[Federal Register Volume 86, Number 144 (Friday, July 30, 2021)]
[Rules and Regulations]
[Pages 40921-40927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-16358]



[[Page 40921]]

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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

[Docket Number SBA-2021-0015]
RIN 3245-AH79


Business Loan Program Temporary Changes; Paycheck Protection 
Program--COVID Revenue Reduction Score, Direct Borrower Forgiveness 
Process, and Appeals Deferment

AGENCY: U.S. Small Business Administration.

ACTION: Interim final rule.

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SUMMARY: This interim final rule implements changes related to the 
forgiveness of 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), as amended. SBA has issued a number of interim final 
rules implementing the PPP Program. This interim final rule further 
streamlines the forgiveness process for PPP loans of $150,000 or less 
by allowing lenders to use a COVID Revenue Reduction Score at the time 
of forgiveness to document the required revenue reduction for Second 
Draw PPP Loans, and establishing a direct borrower forgiveness process 
for lenders that choose to opt-in as an alternative method of 
processing loan forgiveness applications. This interim final rule also 
extends the loan deferment period for those PPP loans where the 
borrower timely files an appeal of a final SBA loan review decision 
with the SBA Office of Hearings and Appeals.

DATES: 
    Effective date: The provisions of this interim final rule are 
effective July 28, 2021.
    Applicability date: The COVID Revenue Reduction Score portion of 
this interim final rule applies to all Second Draw PPP Loans for which 
the lender has not yet issued a loan forgiveness decision to SBA as of 
the effective date of this rule. The direct borrower forgiveness 
process portion of this rule applies to all PPP loans for which a loan 
forgiveness application has not been submitted by the borrower to the 
lender as of the effective date of this rule. The deferment portion of 
the rule applies to PPP appeals filed after the effective date of this 
rule and to those PPP appeals filed before the effective date of this 
rule for which a Notice and Order has not been issued.
    Comment date: Comments must be received on or before August 30, 
2021.

ADDRESSES: You may submit comments, identified by docket number SBA-
2021-0015 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]. 
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. If 
you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339. Individuals with disabilities can obtain this document in 
an accessible format that may be provided in Rich Text Format (RTF) or 
text format (txt), a thumb drive, an mp3 file, Braille, large print, 
audiotape, or compact disc, or other accessible formats.

SUPPLEMENTARY INFORMATION:

I. Background Information

    On March 27, 2020, the Coronavirus Aid, Relief, and Economic 
Security Act (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 April 24, 2020, the Paycheck Protection 
Program and Health Care Enhancement Act (Pub. L. 116-139) was enacted, 
which provided additional funding and authority for the PPP Program.
    On June 5, the Paycheck Protection Program Flexibility Act of 2020 
(PPP Flexibility Act) (Pub. L. 116-142) was enacted, which changed 
provisions of the PPP relating to the maturity of PPP loans, the 
deferral of PPP loan payments, and the forgiveness of PPP loans. On 
July 4, 2020, Public Law 116-147 extended the authority to guarantee 
PPP loans to August 8, 2020.
    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 certain 
eligible borrowers that previously received a First Draw PPP Loan under 
generally the same terms and conditions available under section 
7(a)(36) of the Small Business Act. Among other things, to be eligible 
for a Second Draw PPP Loan, the borrower must have experienced a 
revenue reduction of not less than 25% in at least one quarter of 2020 
compared to the same quarter in 2019. 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. 
Additionally, the Economic Aid Act provided for a simplified 
forgiveness application process for PPP loans of $150,000 or less.
    On March 11, 2021, the American Rescue Plan Act (ARPA) (Pub. L. 
117-2) was enacted, and among other things, expanded eligibility for 
First Draw PPP Loans and Second Draw PPP Loans and revised exclusions 
from payroll costs for purposes of forgiveness. On March 30, 2021, the 
PPP Extension Act of 2021 (Pub. L. 117-6) was enacted, extending SBA's 
PPP program authority through June 30, 2021.
    From April 3, 2020, through August 8, 2020, when the 2020 round of 
PPP expired, SBA guaranteed over 5.2 million PPP loans made by over 
5,000 PPP lenders under delegated authority. From January 11, 2021, 
when the PPP reopened, through June 30, 2021, when the PPP program 
authority expired, SBA guaranteed over 6.6 million additional PPP 
loans. Thus, the total number of PPP loans guaranteed by SBA exceeds 
11.8 million.\1\ The total dollar amount of

