Business Loan Program Temporary Changes; Paycheck Protection Program-Revisions to Loan Amount Calculation and Eligibility, 13149-13156 [2021-04795]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 86, Number 43 (Monday, March 8, 2021)]
[Rules and Regulations]
[Pages 13149-13156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04795]



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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. 

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Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Rules 
and Regulations

[[Page 13149]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

[Docket Number SBA-2021-0010]
RIN 3245-AH67


Business Loan Program Temporary Changes; Paycheck Protection 
Program--Revisions to Loan Amount Calculation and Eligibility

AGENCY: U.S. Small Business Administration.

ACTION: Interim final rule.

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SUMMARY: This interim final rule implements changes related to loans 
made under the Paycheck Protection Program (PPP), which was originally 
established under the Coronavirus Aid, Relief, and Economic Security 
Act (CARES Act) to provide economic relief to small businesses 
nationwide adversely impacted by the Coronavirus Disease 2019 (COVID-
19). On December 27, 2020, the Economic Aid to Hard-Hit Small 
Businesses, Nonprofits, and Venues Act (Economic Aid Act) was enacted, 
extending the authority to make PPP loans through March 31, 2021, 
revising certain PPP requirements, and permitting second draw PPP 
loans. This interim final rule allows individuals who file an IRS Form 
1040, Schedule C to calculate their maximum loan amount using gross 
income, removes the eligibility restriction that prevents businesses 
with owners who have non-financial fraud felony convictions in the last 
year from obtaining PPP loans, and removes the eligibility restriction 
that prevents businesses with owners who are delinquent or in default 
on their Federal student loans from obtaining PPP loans.

DATES: 
    Effective date: Unless otherwise specified in this interim final 
rule, the provisions of this interim final rule are effective March 4, 
2021.
    Applicability date: Unless otherwise specified, this interim final 
rule applies to Paycheck Protection Programs loans approved after the 
effective date of this rule.
    Comment date: Comments must be received on or before April 7, 2021.

ADDRESSES: You may submit comments, identified by number SBA-2021-0010 
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 sba.gov">[email protected]sba.gov. 
All other comments must be submitted through the Federal eRulemaking 
Portal described above. 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 27, 2020, the Coronavirus Aid, Relief, and Economic 
Security Act (the CARES Act) (Pub. L. 116-136) was enacted to provide 
emergency assistance and health care response for individuals, 
families, and businesses affected by the coronavirus disease 2019 
(COVID-19) pandemic. Section 1102 of the CARES Act temporarily 
permitted the Small Business Administration (SBA) to guarantee 100 
percent of 7(a) loans under a new program titled the ``Paycheck 
Protection Program,'' pursuant to section 7(a)(36) of the Small 
Business Act (15 U.S.C. 636(a)(36)) (First Draw PPP Loans). Section 
1106 of the CARES Act provided for forgiveness of up to the full 
principal amount of qualifying loans guaranteed under the Paycheck 
Protection Program (PPP).
    On December 27, 2020, the Economic Aid to Hard-Hit Small 
Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. L. 116-
260) was enacted. The Economic Aid Act reauthorized lending under the 
PPP through March 31, 2021. The Economic Aid Act added a new temporary 
section 7(a)(37) to the Small Business Act, which authorizes SBA to 
guarantee additional PPP loans (Second Draw PPP Loans) to eligible 
borrowers under generally the same terms and conditions available under 
section 7(a)(36) of the Small Business Act through March 31, 2021. The 
Economic Aid Act also redesignated section 1106 of the CARES Act as 
section 7A of the Small Business Act, to appear after section 7 of the 
Small Business Act.
    SBA, in consultation with the Department of the Treasury 
(Treasury), initially published an interim final rule implementing the 
PPP on April 15, 2020 and subsequently issued additional interim final 
rules. On January 14, 2021, SBA published interim final rules 
implementing the Economic Aid Act amendments to the PPP.\1\ On February 
5, 2021, SBA published an additional interim final rule implementing 
Economic Aid Act changes related to the forgiveness and review of PPP 
loans.\2\ As described below, this interim final rule revises the 
consolidated interim final rule implementing updates to the PPP, the 
interim final rule on second draw PPP loans, and the consolidated 
interim final rule on loan forgiveness requirements and loan review 
procedures, to allow individuals who file an IRS Form 1040, Schedule C 
to calculate their maximum loan amount using gross income. This interim 
final rule also revises the consolidated interim final rule 
implementing updates to the PPP to remove the eligibility restriction 
that prevents businesses with owners who have non-financial fraud 
felony convictions in the last year from obtaining PPP loans and remove 
the eligibility restriction that prevents businesses with owners who 
are delinquent or in default on their Federal student loans from 
obtaining PPP loans. The changes apply to both First Draw PPP Loans and 
Second Draw PPP Loans.
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    \1\ 86 FR 3692 (Jan. 14, 2021) (which we refer to as the 
``consolidated interim final rule implementing updates to the 
PPP''); 86 FR 3712 (Jan. 14, 2021) (which we refer to as the 
``interim final rule on second draw PPP loans'').
    \2\ 86 FR 8283 (Feb. 5, 2021) (which we refer to as the 
``consolidated interim final rule on loan forgiveness requirements 
and loan review procedures'').

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[[Page 13150]]

II. Comments and Immediate Effective Date

    This interim final rule is being issued without advance notice and 
public comment because section 1114 of the CARES Act and section 303 of 
the Economic Aid Act authorize SBA to issue regulations to implement 
the Paycheck Protection Program without regard to notice requirements. 
In addition, this rule is being issued to allow for immediate 
implementation of these changes. The intent of both the CARES Act and 
the Economic Aid Act is that SBA provide relief to America's small 
businesses expeditiously. Given the urgent need to provide borrowers 
with timely relief and the short period of time before the program ends 
on March 31, 2021, SBA in consultation with Treasury has determined 
that it is impractical and not in the public interest to provide a 30-
day delayed effective date. An immediate effective date will allow SBA 
to give small businesses affected by this interim final rule the 
maximum amount of time to apply for loans and lenders the maximum 
amount of time to process applications before the program ends. This 
good cause justification also supports waiver of the 60-day delayed 
effective date for major rules under the Congressional Review Act at 5 
U.S.C. 808(2). Although this interim final rule is effective 
immediately, comments are solicited from interested members of the 
public on all aspects of the interim final rule.
    These comments must be submitted on or before April 7, 2021. SBA 
will consider these comments and the need for making any revisions as a 
result of these comments.

