Business Loan Program Temporary Changes; Paycheck Protection Program-Loan Increases, 29842-29845 [2020-10658]

Download as PDF 29842 § 217.301 Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations [Amended] 4. Amend § 217.301 by: a. In paragraphs (b)(1) and (d) introductory, remove ‘‘U.S. GAAP’’ and add in its place ‘‘GAAP’’; and ■ b. In paragraph (c)(2) introductory text, add ‘‘or Category III’’ after the phrase ‘‘an advanced approaches’’ and ‘‘its applicable’’ after the words ‘‘its calculation of’’; ■ c. In paragraph (d)(2)(i) introductory text, remove the phrase ‘‘in a first’’ and add in its place ‘‘in its first’’; and ■ d. In paragraph (d)(2)(ii) introductory text, add ‘‘or Category III’’ after the phrase ‘‘An advanced approaches’’ and ‘‘its applicable’’ after the words ‘‘its calculation of’’. ■ ■ Federal Deposit Insurance Corporation 12 CFR Chapter III Authority and Issuance For the reasons set forth in the joint preamble, chapter III of title 12 of the Code of Federal Regulations is amended as follows: PART 324—CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS 5. The authority citation for part 324 continues to read as follows: ■ Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102–233, 105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102–242, 105 Stat. 2236, 2355, as amended by Pub. L. 103–325, 108 Stat. 2160, 2233 (12 U.S.C. 1828 note); Pub. L. 102–242, 105 Stat. 2236, 2386, as amended by Pub. L. 102–550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 note); Pub. L. 111–203, 124 Stat. 1376, 1887 (15 U.S.C. 78o–7 note); Pub. L. 115–174; Pub. L. 116–136, 134 Stat. 281. 6. Amend § 324.301 as follows: a. Revise paragraph (b)(1); b. In paragraph (b)(2), remove the phrase ‘‘FDIC-supervised’s adoption’’ and add in its place ‘‘FDIC-supervised institution’s adoption’’; ■ c. In paragraph (c)(2) introductory text, add ‘‘or Category III’’ after the phrase ‘‘an advanced approaches’’ and ‘‘its applicable’’ after the words ‘‘its calculation of’’; ■ d. Revise paragraph (d) introductory text; ■ e. In paragraph (d)(2)(i) introductory text, remove the phrase ‘‘in its a’’ and add in its place ‘‘in its first’’; ■ f. In paragraph (d)(2)(i)(C), remove the phrase ‘‘fifty percent of its AACL transitional amount’’ and add in its place ‘‘fifty percent of its modified AACL transitional amount’’ and remove the phrase ‘‘twenty-five percent of its AACL transitional amount’’ and add in ■ ■ ■ VerDate Sep<11>2014 17:20 May 18, 2020 Jkt 250001 its place ‘‘twenty-five percent of its modified AACL transitional amount’’; ■ g. In paragraph (d)(2)(ii) introductory text, add ‘‘or Category III’’ after the phrase ‘‘An advanced approaches’’, remove the phrase ‘‘for the fiscal year that begins during the 2020 calendar year’’ and add in its place ‘‘during 2020’’, and add ‘‘its applicable’’ after the words ‘‘its calculation of’’; and ■ h. In paragraph (d)(2)(ii)(A), remove the phrase ‘‘fifty percent of its CECL transitional amount’’ and add in its place the phrase ‘‘fifty percent of its modified CECL transitional amount’’ and remove the phrase ‘‘twenty-five percent of its CECL transitional amount’’ and add in its place ‘‘twentyfive percent of its modified CECL transitional amount’’. The revisions read as follows: § 324.301 Current expected credit losses (CECL) transition. * * * * (b) * * * (1) Transition period means the threeyear period, beginning the first day of the fiscal year in which an FDICsupervised institution adopts CECL and reflects CECL in its first Call Report filed after that date; or, for the 2020 transition under paragraph (d) of this section, the five-year period beginning on the earlier of the date an FDICsupervised institution was required to adopt CECL for accounting purposes under GAAP (as in effect on January 1, 2020), or the first day of the quarter in which the FDIC-supervised institution files regulatory reports that include CECL. * * * * * (d) Calculation of the five-year CECL transition provision. An FDICsupervised institution that was required to adopt CECL for accounting purposes under GAAP (as in effect January 1, 2020) as of the first day of a fiscal year that begins during the 2020 calendar year, and that makes the election described in paragraph (a)(1) of this section, may use the transitional amounts and modified transitional amounts in paragraph (d)(1) of this section with the 2020 CECL transition calculation in paragraph (d)(2) of this section to adjust its calculation of regulatory capital ratios during each quarter of the transition period in which an FDIC-supervised institution uses CECL for purposes of its Call Report. An FDIC supervised-institution that did not make the election described in paragraph (a)(1) of this section because it did not record a reduction in retained earnings due to the adoption of CECL as of the beginning of the fiscal year in which the FDIC-supervised institution adopted CECL may use the transition provision in this paragraph (d) if it has a positive modified CECL transitional amount during any quarter ending in 2020 and makes the election in the Call Report filed for the same quarter. * * * * * Brian Brooks, First Deputy Comptroller, Comptroller of the Currency. Board of Governors of the Federal Reserve System. Ann Misback, Secretary of the Board. Federal Deposit Insurance Corporation. Dated at Washington, DC, on April 13, 2020. Robert E. Feldman, Executive Secretary. [FR Doc. 2020–08789 Filed 5–18–20; 8:45 am] BILLING CODE 4810–33–P 6210–01–P; 6714–01–P * PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 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 U. S. Small Business Administration. ACTION: