Business Loan Program Temporary Changes; Paycheck Protection Program-Revisions to the Third and Sixth Interim Final Rules, 36997-37000 [2020-13293]
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36997
Rules and Regulations
Federal Register
Vol. 85, No. 119
Friday, June 19, 2020
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket No. SBA–2020–0037]
RIN 3245–AH51
Business Loan Program Temporary
Changes; Paycheck Protection
Program—Revisions to the Third and
Sixth Interim Final Rules
U.S. Small Business
Administration.
ACTION: Interim final rule.
AGENCY:
On April 2, 2020, the U.S.
Small Business Administration (SBA)
posted on its website an interim final
rule relating to the implementation of
sections 1102 and 1106 of the
Coronavirus Aid, Relief, and Economic
Security Act (CARES Act or the Act)
(published in the Federal Register on
April 15, 2020). Section 1102 of the Act
temporarily adds a new product, titled
the ‘‘Paycheck Protection Program,’’ to
SBA’s 7(a) Loan Program. Subsequently,
SBA and Treasury issued additional
interim final rules implementing the
Paycheck Protection Program. On June
5, 2020, the Paycheck Protection
Program Flexibility Act of 2020
(Flexibility Act) was signed into law,
amending the CARES Act. This interim
final rule revises interim final rules
posted on SBA’s website on April 14,
2020 (published in the Federal Register
on April 20, 2020) and April 28, 2020
(published in the Federal Register on
May 4, 2020), by changing provisions to
conform to the Flexibility Act. Several
of these amendments are retroactive to
the date of enactment of the CARES Act,
as required by section 3(d) of the
Flexibility Act.
DATES:
Effective dates: The provisions in this
interim final rule related to loan
forgiveness for PPP loans are effective
March 27, 2020. The provision in this
interim final rule relating to the
maturity date of PPP loans is effective
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SUMMARY:
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June 5, 2020. The remaining provisions
in this interim final rule are effective
June 16, 2020.
Comment date: Comments must be
received on or before July 20, 2020.
ADDRESSES: You may submit comments,
identified by number SBA–2020–0037,
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, 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, have been
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-athome orders, have been 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
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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.
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. On
June 5, 2020, the President signed the
Paycheck Protection Program Flexibility
Act of 2020 (Flexibility Act) (Pub. L.
116–142), which changes key provisions
of the Paycheck Protection Program,
including provisions relating to the
maturity of PPP loans, the deferral of
PPP loan payments, and the forgiveness
of PPP loans. Section 3(d) of the
Flexibility Act provides that the
amendments relating to PPP loan
forgiveness and extension of the deferral
period for PPP loans shall be effective
as if included in the CARES Act, which
means that they are retroactive to March
27, 2020. Section 2 of the Flexibility Act
provides that the amendment relating to
the extension of the maturity date for
PPP loans shall take effect on the date
of enactment (June 5, 2020). Under the
Flexibility Act, the extension of the
maturity date for PPP loans is applicable
to PPP loans made on or after that date,
and lenders and borrowers may
mutually agree to modify PPP loans
made before such date to reflect the
longer maturity.
II. Comments and Retroactive/
Immediate Effective Date
This interim final rule is effective
without advance notice and public
comment because section 1114 of the
CARES 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
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and comment on the grounds that it
would be contrary to the public interest.
Specifically, advance public notice and
comment would defeat the purpose of
this interim final rule given that SBA’s
authority to guarantee PPP loans expires
on June 30, 2020, and that many PPP
borrowers can now apply for loan
forgiveness following the end of their
eight-week covered period. Providing
borrowers and lenders with certainty on
both loan requirements and loan
forgiveness requirements following the
enactment of the Flexibility Act will
enhance the ability of lenders to make
loans and process loan forgiveness
applications, particularly in light of the
fact that most of the Flexibility Act’s
provisions are retroactive to March 27,
2020. Specifically, small businesses that
have yet to apply for and receive a PPP
loan need to be informed of the terms
of PPP loans as soon as possible,
because the last day on which a lender
can obtain an SBA loan number for a
PPP loan is June 30, 2020. Borrowers
who already have applied for and
received a PPP loan need certainty
regarding how loan proceeds must be
used during the covered period, as
amended by the Flexibility Act, so that
they can maximize the amount of loan
forgiveness. These same reasons provide
good cause for SBA to dispense with the
30-day delayed effective date provided
in the Administrative Procedure Act.