III. Paycheck Protection Program--Revisions to Rules Implementing the 
Economic Aid Act

1. Gross Income

    The statutory definition of ``payroll costs'' applicable to sole 
proprietors and independent contractors refers to ``a wage, commission, 
income, net earnings from self-employment, or similar compensation and 
that is in an amount that is not more than $100,000 on an annualized 
basis, as prorated for the period during which the payments are made or 
the obligation to make the payments is incurred.'' \3\ Previously, PPP 
rules defined payroll costs for individuals who file an IRS Form 1040, 
Schedule C as payroll costs (if employees exist) plus net profits, 
which is net earnings from self-employment. SBA is aware of significant 
concerns with this definition, because it does not take into account 
fixed and other business expenses that a small business must cover to 
stay in operation and therefore keep the owner employed. Thus, the 
support for employment for sole proprietors includes covering business 
expenses as well as net profits. This change would affect many sole 
proprietors who have been effectively excluded from the PPP, especially 
those with very little or negative net profit, many of which are 
located in underserved communities. Businesses that file Schedule C 
have higher concentrations of ownership by members of underserved 
groups. An analysis by the SBA Office of Advocacy of Census data found 
that firms with no employees are 70 percent owned by women and 
minorities, compared to 40 percent for businesses with employees.\4\ 
SBA has determined that changing the calculation for sole proprietors, 
independent contractors, and self-employed individuals will reduce 
barriers to accessing the PPP and expand funding among the smallest 
businesses.
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    \3\ 15 U.S.C. 636(a)(36)(A)(viii)(I)(bb).
    \4\ See A Look at Nonemployer Businesses, SBA Office of 
Advocacy, August, 2018, A Look at Nonemployer Businesses (sba.gov).
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    Based on the statutory language of the CARES Act, SBA, in 
consultation with Treasury, has determined that SBA has discretion to 
establish an alternative calculation methodology for payroll costs for 
sole proprietors and independent contractors. For these borrowers, the 
statutory definition of ``payroll costs'' includes both ``income'' as 
well as ``net earnings from self-employment.'' The inclusion of both 
these terms in the statutory language indicates that they may have 
different meanings. Therefore, the term ``income'' as used in the 
definition of payroll costs for sole proprietors and independent 
contractors may be construed broadly to encompass a borrower's net 
income and a borrower's gross income.
    Defining ``income'' to include gross income is consistent with 
Congress's intent that the PPP provide broad relief to small businesses 
and keep individuals employed, and that the PPP prioritize loans to, 
among others, small business concerns and entities in underserved 
markets, and small business concerns owned and controlled by socially 
and economically disadvantaged individuals and women.\5\ As described 
above, under the prior rules, many of these borrowers may not have 
received meaningful amounts from the PPP to support their own 
employment due to having small net profits. Allowing a borrower to 
receive a loan amount based on their gross business income will provide 
the borrower a loan amount that is sufficient to meet the borrower's 
fixed expenses that are necessary to stay in business and keep the 
owner employed. SBA is implementing this change with respect to PPP 
loans that are approved after the effective date of this rule. A 
borrower whose PPP loan has already been approved as of the effective 
date of this rule cannot increase its PPP loan amount based on the new 
calculation methodology.
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    \5\ See 15 U.S.C. 636(a)(36)(P)(iv).
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    Therefore, SBA, in consultation with Treasury, has determined that 
a Schedule C filer may elect to calculate the owner compensation share 
of its payroll costs--that is, the share of its payroll costs that 
represents compensation of the owner--based on either (i) net profit or 
(ii) gross income, as calculated under the rule below.\6\ Gross income 
is the amount the borrower reports on line 7 of Schedule C. If a 
Schedule C filer has no employees, the borrower may elect simply to 
calculate its loan amount based on either net profit or gross income. 
If a Schedule C filer has employees, the borrower may elect to 
calculate the owner compensation share of its payroll costs based on 
either (i) net profit or (ii) gross income minus expenses reported on 
lines 14 (employee benefit programs), 19 (pension and profit-sharing 
plans), and 26 (wages (less employment credits)) of IRS Form 1040, 
Schedule C. Expenses reported on lines 14, 19, and 26 of the IRS Form 
1040, Schedule C represent employee payroll costs and are subtracted 
from the owner compensation share of payroll costs if the owner uses 
gross income to calculate its loan amount in order to avoid double-
counting these costs.\7\ In the context of determining a borrower's 
eligible expenses and forgiveness amount, this interim final rule 
refers to the owner compensation share of a Schedule C filer's loan 
amount as ``proprietor expenses.'' Proprietor expenses encompass an 
owner's business expenses and own compensation but do not include 
employee payroll costs. This proprietor expenses calculation limits a 
Schedule

[[Page 13151]]