Interim final rule. AGENCY: 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. SUMMARY: E:\FR\FM\19MYR1.SGM 19MYR1 Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 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: https://www.regulations.gov. Follow the instructions for submitting comments. SBA will post all comments on www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov, please send an email to ppp-ifr@sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make the final determination whether it will publish the information. FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833–572– 0502, or the local SBA Field Office; the list of offices can be found at https:// www.sba.gov/tools/local-assistance/ districtoffices. SUPPLEMENTARY INFORMATION: I. Background Information On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019 (COVID–19) pandemic of sufficient severity and magnitude to warrant an emergency declaration for all States, territories, and the District of Columbia. With the COVID–19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, 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 VerDate Sep<11>2014 17:20 May 18, 2020 Jkt 250001 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 PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 29843 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 E:\FR\FM\19MYR1.SGM 19MYR1 29844 Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 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 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 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. 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 selfemployed 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. VerDate Sep<11>2014 17:20 May 18, 2020 Jkt 250001 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. 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 selfemployment 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 selfemployment 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-CalculateLoan-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 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 a. If a borrower’s PPP loan has This interim final rule is already been fully disbursed, can the lender make an additional disbursement economically significant for the purposes of Executive Orders 12866 and for the increased loan proceeds? PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 E:\FR\FM\19MYR1.SGM 19MYR1 Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 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 VerDate Sep<11>2014 17:20 May 18, 2020 Jkt 250001 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 SMALL BUSINESS ADMINISTRATION 13 CFR Part 120 [Docket Number SBA–2020–0026] RIN 3245–AH41 Business Loan Program Temporary Changes; Paycheck Protection Program—Requirements—Extension of Limited Safe Harbor With Respect to Certification Concerning Need for PPP Loan Request U.S. Small Business Administration. ACTION: Interim final rule. AGENCY: On April 24, 2020, the U.S. Small Business Administration (SBA) posted an interim final rule relating to promissory notes, authorizations, affiliation, and eligibility in connection with the implementation of a temporary new program, titled the ‘‘Paycheck Protection Program.’’ The Paycheck SUMMARY: PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 29845 Protection Program was established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act). This interim final rule revises the interim final rule posted on April 24, 2020, by extending the date by which certain Paycheck Protection Program borrowers may repay their loans from May 7, 2020 to May 14, 2020, in order to avail themselves of a safe harbor with respect to a certification required by the Act, and makes other conforming changes. This interim final rule supplements SBA’s implementation of the Act and requests public comment. DATES: Effective date: This rule is effective May 19, 2020. Applicability date: This interim final rule applies to borrowers who applied for loans under the Paycheck Protection Program. Comment date: Comments must be received on or before June 18, 2020. ADDRESSES: You may submit comments, identified by number SBA–2020–0026 through the Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments. SBA will post all comments on www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov, please send an email to ppp-ifr@sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make the final determination whether it will publish the information. FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833–572– 0502, or the local SBA Field Office; the list of offices can be found at https:// www.sba.gov/tools/local-assistance/ districtoffices. SUPPLEMENTARY INFORMATION: I. Background Information On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019 (COVID–19) pandemic of sufficient severity and magnitude to warrant an emergency declaration for all States, territories, and the District of Columbia. With the COVID–19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, 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 E:\FR\FM\19MYR1.SGM 19MYR1

Agencies

[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]


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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: https://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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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

[[Page 29845]]

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
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.