Although this interim final rule is
effective on or before date of filing,
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 July 20, 2020.
The SBA will consider these comments,
comments received on the interim final
rules amended by this interim final rule,
which were posted on April 14 and
April 28, 2020 (and published in the
Federal Register on April 20, 2020 and
May 4, 2020, respectively), and the need
for making any revisions as a result of
these comments.
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III. Paycheck Protection Program—
Revisions to Third and Sixth Interim
Final Rules
Overview
The CARES Act was enacted to
provide immediate assistance to
individuals, families, and businesses
affected by the COVID–19 emergency.
Among the provisions contained in the
CARES Act are provisions authorizing
SBA to temporarily guarantee loans
under a new 7(a) loan program titled the
‘‘Paycheck Protection Program.’’ Loans
guaranteed under the Paycheck
Protection Program (PPP) will be 100
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percent guaranteed by SBA, and the full
principal amount of the loans may
qualify for loan forgiveness. The
Flexibility Act amends the CARES Act,
including its provisions relating to loan
terms and loan forgiveness. The purpose
of this interim final rule is to update the
Interim Final Rule on Additional
Eligibility Criteria and Requirements for
Certain Pledges of Loans (Third Interim
Final Rule), posted on SBA’s website on
April 14, 2020 and published in the
Federal Register on April 20, 2020 (85
FR 21747), and the Interim Final Rule
on Disbursements (Sixth Interim Final
Rule), posted on SBA’s website on April
28, 2020 and published in the Federal
Register on May 4, 2020 (85 FR 26321),
in light of the amendments under the
Flexibility Act. The Third Interim Final
Rule and the Sixth Interim Final Rule,
each as amended by this interim final
rule, should be interpreted consistent
with the frequently asked questions
(FAQs) regarding the PPP that are
posted on SBA’s website 1 and the other
interim final rules issued regarding the
PPP.2
1. Changes to the Third Interim Final
Rule
a. Use of PPP Loan Proceeds
Under section 1102 of the CARES Act,
certain provisions regarding the
issuance and use of PPP loans are
limited to the ‘‘covered period.’’
‘‘Covered period,’’ as that term is used
in section 1102 of the CARES Act, was
originally defined as the period from
February 15, 2020, to June 30, 2020.
However, section 3(a) of the Flexibility
Act extended the ‘‘covered period’’ as
defined in section 1102 until December
31, 2020. Therefore, Part III.1.d.(iii.) of
the Third Interim Final Rule (85 FR
21747, 21749) is revised by striking
‘‘during the eight-week period following
the first disbursement of the loan (the
‘‘covered period’’)’’ and ‘‘during the
covered period’’.
Section 2(a) of the Flexibility Act
provides a minimum maturity of five
years for all PPP loans made on or after
the date of enactment of the Flexibility
Act (June 5, 2020), and permits lenders
and borrowers to extend the maturity
date of earlier PPP loans by mutual
agreement. Therefore, Part III.1.d.v. of
the Third Interim Final Rule (85 FR
21747, 21749) is revised by striking
‘‘PPP’s maturity of two years’’ and
replacing it with ‘‘PPP’s maturity of two
years for PPP loans made before June 5,
1 See https://www.sba.gov/document/support-faq-lenders-borrowers.
2 See https://www.sba.gov/funding-programs/
loans/coronavirus-relief-options/paycheckprotection-program.
