximum amount for which they are eligible. This interim
final rule authorizes all PPP lenders to increase existing PPP loans to
partnerships or seasonal employers to include appropriate amounts to
cover partner compensation in accordance with the interim final rule
posted on April 14, 2020, or to permit the seasonal employer to
calculate its maximum loan amount using the alternative criterion
posted on April 28, 2020.
In addition, although the interim final rule on disbursements
posted on April 28, 2020, requires PPP loans to be disbursed in a
single disbursement, if a PPP loan that is increased has already been
disbursed, this interim final rule authorizes the lender to make an
additional disbursement of the increased loan proceeds prior to
submission of the initial SBA Form 1502 that includes that loan. SBA
Form 1502 is required to be submitted within 20 calendar days after a
PPP loan is approved or, for loans approved before availability of the
updated SBA Form 1502 reporting process, by May 22, 2020.\1\
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\1\ SBA extended the deadline for submission of the initial SBA
Form 1502 for such loans from May 18, 2020 to May 22, 2020, in its
interim final rule posted on May 8, 2020.
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1. Loan Increases
a. If a partnership received a PPP loan that did not include any
compensation for its partners, can the loan amount be increased to
include partner compensation?
Yes. If a partnership received a PPP loan that only included
amounts necessary for payroll costs of the partnership's employees and
other eligible operating expenses, but did not include any amount for
partner compensation,\2\ the lender may electronically submit a request
through SBA's E-Tran Servicing site to increase the PPP loan amount to
include appropriate partner compensation, even if the loan has been
fully disbursed, provided that the lender's first SBA Form 1502 report
to SBA on the PPP loan has not been submitted. After the initial SBA
Form 1502 report on the PPP loan has been submitted to SBA, or after
the date the first SBA Form 1502 was required to be submitted to SBA,
the loan cannot be increased. In no event can the increased loan amount
exceed the maximum loan amount allowed under the PPP Program, which is
$10 million for an individual borrower or $20 million for a corporate
group. Additionally, the borrower must provide the lender with required
documentation to support the calculation of the increase.
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\2\ As set forth in the interim final rule posted on April 14,
2020, a partner in a partnership may not submit a separate PPP loan
application 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.
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The interim final rule posted on April 14, 2020, describes how
partnerships, rather than individual partners are eligible for a PPP
loan. The interim final rule further explained that the self-employment
income of general active partners could be reported as a payroll cost,
up to $100,000 annualized, on a PPP loan application filed by or on
behalf of the partnership. Guidance describing how to calculate
partnership PPP loan amounts and defining the self-employment income of
partners was posted on April 24, 2020 (see How to Calculate Maximum
Loan Amounts, Question 4 at https://www.sba.gov/sites/default/files/2020-04/How-to-Calculate-Loan-Amounts.pdf).
b. If a seasonal employer received a PPP loan before the
alternative criterion for determining the maximum loan amount for
seasonal employers became available, can the loan amount be increased
based on a revised calculation using the alternative criterion?
Yes. If a seasonal employer received a PPP loan before the
alternative criterion for such employers was posted on April 28, 2020,
and would be eligible for a higher maximum loan amount under the
alternative criterion, the lender may electronically submit a request
through SBA's E-Tran Servicing site to increase the PPP loan amount,
even if the loan has been fully disbursed, provided that the lender's
first SBA Form 1502 report to SBA on the PPP loan has not been
submitted. After the initial SBA Form 1502 report has been submitted to
SBA, or after the date the initial SBA Form 1502 report was required to
be submitted to SBA, the loan cannot be increased. In no event can the
increased loan amount exceed the maximum loan amount allowed under the
PPP Program, which is $10 million for an individual borrower or $20
million for a corporate group. Additionally, the borrower must provide
the lender with required documentation to support the calculation of
the increase.
2. Disbursements and 1502 Reporting on Increased PPP Loans
a. If a borrower's PPP loan has already been fully disbursed, can
the lender make an additional disbursement for the increased loan
proceeds?
Yes. Notwithstanding the requirement set forth in paragraph 1.a. of
the interim final rule on disbursements posted on April 28, 2020, i.e.,
that lenders make a one-time, full disbursement of the PPP loan within
ten calendar days of loan approval, if a PPP loan is increased under
paragraphs 1.a. or b. above, the lender may make a single additional
disbursement of the increased loan proceeds prior to submission of the
initial SBA Form 1502 report for that loan.
b. How do lenders report disbursements on PPP loans that are
increased and does the increase in the loan delay the timeframe to
report the loan on the SBA Form 1502?
SBA set forth in the interim final rule on disbursements and 1502
reporting posted on April 28, 2020, the process lenders must follow to
electronically upload SBA Form 1502 information on PPP loans. The
interim final rule provided that lenders must submit the SBA Form 1502
information within 20 calendar days after a PPP loan is approved or,
for loans approved before availability of the updated SBA Form 1502
reporting process, by May 18, 2020. In its interim final rule posted on
May 8, 2020, SBA revised that date from May 18, 2020 to May 22, 2020.
Lenders must comply with the initial 1502 reporting deadline. SBA may
review at any time an increase submitted by the lender to confirm that
the increase was submitted within the required timeframe; increases
submitted outside the required timeframe will not be forgiven and no
processing fee will be earned on such amounts. Additionally, lenders
are not entitled to processing fees on increases submitted outside of
the required timeframe.
3. 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
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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 to the public interest. SBA Office of Advocacy guide: How
to Comply with the Regulatory Flexibility Act, Ch.1. p.9. Accordingly,
SBA is not required to conduct a regulatory flexibility analysis.
Jovita Carranza,
Administrator.
[FR Doc. 2020-10658 Filed 5-18-20; 8:45 am]
BILLING CODE P