[Federal Register Volume 85, Number 118 (Thursday, June 18, 2020)]
[Rules and Regulations]
[Pages 36717-36719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13130]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

[Docket No. SBA-2020-0036]
RIN 3245-AH50


Business Loan Program Temporary Changes; Paycheck Protection 
Program--Additional Revisions to First Interim Final Rule

AGENCY: U.S. Small Business Administration.

ACTION: Interim final rule.

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SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA) 
posted on its website an interim final rule relating to the 
implementation of sections 1102 and 1106 of the Coronavirus Aid, 
Relief, and Economic Security Act (CARES Act or the Act) (published in 
the Federal Register on April 15, 2020). Section 1102 of the Act 
temporarily adds a new product, titled the ``Paycheck Protection 
Program,'' to the U.S. Small Business Administration's (SBA's) 7(a) 
Loan Program. Subsequently, SBA issued a number of interim final rules 
implementing the Paycheck Protection Program. This interim final rule 
revises SBA's interim final rule published in the Federal Register on 
April 15, 2020 by changing the eligibility requirement related to 
felony convictions of applicants or owners of the applicant.

DATES: 
    Effective date: The provisions in this interim final rule are 
effective June 16, 2020.
    Comment date: Comments must be received on or before July 20, 2020.

ADDRESSES: You may submit comments, identified by number SBA-2020-0036, 
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, and local public health measures that are 
being taken to minimize the public's exposure to the virus. These 
measures, some of which are government-mandated, have been implemented 
nationwide and include the closures of restaurants, bars, and gyms. In 
addition, based on the advice of public health officials, other 
measures, such as keeping a safe distance from others or even stay-at-
home orders, have been implemented, resulting in a dramatic decrease in 
economic activity as the public avoids malls, retail stores, and other 
businesses.
    On March 27, 2020, the President signed the Coronavirus Aid, 
Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L. 
116-136) to provide emergency assistance and health care response for 
individuals, families, and businesses affected by the coronavirus 
pandemic. The Small Business Administration (SBA) received funding and 
authority through the Act to modify existing loan programs and 
establish a new loan program to assist small businesses nationwide 
adversely impacted by the COVID-19 emergency.
    Section 1102 of the Act temporarily permits SBA to guarantee 100 
percent of 7(a) loans under a new program titled the ``Paycheck 
Protection Program.'' Section 1106 of the Act provides for forgiveness 
of up to the full principal amount of qualifying loans guaranteed under 
the Paycheck Protection Program.
    On April 24, 2020, the President signed the Paycheck Protection 
Program and Health Care Enhancement Act (Pub. L. 116-139), which 
provided additional funding and authority for the PPP. On June 5, 2020, 
the President signed the Paycheck Protection Program Flexibility Act of 
2020 (Flexibility Act) (Pub. L. 116-142).

II. Comments and Immediate Effective Date

    This interim final rule is effective without advance notice and 
public comment because section 1114 of the CARES Act authorizes SBA to 
issue regulations to implement Title I of the Act without regard to 
notice requirements. In addition, SBA has determined that there is good 
cause for dispensing with advance public notice and comment on the 
grounds that that it would be contrary to the public interest. 
Specifically, advance public notice and comment would defeat the 
purpose of this interim final rule given that SBA's authority to 
guarantee PPP loans expires on June 30, 2020. These same reasons 
provide good cause for SBA to dispense with the 30-day delayed 
effective date provided in the Administrative Procedure Act. Although 
this interim final rule is effective on or before date of filing, 
comments are solicited from interested members of the public on all 
aspects of the interim final rule, including section III below. These 
comments must be submitted on or before July 20. 2020. The SBA will 
consider these comments, comments received on the interim final rule 
posted on SBA's website April 2, 2020 (the First Interim Final Rule) 
and published in the Federal Register on April 15, 2020, and the need 
for making any revisions as a result of these comments.

