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
| Published date | 26 May 2020 |
| Citation | 85 FR 31357 |
| Record Number | 2020-11292 |
| Section | Rules and Regulations |
| Court | Small Business Administration |
Federal Register, Volume 85 Issue 101 (Tuesday, May 26, 2020)
[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
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 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]
BILLING CODE P