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the PPP loans guaranteed by SBA exceeds $806 billion.
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    \1\ By way of contrast, in a normal fiscal year, for example FY 
2019, SBA guaranteed 51,907 7(a) loans. The astronomical increase in 
SBA's 7(a) portfolio, of which the PPP is a part, has strained SBA's 
resources and will continue to strain SBA's resources going forward.
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    SBA posted the first interim final rule implementing the PPP on 
SBA's website on April 2, 2020, and published the rule in the Federal 
Register on April 15, 2020 (85 FR 20811). SBA subsequently issued 
numerous additional interim final rules. On June 1, 2020, SBA published 
an interim final rule on loan forgiveness requirements (85 FR 33004) 
and an interim final rule on loan review procedures (85 FR 33010). 
Prior to the publication of the loan forgiveness and loan review 
interim final rules, on May 15, 2020, SBA issued SBA Form 3508, which 
was a loan forgiveness application to be used by all PPP borrowers.
    On June 26, 2020, SBA published an interim final rule revising the 
loan forgiveness and loan review procedures to conform to the key 
forgiveness changes made by the PPP Flexibility Act (85 FR 38304). In 
conjunction with the rule, SBA issued a second loan forgiveness 
application form, SBA Form 3508EZ, which is a streamlined form that 
incorporates the forgiveness safe harbors established under the PPP 
Flexibility Act.
    SBA's 2020 PPP program authority expired on August 8, 2020. On 
August 10, 2020, SBA began accepting PPP lender decisions on PPP 
borrower loan forgiveness applications through SBA's Paycheck 
Protection Platform (Platform) (forgiveness.sba.gov). PPP borrowers 
were required to submit their loan forgiveness applications to their 
PPP lenders, and as required by section 1106 of the CARES Act (now 
section 7A of the Small Business Act), lenders were required to issue a 
decision to SBA on the borrower's loan forgiveness application within 
60 days of receipt of the application. On August 27, 2020, SBA issued 
an interim final rule on Appeals of SBA Loan Review Decisions under the 
Paycheck Protection Program (85 FR 52883). On October 2, 2020, SBA 
began remitting forgiveness payments to PPP lenders that submitted 
forgiveness decisions to SBA through the Platform. SBA continues to 
remit forgiveness payments to PPP lenders, and as of July 12, 2021, SBA 
has remitted over 4.3 million forgiveness payments to lenders.\2\
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    \2\ As of July 12, 2021, SBA has received over 4.5 million 
forgiveness decisions from PPP lenders through the Platform.
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    On October 19, 2020, in response to borrower and lender concerns 
about the complexity of the loan forgiveness process for the smallest 
of borrowers, SBA and the Department of the Treasury (Treasury) jointly 
issued an interim final rule revising the loan forgiveness and loan 
review procedures to simplify the forgiveness process for PPP loans of 
$50,000 or less. Among other things, the rule exempted borrowers with 
loans of $50,000 or less from the full-time equivalent employee (FTE) 
and salary/wage reduction penalties included in section 1106 of the 
CARES Act, under the joint SBA/Treasury statutory authority to make de 
minimis exemptions to those penalties. In conjunction with the rule, 
SBA issued a third loan forgiveness application, SBA Form 3508S, which 
was a further streamlined loan forgiveness application available for 
use by borrowers with loans of $50,000 or less.
    On January 14, 2021, SBA published interim final rules implementing 
the Economic Aid Act amendments to the PPP. The first interim final 
rule implemented Economic Aid Act changes to, among other things, PPP 
eligibility, and consolidated numerous prior interim final rules on PPP 
(86 FR 3692) (Consolidated Eligibility IFR). The second interim final 
rule implemented the Second Draw PPP Loan program authorized by the 
Economic Aid Act under section 7(a)(37) of the Small Business Act (86 
FR 3712) (Second Draw IFR). On February 5, 2021, SBA published a third 
interim final rule implementing Economic Aid Act changes related to the 
forgiveness and review of PPP loans (86 FR 8283) (Consolidated 
Forgiveness and Loan Review IFR). Among other things, the Consolidated 
Forgiveness and Loan Review IFR implemented the simplified forgiveness 
application process for loans of $150,000 or less required by the 
Economic Aid Act. In conjunction with this rule, on January 19, 2021, 
SBA issued a revised SBA Form 3508S, which increased the loan amount 
for which the form could be used from $50,000 to $150,000.\3\ The new 
SBA Form 3508S was also shortened to one page, as required by the 
Economic Aid Act, and no longer requires the submission of supporting 
forgiveness documentation, as mandated by the Economic Aid Act.
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    \3\ Although borrowers with loans of $150,000 or less may now 
use SBA Form 3508S, only those borrowers with loans of $50,000 or 
less may use the de minimis exemption from the FTE and salary/wage 
reduction penalty.
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    Following the publication of the interim final rules implementing 
the Economic Aid Act, SBA published another interim final rule on March 
8, 2021, revising certain loan amount calculation and eligibility 
provisions for PPP (86 FR 13149). On March 22, 2021, SBA published an 
interim final rule implementing the PPP provisions of ARPA (86 FR 
15083).
    As described below, this interim final rule further streamlines the 
forgiveness process for PPP loans of $150,000 or less by (a) allowing 
lenders to use a COVID Revenue Reduction Score at the time of loan 
forgiveness to document the required revenue reduction for Second Draw 
PPP loans of $150,000 or less, and (b) establishing a direct borrower 
forgiveness process for lenders that choose to opt-in as an alternative 
method of processing loan forgiveness applications for PPP Loans of 
$150,000 or less. This interim final rule also extends the loan 
deferment period for those PPP loans where the borrower timely files an 
appeal of a final SBA loan review decision with the SBA Office of 
Hearings and Appeals.

