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33004Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and RegulationsDated at Washington, DC, on February 20,2020.Robert E. Feldman,Executive Secretary.By the National Credit UnionAdministration Board.Gerard Poliquin,Secretary of the Board.[FR Doc. 2020–10291 Filed 5–29–20; 8:45 am]BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P;7535–01–PSMALL BUSINESS ADMINISTRATION13 CFR Part 120[Docket Number SBA–2020–0032]RIN 3245–AH46DEPARTMENT OF THE TREASURYRIN 1505–AC69Business Loan Program TemporaryChanges; Paycheck U.S. Small BusinessAdministration; Department of theTreasury.ACTION: Interim final rule.AGENCY:On April 2, 2020, the U.S.Small Business Administration (SBA)posted an interim final rule announcingthe implementation of the CoronavirusAid, Relief, and Economic Security Act(CARES Act). The CARES Acttemporarily adds a new program, titledthe ‘‘Paycheck Protection Program,’’ tothe SBA’s 7(a) Loan Program. TheCARES Act also provides for forgivenessof up to the full principal amount ofqualifying loans guaranteed under thePaycheck Protection Program (PPP). ThePPP is intended to provide economicrelief to small businesses nationwideadversely impacted by the CoronavirusDisease 2019 (COVID–19). SBA postedadditional interim final rules on April 3,2020, April 14, 2020, April 24, 2020,April 28, 2020, April 30, 2020, May 5,2020, May 8, 2020, May 13, 2020, May14, 2020, May 18, 2020, and May 20,2020, and the Department of theTreasury (Treasury) posted anadditional interim final rule on April27, 2020. This interim final rulesupplements the previously postedinterim final rules in order to help PPPborrowers prepare and submit loanforgiveness applications as provided forin the CARES Act, help PPP lenderswho will be making the loan forgivenessdecisions, inform borrowers and lendersof SBA’s process for reviewing PPP loanapplications and loan forgivenessjbell on DSKJLSW7X2PROD with RULESSUMMARY:VerDate Sep 11 201416:09 May 29, 2020Jkt 250001applications, and requests publiccomment.DATES: Effective date: May 28, 2020.Applicability date: This interim finalrule applies to loan forgivenessapplications submitted under thePaycheck Protection Program.Comment date: Comments must bereceived on or before July 1, 2020.ADDRESSES: You may submit comments,identified by number SBA–2020–0032through the Federal eRulemaking Portal:http://www.regulations.gov. Follow theinstructions for submitting comments.SBA will post all comments onwww.regulations.gov. If you wish tosubmit confidential businessinformation (CBI) as defined in the UserNotice at www.regulations.gov, pleasesend an email to ppp-ifr@sba.gov.Highlight the information that youconsider to be CBI and explain why youbelieve SBA should hold thisinformation as confidential. SBA willreview the information and make thefinal determination whether it willpublish the information.FOR FURTHER INFORMATION CONTACT: ACall Center Representative at 833–572–0502, or the local SBA Field Office; thelist of offices can be found at toffices.SUPPLEMENTARY INFORMATION:I. Background InformationOn March 13, 2020, President Trumpdeclared the ongoing CoronavirusDisease 2019 (COVID–19) pandemic ofsufficient severity and magnitude towarrant an emergency declaration for allStates, territories, and the District ofColumbia. With the COVID–19emergency, many small businessesnationwide are experiencing economichardship as a direct result of theFederal, State, tribal, and local publichealth measures that are being taken tominimize the public’s exposure to thevirus. These measures, some of whichare government-mandated, are beingimplemented nationwide and includethe closures of restaurants, bars, andgyms. In addition, based on the adviceof public health officials, othermeasures, such as keeping a safedistance from others or even stay-athome orders, are being implemented,resulting in a dramatic decrease ineconomic activity as the public avoidsmalls, retail stores, and otherbusinesses.On March 27, 2020, the Presidentsigned the Coronavirus Aid, Relief, andEconomic Security Act (the CARES Act)(Pub. L. 116–136) to provide emergencyassistance and health care response forindividuals, families, and businessesPO 00000Frm 00028Fmt 4700Sfmt 4700affected by the coronavirus pandemic.The Small Business Administration(SBA) received funding and authoritythrough the CARES Act to modifyexisting loan programs and establish anew loan program to assist smallbusinesses nationwide adverselyimpacted by the COVID–19 emergency.Section 1102 of the CARES Acttemporarily permits SBA to guarantee100 percent of 7(a) loans under a newprogram titled the ‘‘Paycheck ProtectionProgram.’’ Section 1106 of the CARESAct provides for forgiveness of up to thefull principal amount of qualifyingloans guaranteed under the PaycheckProtection Program, and requires SBA toissue guidance and regulationsimplementing section 1106 within 30days after the date of enactment of theCARES Act. On April 2, 2020, SBAposted its first PPP interim final rule (85FR 20811) (the First Interim Final Rule)covering in part loan forgiveness. OnApril 8, 2020 and April 26, 2020, SBAalso posted Frequently Asked Questionsrelating to loan forgiveness.1 On April14, 2020, SBA posted an interim finalrule covering in part loan forgiveness forindividuals with self-employmentincome. On April 24, 2020, thePresident signed the PaycheckProtection Program and Health CareEnhancement Act (Pub. L. 116–139),which provided additional funding andauthority for the Paycheck ProtectionProgram.As described below, this interim finalrule provides borrowers and lendersguidance on requirements governing theforgiveness of PPP loans.Four provisions of this interim finalrule are an exercise of rulemakingauthority by Treasury either jointly withSBA or by Treasury alone: (1) The deminimis exemption provided withrespect to certain offers of rehire, (2) theadditional reference period optionprovided for seasonal employers, (3) thede minimis exemption from the fulltime equivalent employee reductionpenalty when an employee is, forexample, fired for cause, and (4) the deminimis exemption from the full-timeequivalent employee reduction penaltywhen the borrower eliminatesreductions by June 30, 2020. Otherwise,all provisions in this rule are an exerciseof rulemaking authority by SBA alone.II. Comments and Immediate EffectiveDateThe intent of the CARES Act is thatSBA provide relief to America’s smallbusinesses expeditiously. This intent,along with the dramatic decrease in1 rrowers.E:\FR\FM\01JNR1.SGM01JNR1
jbell on DSKJLSW7X2PROD with RULESFederal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulationseconomic activity nationwide, providesgood cause for SBA to dispense with the30-day delayed effective date providedin the Administrative Procedure Act.Specifically, it is critical to meetlenders’ and borrowers’ need for clarityconcerning loan forgivenessrequirements as rapidly as possiblebecause borrowers can seek loanforgiveness as early as eight-weeksfollowing the date of disbursement oftheir PPP loans. Because the first PPPloans were disbursed after April 3,providing borrowers with certainty onloan forgiveness requirements and otherprogram requirements will enhancetheir ability to carry out the purposes ofthe CARES Act in keeping their workersemployed and paid, while at the sametime taking necessary steps to maximizeeligible loan forgiveness amounts. Animmediate effective date also isnecessary for PPP lenders who generallywill make the loan forgivenessdeterminations as provided in theCARES Act. Specifically, an immediateeffective date is necessary for lenders sothat they will have both a degree ofcertainty and sufficient time to developtheir systems and policies andprocedures in order to timely reviewand process loan forgivenessapplications, which borrowers arepermitted to begin submitting at the endof their covered period.This interim final rule supplementsprevious regulations and guidance onthe discrete issues related to loanforgiveness. This interim final rule iseffective without advance notice andpublic comment because section 1114 ofthe CARES Act authorizes SBA to issueregulations to implement Title I of theCARES Act without regard to noticerequirements. In addition, SBA hasdetermined that there is good cause fordispensing with advance public noticeand comment on the ground that itwould be contrary to the public interest.Specifically, SBA has determined thatadvance notice and public commentwould delay the ability of PPPborrowers to understand with certaintywhich payroll costs and nonpayrollcosts that are incurred or paid duringthe covered period are eligible forforgiveness. By providing a high degreeof certainty to PPP borrowers throughthis interim final rule, PPP borrowerswill be able to take immediate steps tomaximize their loan forgivenessamounts, for example, by either rehiringemployees or not laying off employeesduring the covered period. This rule isbeing issued to allow for immediateimplementation of the forgivenesscomponent of this program. Althoughthis interim final rule is effectiveVerDate Sep 11 201416:09 May 29, 2020Jkt 250001immediately, comments are solicitedfrom interested members of the publicon all aspects of this interim final rule,including section III below. Thesecomments must be submitted on orbefore July 1, 2020. SBA will