[Federal Register Volume 85, Number 84 (Thursday, April 30, 2020)]
[Rules and Regulations]
[Pages 23917-23919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09239]


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DEPARTMENT OF THE TREASURY

13 CFR Part 120

[Docket Number TREAS-DO-2020-0009]
RIN 1505-AC67


Small Business Administration Business Loan Program Temporary 
Changes; Paycheck Protection Program--Additional Criterion for Seasonal 
Employers

AGENCY: U.S. Department of the Treasury.

ACTION: Interim final rule.

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SUMMARY: The Coronavirus Aid, Relief, and Economic Security Act (the 
CARES Act or the Act) authorizes the U.S. Department of the Treasury 
(Treasury) to issue regulations for the Paycheck Protection Program 
(PPP) administered by the Small Business Administration (SBA), 
including regulations that allow additional lenders to originate loans 
and establish terms and conditions. In this interim final rule, 
Treasury authorizes all lenders eligible to originate loans under the 
PPP to use an alternative criterion for calculating the maximum loan 
amount for PPP loans issued to seasonal employers.

DATES: 
    Effective Date: This rule is effective April 30, 2020.
    Comment Date: Comments must be received on or before June 1, 2020.

ADDRESSES: You may submit comments, identified by number TREAS-DO-2020-
0009 through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. 
Treasury 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 highlight the information that 
you consider to be CBI and explain why you believe Treasury should hold 
this information as confidential. Treasury will review the information 
and make the final determination whether it will publish the 
information.

FOR FURTHER INFORMATION CONTACT: Jonathan Greenstein, Office of 
Domestic Finance, 202-622-1408; [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background Information

    On March 27, 2020, the President signed the CARES Act, Public Law 
116-136, to provide emergency assistance and health care response for 
individuals, families, and businesses affected by the coronavirus 
pandemic. Section 1102 of the Act establishes the PPP as a temporary 
addition to the SBA's 7(a) loan program. The PPP is designed to assist 
small businesses nationwide adversely impacted by the coronavirus 
pandemic. SBA has published information about the PPP in interim final 
rules available at 85 FR 20811 (April 15, 2020); 85 FR 20817 (April 15, 
2020); 85 FR 21747 (April 20, 2020); and 85 FR 23450 (April 28, 2020).
    Section 1109(b) of the Act authorizes Treasury to establish 
criteria for insured depository institutions, insured credit unions, 
institutions of the Farm Credit System chartered under the Farm Credit 
Act of 1971 (12 U.S.C. 2001 et seq.), and other lenders to participate 
in the PPP. The SBA is required to administer the program that Treasury 
establishes under section 1109 of the Act, with guidance from Treasury.
    The Act authorizes Treasury to issue regulations and guidance to 
implement section 1109, including regulations that establish ``terms 
and conditions'' for PPP loans. See Section 1109(d)(2). The terms and 
conditions established by Treasury under section 1109 are not required 
to be identical to those set forth in section 1102. However, the Act 
requires that terms and conditions that

[[Page 23918]]

