Business Loan Program Temporary Changes; Paycheck Protection Program-Certain Eligible Payroll Costs, 39066-39068 [2020-14128]

Download as PDF 39066 Federal Register / Vol. 85, No. 126 / Tuesday, June 30, 2020 / Rules and Regulations SMALL BUSINESS ADMINISTRATION 13 CFR Part 120 [Docket Number SBA–2020–0040] RIN 3245–AH54 Business Loan Program Temporary Changes; Paycheck Protection Program—Certain Eligible Payroll Costs 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 the U.S. Small Business Administration’s (SBA’s) 7(a) Loan Program. Subsequently, SBA issued a number of interim final rules implementing the Paycheck Protection Program. This interim final rule supplements the previously posted interim final rules by providing additional guidance on certain eligible payroll costs. DATES: Effective Date: The provisions in this interim final rule are effective June 26, 2020. Comment Date: Comments must be received on or before July 30, 2020. ADDRESSES: You may submit comments, identified by number SBA–2020–0040 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. khammond on DSKJM1Z7X2PROD with RULES SUMMARY: SUPPLEMENTARY INFORMATION: VerDate Sep<11>2014 15:54 Jun 29, 2020 Jkt 250001 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, 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) (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. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) (Pub. L. 116–142), which changed provisions of the PPP relating to the maturity of PPP loans, the deferral of PPP loan payments, and the forgiveness of PPP loans. This interim final rule addresses payroll costs that may be included on a PPP loan application submitted by certain boat owners or operators that are engaged in catching fish or other forms PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 of aquatic animal life (fishing boat owners) and that have hired one or more crewmembers who are regarded as independent contractors or otherwise self-employed for certain federal tax purposes under 26 U.S.C. 3121(b)(20) of the Internal Revenue Code (the Code). A crewmember may be described in Section 3121(b)(20) of the Code if the fishing boat on which he or she works has an operating crew that is normally made up of fewer than 10 individuals and the crewmember receives as compensation for his or her work a share of the boat’s catch or of the proceeds from the sale of the catch, in an amount that depends on the amount of the catch. Such a crewmember generally may not receive additional cash remuneration or other compensation for his or her services with respect to the fishing boat. A fishing boat owner must report compensation paid to such a crewmember on Box 5 of IRS Form 1099–MISC. The First Interim Final Rule, posted on April 2, 2020, provided that because independent contractors have the ability to apply for a PPP loan on their own, they do not count for purposes of another applicant’s PPP loan calculation. 85 FR 20811, 20813 (April 15, 2020). Because crewmembers described in Section 3121(b)(20) of the Code are treated as independent contractors or otherwise self-employed for certain federal tax purposes, fishing boat owners have faced uncertainty about whether to report payments to such crewmembers as a payroll cost on their PPP loan applications. On April 14, 2020, SBA, in consultation with Treasury, posted an interim final rule explaining that the self-employment income of the general active partners of a partnership 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.1 85 FR 21747, 21748 (April 20, 2020). The Administrator, in consultation with the Secretary, has determined that the relationship of a fishing boat owner and a crewmember described in Section 3121(b)(20) of the Code is analogous to a joint venture or partnership. For example, the fishing boat owner and crewmembers each contribute labor or resources to a common commercial enterprise, and the owner and crewmembers share in the enterprise’s profits. In order to 1 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/2020-06/How-to-Calculate-LoanAmounts-508_0.pdf). E:\FR\FM\30JNR1.SGM 30JNR1 Federal Register / Vol. 85, No. 126 / Tuesday, June 30, 2020 / Rules and Regulations harmonize SBA’s interim final rule regarding partnerships with SBA’s interim final rule described above regarding independent contactors, the Administrator, in consultation with the Secretary, has determined that in the event of a conflict (i.e., a case where one or more partners in a partnership are treated as independent contractors for tax purposes), the rules regarding partnership will govern. Accordingly, as described below, this interim final rule (1) provides that a fishing boat owner may include compensation reported on Box 5 of Form 1099–MISC and paid to a crewmember described in Section 3121(b)(20) as a payroll cost in its PPP loan application, and (2) addresses a fishing boat owner’s eligibility to obtain loan forgiveness of payroll costs paid to a crewmember who has obtained his or her own PPP loan. II. Comments and 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 and comment on the grounds that 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. These same reasons provide good cause for SBA to dispense with the 30-day delayed effective date provided in the Administrative Procedure Act (APA). See 5 U.S.C. 553(b)(B). 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 30, 2020. The SBA will consider these comments and the need for making any revisions as a result of these comments. khammond on DSKJM1Z7X2PROD with RULES III. Paycheck Protection Program— Additional Guidance on Certain Eligible Payroll Costs 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 VerDate Sep<11>2014 15:54 Jun 29, 2020 Jkt 250001 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 purpose of this interim final rule is to provide additional guidance concerning payroll costs that may be reported in connection with certain PPP loan and loan forgiveness applications. 