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2020 unless the borrower and lender
mutually agree to extend the maturity of
such loans to five years, or PPP’s
maturity of five years for PPP loans
made on or after June 5’’.
Section 3(b) of the Flexibility Act
amended the requirements regarding
forgiveness of PPP loans to reduce, from
75 percent to 60 percent, the portion of
PPP loan proceeds that must be used for
payroll costs for the full amount of the
PPP loan to be eligible for forgiveness.
Consistent with this change, SBA’s
interim final rule posted on June 11,
2020, decreased from 75 percent to 60
percent the portion of loan proceeds
that must be used for payroll costs.
Therefore, Part III.1.e. of the Third
Interim Final Rule (85 FR 21747, 21750)
is revised to read as follows:
e. Are there any other restrictions on how I
can use PPP loan proceeds?
Yes. At least 60 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 60 percent floor is
contained in the First PPP Interim Final Rule
and SBA’s interim final rule posted on June
11, 2020.
b. Loan Forgiveness
Under section 1106 of the CARES Act,
certain provisions regarding the
forgiveness of PPP loans are limited to
the ‘‘covered period.’’ ‘‘Covered
period,’’ as that term is used in section
1106 of the CARES Act, was originally
defined as the eight-week period
beginning on the date of the origination
of a covered loan. However, section 3(b)
of the Flexibility Act extended the
length of the covered period as defined
in section 1106 of the CARES Act from
eight to 24 weeks, while allowing
borrowers that received PPP loans
before June 5, 2020 to elect to use the
original eight-week covered period. As
noted above, section 3(b) of the
Flexibility Act also amended the
requirements regarding forgiveness of
PPP loans to reduce, from 75 percent to
60 percent, the amount of PPP loan
proceeds that must be used for payroll
costs for the full amount of the PPP loan
to be eligible for forgiveness. Therefore,
Part III.1.f. of the Third Interim Final
Rule (85 FR 21747, 21750) is revised to
read as follows:
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 24-week period
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beginning on the date your PPP loan is
disbursed 3 (‘‘covered period’’) on:
i. Payroll costs including salary, wages,
and tips, up to $100,000 of annualized pay
per employee (for 24 weeks, a maximum of
$46,154 per individual,4 or 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 (up to
$15,385) for an eight-week covered period or
2.5 months’ worth (2.5/12) of 2019 net profit
(up to $20,833) for a 24-week covered period,
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).
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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 or F to
either eight weeks’ worth (8/52) of 2019
net profit (up to $15,385) for an eightweek covered period or 2.5 months’
worth (2.5/12) of 2019 net profit (up to
$20,833) for a 24-week covered period
per owner in total across all businesses.
This approach is consistent with the
structure of the CARES Act and its
overarching focus on keeping workers
paid, and will prevent windfalls that
Congress did not intend. Specifically,
Congress determined that the maximum
loan amount is generally based on 2.5
3 If your PPP loan was made before June 5, 2020,
you may elect to have your covered period be the
eight-week period beginning on the date your PPP
loan was disbursed. In addition, under section
3(b)(1) of the Paycheck Protection Program
Flexibility Act of 2020 (Flexibility Act), the covered
period of any borrower will end no later than
December 31, 2020.
4 Given the 2.5 multiplier in the calculation of
maximum PPP loan amount in SBA Form 2483, this
per-individual maximum would only be reached if
the borrower had reduced its FTEs but was eligible
for an exemption (safe harbor) from the resulting
reduction in forgiveness.