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. 
Even otherwise, SBA finds good cause for setting aside the advance 
notice-and-public-comment procedure because that procedure would be 
impracticable and contrary to the public interest. The intent of the 
CARES Act and the Economic Aid Act is to afford SBA the flexibility to 
provide relief to America's small businesses and nonprofit 
organizations expeditiously. Given the urgent need to provide borrowers 
with timely relief, the purpose of the rule is to minimize the burdens 
of the current loan forgiveness process that, without modification, 
could result in borrowers unnecessarily having to make principal and 
interest payments on loans that should be forgiven. If SBA were to 
follow the advance notice-and-public-comment process, that would delay 
issuance of the rule by at least three months. SBA understands--based 
on its expertise and consistent portfolio analysis--that a significant 
number of borrowers will have to apply for loan forgiveness in the next 
three months. Therefore, if the proposed rule is still undergoing 
notice and comment during that time, these borrowers will be applying 
under the current process, which (as noted above) would mean these 
borrowers could unnecessarily have to make principal and interest 
payments on loans that should be forgiven and would not be positively

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impacted by a later rule change. Providing for notice and comment would 
render the rule effectively moot and useless for millions of intended 
beneficiaries.
    For these same reasons, SBA 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 expedite loan 
forgiveness to small businesses and nonprofit organizations and remit 
forgiveness payments to lenders.
    This good cause justification also supports waiver of the 60-day 
delayed effective date for major rules under Subtitle E of the Small 
Business Regulatory Enforcement Fairness Act of 1996 (also known as 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 August 30, 2021. SBA 
will consider these comments and the need for making any revisions as a 
result of these comments.

III. Paycheck Protection Program--COVID Revenue Reduction Score, Direct 
Borrower Forgiveness Process, and Appeals Deferment