C filer that included employee payroll costs in determining the PPP 
loan amount from taking the full loan amount as owner compensation. 
This promotes Congress's goal of keeping workers paid and employed. 
However, the use of gross income by Schedule C filers may, in some 
cases, increase the risk of waste, fraud, or abuse, because it will 
substantially increase the maximum loan amount for relevant applicants, 
and in some cases an applicant's gross income may not accurately 
reflect the extent to which a PPP loan is necessary to support the 
ongoing operations of the applicant's business. To mitigate this risk, 
if a Schedule C filer elects to use gross income to calculate its loan 
amount on a First Draw PPP Loan and the borrower reported more than 
$150,000 in gross income on the Schedule C that was used to calculate 
the borrower's loan amount, the borrower will not automatically be 
deemed to have made the statutorily required certification concerning 
the necessity of the loan request in good faith, and the borrower may 
be subject to a review by SBA of its certification.\8\ The safe harbor 
that SBA previously provided for borrowers that, together with their 
affiliates, receive PPP Loans with an original principal amount of less 
than $2 million, will not apply to Schedule C filers that elect to use 
gross income to calculate their loan amount on a First Draw PPP Loan if 
they report more than $150,000 in gross income on the Schedule C that 
was used to calculate the borrower's loan amount. SBA is eliminating 
the loan necessity safe harbor for these borrowers as they may be more 
likely to have other available sources of liquidity to support their 
business's operations than Schedule C filers with lower levels of gross 
income. SBA will review a sample of the population of First Draw PPP 
Loans made to Schedule C filers using the gross income calculation if 
the gross income on the Schedule C used to calculated the borrower's 
loan amount exceeds the threshold of $150,000.\9\ If the borrower 
exceeds this threshold, then SBA will, for the sample drawn, assess 
whether these borrowers complied with the PPP eligibility criteria, 
including the good faith loan necessity certification. This will serve 
as an additional deterrent to fraud, waste, and abuse because higher 
income borrowers that elect to use gross income rather than net profit 
to calculate their loan amount will face the prospect of a heightened 
review, which would include a review of their good faith loan necessity 
certification. The $150,000 gross income threshold is necessary in 
light of the potentially large volume of applications SBA will receive 
from First Draw PPP Loan applicants that are eligible to use the gross 
income calculation. Maintaining the safe harbor for borrowers under 
this threshold is also necessary in light of the deterrent effect of 
auditing risk for many underresourced borrowers whose fixed cost of 
bookkeeping is higher in proportion to their income. This approach will 
enable SBA to conserve its finite audit resources and focus its reviews 
of First Draw PPP Loans using the new calculation on larger loans, 
where the compliance effort may yield higher returns. The reviews of 
loans to Schedule C filers that used the gross income calculation will 
follow the same processes that apply to PPP loans generally, except as 
specified above.\10\
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    \6\ For a Schedule C filer without employees, owner compensation 
is the only component of the borrower's payroll costs. For a 
Schedule C filer with employees, owner compensation is added to 
employee payroll costs to determine the borrower's total payroll 
costs.
    \7\ This is consistent with the approach for calculating payroll 
costs for farmers and ranchers in subsection B.4.d. of the 
consolidated interim final rule implementing updates to the PPP.
    \8\ SBA is not applying this safe harbor exclusion to Second 
Draw PPP Loans, because those applicants are required to certify 
that they have realized a reduction in gross receipts in excess of 
25% relative to the relevant comparison time period.
    \9\ SBA has developed a new borrower application form, SBA Form 
2483-C, for First Draw PPP Loan borrowers that elect to use the new 
gross income calculation. Borrowers will be required to disclose 
their total amount of gross income on the form.
    \10\ See part V. of the consolidated interim final rule on loan 
forgiveness requirements and loan review procedures.
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    Therefore, the following changes are made to PPP rules:
    a. Subsection B.4.b of the consolidated interim final rule 
implementing updates to the PPP (86 FR 3692, 3700) is revised to read 
as follows:
    b. I have income from self-employment and file an IRS Form 1040, 
Schedule C. How do I calculate the maximum amount I can borrow, and 
what documentation is required? \53\
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    \53\ This subsection was originally published at 85 FR 21747, 
subsection III.1.b. (April 20, 2020) and has been modified to 
conform to additional rules or guidance and the Economic Aid Act.
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    How you calculate your maximum loan amount depends upon whether you 
employ other individuals. If you have no employees, use the following 
methodology to calculate your maximum loan amount:
    i. Step 1: From your 2019 or 2020 IRS Form 1040, Schedule C, you 
may elect to use either your line 31 net profit amount or your line 7 
gross income amount. (If you are using 2020 to calculate payroll costs 
and have not yet filed a 2020 return, fill it out and compute the 
value.) If this amount is over $100,000, reduce it to $100,000. If both 
your net profit and gross income are zero or less, you are not eligible 
for a PPP loan.
    ii. Step 2: Calculate the average monthly net profit or gross 
income amount (divide the amount from Step 1 by 12).
    iii. Step 3: Multiply the average monthly net profit or gross 
income amount from Step 2 by 2.5. This amount cannot exceed $20,833.
    iv. Step 4: Add the outstanding amount of any Economic Injury 
Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 
that you seek to refinance. Do not include the amount of any advance 
under an EIDL COVID-19 loan (because it does not have to be repaid).
    You must provide the 2019 or 2020 (whichever you used to calculate 
your loan amount) IRS Form 1040, Schedule C with your PPP loan 
application to substantiate the applied-for PPP loan amount and a 2019 
or 2020 (whichever you used to calculate your loan amount) IRS Form 
1099-MISC detailing nonemployee compensation received (box 7), invoice, 
bank statement, or book of record that establishes you are self-
employed. If using 2020 to calculate your loan amount, this is required 
regardless of whether you have filed a 2020 tax return with the IRS. 
You must provide a 2020 invoice, bank statement, or book of record to 
establish you were in operation on or around February 15, 2020.
    If you have employees, use the following methodology to calculate 
your maximum loan amount:
    i. Step 1: Compute 2019 or 2020 payroll (using the same year for 
all items) by adding the following:
    a. At your election, either (1) the net profit amount from line 31 
of your 2019 or 2020 IRS Form 1040, Schedule C, or (2) your 2019 or 
2020 gross income minus employee payroll costs, calculated as your 
gross income reported on IRS Form 1040, Schedule C, line 7, minus your 
employee payroll costs reported on lines 14, 19, and 26 of IRS Form 
1040, Schedule C (for either option, if you are using 2020 amounts and 
have not yet filed a 2020 return, fill it out and compute the value), 
up to $100,000 on an annualized basis, as prorated for the period 
during which the payments are made or the obligation to make the 
payments is incurred (if this amount is over $100,000, reduce it to 
$100,000, or if this amount is less than zero, set this amount at 
zero);
    b. 2019 or 2020 gross wages and tips paid to your employees whose 
principal place of residence is in the United States, computed using 
2019 or 2020 IRS Form 941 Taxable Medicare wages & tips (line 5c, 
Column 1) from each quarter plus any pre-tax employee contributions for 
health insurance or other fringe benefits excluded from Taxable 
Medicare wages & tips; subtract