1. Calculation of Payroll Costs of Certain Fishing Boat Owners May fishing boat owners include payroll costs in their PPP loan applications that are attributable to crewmembers described in Section 3121(b)(20) of the Internal Revenue Code? Yes. The Administrator, in consultation with the Secretary, has determined that the relationship of a crewmember described in Section 3121(b)(20) of the Internal Revenue Code (Code) and a fishing boat owner or operator (fishing boat owner) is analogous to a joint venture or partnership for purposes of the PPP. As a result, a fishing boat owner may include compensation reported on Box 5 of IRS Form 1099–MISC and paid to a crewmember described in Section 3121(b)(20) of the Code, up to $100,000 annualized, as a payroll cost in its PPP loan application. The Administrator, in consultation with the Secretary, has determined that this treatment is appropriate to effectuate the purposes of the CARES Act to provide assistance to eligible PPP borrowers, including business concerns that operate as partnerships, affected by the COVID–19 emergency. 2. Calculation of Certain Payroll Costs Eligible for Loan Forgiveness May a fishing boat owner include as payroll costs in its application for loan forgiveness any compensation paid to a crewmember who received his or her own PPP loan and is seeking forgiveness for amounts of compensation the crewmember received for performing services described in Section 3121(b)(20) of the Code with respect to that owner’s fishing boat? No. If a fishing boat crewmember obtains his or her own PPP loan and seeks forgiveness of that loan based in part on compensation from a particular fishing boat owner, the fishing boat owner cannot also obtain PPP loan forgiveness based on compensation paid to that same crewmember. This restriction applies only if the crewmember is performing services described in Section 3121(b)(20) of the PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 39067 Code for the particular fishing boat owner. The Administrator, in consultation with the Secretary, has determined that this restriction is necessary to prevent fishing boat owners and crewmembers from claiming forgiveness for the same payroll costs (for the owner’s PPP loan, the compensation to a specific crewmember; for the crewmember’s PPP loan, the compensation from the owner to that crewmember). As a result, only the crewmember’s PPP loan is eligible for forgiveness, and the owner may not obtain forgiveness for any payroll costs paid to the crewmember. The fishing boat owner is responsible for determining whether any of its crewmembers during the covered period for loan forgiveness received their own PPP loans. Due to the increased risk of duplicate payroll costs, PPP loans to fishing boat owners are more likely to be subject to an SBA loan review. 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 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. E:\FR\FM\30JNR1.SGM 30JNR1 39068 Federal Register / Vol. 85, No. 126 / Tuesday, June 30, 2020 / Rules and Regulations 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. khammond on DSKJM1Z7X2PROD with RULES 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 VerDate Sep<11>2014 15:54 Jun 29, 2020 Jkt 250001 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. 2020–14128 Filed 6–26–20; 11:15 am] BILLING CODE 8026–03–P FAA Order 7400.11D, Airspace Designations and Reporting Points, and subsequent amendments can be viewed on line at https:// www.faa.gov/air_traffic/publications/. For further information, you can contact the Airspace Policy Group, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267–8783. The Order is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of FAA Order 7400.11D at NARA, email fedreg.legal@nara.gov or go to https:// www.archives.gov/federal-register/cfr/ ibr-locations.html. FOR FURTHER INFORMATION, CONTACT: John Fornito, Operations Support Group, Eastern Service Center, Federal Aviation Administration, 1701 Columbia Avenue, College Park, GA 30337; telephone (404) 305–6364. SUPPLEMENTARY INFORMATION: ADDRESSES: DEPARTMENT OF TRANSPORTATION Authority for This Rulemaking Federal Aviation Administration The FAA’s authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency’s authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends Class D airspace and removes Class E airspace extending upward from 700 feet above the surface at Bogue Field MCALF, Bogue, NC, due to the airspace no longer being necessary. 14 CFR Part 71 [Docket No. FAA–2020–0164; Airspace Docket No. 20–ASO–3] RIN 2120–AA66 Amendment of Class D Airspace and Revocation of Class E Airspace; Bogue, NC Federal Aviation Administration (FAA), DOT. ACTION: Final rule. AGENCY: This action amends Class D airspace by updating the geographic coordinates, and removes Class E airspace extending upward from 700 feet above the surface at Bogue Field Marine Corps Auxiliary Field, Bogue, NC, at the request of the US Marine Corps. Class E airspace is no longer required, as there are no instrument approaches into Bogue Field MCALF. This action also replaces the outdated term Airport/Facility Directory with the term Chart Supplement in the legal description of associated Class D airspace. This action enhances the safety and management of controlled airspace within the national airspace system. DATES: Effective 0901 UTC, September 10, 2020. The Director of the Federal Register approves this incorporation by reference action under Title 1 Code of Federal Regulations part 51, subject to the annual revision of FAA Order 7400.11 and publication of conforming amendments. SUMMARY: PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 History The FAA published a notice of proposed rulemaking in the Federal Register (85 FR 14809, March 16, 2020) for Docket No. FAA–2020–0164 to amend Class D airspace by updating the geographic coordinates, and remove Class E airspace extending upward from 700 feet above the surface at Bogue Field Marine Corps Auxiliary Field, Bogue, NC as the airport has no instrument approaches. Therefore, the Class E airspace is no longer necessary. This action enhances the safety and management of controlled airspace within the national airspace system. Interested parties were invited to participate in this rulemaking effort by E:\FR\FM\30JNR1.SGM 30JNR1