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months of the borrower’s average total
monthly payroll costs during the oneyear period preceding the loan. 15
U.S.C. 636(a)(36)(E). For example, a
borrower with one other employee
would receive a maximum loan amount
equal to five months of payroll (2.5
months of payroll for the owner plus 2.5
months of payroll for the employee). If
the owner laid off the employee and
availed itself of the safe harbor in the
Flexibility Act from reductions in loan
forgiveness for a borrower that is unable
to return to the same level of business
activity the business was operating at
before February 15, 2020, the owner
could treat the entire amount of the PPP
loan as payroll, with the entire loan
being forgiven. This would not only
result in a windfall for the owner, by
providing the owner with five months of
payroll instead of 2.5 months, but also
defeat the purpose of the CARES Act of
protecting the paycheck of the
employee. For borrowers with no
employees, this limitation will have no
effect, because the maximum loan
amount for such borrowers already
includes only 2.5 months of their
payroll. Finally, at least 60 percent of
the amount forgiven must be
attributable to payroll costs, for the
reasons specified in the First PPP
Interim Final Rule and SBA’s interim
final rule posted on June 11, 2020.
In addition, Part III.1.g. of the Third
Interim Final Rule (85 FR 21747, 21750)
is revised by striking ‘‘eight-week’’.
2. Changes to the Sixth Interim Final
Rule
As described above, section 3(b) of the
Flexibility Act extended the length of
the covered period as defined in section
1106 of the CARES Act from eight to 24
weeks, while allowing borrowers that
received PPP loans before June 5, 2020
to elect to use the original eight-week
covered period. Therefore, Part III.1.a. of
the Sixth Interim Final Rule (85 FR
26321, 26322–23) is revised by striking
both references to ‘‘eight-week covered
period’’ and replacing them with
‘‘covered period’’.
3. Additional Information
SBA may provide further guidance, if
needed, through SBA notices which 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.
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36999
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.
This rule is necessary to implement
Sections 1102 and 1106 of the CARES
Act and the Flexibility Act in order to
provide economic relief to small
businesses nationwide adversely
impacted under the COVID–19
Emergency Declaration. We anticipate
that this rule will result in substantial
benefits to small businesses, their
employees, and the communities they
serve. However, we lack data to estimate
the effects of this rule.
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 effect but does have
a limited retroactive effect consistent
with section 3(d) of the Flexibility Act.
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 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
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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. Small Business
Administration’s 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.
Authority: 15 U.S.C. 636(a)(36); Paycheck
Protection Program Flexibility Act of 2020,
Pub. L. 116–142; Coronavirus Aid, Relief,
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and Economic Security Act, Pub. L. 116–136,
Section 1114.
Jovita Carranza,
Administrator.
[FR Doc. 2020–13293 Filed 6–16–20; 4:15 pm]
BILLING CODE P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2019–0683; Project
Identifier AD–2020–00149–E; Amendment
39–21149; AD 2020–13–04]
RIN 2120–AA64
Airworthiness Directives; General
Electric Company Turbofan Engines
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
The FAA is superseding
Airworthiness Directive (AD) 2017–09–
06 for all General Electric Company (GE)
GEnx-1B and GEnx-2B model turbofan
engines. AD 2017–09–06 required
updating electronic engine control (EEC)
full authority digital electronic control
(FADEC) software on GEnx-1B and
GEnx-2B turbofan engines and replacing
a certain fan hub frame assembly part
installed on GEnx-2B turbofan engines.
This AD requires updating EEC software
on GEnx-1B and GEnx-2B engines and
replacing a certain fan hub frame
assembly part installed on GEnx-2B
engines. This AD was prompted by the
development of a design change by GE
to remove the unsafe condition. The
FAA is issuing this AD to address the
unsafe condition on these products.
DATES: This AD is effective July 24,
2020.
SUMMARY:
For service information
identified in this final rule, contact
General Electric Company, GE Aviation,
Room 285, 1 Neumann Way, Cincinnati,
OH 45215; phone: 513–552–3272; email:
geae.aoc@ge.com. You may view this
service information at the FAA,
Airworthiness Products Section,
Operational Safety Branch, 1200 District
Avenue, Burlington, MA 01803. For
information on the availability of this
material at the FAA, call 781–238–7759.