[[Page 13152]]

any amounts paid to any individual employee in excess of $100,000 on an 
annualized basis, as prorated for the period during which the payments 
are made or the obligation to make the payments is incurred, and any 
amounts paid to any employee whose principal place of residence is 
outside the United States; and
    c. 2019 or 2020 employer contributions to employee group health, 
life, disability, vision and dental insurance (portion of IRS Form 
1040, Schedule C line 14 attributable to those contributions); 
retirement contributions (IRS Form 1040, Schedule C, line 19); and 
state and local taxes assessed on employee compensation (primarily 
under state laws commonly referred to as the State Unemployment Tax Act 
or SUTA from state quarterly wage reporting forms).
    ii. Step 2: Calculate the average monthly amount (divide the amount 
from Step 1 by 12).
    iii. Step 3: Multiply the average monthly amount from Step 2 by 
2.5.
    iv. Step 4: Add the outstanding amount of any EIDL made between 
January 31, 2020 and April 3, 2020 that you seek to refinance. Do not 
include the amount of any advance under an EIDL COVID-19 loan (because 
it does not have to be repaid).
    You must supply your 2019 or 2020 (whichever you used to calculate 
your loan amount) IRS Form 1040, Schedule C; Form 941 (or other tax 
forms or equivalent payroll processor records containing similar 
information); and state quarterly wage unemployment insurance tax 
reporting forms from each quarter in 2019 or 2020 (whichever you used 
to calculate your loan amount) or equivalent payroll processor records, 
along with evidence of any retirement and health insurance 
contributions, if applicable. A payroll statement or similar 
documentation from the pay period that covered February 15, 2020 must 
be provided to establish you were in operation on February 15, 2020.
    b. Subsection B.11.b of the consolidated interim final rule 
implementing updates to the PPP (86 FR 3692, 3704) is revised to read 
as follows (footnotes are not restated):
    b. How can PPP loans be used by individuals with income from self-
employment who file an IRS Form 1040, Schedule C? \80\
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    \80\ This subsection was originally published at 85 FR 21747, 
subsection III.1.d. (April 20, 2020) and has been modified to 
conform to the Economic Aid Act.
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    The proceeds of a PPP loan are to be used for the following:
    i. For borrowers that use net profit to calculate loan amount, 
owner compensation replacement, calculated based on 2019 or 2020 (using 
the same year that was used to calculate the loan amount) net profit as 
described in subsection B.4.b. For borrowers that use gross income to 
calculate loan amount, proprietor expenses (business expenses plus 
owner compensation), calculated based on 2019 or 2020 (using the same 
year that was used to calculate the loan amount) gross income as 
described in subsection B.4.b (this amount cannot exceed $20,833). For 
borrowers who used gross income to calculate the loan amount and have 
no employees, proprietor expenses equal gross income. For borrowers who 
used gross income to calculate the loan amount and have employees, 
proprietor expenses equal the difference between gross income and 
employee payroll costs.
    ii. Employee payroll costs (as defined in subsection B.4.g. of the 
consolidated interim final rule implementing updates to the PPP) for 
employees whose principal place of residence is in the United States, 
if you have employees.
    iii. Mortgage interest payments (but not mortgage prepayments or 
principal payments) on any business mortgage obligation on real or 
personal property (e.g., the interest on your mortgage for the 
warehouse you purchased to store business equipment or the interest on 
an auto loan for a vehicle you use to perform your business), business 
rent payments (e.g., the warehouse where you store business equipment 
or the vehicle you use to perform your business), and business utility 
payments (e.g., the cost of electricity in the warehouse you rent or 
gas you use driving your business vehicle). You must have claimed or be 
entitled to claim a deduction for such expenses on your 2019 or 2020 
(whichever you used to calculate loan amount) IRS Form 1040, Schedule C 
for them to be a permissible use. For example, if you did not claim or 
are not entitled to claim utilities expenses on your 2019 or 2020 IRS 
Form 1040, Schedule C, you cannot use the proceeds for utilities.
    iv. Interest payments on any other debt obligations that were 
incurred before February 15, 2020 (such amounts are not eligible for 
PPP loan forgiveness).
    v. Refinancing an SBA EIDL loan made between January 31, 2020 and 
April 3, 2020 (maturity will be reset to 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).\81\
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    \81\ Under section 7(a)(36)(Q) of the Small Business Act, as 
amended by section 341 of the Economic Aid Act, an EIDL loan used 
for purposes other than paying payroll costs and other eligible PPP 
expenditures is not considered a duplication of the assistance 
available under the PPP.
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    vi. Covered operations expenditures, as defined in section 7A(a) of 
the Small Business Act, to the extent they are deductible on IRS Form 
1040, Schedule C.
    vii. Covered property damage costs, as defined in section 7A(a) of 
the Small Business Act, to the extent they are deductible on IRS Form 
1040, Schedule C.
    viii. Covered supplier costs, as defined in section 7A(a) of the 
Small Business Act, to the extent they are deductible on IRS Form 1040, 
Schedule C.
    ix. Covered worker protection expenditures, as defined in section 
7A(a) of the Small Business Act, to the extent they are deductible on 
Form IRS 1040, Schedule C.\82\
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    \82\ Items vi. through ix. were added to conform to section 304 
of the Economic Aid Act. These provisions are effective as if 
included in the CARES Act and apply to any loan made before, on, or 
after December 27, 2020, including forgiveness of such loan, unless 
SBA has remitted a loan forgiveness payment to the lender on the PPP 
loan.
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    c. Subsection B.13 of the consolidated interim final rule 
implementing updates to the PPP (86 FR 3692, 3706) is revised to read 
as follows:
    13. Limited safe harbor with respect to certification concerning 
need for PPP loan request.\87\
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    \87\ This subsection has been added to codify the safe harbor 
contained in FAQ 46 (posted May 13, 2020).
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    The CARES Act requires each applicant applying for a PPP loan to 
certify in good faith ``that the uncertainty of current economic 
conditions makes necessary the loan request to support the ongoing 
obligations'' of the applicant. SBA, in consultation with Treasury, 
issued additional guidance concerning how SBA will review the required 
good-faith certification. See FAQ 46 (as originally posted May 13, 
2020). This guidance included a safe harbor providing that any PPP 
borrower, together with its affiliates, that received PPP loans with an 
original principal amount of less than $2 million will be deemed to 
have made the required certification concerning the necessity of the 
loan request in good faith. In light of the additional flexibility 
being provided to certain borrowers to use their gross income amount, 
as reported on line 7 of IRS Form 1040, Schedule C, borrowers that 
elect to use gross income to calculate their maximum loan amount