Agencies

[Federal Register Volume 85, Number 126 (Tuesday, June 30, 2020)]
[Rules and Regulations]
[Pages 39066-39068]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14128]



[[Page 39066]]

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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

[Docket Number SBA-2020-0040]
RIN 3245-AH54


Business Loan Program Temporary Changes; Paycheck Protection 
Program--Certain Eligible Payroll Costs

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 the U.S. Small Business Administration's (SBA's) 7(a) 
Loan Program. Subsequently, SBA issued a number of interim final rules 
implementing the Paycheck Protection Program. This interim final rule 
supplements the previously posted interim final rules by providing 
additional guidance on certain eligible payroll costs.

DATES: 
    Effective Date: The provisions in this interim final rule are 
effective June 26, 2020.
    Comment Date: Comments must be received on or before July 30, 2020.

ADDRESSES: You may submit comments, identified by number SBA-2020-0040 
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, 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) (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. On June 5, 2020, 
the President signed the Paycheck Protection Program Flexibility Act of 
2020 (Flexibility Act) (Pub. L. 116-142), which changed provisions of 
the PPP relating to the maturity of PPP loans, the deferral of PPP loan 
payments, and the forgiveness of PPP loans.
    This interim final rule addresses payroll costs that may be 
included on a PPP loan application submitted by certain boat owners or 
operators that are engaged in catching fish or other forms of aquatic 
animal life (fishing boat owners) and that have hired one or more 
crewmembers who are regarded as independent contractors or otherwise 
self-employed for certain federal tax purposes under 26 U.S.C. 
3121(b)(20) of the Internal Revenue Code (the Code). A crewmember may 
be described in Section 3121(b)(20) of the Code if the fishing boat on 
which he or she works has an operating crew that is normally made up of 
fewer than 10 individuals and the crewmember receives as compensation 
for his or her work a share of the boat's catch or of the proceeds from 
the sale of the catch, in an amount that depends on the amount of the 
catch. Such a crewmember generally may not receive additional cash 
remuneration or other compensation for his or her services with respect 
to the fishing boat. A fishing boat owner must report compensation paid 
to such a crewmember on Box 5 of IRS Form 1099-MISC. The First Interim 
Final Rule, posted on April 2, 2020, provided that because independent 
contractors have the ability to apply for a PPP loan on their own, they 
do not count for purposes of another applicant's PPP loan calculation. 
85 FR 20811, 20813 (April 15, 2020). Because crewmembers described in 
Section 3121(b)(20) of the Code are treated as independent contractors 
or otherwise self-employed for certain federal tax purposes, fishing 
boat owners have faced uncertainty about whether to report payments to 
such crewmembers as a payroll cost on their PPP loan applications.
    On April 14, 2020, SBA, in consultation with Treasury, posted an 
interim final rule explaining that the self-employment income of the 
general active partners of a partnership 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.\1\ 85 FR 21747, 21748 (April 20, 2020). 
The Administrator, in consultation with the Secretary, has determined 
that the relationship of a fishing boat owner and a crewmember 
described in Section 3121(b)(20) of the Code is analogous to a joint 
venture or partnership. For example, the fishing boat owner and 
crewmembers each contribute labor or resources to a common commercial 
enterprise, and the owner and crewmembers share in the enterprise's 
profits. In order to