Overview

A. Further Streamlining Forgiveness for PPP Loans of $150,000 or Less
    A key feature of the PPP is that a borrower may obtain forgiveness 
of up to the full amount of its PPP loan provided that the borrower 
complied with PPP requirements. Since SBA issued the first loan 
forgiveness application form (SBA Form 3508) in May 2020 and published 
the first loan forgiveness and loan review rules in June 2020, SBA has 
received comments from borrowers and lenders that the loan forgiveness 
process is overwhelming and difficult to manage and requesting 
simplification of the process. In response to borrower and lender 
requests for simplification of the loan forgiveness process, Congress 
enacted the PPP Flexibility Act in June 2020, which created safe 
harbors from the FTE and salary/wage reduction penalties of section 
1106 of the CARES Act, and in response, SBA issued a new streamlined 
loan forgiveness application (SBA Form 3508EZ) implementing those 
changes.
    In October 2020, SBA and Treasury exempted borrowers with loans of 
$50,000 or less from the FTE and salary/wage reduction penalties and 
issued a second new streamlined loan forgiveness application (SBA Form 
3508S) implementing those changes. Borrowers and lenders continued to 
express concerns about the complexity of the loan forgiveness process, 
and in December 2020, Congress enacted the Economic Aid Act, which 
provides for a simplified loan forgiveness application process for 
borrowers with loans of $150,000 or less. SBA implemented this 
requirement by revising the second streamlined loan forgiveness 
application (SBA Form 3508S) to allow all borrowers with loans of 
$150,000 or less to use the form.
    Loans of $150,000 or less represent 93 percent of the outstanding 
PPP loans. Despite the implementation of the streamlined loan 
forgiveness application for borrowers with loans of $150,000 or less, 
many smaller PPP lenders continue to express concerns to SBA that they 
do not have the technology or human resources to develop efficient 
electronic loan forgiveness platforms to process the new streamlined 
loan forgiveness application.\4\ SBA has also become aware that because 
lenders are overwhelmed by the volume of PPP loans and are mindful of 
the statutory 60-day requirement for lenders to issue a forgiveness 
decision to SBA from receipt of the borrower's loan forgiveness 
application, lenders are limiting when loan forgiveness applications 
are accepted from borrowers, creating uncertainty among borrowers that 
they are going to have to start making payments on their PPP loans 
while they are waiting for their lenders to accept and process their 
loan forgiveness applications.
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    \4\ Borrowers may submit and lenders may accept paper versions 
of loan forgiveness applications, but given the volume of PPP loans 
made by lenders, electronic processing of loan forgiveness is more 
efficient.
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    Additionally, SBA has heard concerns from PPP lenders of all sizes 
that the requirement for borrowers to submit and lenders to review at 
the time of forgiveness the revenue reduction documentation for Second 
Draw PPP Loans of $150,000 or less is delaying the forgiveness process 
for these borrowers.
    To further simplify and streamline the forgiveness process for 
loans $150,000 or less, SBA is making two changes under this interim 
final rule. First, for Second Draw PPP Loans of $150,000 or less, where 
the borrower is required to provide revenue reduction documentation at 
the time of loan forgiveness, SBA is allowing lenders to use a COVID 
Revenue Reduction Score developed by SBA's contractor as an optional 
method to document the borrower's revenue reduction. Second, SBA is 
making available a direct borrower forgiveness process for lenders that 
choose to opt-in as an alternative method for processing borrower loan 
forgiveness applications for all PPP loans of $150,000 or less.
1. COVID Revenue Reduction Score
    Among other things, to be eligible for a Second Draw PPP Loan, a 
PPP borrower is required to have experienced a revenue reduction of not 
less than 25% during one quarter of 2020 compared to the same quarter 
in 2019. Under section 7(a)(37)(I) of the Small Business Act, when a 
borrower applies for a Second Draw PPP Loan of $150,000 or less, the 
borrower can submit a certification that the borrower meets the revenue 
reduction standard, provided that on or before the date on which the 
borrower submits an application for loan forgiveness, the borrower 
produces adequate documentation that the borrower has met the revenue 
reduction standard. All Second Draw PPP Loan borrowers were required to 
certify on their loan applications (SBA Forms 2483-SD and 2483-SD-C) 
that they realized a reduction in gross receipts in excess of 25% 
relative to the relevant comparison time period.
    The Second Draw PPP Loan IFR and the Loan Forgiveness and Loan 
Review IFR implementing the Economic Aid Act provide that if a borrower 
with a Second Draw PPP Loan of $150,000 or less did not produce 
documentation of revenue reduction at the time of application, the 
borrower must, on or before the date the borrower applies for loan 
forgiveness, submit to the lender documentation adequate to establish 
that the borrower experienced a revenue reduction of 25% or greater in 
2020 relative to 2019, and such documentation may include relevant tax 
forms, including annual tax forms, or if relevant tax forms are not 
available, quarterly financial statements or bank statements. The rules 
also provide that where a borrower with a Second Draw PPP Loan of 
$150,000 or less does not provide documentation of revenue reduction 
with its loan application, the lender must perform a good faith review 
of the documents provided by the borrower at or before forgiveness, 
including the borrower's calculations and supporting documents.\5\
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    \5\ As set forth in the Consolidated Eligibility IFR, Lenders 
must comply with the applicable lender obligations set forth in the 
interim final rule, but will be held harmless for borrowers' failure 
to comply with program criteria and will not be subject to any 
enforcement action or penalty relating to loan origination or 
forgiveness of the PPP loan if the lender acts in good faith 
relating to the origination or forgiveness of the PPP loan and 
satisfies all other applicable Federal, State, local, and other 
statutory or regulatory requirements (as provided in section 7A(h) 
of the Small Business Act, as amended) (86 FR 3692, 3695).