It is also available on the internet at
https://www.regulations.gov by
searching for and locating Docket No.
FAA–2019–0683.
ADDRESSES:
Examining the AD Docket
You may examine the AD docket on
the internet at https://
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www.regulations.gov by searching for
and locating Docket No. FAA–2019–
0683; or in person at Docket Operations
between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
The AD docket contains this final rule,
the regulatory evaluation, any
comments received, and other
information. The address for Docket
Operations is U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT:
Mehdi Lamnyi, Aerospace Engineer,
ECO Branch, FAA, 1200 District
Avenue, Burlington, MA 01803; phone:
(781) 238–7743; fax: (781) 238–7199;
email: Mehdi.Lamnyi@faa.gov.
SUPPLEMENTARY INFORMATION:
Discussion
The FAA issued a notice of proposed
rulemaking (NPRM) to amend 14 CFR
part 39 to supersede AD 2017–09–06,
Amendment 39–18868 (82 FR 21111,
May 5, 2017), (‘‘AD 2017–09–06’’). AD
2017–09–06 applied to all GE GEnx-1B
and GEnx-2B model turbofan engines.
The NPRM published in the Federal
Register on November 19, 2019 (84 FR
63820). The NPRM was prompted by the
development of a design change by GE
to remove the unsafe condition. The
NPRM proposed to require updating
EEC FADEC software on GEnx-1B and
GEnx-2B model turbofan engines and
replacing a certain fan hub frame
assembly part installed on GEnx-2B
model turbofan engines. The FAA is
issuing this AD to address the unsafe
condition on these products.
Comments
The FAA gave the public the
opportunity to participate in developing
this final rule. The following presents
the comments received on the NPRM
and the FAA’s response to each
comment.
Request To Clarify Compliance Time
The Air Line Pilots Association,
International (ALPA), commented that it
is unclear why the compliance time to
remove the affected fan hub stator
assembly booster outlet guide vanes
(BOGV) of ‘‘before further flight,’’ would
occur after an independent engine shop
visit. ALPA suggested either removal or
clarification of the ‘‘before further
flight’’ compliance time requirement.
This AD supersedes AD 2017–09–06
(82 FR 21111, May 5, 2017), which
specified removal of certain fan hub
stator assembly BOGV at the next engine
shop visit after its effective date (June 9,
2017). This AD retains the requirement
E:\FR\FM\19JNR1.SGM
19JNR1
Agencies
[Federal Register Volume 85, Number 119 (Friday, June 19, 2020)]
[Rules and Regulations]
[Pages 36997-37000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13293]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 85, No. 119 / Friday, June 19, 2020 / Rules
and Regulations
[[Page 36997]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket No. SBA-2020-0037]
RIN 3245-AH51
Business Loan Program Temporary Changes; Paycheck Protection
Program--Revisions to the Third and Sixth Interim Final Rules
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 on its website an interim final rule relating to the
implementation of sections 1102 and 1106 of the Coronavirus Aid,
Relief, and Economic Security Act (CARES Act or the Act) (published in
the Federal Register on April 15, 2020). Section 1102 of the Act
temporarily adds a new product, titled the ``Paycheck Protection
Program,'' to SBA's 7(a) Loan Program. Subsequently, SBA and Treasury
issued additional interim final rules implementing the Paycheck
Protection Program. On June 5, 2020, the Paycheck Protection Program
Flexibility Act of 2020 (Flexibility Act) was signed into law, amending
the CARES Act. This interim final rule revises interim final rules
posted on SBA's website on April 14, 2020 (published in the Federal
Register on April 20, 2020) and April 28, 2020 (published in the
Federal Register on May 4, 2020), by changing provisions to conform to
the Flexibility Act. Several of these amendments are retroactive to the
date of enactment of the CARES Act, as required by section 3(d) of the
Flexibility Act.
