[Federal Register Volume 85, Number 101 (Tuesday, May 26, 2020)]
[Rules and Regulations]
[Pages 31357-31359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11292]



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 Rules and Regulations
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  Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Rules 
and Regulations  

[[Page 31357]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

[Docket Number SBA-2020-0031]
RIN 3245-AH45


Business Loan Program Temporary Changes; Paycheck Protection 
Program--Second Extension of Limited Safe Harbor With Respect to 
Certification Concerning Need for PPP Loan and Lender Reporting

AGENCY: U.S. Small Business Administration.

ACTION: Interim final rule.

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SUMMARY: On May 8, 2020, the U.S. Small Business Administration (SBA) 
posted an interim final rule relating to the extension of a safe harbor 
with respect to a certification required by the Coronavirus Aid, 
Relief, and Economic Security Act (CARES Act or the Act) in connection 
with the implementation of a temporary new program, titled the 
``Paycheck Protection Program.'' This interim final rule revises the 
interim final rule posted on May 8, 2020, and published in the Federal 
Register on May 19, 2020, by extending the date by which certain 
Paycheck Protection Program (PPP) borrowers may repay their loans from 
May 14, 2020 to May 18, 2020, in order to avail themselves of a safe 
harbor with respect to the certification required by the Act, and by 
extending the timeframe for submission of the initial SBA Form 1502 
report for PPP loans. This interim final rule supplements SBA's 
implementation of the Act and requests public comment.

DATES: 
    Effective date: This rule is effective May 26, 2020.
    Comment date: Comments must be received on or before June 25, 2020.

ADDRESSES: You may submit comments, identified by number SBA-2020-0031 
through the Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. SBA will post all 
comments on www.regulations.gov. If you wish to submit confidential 
business information (CBI) as defined in the User Notice at 
www.regulations.gov, please send an email to [email protected]. Highlight 
the information that you consider to be CBI and explain why you believe 
SBA should hold this information as confidential. SBA will review the 
information and make the final determination whether it will publish 
the information.

FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833-
572-0502, or the local SBA Field Office; the list of offices can be 
found at https://www.sba.gov/tools/local-assistance/districtoffices.

SUPPLEMENTARY INFORMATION:

I. Background Information

    On March 13, 2020, President Trump declared the ongoing Coronavirus 
Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude 
to warrant an emergency declaration for all States, territories, and 
the District of Columbia. With the COVID-19 emergency, many small 
businesses nationwide are experiencing economic hardship as a direct 
result of the Federal, State, tribal, and local public health measures 
that are being taken to minimize the public's exposure to the virus. 
These measures, some of which are government-mandated, are being 
implemented nationwide and include the closures of restaurants, bars, 
and gyms. In addition, based on the advice of public health officials, 
other measures, such as keeping a safe distance from others or even 
stay-at-home orders, are being implemented, resulting in a dramatic 
decrease in economic activity as the public avoids malls, retail 
stores, and other businesses.
    On March 27, 2020, the President signed the Coronavirus Aid, 
Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L. 
116-136) to provide emergency assistance and health care response for 
individuals, families, and businesses affected by the coronavirus 
pandemic. The Small Business Administration (SBA) received funding and 
authority through the Act to modify existing loan programs and 
establish a new loan program to assist small businesses nationwide 
adversely impacted by the COVID-19 emergency. Section 1102 of the Act 
temporarily permits SBA to guarantee 100 percent of 7(a) loans under a 
new program titled the ``Paycheck Protection Program.'' Section 1106 of 
the Act provides for forgiveness of up to the full principal amount of 
qualifying loans guaranteed under the Paycheck Protection Program. On 
April 24, 2020, the President signed the Paycheck Protection Program 
and Health Care Enhancement Act (Pub. L. 116-139), which provided 
additional funding and authority for the PPP.

II. Comments and Immediate Effective Date

    This interim final rule is effective without advance notice and 
public comment because section 1114 of the Act authorizes SBA to issue 
regulations to implement Title I of the Act without regard to notice 
requirements. In addition, SBA has determined that there is good cause 
for dispensing with advance public notice and comment on the ground 
that it would be contrary to the public interest. Specifically, SBA, in 
consultation with the Department of the Treasury, issued additional 
guidance with regard to the safe harbor posted on SBA's website on May 
13, 2020. See FAQ 46 (posted May 13, 2020).\1\ SBA, in consultation 
with the Department of the Treasury, determined that extending the safe 
harbor deadline from May 14, 2020 to May 18, 2020 would afford Paycheck 
Protection Program borrowers time to review SBA's May 13, 2020 guidance 
and decide whether to avail themselves of the safe harbor. SBA 
previously announced this intended extension in nonbinding guidance 
published on May 13, 2020. See FAQ 47 (posted on May 13, 2020).\2\ SBA, 
in consultation with the Department of the Treasury, determined that 
the immediate effective date of this interim final rule would benefit 
lenders by allowing them to swiftly close and disburse loans to small 
businesses and fulfill associated reporting requirements. Advance 
notice and public comment would defeat the purpose of this interim 
final rule given the existing May 22, 2020 deadline for lenders to 
submit the initial SBA Form 1502 report for PPP loans, which this 
interim final rule extends to the later of (1) May 29, 2020; or (2) 10 
calendar days

[[Page 31358]]

after disbursement or cancellation of a PPP loan. These same reasons 
provide good cause for SBA to dispense with the 30-day delayed 
effective date provided in the Administrative Procedure Act.
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    \1\ https://www.sba.gov/sites/default/files/2020-05/Paycheck-Protection-Program-Frequently-Asked-Questions_05%2013%2020_2.pdf.
    \2\ Id.
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    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 25, 2020. SBA will consider these 
comments and the need for making any revisions as a result of these 
comments.