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    To streamline forgiveness of Second Draw PPP Loans of $150,000 or 
less where the borrower did not submit documentation of revenue 
reduction at the time of the loan application, SBA has determined that 
an alternative form of revenue reduction confirmation is warranted to 
document the borrower's revenue reduction. An independent third-party 
SBA contractor has developed a COVID Revenue Reduction Score (score) 
based on a variety of inputs including industry, geography, and 
business size. The score uses current data on economic recovery and 
return of businesses to operational status.\6\ Each Second Draw PPP 
Loan of $150,000 or less will be assigned a score, which will be 
maintained in the Platform and will be visible to lenders to use on an 
optional basis as an alternative to document revenue reduction. 
Additionally, the score will be visible to those borrowers that submit 
their loan forgiveness applications through the Platform using the 
direct borrower forgiveness process.
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    \6\ The independent third-party contractor will use a Consumer 
Demand Recovery Index that combines multiple data sources of the 
consumption of products and/or services (foot traffic, third party 
data, credit card spending, etc.) provided by businesses. Further, 
using the Business Operations Response Index, the score will measure 
the businesses' return to operational status, which includes 
employment and unemployment data, business to business payment 
transactions, mobility and foot traffic on workplace and visitor 
frequency at physical locations. The resulting score will reflect 
declines in revenue. The contractor has advised SBA that this 
methodology will result in a score that will adequately document 
that the borrower met the revenue reduction standard as required by 
section 7(a)(37)(I)(i)(II) of the Small Business Act.
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    When the score meets or exceeds the value required for validation 
of the borrower's revenue reduction, use of the score will satisfy the 
requirement for the borrower to document revenue reduction. When the 
score does not meet the value required for validation of the borrower's 
revenue reduction, and if the borrower has not already provided 
documentation to the lender that validates the borrower's revenue 
reduction, the borrower must provide documentation either directly to 
the lender (for those lenders that do not opt-in to the direct borrower 
forgiveness process) or provide documentation to the lender by 
uploading it to the Platform.
    Shortly after issuance of this rule, SBA will be providing 
additional guidance regarding the procedures for lenders and borrowers 
to use the COVID Revenue Reduction Score, including when a score meets 
or exceeds the value required for validation of the required reductions 
in gross receipts and thus is considered adequate documentation of the 
borrower's revenue reduction.
2. Direct Borrower Forgiveness Process
    In response to PPP lender and borrower concerns, SBA is 
implementing a direct borrower forgiveness process. The direct borrower 
forgiveness process is an optional technology solution that SBA is 
providing to PPP lenders that will leverage SBA's existing and proven 
Platform and align with and seamlessly integrate the streamlined 
forgiveness application for loans of $150,000 or less mandated by the 
Economic Aid Act.
    When a PPP lender opts-in to the direct borrower forgiveness 
process, the Platform will provide a single secure location for all of 
its borrowers with loans of $150,000 or less to apply for loan 
forgiveness through the Platform using the electronic equivalent of SBA 
Form 3508S. Upon receipt of notice that a borrower has applied for 
forgiveness through the Platform, lenders will review the loan 
forgiveness application in the Platform and issue a forgiveness 
decision to SBA inside the Platform. SBA believes that lenders that 
opt-in to using the direct borrower forgiveness process will benefit 
with reduced costs, increased efficiency, and more timely remittance of 
forgiveness payments from SBA, while borrowers will benefit from the 
ability to submit loan forgiveness applications directly through the 
Platform and reduce the wait time and uncertainty associated with 
submission through their lender.
    Shortly after issuance of this rule, SBA will be issuing more 
detailed procedural guidance regarding (1) the process for lenders to 
opt-in to the direct borrower forgiveness process, (2) the process for 
borrowers with loans of $150,000 or less to access the Platform and 
submit their loan forgiveness applications directly through the 
Platform, and (3) the process for lenders to access the forgiveness 
applications in the Platform to perform reviews of their borrowers' 
applications, issue forgiveness decisions to SBA, and request 
forgiveness payments from SBA. During the transition period after the 
launch of the direct borrower forgiveness process, lenders that opt-in 
will be expected to complete the processing of any loan forgiveness 
applications that have already been submitted by borrowers to the 
lender and should inform such borrowers not to submit a duplicate loan 
forgiveness application through the Platform.
    After the launch of the direct borrower forgiveness process, 
borrowers will continue to submit loan forgiveness applications to 
their lenders, rather than through the Platform, under the following 
circumstances:
     The PPP lender does not opt-in to use the direct borrower 
forgiveness process;
     The borrower's PPP loan amount is greater than $150,000;
     The borrower does not agree with the data as provided by 
the SBA system of record, or cannot validate their identity in the 
Platform (for example, if there is an unreported change of ownership); 
or
     For any other reason where the Platform rejects the 
borrower's submission.
    In such circumstances, borrowers must follow instructions from 
their lender regarding how the lender expects the borrower to submit a 
forgiveness application for its PPP loan.
B. Deferment Extension for OHA Appeals
    Currently, the rule for appeals of final SBA loan review decisions 
on PPP loans provides that because a PPP borrower must begin making 
payments of principal and interest on the remaining balance of its PPP 
loan when SBA remits the loan forgiveness amount to the PPP lender (or 
notifies the lender that no loan forgiveness is allowed), an appeal by 
a PPP borrower of any final SBA loan review decision does not extend 
the deferment period of the PPP loan. SBA is amending the appeals rule 
to, among other things, provide that a borrower's timely appeal of a 
final SBA loan review decision will extend the deferment period for the 
PPP loan until SBA's Office of Hearings and Appeals (OHA) issues a 
final decision on the appeal. The revised OHA rule will provide that 
the borrower should notify the lender of the appeal so that the lender 
can extend the deferment period. Under the revised OHA rule, an appeal 
petition must be filed with OHA within 30 calendar days after the 
appellant's receipt of the final SBA loan review decision.
    SBA has determined that, in order to avoid the potential 
administrative burden of having to reverse implementation of the final 
SBA loan review decision, including the refund of borrower payments by 
the lender and the processing of forgiveness payments by SBA, a timely 
appeal by a PPP borrower of a final SBA loan review decision should 
extend the deferment period of the PPP loan. SBA believes