Treasury establishes under section 1109 pertaining to certain 
criteria--the maximum interest rate, maximum loan amount, and other 
specified terms--must be ``consistent,'' to ``the maximum extent 
practicable,'' with those set forth in section 1102. See Section 
1109(d)(2).
    In this rulemaking, Treasury is addressing the needs of certain 
potential borrowers that are seasonal employers by allowing seasonal 
employers to use an alternative base period for purposes of calculating 
the loan amount for which they are eligible under the PPP. Section 1102 
of the Act permits seasonal employers to calculate their maximum loan 
amount by using their monthly average payments for payroll during ``the 
12-week period beginning February 15, 2019, or at the election of the 
eligible [borrower], March 1, 2019, and ending June 30, 2019.'' Some 
seasonal employers, however, have seasons that occur later in the year. 
Without the ability to use an alternative base period, many summer 
seasonal businesses would be unable to obtain funding on terms 
commensurate with those available to winter and spring seasonal 
businesses. This interim final rule addresses that disparity and 
ensures consistency in program administration by providing a seasonal 
employer the option of using any consecutive 12-week period between May 
1, 2019 and September 15, 2019 for determining its maximum loan amount.
    As required by section 1109(d)(2)(B), Treasury has determined that 
this alternative period for seasonal employers is, to the ``maximum 
extent practicable,'' consistent with the terms applicable to the PPP 
in general. In section 1102, Congress gave seasonal employers the 
option to calculate their maximum loan amount using alternative base 
periods. By permitting seasonal employers to calculate the maximum loan 
amount using any consecutive 12 weeks within a specified 4.5-month 
period, this interim final rule ensures that seasonal employers 
affected by the pandemic are treated even-handedly.
    Other than this adjustment, the terms and requirements applicable 
to PPP loans under this rule are identical to the terms and 
requirements that section 1102 and SBA regulations impose on other PPP 
loans. As a result, a seasonal borrower that elects to use the 
alternative timing criterion under this interim final rule may follow 
the same processes and procedures applicable to other PPP loans.

II. Comments and Immediate Effective Date

    Congress intended that the PPP provide relief to America's small 
businesses expeditiously. Given this intent and the dramatic decrease 
in economic activity nationwide, there is good cause for Treasury to 
dispense with the 30-day delayed effective date provided in the 
Administrative Procedure Act. This interim final rule provides an 
alternative criterion for calculating the maximum loan amount for PPP 
loans issued to seasonal employers. Seasonal employers need timely 
additional guidance concerning the maximum loan available under the 
interim final rule because the last day to apply for and receive a loan 
is June 30, 2020. The immediate effective date of this interim final 
rule will benefit seasonal employers by providing a full understanding 
of loan terms and conditions. Although this interim final rule is 
effective immediately, comments are solicited from interested members 
of the public on all aspects of the interim final rule, including 
section III below. These comments must be submitted on or before June 
1, 2020. Treasury will consider these comments and the need for any 
revisions as a result of these comments.

III. Paycheck Protection Program--Alternative Criterion for Seasonal 
Employers

Overview

    The SBA administers the PPP to provide immediate assistance to 
small businesses affected by the coronavirus pandemic. Under section 
1109 of the CARES Act, Treasury is authorized to issue regulations that 
allow lenders to originate PPP loans under terms and conditions 
established by the Secretary. Through this interim final rule, Treasury 
is exercising its section 1109 authority to address the needs of 
certain potential borrowers that are seasonal employers. The SBA will 
administer this rule as part of the PPP, with guidance from Treasury, 
until the date on which the national emergency declared by the 
President under the National Emergencies Act (50 U.S.C. 1601 et seq.) 
with respect to the Coronavirus Disease 2019 (COVID-19) expires. Except 
as modified in this interim final rule, PPP regulations, guidance, 
forms, and processes apply fully to PPP loans for seasonal employers 
utilizing the base period calculation option set forth in this rule.
1. General
    This interim final rule supplements the SBA's rules for the PPP by 
establishing an alternative criterion for calculating the maximum loan 
amount for seasonal employers.
2. What does this interim final rule apply to?
    This rule applies to PPP loans issued to seasonal employers.
3. How does this rule affect the calculation of the maximum loan amount 
for seasonal employers?
    Under section 1102 of the CARES Act, a seasonal employer may 
determine its maximum loan amount for purposes of the PPP by reference 
to the employer' average total monthly payments for payroll ``the 12-
week period beginning February 15, 2019, or at the election of the 
eligible [borrower], March 1, 2019, and ending June 30, 2019.'' Under 
this interim final rule issued pursuant to section 1109 of the Act, a 
seasonal employer may alternatively elect to determine its maximum loan 
amount as the average total monthly payments for payroll during any 
consecutive 12-week period between May 1, 2019 and September 15, 2019.
4. If a seasonal business was dormant or not fully operating as of 
February 15, 2020, is it still eligible?
    Yes, in evaluating eligibility, a seasonal business will be 
considered to have been in operation as of February 15, 2020, if the 
business was in operation for any 8-week period between May 1, 2019 and 
September 15, 2019. This approach aligns with guidance previously 
provided by the Small Business Administration concerning other seasonal 
businesses under section 1102. See Treasury, Paycheck Protection 
Program Loans: Frequently Asked Questions (FAQs), FAQ 9 (posted April 
6, 2020) (https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses).
6. Are any other SBA rules or guidance for the PPP affected by 
Treasury's interim final rule?
    No. This interim final rule only provides certain employers with an 
alternative means of calculating the maximum loan amount. All other 
terms and conditions in the PPP remain unchanged. All PPP applicants, 
borrowers, and lenders should continue to use existing SBA forms and 
follow all requirements set forth in the CARES Act and SBA regulations, 
except for the alternative approach described above for calculating the 
maximum loan amount.
7. What lenders are authorized to offer terms in Treasury's interim 
final rule to seasonal employers?
    All lenders authorized to originate PPP loans may offer the terms 
under this interim final rule to eligible applicants and borrowers. PPP 
loans