considerthese comments and the need formaking any revisions as a result of thesecomments.III. Paycheck Protection ProgramRequirements for Loan ForgivenessOverviewThe CARES Act was enacted toprovide immediate assistance toindividuals, families, and organizationsaffected by the COVID–19 emergency.Among the provisions contained in theCARES Act are provisions authorizingSBA to temporarily guarantee loansunder the Paycheck Protection Program(PPP). Loans under the PPP will be 100percent guaranteed by SBA, and the fullprincipal amount of the loans mayqualify for loan forgiveness. Additionalinformation about the PPP is availablein interim final rules published by SBAand Treasury in the Federal Register (85FR 20811, 85 FR 20817, 85 FR 21747,85 FR 23450, 85 FR 23917, 85 FR 26321,85 FR 26324, 85 FR 27287, 85 FR 29842,85 FR 29845, 85 FR 29847, 85 FR 30835)as well as an SBA interim final ruleposted on May 20, 2020.1. GeneralSection 1106(b) of the CARES Actprovides that, subject to severalimportant limitations, borrowers shallbe eligible for forgiveness of their PPPloan in an amount equal to the sum ofthe following costs incurred andpayments made during the coveredperiod (as described in section III.3.below):(1) Payroll costs; 2(2) Interest payments on any businessmortgage obligation on real or personalproperty that was incurred beforeFebruary 15, 2020 (but not anyprepayment or payment of principal);(3) Payments on business rentobligations on real or personal property2 Payroll costs consist of compensation toemployees (whose principal place of residence isthe United States) in the form of salary, wages,commissions, or similar compensation; cash tips orthe equivalent (based on employer records of pasttips or, in the absence of such records, a reasonable,good-faith employer estimate of such tips); paymentfor vacation, parental, family, medical, or sickleave; allowance for separation or dismissal;payment for the provision of employee benefitsconsisting of group health care coverage, includinginsurance premiums, and retirement; payment ofstate and local taxes assessed on compensation ofemployees; and for an independent contractor orsole proprietor, wages, commissions, income, or netearnings from self-employment, or similarcompensation. See 15 U.S.C. 636(a)(36)(A)(viii); 85FR 20811, 20813.PO 00000Frm 00029Fmt 4700Sfmt 470033005under a lease agreement in force beforeFebruary 15, 2020; and(4) Business utility payments for thedistribution of electricity, gas, water,transportation, telephone, or internetaccess for which service began beforeFebruary 15, 2020.This interim final rule uses the term‘‘nonpayroll costs’’ to refer to thepayments described in (2), (3), and (4).As set forth in the First Interim FinalRule (85 FR 20811), eligible nonpayrollcosts cannot exceed 25 percent of theloan forgiveness amount.2. Loan Forgiveness ProcessWhat is the general process to obtainloan forgiveness?To receive loan forgiveness, aborrower must complete and submit theLoan Forgiveness Application (SBAForm 3508 or lender equivalent) to itslender (or the lender servicing its loan).As a general matter, the lender willreview the application and make adecision regarding loan forgiveness. Thelender has 60 days from receipt of acomplete application to issue a decisionto SBA. If the lender determines that theborrower is entitled to forgiveness ofsome or all of the amount applied forunder the statute and applicableregulations, the lender must requestpayment from SBA at the time thelender issues its decision to SBA. SBAwill, subject to any SBA review of theloan or loan application, remit theappropriate forgiveness amount to thelender, plus any interest accruedthrough the date of payment, not laterthan 90 days after the lender issues itsdecision to SBA. If applicable, SBA willdeduct EIDL Advance Amounts fromthe forgiveness amount remitted to theLender as required by section 1110(e)(6)of the CARES Act. If SBA determines inthe course of its review that theborrower was ineligible for the PPP loanbased on the provisions of the CARESAct, SBA rules or guidance available atthe time of the borrower’s loanapplication, or the terms of theborrower’s PPP loan application (forexample, because the borrower lackedan adequate basis for the certificationsthat it made in its PPP loan application),the loan will not be eligible for loanforgiveness. The lender is responsiblefor notifying the borrower of theforgiveness amount. If only a portion ofthe loan is forgiven, or if the forgivenessrequest is denied, an
Federal Register/Vol. 85, No. 105/Monday, June 1, 2020/Rules and Regulations 33005 2 Payroll costs consist of compensation to employees (whose principal place of