III. Paycheck Protection Program--Additional Revisions to First Interim 
Final Rule (85 FR 20811)

Overview

    The CARES Act was enacted to provide immediate assistance to 
individuals, families, and businesses affected by the COVID-19 
emergency. Among the provisions contained in the CARES Act are 
provisions authorizing SBA to temporarily guarantee loans under a new 
7(a) loan program titled the ``Paycheck Protection Program.'' Loans 
guaranteed under the Paycheck Protection Program (PPP) will be 100 
percent guaranteed by SBA, and the full principal amount of the loans 
may qualify for loan forgiveness. The purpose of this interim final 
rule is to make changes to the First Interim Final Rule, posted on 
SBA's website on April 2, 2020, and published in the Federal Register 
on April 15, 2020 (85 FR 20811). The First Interim Final Rule, as 
amended, should be interpreted

[[Page 36718]]

consistent with the frequently asked questions (FAQs) regarding the PPP 
that are posted on SBA's website \1\ and the other interim final rules 
issued regarding the PPP.\2\
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    \1\ See https://www.sba.gov/document/support--faq-lenders-
borrowers.
    \2\ See https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.
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1. Changes to the First Interim Final Rule

Eligibility Requirements
    The First Interim Final Rule provided, among other things, that a 
PPP loan will not be approved if an owner of 20 percent or more of the 
equity of the applicant has been convicted of a felony within the last 
five years. After further consideration, the Administrator, in 
consultation with the Secretary of the Treasury (the Secretary), has 
determined that a shorter timeframe for felonies that do not involve 
fraud, bribery, embezzlement, or a false statement in a loan 
application or an application for federal financial assistance is more 
consistent with Congressional intent to provide relief to small 
businesses and also promotes the important policies underlying the 
First Step Act of 2018 (Pub. L. 115-391). Therefore, Part III.2.b.iii. 
of the First Interim Final Rule (85 FR 20811, 20812) is revised to read 
as follows:
    b. Could I be ineligible even if I meet the eligibility 
requirements in (a) above?
    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 incarcerated, on probation, on parole; 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 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 any other felony 
within the last year; or
* * * * *

2. Additional Information

    SBA may provide further guidance, if needed, through SBA notices 
which will be posted on SBA's website at www.sba.gov. Questions on the 
Paycheck Protection Program may be directed to the Lender Relations 
Specialist in the local SBA Field Office. The local SBA Field Office 
may be found at https://www.sba.gov/tools/local-assistance/districtoffices.

Compliance With Executive Orders 12866, 12988, 13132, 13563, and 13771, 
the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Orders 12866, 13563, and 13771

    This interim final rule is economically significant for the 
purposes of Executive Orders 12866 and 13563, and is considered a major 
rule under the Congressional Review Act. SBA, however, is proceeding 
under the emergency provision at Executive Order 12866 Section 
6(a)(3)(D) based on the need to move expeditiously to mitigate the 
current economic conditions arising from the COVID-19 emergency. This 
rule's designation under Executive Order 13771 will be informed by 
public comment.
    This rule is necessary to implement Sections 1102 and 1106 of the 
CARES Act and the Flexibility Act in order to provide economic relief 
to small businesses nationwide adversely impacted under the COVID-19 
Emergency Declaration. We anticipate that this rule will result in 
substantial benefits to small businesses, their employees, and the 
communities they serve. However, we lack data to estimate the effects 
of this rule.

Executive Order 12988

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

Executive Order 13132

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

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

    SBA has determined that this rule will require modification to the 
existing PPP information collection that is approved under OMB Control 
Number 3245-0407 as an emergency request until October 31, 2020. As 
discussed above, this rule amends the PPP eligibility requirements 
regarding certain felony charges. As a result of these amendments, 
conforming changes will be made to Question 6 of Form 2483, Borrower 
Application Form, and Section H of Form 2484, Lender Application Form. 
SBA will submit the revisions to these forms to the Office of 
Management and Budget for approval.

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

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procedure are impracticable, unnecessary, or contrary to the public 
interest. Small Business Administration's Office of Advocacy guide: How 
to Comply with the Regulatory Flexibility Act, Ch.1. p.9. Accordingly, 
SBA is not required to conduct a regulatory flexibility analysis.

    Authority: 15 U.S.C. 636(a)(36); Coronavirus Aid, Relief, and 
Economic Security Act, Pub. L. 116-136, Section 1114.

Jovita Carranza,
Administrator.
[FR Doc. 2020-13130 Filed 6-16-20; 2:00 pm]
BILLING CODE 8026-03-P