[[Page 40925]]

that allowing for continued deferment is in the best interest of the 
borrower. For these reasons, SBA is conforming the applicable PPP rules 
to provide that a timely appeal by a PPP borrower of a final SBA loan 
review decision extends the deferment period of the PPP loan until 
OHA's decision becomes final under 13 CFR 134.1211.

IV. Revisions to Prior PPP Rules

    Therefore, the following changes are made to PPP rules:
    1st Revision: The first sentence of Part IV.2.a. of the 
Consolidated Forgiveness and Loan Review IFR (86 FR 8283, 8287) is 
revised to read as follows:
    2. Loan Forgiveness Process
    a. What is the general process to obtain loan forgiveness?
    To receive loan forgiveness on either a First Draw PPP Loan or a 
Second Draw PPP Loan, a borrower must complete and submit the Loan 
Forgiveness Application \27\ to its lender (or to the lender servicing 
its loan), or for loans of $150,000 or less if directed by its lender, 
through the Paycheck Protection Platform (forgiveness.sba.gov). * * *
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    \27\ SBA Form 3508, 3508EZ, 3508S, as applicable, or lender 
equivalent. Loan Forgiveness Application forms were amended to 
conform to the Economic Aid Act, including section 307, which 
requires a simplified forgiveness application for loans of not more 
than $150,000. The Simplified Forgiveness Application is SBA Form 
3508S (as amended).
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* * * * *
    2nd Revision: Part IV.2.b. of the Consolidated Forgiveness and Loan 
Review IFR (86 FR 8283, 8288) is revised by adding a sentence to the 
end of the paragraph to read as follows:
    b. When must a borrower apply for loan forgiveness or start making 
payments on a loan? \31\
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    \31\ This subsection was originally published at 85 FR 38304, 
section III.1.e. (June 26, 2020), was modified to conform to 
sections 306 and 307 of the Economic Aid Act by 86 FR 8283, 8288 
(February 5, 2021), and is being further modified to incorporate 
deferments due to appeals.
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    * * * Notwithstanding the foregoing, a borrower's timely appeal of 
a final SBA loan review decision extends the deferment period on the 
PPP loan until SBA's Office of Hearings and Appeals issues a final 
decision on the appeal under 13 CFR 134.1211.
    3rd Revision: Part IV.6.a. of the Consolidated Forgiveness and Loan 
Review IFR (86 FR 8283, 8293) is revised by adding a sentence to the 
end of the first paragraph to read as follows:
    6. Documentation Requirements
    a. What must borrowers submit for forgiveness of their PPP loans?
    * * * If a Second Draw PPP Loan borrower's COVID Revenue Reduction 
Score in the Paycheck Protection Platform meets or exceeds the value 
required to validate the borrower's revenue reduction, no additional 
documentation is required to be submitted by the borrower.
* * * * *
    4th Revision: The first sentence of Part IV.6.b. of the 
Consolidated Forgiveness and Loan Review IFR (86 FR 8283, 8293) is 
revised to read as follows:
    b. What documentation are borrowers who are individuals with self-
employment income who file a Form 1040, Schedule C or F required to 
submit to their lender with their request for loan forgiveness?
    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 (which 
could be the COVID Revenue Reduction Score, if applicable) if such 
documentation was not provided at the time of application.\68\ * * *
---------------------------------------------------------------------------