DATES:
Effective dates: The provisions in this interim final rule related
to loan forgiveness for PPP loans are effective March 27, 2020. The
provision in this interim final rule relating to the maturity date of
PPP loans is effective June 5, 2020. The remaining provisions in this
interim final rule are effective June 16, 2020.
Comment date: Comments must be received on or before July 20, 2020.
ADDRESSES: You may submit comments, identified by number SBA-2020-0037,
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, 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, have been 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, have been 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.
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. On June 5, 2020,
the President signed the Paycheck Protection Program Flexibility Act of
2020 (Flexibility Act) (Pub. L. 116-142), which changes key provisions
of the Paycheck Protection Program, including provisions relating to
the maturity of PPP loans, the deferral of PPP loan payments, and the
forgiveness of PPP loans. Section 3(d) of the Flexibility Act provides
that the amendments relating to PPP loan forgiveness and extension of
the deferral period for PPP loans shall be effective as if included in
the CARES Act, which means that they are retroactive to March 27, 2020.
Section 2 of the Flexibility Act provides that the amendment relating
to the extension of the maturity date for PPP loans shall take effect
on the date of enactment (June 5, 2020). Under the Flexibility Act, the
extension of the maturity date for PPP loans is applicable to PPP loans
made on or after that date, and lenders and borrowers may mutually
agree to modify PPP loans made before such date to reflect the longer
maturity.
II. Comments and Retroactive/Immediate Effective Date
This interim final rule is effective without advance notice and
public comment because section 1114 of the CARES 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
[[Page 36998]]
and comment on the grounds that it would be contrary to the public
interest. Specifically, advance public notice and comment would defeat
the purpose of this interim final rule given that SBA's authority to
guarantee PPP loans expires on June 30, 2020, and that many PPP
borrowers can now apply for loan forgiveness following the end of their
eight-week covered period. Providing borrowers and lenders with
certainty on both loan requirements and loan forgiveness requirements
following the enactment of the Flexibility Act will enhance the ability
of lenders to make loans and process loan forgiveness applications,
particularly in light of the fact that most of the Flexibility Act's
provisions are retroactive to March 27, 2020. Specifically, small
businesses that have yet to apply for and receive a PPP loan need to be
informed of the terms of PPP loans as soon as possible, because the
last day on which a lender can obtain an SBA loan number for a PPP loan
is June 30, 2020. Borrowers who already have applied for and received a
PPP loan need certainty regarding how loan proceeds must be used during
the covered period, as amended by the Flexibility Act, so that they can
maximize the amount of loan forgiveness. These same reasons provide
good cause for SBA to dispense with the 30-day delayed effective date
provided in the Administrative Procedure Act. Although this interim
final rule is effective on or before date of filing, 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 July 20, 2020. The SBA will consider these
comments, comments received on the interim final rules amended by this
interim final rule, which were posted on April 14 and April 28, 2020
(and published in the Federal Register on April 20, 2020 and May 4,
2020, respectively), and the need for making any revisions as a result
of these comments.
III. Paycheck Protection Program--Revisions to Third and Sixth Interim
Final Rules
Overview
The CARES Act was enacted to provide immediate assistance to
individuals, families, and businesses affected by the COVID-19
emergency. Among the provisions contained in the CARES Act are
provisions authorizing SBA to temporarily guarantee loans under a new
7(a) loan program titled the ``Paycheck Protection Program.'' Loans
guaranteed under the Paycheck Protection Program (PPP) will be 100
percent guaranteed by SBA, and the full principal amount of the loans
may qualify for loan forgiveness. The Flexibility Act amends the CARES
Act, including its provisions relating to loan terms and loan
forgiveness. The purpose of this interim final rule is to update the
Interim Final Rule on Additional Eligibility Criteria and Requirements
for Certain Pledges of Loans (Third Interim Final Rule), posted on
SBA's website on April 14, 2020 and published in the Federal Register
on April 20, 2020 (85 FR 21747), and the Interim Final Rule on
Disbursements (Sixth Interim Final Rule), posted on SBA's website on
April 28, 2020 and published in the Federal Register on May 4, 2020 (85
FR 26321), in light of the amendments under the Flexibility Act. The
Third Interim Final Rule and the Sixth Interim Final Rule, each as
amended by this interim final rule, should be interpreted consistent
with the frequently asked questions (FAQs) regarding the PPP that are
posted on SBA's website \1\ and the other interim final rules issued
regarding the PPP.\2\
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\1\ See https://www.sba.gov/document/support--faq-lenders-borrowers.