[[Page 13153]]

for a First Draw PPP Loan and that report more than $150,000 in gross 
income on the Schedule C that was used to calculate the borrower's loan 
amount will not automatically be deemed to have made the required 
certification concerning the necessity of the loan request in good 
faith. SBA may review their certification that ``Current economic 
uncertainty makes this loan request necessary to support the ongoing 
operations of the Applicant.'' If SBA determines that a borrower lacked 
an adequate basis for the required certification concerning the 
necessity of the loan request, SBA may determine that the borrower was 
not eligible for the loan, for the loan amount, or for loan 
forgiveness.
    d. Subsection (f)(7) of the interim final rule for Second Draw PPP 
Loans (86 FR 3712, 3720) is revised to read as follows:
    (7) The maximum amount of a Second Draw PPP Loan to a borrower that 
has income from self-employment and files an IRS Form 1040, Schedule C, 
is calculated as follows, depending on whether the borrower has 
employees:
    (i) For a borrower that has income from self-employment and does 
not have any employees, the maximum loan amount is the lesser of:
    (A) The product obtained by multiplying:
    (1) The net profit or gross income of the borrower in 2019 or 2020, 
as reported on IRS Form 1040, Schedule C, that is not more than 
$100,000, divided by 12; and
    (2) 2.5 (or, only for a borrower assigned a NAICS code beginning 
with 72 as defined in subsection (f)(10) at the time of disbursement, 
3.5). This amount cannot exceed $29,167 for NAICS code 72 borrowers and 
$20,833 for all other borrowers.
    (ii) For a borrower that has income from self-employment and has 
employees, the maximum loan amount is the lesser of:
    (A) The product obtained by multiplying:
    (1) The sum of (i) one of the two following options, up to 
$100,000; if this amount is less than zero, set this amount at zero (if 
you are using 2020 and have not yet filed a 2020 return, fill it out 
and compute the value):
     The borrower's net profit reported on IRS Form 1040, 
Schedule C for 2019 or 2020, divided by 12; or
     line 7 from the borrower's 2019 or 2020 IRS Form 1040, 
Schedule C, minus lines 14, 19, and 26, divided by 12; and
    (ii) the average total monthly payment for employee payroll costs 
incurred or paid by the borrower during the same year elected by the 
borrower; by
    (2) 2.5 (or, only for a borrower assigned a NAICS code beginning 
with 72 at the time of disbursement as defined in subsection (f)(10), 
3.5); or
    (B) $2,000,000.
    e. Subsection IV.1.b.ii of the interim final rule on loan 
forgiveness requirements and loan review procedures (86 FR 8283, 8287) 
is revised to read as follows:
    ii. Owner compensation replacement, calculated based on 2019 or 
2020 \19\ net profit or proprietor expenses, if applicable,\20\ as 
described in subsection 3.c. below; forgiveness of such amounts is 
limited to either (a) the prorated portion of 2019 or 2020 net profit 
or gross income, if applicable, for a covered period up to 2.5 months, 
or (b) 2.5 months' worth (2.5/12) of 2019 or 2020 net profit or gross 
income, if applicable, (up to $20,833) for a covered period greater 
than 2.5 months,\21\ 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;
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    \19\ For First Draw PPP loans made in 2020, borrowers use 2019. 
For First Draw PPP loans made in 2021 and Second Draw PPP Loans, 
borrowers use the year (2019 or 2020) that was used to calculate the 
borrower's loan amount.
    \20\ For self-employed borrowers with no employees that file IRS 
Form 1040, Schedule C, who used gross income to calculate the loan 
amount, proprietor expenses equal gross income. For self-employed 
borrowers with employees that file IRS Form 1040, Schedule C, who 
used gross income to calculate the loan amount, proprietor expenses 
equal the difference between gross income and employee payroll 
costs. See subsections B.4.b and B.11.b of the consolidated interim 
final rule implementing updates to the PPP as amended by this 
interim final rule. For self-employed borrowers that file IRS Form 
1040, Schedule F and have no employees, gross income may be used 
instead of net profit throughout this calculation. For self-employed 
borrowers that file IRS Form 1040, Schedule F and have employees, 
the difference between gross income and employee payroll costs may 
be used instead of net profit throughout this calculation. See 
section 313 of the Economic Aid Act. This calculation for Schedule F 
filers is equivalent to proprietor expenses for Schedule C filers.
    \21\ Section 306 of the Economic Aid Act allows the borrower to 
select a covered period between 8 weeks and 24 weeks.
---------------------------------------------------------------------------

    f. Subsection IV.3.c of the interim final rule on loan forgiveness 
requirements and loan review procedures (86 FR 8283, 8289) is revised 
to read as follows:
    c. Are there caps on the amount of loan forgiveness available for 
owner-employees and self-employed individuals' own payroll 
compensation? \37\
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    \37\ This subsection was originally published at 85 FR 33004, 
subsection III.3.c. (June 1, 2020) and amended by 85 FR 38304, 
subsection III.1.d (June 26, 2020) and has been modified to conform 
to sections 308 and 344 of the Economic Aid Act and for readability.
---------------------------------------------------------------------------

    Yes. Forgiveness is capped at 2.5 months' worth (2.5/12) of an 
owner-employee or self-employed individual's 2019 or 2020 \38\ 
compensation (up to a maximum $20,833 per individual in total across 
all businesses). The individual's total compensation may not exceed 
$100,000 on an annualized basis, as prorated for the period during 
which the payments are made or the obligation to make the payments is 
incurred. For example, for borrowers that elect to use an eight-week 
covered period, the amount of loan forgiveness requested for owner-
employees and self-employed individuals' payroll compensation is capped 
at eight weeks' worth (8/52) of 2019 or 2020 compensation (i.e., 
approximately 15.38 percent of 2019 or 2020 compensation) or $15,385 
per individual, whichever is less, in total across all businesses. For 
borrowers that elect to use a ten-week covered period, the cap is ten 
weeks' worth (10/52) of 2019 or 2020 compensation (approximately 19.23 
percent) or $19,231 per individual, whichever is less, in total across 
all businesses. For a covered period longer than 2.5 months, the amount 
of loan forgiveness requested for owner-employees and self-employed 
individuals' payroll compensation is capped at 2.5 months' worth (2.5/
12) of 2019 or 2020 compensation (up to $20,833) in total across all 
businesses.
---------------------------------------------------------------------------

    \38\ For First Draw PPP loans made in 2020, borrowers use 2019. 
For First Draw PPP loans made in 2021 and Second Draw PPP loans, 
borrowers use the year (2019 or 2020) that was used to calculate the 
borrower's loan amount.
---------------------------------------------------------------------------