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

* * * * *
    5th Revision: Part IV.6.c. of the Consolidated Forgiveness and Loan 
Review IFR (86 FR 8283, 8293) is revised by adding a sentence to the 
end of the third paragraph to read as follows:
    c. What additional documentation must a borrower submit when the 
President of the United States, Vice President of the United States, 
the head of an Executive department, or a Member of Congress, or the 
spouse of any of the preceding, directly or indirectly holds a 
controlling interest in the borrower?
* * * * *
    * * * If a borrower with a First Draw PPP Loan of $150,000 or less 
submits its loan forgiveness application through the Paycheck 
Protection Platform (Platform), the borrower must submit any required 
SBA Form 3508D through the Platform not later than 30 days after 
submitting its application through the Platform.
* * * * *
    6th Revision: Footnote 82 in Part V.1.f. of the Consolidated 
Forgiveness and Loan Review IFR (86 FR 8283, 8295) is revised to read 
as follows:
    See 85 FR 52833 (Aug. 27, 2020), as amended.
    7th Revision: The SBA Form 3508S subsection of Part V.2.a. of the 
Consolidated Forgiveness and Loan Review IFR (86 FR 8283, 8296) is 
revised to read as follows:
    2. The Loan Forgiveness Process for Lenders
    a. What should a lender review?
* * * * *
    When a borrower submits SBA Form 3508S or lender's equivalent form, 
the lender shall:
    i. Confirm receipt of the borrower certifications contained in the 
SBA Form 3508S or lender's equivalent form.
    ii. In the case of a Second Draw PPP Loan of $150,000 or less for 
which the borrower did not provide documentation of revenue reduction 
with its application and the lender did not conduct a review of the 
documentation at the time of application:
    If the borrower submits its loan forgiveness application to the 
lender, the lender may review the borrower's COVID Revenue Reduction 
Score (score) in the Platform to confirm that it meets or exceeds the 
value required to validate the required reduction in gross receipts. If 
the borrower's score does not meet or exceed the required value, the 
lender must confirm the dollar amount and percentage of the borrower's 
revenue reduction by performing a good faith review, in a reasonable 
time, of the borrower's calculations and supporting documents 
concerning the borrower's revenue reduction.\85\
---------------------------------------------------------------------------

    \85\ See subsection (h)(2)(i)(D) of the interim final rule on 
Second Draw PPP Loans. 86 FR 3712, 3721 (Jan. 14, 2021).
---------------------------------------------------------------------------

    If the borrower submits its loan forgiveness application through 
the Paycheck Protection Platform (Platform), the lender must review the 
borrower's score in the Platform to confirm that it meets or exceeds 
the value required to validate the required reduction in gross 
receipts. If the borrower's score does not meet or exceed the required 
value, the lender must review the revenue reduction documentation 
uploaded by the borrower into the Platform and confirm the dollar 
amount and percentage of the borrower's revenue reduction by performing 
a good faith review, in a reasonable time, of the borrower's 
calculations and supporting documents concerning the borrower's revenue 
reduction.
    For those borrowers that are required to submit documentation 
regarding revenue reduction (other than a COVID Revenue Reduction 
Score), if the lender identifies errors in the borrower's calculation 
or material lack of substantiation in the borrower's supporting 
documents regarding revenue reduction, the lender should work with the 
borrower to remedy the issue. Providing an accurate calculation

[[Page 40926]]

of the loan forgiveness amount is the responsibility of the borrower, 
and the borrower attests to the accuracy of its reported information 
and calculations on the Loan Forgiveness Application. The borrower 
shall not receive forgiveness without submitting all required 
documentation to the lender.
    As the First Interim Final Rule \86\ and section IV.7 above 
indicate, lenders may rely on borrower representations. As stated in 
paragraph III.3.c of the First Interim Final Rule, the lender does not 
need to independently verify the borrower's reported information if the 
borrower submits documentation supporting its request for loan 
forgiveness (if required) and attests that it accurately verified the 
payments for eligible costs.
---------------------------------------------------------------------------

    \86\ 85 FR 20811, 20815-20816 (Apr. 15, 2020).
---------------------------------------------------------------------------