[[Page 39067]]

harmonize SBA's interim final rule regarding partnerships with SBA's 
interim final rule described above regarding independent contactors, 
the Administrator, in consultation with the Secretary, has determined 
that in the event of a conflict (i.e., a case where one or more 
partners in a partnership are treated as independent contractors for 
tax purposes), the rules regarding partnership will govern. 
Accordingly, as described below, this interim final rule (1) provides 
that a fishing boat owner may include compensation reported on Box 5 of 
Form 1099-MISC and paid to a crewmember described in Section 
3121(b)(20) as a payroll cost in its PPP loan application, and (2) 
addresses a fishing boat owner's eligibility to obtain loan forgiveness 
of payroll costs paid to a crewmember who has obtained his or her own 
PPP loan.
---------------------------------------------------------------------------

    \1\ 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/2020-06/How-to-Calculate-Loan-Amounts-508_0.pdf).
---------------------------------------------------------------------------

II. Comments and 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 and comment on the 
grounds that 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. These same reasons 
provide good cause for SBA to dispense with the 30-day delayed 
effective date provided in the Administrative Procedure Act (APA). See 
5 U.S.C. 553(b)(B). 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 
30, 2020. The SBA will consider these comments and the need for making 
any revisions as a result of these comments.

III. Paycheck Protection Program--Additional Guidance on Certain 
Eligible Payroll Costs

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 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 purpose of this interim final 
rule is to provide additional guidance concerning payroll costs that 
may be reported in connection with certain PPP loan and loan 
forgiveness applications.
1. Calculation of Payroll Costs of Certain Fishing Boat Owners
    May fishing boat owners include payroll costs in their PPP loan 
applications that are attributable to crewmembers described in Section 
3121(b)(20) of the Internal Revenue Code?
    Yes. The Administrator, in consultation with the Secretary, has 
determined that the relationship of a crewmember described in Section 
3121(b)(20) of the Internal Revenue Code (Code) and a fishing boat 
owner or operator (fishing boat owner) is analogous to a joint venture 
or partnership for purposes of the PPP. As a result, a fishing boat 
owner may include compensation reported on Box 5 of IRS Form 1099-MISC 
and paid to a crewmember described in Section 3121(b)(20) of the Code, 
up to $100,000 annualized, as a payroll cost in its PPP loan 
application. The Administrator, in consultation with the Secretary, has 
determined that this treatment is appropriate to effectuate the 
purposes of the CARES Act to provide assistance to eligible PPP 
borrowers, including business concerns that operate as partnerships, 
affected by the COVID-19 emergency.
2. Calculation of Certain Payroll Costs Eligible for Loan Forgiveness
    May a fishing boat owner include as payroll costs in its 
application for loan forgiveness any compensation paid to a crewmember 
who received his or her own PPP loan and is seeking forgiveness for 
amounts of compensation the crewmember received for performing services 
described in Section 3121(b)(20) of the Code with respect to that 
owner's fishing boat?
    No. If a fishing boat crewmember obtains his or her own PPP loan 
and seeks forgiveness of that loan based in part on compensation from a 
particular fishing boat owner, the fishing boat owner cannot also 
obtain PPP loan forgiveness based on compensation paid to that same 
crewmember. This restriction applies only if the crewmember is 
performing services described in Section 3121(b)(20) of the Code for 
the particular fishing boat owner. The Administrator, in consultation 
with the Secretary, has determined that this restriction is necessary 
to prevent fishing boat owners and crewmembers from claiming 
forgiveness for the same payroll costs (for the owner's PPP loan, the 
compensation to a specific crewmember; for the crewmember's PPP loan, 
the compensation from the owner to that crewmember). As a result, only 
the crewmember's PPP loan is eligible for forgiveness, and the owner 
may not obtain forgiveness for any payroll costs paid to the 
crewmember. The fishing boat owner is responsible for determining 
whether any of its crewmembers during the covered period for loan 
forgiveness received their own PPP loans. Due to the increased risk of 
duplicate payroll costs, PPP loans to fishing boat owners are more 
likely to be subject to an SBA loan review.
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 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.

[[Page 39068]]

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. 2020-14128 Filed 6-26-20; 11:15 am]
BILLING CODE 8026-03-P
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