    In particular, C-corporation owner-employees are capped by the 
prorated amount of their 2019 or 2020 \39\ employee cash compensation 
and employer retirement and health, life, disability, vision and dental 
insurance contributions made on their behalf. S-corporation owner-
employees are capped by the prorated amount of their 2019 or 2020 \40\ 
employee cash compensation and employer retirement contributions made 
on their behalf. However, employer health, life, disability, vision and 
dental insurance contributions made on their behalf cannot be 
separately added; those payments are already included in their employee 
cash compensation. Schedule C or F filers are capped by the prorated 
amount of their owner compensation replacement (calculated based on 
2019

[[Page 13154]]

or 2020 net profit) or proprietor expenses (calculated based on 2019 or 
2020 gross income).\41\ General partners are capped by the prorated 
amount of their 2019 or 2020 net earnings from self-employment (reduced 
by claimed section 179 expense deduction, unreimbursed partnership 
expenses, and depletion from oil and gas properties) multiplied by 
0.9235. For self-employed individuals, including Schedule C or F filers 
and general partners, retirement and health, life, disability, vision 
or dental insurance contributions are included in their net self-
employment income and therefore cannot be separately added to their 
payroll calculation. LLC members are subject to the rules based on 
their LLC's tax filing status in the reference year used to determine 
their loan amount.
---------------------------------------------------------------------------

    \39\ Use whichever year was used to calculate the borrower's 
loan amount.
    \40\ Use whichever year was used to calculate the borrower's 
loan amount.
    \41\ For self-employed borrowers with no employees that file IRS 
Form 1040, Schedule C, who used gross income to calculate the loan 
amount, proprietor expenses equal gross income. For self-employed 
borrowers with employees that file IRS Form 1040, Schedule C, who 
used gross income to calculate the loan amount, proprietor expenses 
equal the difference between gross income and employee payroll 
costs. See subsections B.4.b and B.11.b of the consolidated interim 
final rule implementing updates to the PPP as amended by this 
interim final rule. For self-employed borrowers that file IRS Form 
1040, Schedule F and have no employees, gross income may be used 
instead of net profit. For self-employed borrowers that file IRS 
Form 1040, Schedule F and have employees, the difference between 
gross income and employee payroll costs may be used. See section 313 
of the Economic Aid Act.
---------------------------------------------------------------------------

    g. Subsection IV.6.b of the interim final rule on loan forgiveness 
requirements and loan review procedures (86 FR 8283, 8293) is revised 
to read as follows:
    b. What documentation are borrowers who are individuals with self-
employment income who file an IRS Form 1040, Schedule C or F required 
to submit to their lender with their request for loan forgiveness? 
67
---------------------------------------------------------------------------

    \67\ This subsection was originally published at 85 FR 21747, 
subsection III.1.g. (Apr. 20, 2020) and has been modified to conform 
to sections 304, 307, 308, and 313 of the Economic Aid Act and for 
readability.
---------------------------------------------------------------------------

    For borrowers that received loans of $150,000 or less that use the 
SBA Form 3508S, the borrower must submit the certification and 
information required by section 7A(l)(1)(A) of the Small Business Act 
and, for a Second Draw PPP Loan, revenue reduction documentation if 
such documentation was not provided at the time of application.\68\ All 
other borrowers must submit the certification required by section 
7A(e)(3) of the Small Business Act, and (if the borrower has employees) 
IRS Form 941 and state quarterly business and individual employee wage 
reporting and unemployment insurance tax forms or equivalent payroll 
processor records that best correspond to the covered period (with 
evidence of any retirement and group health, life, disability, vision, 
and dental insurance contributions). Whether or not the borrower has 
employees, the borrower must submit evidence of business rent, business 
mortgage interest payments on real or personal property, business 
utility payments, or payments for a covered operations expenditure, 
covered property damage cost, covered supplier cost, or covered worker 
protection expenditure during the covered period if the borrower used 
loan proceeds for those purposes. This documentation may include 
cancelled checks, payment receipts, transcripts of accounts, purchase 
orders, orders, invoices, or other documents verifying payments on 
nonpayroll costs.
---------------------------------------------------------------------------

    \68\ See subsection (g)(2)(v) of the interim final rule on 
Second Draw PPP Loans. 86 FR 3712, 3721 (Jan. 14, 2021).
---------------------------------------------------------------------------

    For all loans, the 2019 or 2020 IRS Form 1040, Schedule C or F that 
the borrower provided at the time of the PPP loan application must be 
used to determine the amount of net profit or proprietor expenses 
allocated to the owner for the covered period.\69\
---------------------------------------------------------------------------

    \69\ For self-employed borrowers with no employees that file IRS 
Form 1040, Schedule C, who used gross income to calculate the loan 
amount, proprietor expenses equal gross income. For self-employed 
borrowers with employees that file IRS Form 1040, Schedule C, who 
used gross income to calculate the loan amount, proprietor expenses 
equal the difference between gross income and employee payroll 
costs. See subsections B.4.b and B.11.b of the consolidated interim 
final rule implementing updates to the PPP as amended by this 
interim final rule. For self-employed borrowers that file IRS Form 
1040, Schedule F and have no employees, gross income may be used 
instead of net profit. For self-employed borrowers that file IRS 
Form 1040, Schedule F and have employees, the difference between 
gross income and employee payroll costs may be used instead of net 
profit.
---------------------------------------------------------------------------

    h. SBA has developed new Borrower Application Forms for use by 
borrowers that are Schedule C filers and elect to calculate their loan 
amount using gross income, as allowed under this interim final rule. 
SBA Form 2483-C will be used by such borrowers when applying for First 
Draw PPP Loans and SBA Form 2483-SD-C will be used by such borrowers 
when applying for Second Draw PPP Loans. All references to the Borrower 
Application Form in the consolidated interim final rule implementing 
updates to the PPP, the interim final rule on second draw PPP loans, 
and the consolidated interim final rule on loan forgiveness 
requirements and loan review procedures include the SBA Form 2483-C and 
the SBA Form 2483-SD-C, as applicable.