    8th Revision: The first sentence of the first paragraph of Part 
V.2.b. of the Consolidated Forgiveness and Loan Review IFR (86 FR 8283, 
8296) is revised to read as follows:
    b. What is the timeline for the lender's decision on a loan 
forgiveness application?
    The lender must issue a decision to SBA on a loan forgiveness 
application not later than 60 days after receipt of a complete loan 
forgiveness application from the borrower or, if applicable, 
notification by the Paycheck Protection Platform (Platform) that the 
borrower has submitted a loan forgiveness application into the 
Platform. * * *
* * * * *
    9th Revision: Part III.B.9. of the Consolidated Eligibility IFR (86 
FR 3692, 3703) is revised to add a fourth paragraph at the end that 
reads as follows:
    9. When will I have to begin paying principal and interest on my 
PPP loan?
* * * * *
    Notwithstanding the foregoing, a borrower's timely appeal of a 
final SBA loan review decision extends the deferment period on the PPP 
loan until SBA's Office of Hearings and Appeals issues a final decision 
on the appeal under 13 CFR 134.1211.
    10th Revision: Part IV.(g)(2)(v) of the Second Draw IFR (86 FR 
3712, 3721) is revised to read as follows:
    (g) How do I submit an application for a Second Draw PPP Loan and 
what documentation must I provide to demonstrate eligibility?
* * * * *
    (2) * * *
    (v) For loans with a principal amount of $150,000 or less, the 
applicant must submit documentation sufficient to establish that the 
applicant experienced a reduction in revenue as provided in subsection 
(c)(1)(i) of this section at the time of application, on or before the 
date the borrower submits an application for loan forgiveness, or, if 
the borrower does not apply for loan forgiveness, at SBA's request. 
Such documentation may include relevant tax forms, including annual tax 
forms, or, if relevant tax forms are not available, a copy of the 
applicant's quarterly income statements or bank statements. A COVID 
Revenue Reduction Score that meets or exceeds the value required to 
validate the required reduction in gross receipts will be considered 
adequate documentation of the borrower's revenue reduction.
    11th Revision: Part IV.(h)(2)(D) of the Second Draw IFR (86 FR 
3712, 3721) is revised to read as follows:
    (h) What do lenders need to know and do?
    (2) * * *
    (D) For a Second Draw PPP Loan greater than $150,000 or a loan of 
$150,000 or less where the borrower provides documentation of revenue 
reduction, confirm the dollar amount and percentage of the borrower's 
revenue reduction by performing a good faith review, in a reasonable 
time, of the borrower's calculations and supporting documents 
concerning the borrower's revenue reduction. For a loan of $150,000 or 
less where the borrower does not provide documentation of revenue 
reduction with its application, the lender shall perform this review 
when the borrower provides such documentation. If the lender identifies 
errors in the borrower's calculation or material lack of substantiation 
in the borrower's supporting documents, the lender should work with the 
borrower to remedy the issue. For loans of $150,000 or less where the 
lender elects to use the COVID Revenue Reduction Score (score) in the 
Paycheck Protection Platform (Platform) or where the lender has opted-
in to the direct borrower forgiveness process and the borrower submits 
a loan forgiveness application to the lender through the Platform, the 
lender must review the borrower's score to confirm that it meets or 
exceeds the value required to validate the required reduction in gross 
receipts, otherwise the lender must review the borrower's supporting 
documentation in accordance with the foregoing requirements.
* * * * *
    12th Revision: Part IV.(j) of the Second Draw IFR (86 FR 3712, 
3722) is revised to read as follows:
    (j) Are Second Draw PPP Loans eligible for loan forgiveness?
    Second Draw PPP Loans are eligible for loan forgiveness on the same 
terms and conditions as First Draw PPP Loans, except that Second Draw 
PPP Loan borrowers with a principal amount of $150,000 or less are 
required to provide documentation of revenue reduction if such 
documentation was not provided at the time of the loan application as 
specified in subsections (g)(2)(iv) and (v) of this section. If a 
lender elects to use the COVID Revenue Reduction Score (score) in the 
Paycheck Protection Platform (Platform) or where the lender has opted-
in to the direct borrower forgiveness process and the borrower submits 
a loan forgiveness application to the lender through the Platform, a 
score that meets or exceeds the value required to validate the required 
reduction in gross receipts will be considered adequate documentation 
of the borrower's revenue reduction.

V. 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 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

    OMB's Office of Information and Regulatory Affairs (OIRA) has 
determined that 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 and nonprofit organizations nationwide adversely impacted 
under the COVID-19 Emergency Declaration. We anticipate that this rule 
will result in substantial benefits to small businesses, nonprofit 
organizations, their employees, and the communities they serve. 
However, we lack data to estimate the effects of this rule.

[[Page 40927]]

Congressional Review Act and Administrative Procedure Act

    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 section 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).
    As discussed elsewhere in this interim final rule, given the urgent 
need to provide borrowers with timely relief and the short period of 
time before certain borrowers will be required to begin making 
principal and interest payments if they have not yet applied for 
forgiveness with their lenders, SBA has determined that it is 
impractical and not in the public interest to provide a delayed 
effective date. An immediate effective date will allow SBA to expedite 
loan forgiveness to small businesses and nonprofit organizations and 
remit forgiveness payments to lenders.

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 require revisions to 
existing recordkeeping or reporting requirements of the Paycheck 
Protection Program (PPP) information collection, OMB Control Number 
3245-0407. The revisions will affect SBA Forms 3508S and 3508D. SBA 
Form 3508S will be revised to incorporate the direct borrower 
forgiveness process and the COVID Revenue Reduction Score. SBA Form 
3508D will be revised to incorporate the direct borrower forgiveness 
process.
    SBA has requested Office of Management and Budget (OMB) emergency 
approval of the revisions to the information collections to give small 
businesses and nonprofits affected by this interim final rule the 
maximum amount of time to apply for loan forgiveness under the new 
procedures.

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); and 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.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2021-16358 Filed 7-28-21; 4:15 pm]
BILLING CODE 8026-03-P