III. Paycheck Protection Program Requirements for Second Extension of 
Limited Safe Harbor With Respect to Certification Concerning Need for 
PPP Loan Request and Lender Reporting

Overview

    The CARES Act was enacted to provide immediate assistance to 
individuals, families, and organizations affected by the COVID-19 
emergency. Among the provisions contained in the CARES Act are 
provisions authorizing SBA to temporarily guarantee loans under the 
Paycheck Protection Program (PPP). Loans under the PPP are 100 percent 
guaranteed by SBA, and the full principal amount of the loans and any 
accrued interest may qualify for loan forgiveness. Additional 
information about the PPP is available in interim final rules published 
by SBA and the Department of the Treasury in the Federal Register (85 
FR 20811, 85 FR 20817, 85 FR 21747, 85 FR 23450, 85 FR 23917, 85 FR 
26321, 85 FR 26324, 85 FR 27287, 85 FR 29845, 85 FR 29842, 85 FR 29847, 
and 85 FR 30835) (collectively, the PPP Interim Final Rules).
1. Second Extension of Limited Safe Harbor With Respect to 
Certification Concerning Need for PPP Loan Request
    The 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. On April 24, 2020, SBA posted on its website an 
interim final rule (the Fourth PPP Interim Final Rule), which also was 
published in the Federal Register on April 28, 2020 (85 FR 23450), to 
provide relief to PPP borrowers that applied for and received PPP loans 
based on a misunderstanding or misapplication of the required good-
faith certification standard. The Fourth PPP Interim Final Rule 
provides that any borrower that applied for a PPP loan and repays the 
loan in full by May 7, 2020, will be deemed by SBA to have made the 
required certification in good faith. On May 5, 2020, SBA, in 
consultation with the Department of the Treasury, issued additional 
guidance to extend the safe harbor deadline from May 7, 2020 to May 14, 
2020. See FAQ 43 (posted May 5, 2020) and SBA's interim final rule on 
Extension of Limited Safe Harbor with Respect to Certification 
Concerning Need for PPP Loan Request, posted May 8, 2020, and published 
in the Federal Register on May 19, 2020 (85 FR 29845). SBA, in 
consultation with the Department of the Treasury, issued additional 
guidance on May 13, 2020 concerning how SBA will review the required 
good-faith certification to help PPP borrowers evaluate whether they 
may have misunderstood or misapplied the statutory certification 
standard. See FAQ 46 (posted May 13, 2020). This guidance included an 
additional 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. Based on this guidance, SBA, in consultation with the Department 
of the Treasury, determined that it is necessary and appropriate to 
further extend the safe harbor deadline for repaying PPP loans from May 
14, 2020 to May 18, 2020. See FAQ 47 (posted May 13, 2020).
    Second Extension of Limited Safe Harbor with Respect to Good-Faith 
Certification Concerning Need for PPP Loan Request. Consistent with 
section 1102 of the CARES Act, the Borrower Application Form requires 
PPP applicants to certify in good faith that ``[c]urrent economic 
uncertainty makes this loan request necessary to support the ongoing 
operations of the Applicant.'' Any borrower that applied for a PPP loan 
and repays the loan in full by May 18, 2020 will be deemed by SBA to 
have made the required certification in good faith. The Administrator, 
in consultation with the Secretary, determined that this safe harbor is 
necessary and appropriate to ensure that borrowers promptly repay PPP 
loan funds that the borrower obtained based on a misunderstanding or 
misapplication of the statutory certification standard.
2. Lender Reporting
    The extension of the safe harbor and administrative convenience 
necessitate a corresponding date change to the interim final rule that 
SBA posted on its website on April 28, 2020, which was published in the 
Federal Register on May 4, 2020 (85 FR 26321), regarding PPP loan 
disbursements (the May 4 Interim Final Rule), as amended by the interim 
final rule that SBA posted on its website on May 8, 2020 (the May 8 
Interim Final Rule). Specifically, Part III.1.b. of the May 4 Interim 
Final Rule provided that lenders must electronically upload SBA Form 
1502 reporting information within 20 calendar days after a PPP loan is 
approved or, for loans approved before the availability of the updated 
SBA Form 1502 reporting process, by May 18, 2020. 85 FR 26321, 26323. 
The May 8 Interim Final Rule extended the deadline for the submission 
of the initial SBA Form 1502 reporting information from May 18, 2020 to 
May 22, 2020 because of the extension of the safe harbor deadline to 
May 14, 2020. Because of the extension of the safe harbor deadline from 
May 14, 2020 to May 18, 2020 and to promote the administrability of the 
PPP, SBA is further extending the timelines for reporting Form 1502 
information, such that lenders must electronically upload SBA Form 1502 
reporting information by the later of: (1) May 29, 2020, or (2) 10 
calendar days after disbursement or cancellation of a PPP loan.
    As noted in the May 4 Interim Final Rule, lenders must disburse PPP 
loans within 10 calendar days of loan approval; a loan is considered 
approved when the loan is assigned a loan number by the SBA. Loans for 
which funds have not been disbursed because a borrower has not 
submitted required loan documentation within 20 calendar days of loan 
approval shall be cancelled by the lender. These two requirements 
remain unchanged.
    The extension of the safe harbor and administrative convenience 
also require an identical corresponding date change to the interim 
final rule that SBA posted on May 13, 2020, regarding PPP loan 
increases. Specifically, that interim final rule states, in Parts III 
and III.2.b., that SBA Form 1502 reporting information is required to 
be submitted within 20 calendar days after a PPP loan is approved or, 
for loans approved before availability of the updated SBA Form 1502 
reporting process, by May 22, 2020. As described above, SBA is further 
extending timelines for reporting Form 1502 information, such that 
lenders must electronically upload SBA Form 1502 reporting information 
by the later of: (1) May 29, 2020, or (2) 10 calendar days after 
disbursement or cancellation of a PPP loan.
    The Administrator, in consultation with the Secretary, believes 
that clarifying timelines for lender reporting will enable lenders to 
swiftly close and disburse loans and will enhance the