2. Eligibility

    The consolidated interim final rule implementing updates to the PPP 
provided, among other things, that a PPP loan applicant is ineligible 
if an owner of 20 percent or more of the equity of the applicant has 
been convicted of, pleaded guilty or nolo contendere to, or commenced 
any form of parole or probation (including probation before judgment) 
for (1) a felony involving fraud, bribery, embezzlement, or a false 
statement in a loan application or an application for federal financial 
assistance within the last five years, or (2) any other felony within 
the last year. This provision reflected the PPP eligibility 
requirements as revised in an interim final rule titled ``Business Loan 
Program Temporary Changes; Paycheck Protection Program--Additional 
Revisions to First Interim Final Rule,'' published on June 18, 2020 (85 
FR 36717). SBA has further reviewed these eligibility restrictions and, 
in consultation with Treasury, has determined that modification to the 
consolidated interim final rule implementing updates to the PPP is 
appropriate to ensure consistency with Congressional intent to provide 
relief to small businesses and their employees, expand access to the 
PPP, and remove barriers people with prior convictions face when 
working to restart their lives and contribute to our economy. SBA has 
determined that the one-year lookback restriction related to non-
financial fraud felonies should be removed and only the five-year 
lookback restriction for those felonies involving fraud, bribery, 
embezzlement, or a false statement in a loan application or an 
application for federal financial assistance will limit an applicant's 
eligibility for the PPP. Removing the one-year lookback restriction 
related to non-financial fraud felonies is consistent with 
Congressional support for reducing criminal background checks in the 
PPP \11\ and the important policies underlying recent criminal justice 
reforms in Congress, such as last year's Fair Chance to Compete for 
Jobs Act of 2019 (Pub. L. 116-92, Div. A, Tit. XI, Subtit. B,) and the 
First Step Act of 2018 (Pub. L. 115-391).
---------------------------------------------------------------------------

    \11\ See Paycheck Protection Program Second Chance Act, S. 3865, 
116th Congress (introduced in the Senate on June 2, 2020).
---------------------------------------------------------------------------

    In light of the unique, emergency nature of the PPP and the higher 
fraud risk that exists due to the PPP's emphasis on speed in loan 
approvals and disbursements, the remaining restrictions on eligibility 
related to an applicant or owner's criminal history

[[Page 13155]]

will help mitigate the risk of default, fraud, or misuse of PPP loan 
funds that are intended to benefit small business employees. By 
removing barriers for applicants with non-financial fraud felonies, 
this interim final rule balances the need to increase access to the PPP 
and remove barriers for people with prior convictions while still 
ensuring basic guardrails against fraud exist for this emergency 
program. Preserving the five-year lookback for financial fraud-related 
felonies is one of these guardrails.
    The consolidated interim final rule implementing updates to the PPP 
also provided that a PPP loan applicant is ineligible for a PPP loan if 
the applicant, or any business owned or controlled by the applicant or 
any of its owners, has ever obtained a direct or guaranteed loan from 
SBA or any other Federal agency that is currently delinquent or has 
defaulted within the last seven years and caused a loss to the 
government. SBA, in consultation with Treasury, has decided to 
eliminate the restriction in the consolidated interim final rule to the 
extent it applies to Federal student loans.\12\ SBA has determined that 
eliminating consideration of delinquent or defaulted Federal student 
loans is appropriate to ensure consistency with Congressional intent to 
provide relief to small businesses and their employees and expand 
access to the PPP. This change will make PPP loans available to more 
borrowers with financial need and is consistent with Congress's intent 
that PPP loans be prioritized for small business concerns owned and 
controlled by socially and economically disadvantaged individuals as 
defined in section 8(d)(3)(c) of the Small Business Act.\13\ According 
to the Department of Eduction, ``Black and Brown students rely more 
heavily on student loan debt than their peers and experience 
delinquency at disproportionately high rates. As a result prohibiting 
delinquent student loan borrowers from obtaining PPP loans is more 
likely to exclude business owners of color from access to the loans 
they need.'' \14\ In addition, this change is consistent with the 
policy set in section 3513 of the CARES Act and the Department of 
Education's ongoing actions to provide economic relief to student loan 
borrowers whose loans are held by the agency by suspending Federal 
student loan payments and collections during the pandemic and keeping 
the interest rate at 0 percent.\15\ At the request of the Department of 
Education by letter dated February 27, 2021, Treasury also has granted 
an exemption from the bar in 31 U.S.C. 3720B and 31 CFR 285.13, with 
respect to PPP borrowers with Federal student loans in delinquent 
status.
---------------------------------------------------------------------------

    \12\ ``Federal student loans'' mean programs under Parts B, D 
and E of the Higher Education Act of 1965, as amended, as well as 
other programs now administered by the Department. These include 
loans under the under the William D. Ford Federal Direct Loan 
program, the Federal Family Education Loan (FFEL) program, the 
Federal Perkins Loan program, the Health Education Assistance Loan 
(HEAL) program, and the Teacher Education Assistance for College and 
Higher Education (TEACH) Grant program if those awards have 
converted into loans. These delinquencies include loans owed 
directly to the Department of Education as well as Federal student 
loans held by institutions of higher education or those guaranteed 
or insured by the Department of Education and which are held by 
private lenders or guaranty agencies.
    \13\ See 15 U.S.C. 636(a)(36)(P)(iv).
    \14\ See letter from Department of Education to Department of 
the Treasury requesting an exemption under 31 CFR 285.13 of the ban 
on Federal financial assistance to debtors with delinquent Federal 
student loans, for the PPP program, dated February 27, 2021.
    \15\ See Department of Education, Coronavirus and Forbearance 
Info for Students, Borrowers, and Parents, https://studentaid.gov/announcements-events/coronavirus.
---------------------------------------------------------------------------

    The change in PPP regulations relating to Federal student loans and 
the Treasury exemption apply to new PPP applicants as well as those 
borrowers who have already received a PPP loan. In this way, PPP 
borrowers with delinquent or defaulted student loan debts are treated 
equally, without regard to when they submitted their PPP application. 
Although PPP applications previously required applicants to disclose 
whether they had a delinquent Federal debt, student loan borrowers may 
have been confused about the status of their loans due to the current 
suspension on the payment and collection of Federal student loans or 
uncertain about whether loans not directly serviced or held by the 
Department of Education constitute Federal debt. This confusion may 
have led some borrowers to make innocent errors on their PPP 
application. For these reasons, SBA will apply this change to any First 
Draw PPP Loan or Second Draw PPP Loan, regardless of when the PPP loan 
was made.
    Part IV.(e) of the interim final rule titled ``Business Loan 
Program Temporary Changes; Paycheck Protection Program Second Draw 
Loans,'' published on January 14, 2021 (``Second Draw Interim Final 
Rule'') (86 FR 3712), provides that an applicant is not eligible for a 
Second Draw PPP Loan if the applicant is excluded from eligibility 
under the consolidated interim final rule implementing updates to the 
PPP. The following revisions to Part III.B.2.a. of the consolidated 
interim final rule implementing updates to the PPP also affect 
eligibility for Second Draw PPP Loans.
    Therefore, subsections B.2.a.iii. and B.2.a.iv of the consolidated 
interim final rule implementing updates to the PPP (86 FR 3692, 3698) 
are revised to read as follows:

2. What businesses, organizations, and individuals are ineligible?

a. Could I be ineligible even if I meet the eligibility requirements in 
section 1?
    You are ineligible for a PPP loan if, for example:
* * * * *
    iii. An owner of 20 percent or more of the equity of the applicant 
is presently incarcerated or, for any felony, presently subject to an 
indictment, criminal information, arraignment, or other means by which 
formal criminal charges are brought in any jurisdiction; or has been 
convicted of, pleaded guilty or nolo contendere to, or commenced any 
form of parole or probation (including probation before judgment) for a 
felony involving fraud, bribery, embezzlement, or a false statement in 
a loan application or an application for federal financial assistance 
within the last five years; or
    iv. You, or any business owned or controlled by you or any of your 
owners, has ever obtained a direct or guaranteed loan from SBA or any 
other Federal agency (other than a Federal student loan made under 
Parts B, D, and E of the Higher Education Act of 1965, as amended, or 
other programs now administered by the U.S. Department of Education, 
which include the William D. Ford Federal Direct Loan program, the 
Federal Family Education Loan (FFEL) program, the Federal Perkins Loan 
program, the Health Education Assistance Loan (HEAL) program, or the 
Teacher Education Assistance for College and Higher Education (TEACH) 
program) that is currently delinquent or has defaulted within the last 
seven years and caused a loss to the government;
* * * * *
    Subsection B.2.a. is amended to add after subsection B.2.a.ix:
    The exclusion of Federal student loans from the restriction on 
applicants with delinquent or defaulted Federal debt in subsection (iv) 
applies to any loan made pursuant to section 7(a)(36) or 7(a)(37) of 
the Small Business Act, including forgiveness of such a loan, 
regardless of when the loan was made.

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

[[Page 13156]]

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 and 13563 the 
Congressional Review Act, the Administrative Procedure Act, the 
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Orders 12866 and 13563

    This interim final rule is economically significant for the 
purposes of Executive Orders 12866 and 13563. 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 is necessary 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.
    The Administrator of the Office of Management and Budget's Office 
of Information and Regulatory Affairs (OIRA) has determined that this 
is a major rule for purposes of Subtitle E of the Small Business 
Regulatory Enforcement and Fairness Act of 1996 (also known as the 
Congressional Review Act or CRA) (5 U.S.C. 804(2) et seq.). Under the 
CRA, a major rule takes effect 60 days after the rule is published in 
the Federal Register. 5 U.S.C. 801(a)(3).
    Notwithstanding this requirement, the CRA allows agencies to 
dispense with the requirements of section 801 when the agency for good 
cause finds that such procedure would be impracticable, unnecessary, or 
contrary to the public interest and the rule shall take effect at such 
time as the agency promulgating the rule determines. 5 U.S.C. 808(2). 
Pursuant to Sec.  808(2), SBA for good cause finds that a 60-day delay 
to provide public notice is impracticable and contrary to the public 
interest. Likewise, for the same reasons, SBA for good cause finds that 
there are grounds to waive the 30-day effective date delay under the 
Administrative Procedure Act. 5 U.S.C. 553(d)(3).
    The last day to apply for and receive a PPP loan is March 31, 2021. 
Given the short duration of this program, and the urgent need to issue 
loans quickly, SBA, in consultation with Treasury, has determined that 
it is impractical and not in the public interest to provide a delayed 
effective date. An immediate effective date will give small businesses 
affected by this interim final rule the maximum amount of time to apply 
for loans and lenders the maximum amount of time to process 
applications before the program ends.

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 the change to remove the 
eligibility restriction that prevents businesses with owners who are 
delinquent on their Federal student loans from obtaining PPP loans is 
retroactive to March 27, 2020.

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

Paperwork Reduction Act, 44 U.S.C. Chapter 35

    SBA has determined that this rule will require revisions to 
existing recordkeeping or reporting requirements of the Paycheck 
Protection Program (PPP) information collections (OMB Control Numbers 
3245-0407 and 3245-0417. The revisions will affect SBA Form 2483, 
Borrower Application Form Revised February 17, 2021, SBA Form 2483-SD, 
Second Draw Borrower Application Form Revised February 17, 2021, SBA 
Form 2484, Lender's Application--Paycheck Protection Program Loan 
Guaranty Revised January 8, 2021, and SBA Form 2484-SD, Lender's 
Application--Second Draw Loan Guaranty. SBA Forms 2483 and 2483-SD were 
amended to implement to the revisions to the criminal history and 
delinquent student loan restrictions as set forth in this interim final 
rule. SBA Forms 2484 and 2484-SD were amended to implement the new loan 
amount calculation option for Schedule C filers, and the revisions to 
the criminal history and delinquent student loan restrictions as set 
forth in this interim final rule.
    Additionally, to implement the new loan amount calculation option 
for Schedule C filers, SBA has developed two new forms, SBA Form 2483-
C, PPP Borrower Application Form for Schedule C Filers Using Gross 
Income, and SBA Form 2483-SD-C, PPP Second Draw Borrower Application 
Form for Schedule C Filers Using Gross Income, which are required for 
applicants who are Schedule C filers and choose the gross income loan 
amount calculation option.
    SBA has requested Office of Management and Budget (OMB) emergency 
approval of the revisions to the information collections to give small 
businesses affected by this interim final rule the maximum amount of 
time to apply for loans and lenders the maximum amount of time to 
process applications before the program ends.

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 Administrative Procedure Act 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.
    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. Since this rule is 
exempt from notice and comment, SBA is not required to conduct a 
regulatory flexibility analysis.

    Authority: 15 U.S.C. 636(a)(36); 15 U.S.C. 636(a)(37); 15 U.S.C. 
636m; Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 
116-136, section 1114 and Economic Aid to Hard-Hit Small Businesses, 
Nonprofits, and Venues Act (Pub. L. 116-260), section 303.

Tami Perriello,
Acting Administrator, Small Business Administration.
[FR Doc. 2021-04795 Filed 3-4-21; 8:45 am]
BILLING CODE 8026-03-P