\2\ See https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.
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1. Changes to the Third Interim Final Rule
a. Use of PPP Loan Proceeds
Under section 1102 of the CARES Act, certain provisions regarding
the issuance and use of PPP loans are limited to the ``covered
period.'' ``Covered period,'' as that term is used in section 1102 of
the CARES Act, was originally defined as the period from February 15,
2020, to June 30, 2020. However, section 3(a) of the Flexibility Act
extended the ``covered period'' as defined in section 1102 until
December 31, 2020. Therefore, Part III.1.d.(iii.) of the Third Interim
Final Rule (85 FR 21747, 21749) is revised by striking ``during the
eight-week period following the first disbursement of the loan (the
``covered period'')'' and ``during the covered period''.
Section 2(a) of the Flexibility Act provides a minimum maturity of
five years for all PPP loans made on or after the date of enactment of
the Flexibility Act (June 5, 2020), and permits lenders and borrowers
to extend the maturity date of earlier PPP loans by mutual agreement.
Therefore, Part III.1.d.v. of the Third Interim Final Rule (85 FR
21747, 21749) is revised by striking ``PPP's maturity of two years''
and replacing it with ``PPP's maturity of two years for PPP loans made
before June 5, 2020 unless the borrower and lender mutually agree to
extend the maturity of such loans to five years, or PPP's maturity of
five years for PPP loans made on or after June 5''.
Section 3(b) of the Flexibility Act amended the requirements
regarding forgiveness of PPP loans to reduce, from 75 percent to 60
percent, the portion of PPP loan proceeds that must be used for payroll
costs for the full amount of the PPP loan to be eligible for
forgiveness. Consistent with this change, SBA's interim final rule
posted on June 11, 2020, decreased from 75 percent to 60 percent the
portion of loan proceeds that must be used for payroll costs.
Therefore, Part III.1.e. of the Third Interim Final Rule (85 FR 21747,
21750) is revised to read as follows:
e. Are there any other restrictions on how I can use PPP loan proceeds?
Yes. At least 60 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 60 percent floor is contained in the First PPP Interim
Final Rule and SBA's interim final rule posted on June 11, 2020.
b. Loan Forgiveness
Under section 1106 of the CARES Act, certain provisions regarding
the forgiveness of PPP loans are limited to the ``covered period.''
``Covered period,'' as that term is used in section 1106 of the CARES
Act, was originally defined as the eight-week period beginning on the
date of the origination of a covered loan. However, section 3(b) of the
Flexibility Act extended the length of the covered period as defined in
section 1106 of the CARES Act from eight to 24 weeks, while allowing
borrowers that received PPP loans before June 5, 2020 to elect to use
the original eight-week covered period. As noted above, section 3(b) of
the Flexibility Act also amended the requirements regarding forgiveness
of PPP loans to reduce, from 75 percent to 60 percent, the amount of
PPP loan proceeds that must be used for payroll costs for the full
amount of the PPP loan to be eligible for forgiveness. Therefore, Part
III.1.f. of the Third Interim Final Rule (85 FR 21747, 21750) is
revised to read as follows:
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
24-week period
[[Page 36999]]
beginning on the date your PPP loan is disbursed \3\ (``covered
period'') on:
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\3\ If your PPP loan was made before June 5, 2020, you may elect
to have your covered period be the eight-week period beginning on
the date your PPP loan was disbursed. In addition, under section
3(b)(1) of the Paycheck Protection Program Flexibility Act of 2020
(Flexibility Act), the covered period of any borrower will end no
later than December 31, 2020.