[[Page 31359]]

administrability of key program components by enabling lenders and SBA 
to process data regarding loan disbursements and cancelations in a 
streamlined manner.

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), and the good cause exemption under 5 U.S.C. 809(2), based 
on the need to move expeditiously to mitigate the current economic 
conditions arising from the COVID-19 emergency. This rule's designation 
under Executive Order 13771 will be informed by public comment.

Executive Order 12988

    SBA has drafted this rule, to the extent practicable, in accordance 
with the standards set forth in section 3(a) and 3(b)(2) of Executive 
Order 12988, to minimize litigation, eliminate ambiguity, and reduce 
burden. The rule has no preemptive or retroactive effect.

Executive Order 13132

    SBA has determined that this rule will not have substantial direct 
effects on the States, on the relationship between the National 
Government and the States, or on the distribution of power and 
responsibilities among the various layers of government. Therefore, SBA 
has determined that this rule has no federalism implications warranting 
preparation of a federalism assessment.

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

    SBA has determined that this rule will not impose new or modify 
existing recordkeeping or reporting requirements under the Paperwork 
Reduction Act.

Regulatory Flexibility Act (RFA)

    The Regulatory Flexibility Act (RFA) generally requires that when 
an agency issues a proposed rule, or a final rule pursuant to section 
553(b) of the APA or another law, the agency must prepare a regulatory 
flexibility analysis that meets the requirements of the RFA and publish 
such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to describe the impact of a 
rulemaking on small entities by providing a regulatory impact analysis. 
Such analysis must address the consideration of regulatory options that 
would lessen the economic effect of the rule on small entities. The RFA 
defines a ``small entity'' as (1) a proprietary firm meeting the size 
standards of the Small Business Administration (SBA); (2) a nonprofit 
organization that is not dominant in its field; or (3) a small 
government jurisdiction with a population of less than 50,000. 5 U.S.C. 
601(3)-(6). Except for such small government jurisdictions, neither 
State nor local governments are ``small entities.'' Similarly, for 
purposes of the RFA, individual persons are not small entities. The 
requirement to conduct a regulatory impact analysis does not apply if 
the head of the agency ``certifies that the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities.'' 5 U.S.C. 605(b). The agency must, however, publish 
the certification in the Federal Register at the time of publication of 
the rule, ``along with a statement providing the factual basis for such 
certification.'' If the agency head has not waived the requirements for 
a regulatory flexibility analysis in accordance with the RFA's waiver 
provision, and no other RFA exception applies, the agency must prepare 
the regulatory flexibility analysis and publish it in the Federal 
Register at the time of promulgation or, if the rule is promulgated in 
response to an emergency that makes timely compliance impracticable, 
within 180 days of publication of the final rule. 5 U.S.C. 604(a), 
608(b). Rules that are exempt from notice and comment are also exempt 
from the RFA requirements, including conducting a regulatory 
flexibility analysis, when among other things the agency for good cause 
finds that notice and public procedure are impracticable, unnecessary, 
or contrary to the public interest. SBA Office of Advocacy guide: How 
to Comply with the Regulatory Flexibility Act, Ch. 1. p. 9. 
Accordingly, SBA is not required to conduct a regulatory flexibility 
analysis.

Jovita Carranza,
Administrator.
[FR Doc. 2020-11292 Filed 5-22-20; 8:45 am]
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