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under this interim final rule are eligible for an SBA guarantee to the 
same extent as PPP loans based on existing PPP rules.

Compliance With Executive Orders 12866, 12988, 13132, 13563, and 13771, 
the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Administrative 
Procedure Act (5 U.S.C. 553)

Executive Orders 12866, 13563, and 13771
    The Office of Management and Budget has determined that 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. Treasury, 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
    Treasury has drafted this rule, to the extent practicable, in 
accordance with the standards set forth in section 3(a) and 3(b)(2) of 
Executive Order 12988, to minimize litigation, eliminate ambiguity, and 
reduce burden. The rule has no preemptive or retroactive effect.
Executive Order 13132
    Treasury 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, 
Treasury has determined that this rule has no federalism implications 
warranting preparation of a federalism assessment.
Paperwork Reduction Act, 44 U.S.C. Chapter 35
    Treasury has determined that this rule will not impose new or 
modify existing recordkeeping or reporting requirements under the 
Paperwork Reduction Act.
Inapplicability of Notice and Delayed Effective Date
    The Administrative Procedure Act (APA) requirements in 5 U.S.C. 553 
govern agency rulemaking procedures. Section 553(b) of the APA 
generally requires notice and public comment before issuance of a final 
rule. In addition, section 553(d) of the APA requires that a final rule 
have a 30-day delayed effective date. The APA, however, provides 
exceptions from the prior notice and public comment requirement and the 
delayed effective date requirements, when an agency for good cause 
finds that such procedures are impracticable, unnecessary, or contrary 
to the public interest. 5 U.S.C. 553(b)(B), (d)(3). Treasury finds that 
prior notice and comment are impracticable and contrary to the public 
interest and that good cause exists to issue this interim final rule 
immediately.
    The ongoing unprecedented situation related to COVID-19 is having a 
nationwide impact, as demonstrated by the declaration of a national 
emergency by the President. See Proclamation 9994 of March 13, 2020, 85 
FR 15337 (Mar. 18, 2020). The interim final rule supports seasonal 
employers affected by COVID-19 in obtaining PPP loans to maintain their 
businesses and keep people employed. To protect our public interests 
during the ongoing national emergency, Treasury concludes, pursuant to 
5 U.S.C. 553(b)(B), that there is good cause to dispense with prior 
public notice and the opportunity to comment on this rule before 
issuing this interim final rule. For the same reasons, Treasury has 
determined, consistent with section 553(d)(3) of the APA, that there is 
good cause to make this temporary final rule effective immediately.

Michael Faulkender,
Assistant Secretary for Economic Policy.
[FR Doc. 2020-09239 Filed 4-28-20; 4:15 pm]
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