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i. Payroll costs including salary, wages, and tips, up to
$100,000 of annualized pay per employee (for 24 weeks, a maximum of
$46,154 per individual,\4\ or 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);
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\4\ Given the 2.5 multiplier in the calculation of maximum PPP
loan amount in SBA Form 2483, this per-individual maximum would only
be reached if the borrower had reduced its FTEs but was eligible for
an exemption (safe harbor) from the resulting reduction in
forgiveness.
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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
(up to $15,385) for an eight-week covered period or 2.5 months'
worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week
covered period, 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 or F to either eight weeks' worth (8/52) of 2019
net profit (up to $15,385) for an eight-week covered period or 2.5
months' worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week
covered period per owner in total across all businesses. This approach
is consistent with the structure of the CARES Act and its overarching
focus on keeping workers paid, and will prevent windfalls that Congress
did not intend. Specifically, Congress determined that the maximum loan
amount is generally based on 2.5 months of the borrower's average total
monthly payroll costs during the one-year period preceding the loan. 15
U.S.C. 636(a)(36)(E). For example, a borrower with one other employee
would receive a maximum loan amount equal to five months of payroll
(2.5 months of payroll for the owner plus 2.5 months of payroll for the
employee). If the owner laid off the employee and availed itself of the
safe harbor in the Flexibility Act from reductions in loan forgiveness
for a borrower that is unable to return to the same level of business
activity the business was operating at before February 15, 2020, the
owner could treat the entire amount of the PPP loan as payroll, with
the entire loan being forgiven. This would not only result in a
windfall for the owner, by providing the owner with five months of
payroll instead of 2.5 months, but also defeat the purpose of the CARES
Act of protecting the paycheck of the employee. For borrowers with no
employees, this limitation will have no effect, because the maximum
loan amount for such borrowers already includes only 2.5 months of
their payroll. Finally, at least 60 percent of the amount forgiven must
be attributable to payroll costs, for the reasons specified in the
First PPP Interim Final Rule and SBA's interim final rule posted on
June 11, 2020.
In addition, Part III.1.g. of the Third Interim Final Rule (85 FR
21747, 21750) is revised by striking ``eight-week''.
2. Changes to the Sixth Interim Final Rule
As described above, section 3(b) of the Flexibility Act extended
the length of the covered period as defined in section 1106 of the
CARES Act from eight to 24 weeks, while allowing borrowers that
received PPP loans before June 5, 2020 to elect to use the original
eight-week covered period. Therefore, Part III.1.a. of the Sixth
Interim Final Rule (85 FR 26321, 26322-23) is revised by striking both
references to ``eight-week covered period'' and replacing them with
``covered period''.
3. Additional Information
SBA may provide further guidance, if needed, through SBA notices
which 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.
This rule is necessary to implement Sections 1102 and 1106 of the
CARES Act and the Flexibility Act in order to provide economic relief
to small businesses nationwide adversely impacted under the COVID-19
Emergency Declaration. We anticipate that this rule will result in
substantial benefits to small businesses, their employees, and the
communities they serve. However, we lack data to estimate the effects
of this rule.
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 effect but does have a limited
retroactive effect consistent with section 3(d) of the Flexibility Act.
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 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
[[Page 37000]]
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. Small Business Administration's 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.
Authority: 15 U.S.C. 636(a)(36); Paycheck Protection Program
Flexibility Act of 2020, Pub. L. 116-142; Coronavirus Aid, Relief,
and Economic Security Act, Pub. L. 116-136, Section 1114.
Jovita Carranza,
Administrator.
[FR Doc. 2020-13293 Filed 6-16-20; 4:15 pm]
BILLING CODE P