38304 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations

the current economic conditions arising Register. 5 U.S.C. 603, 604. Specifically, SMALL BUSINESS ADMINISTRATION from the COVID–19 emergency. This the RFA normally requires agencies to rule’s designation under Executive describe the impact of a rulemaking on 13 CFR Part 120 Order 13771 will be informed by public small entities by providing a regulatory [Docket No. SBA–2020–0038] comment. impact analysis. Such analysis must This rule is necessary to implement address the consideration of regulatory RIN 3245–AH52 Sections 1102 and 1106 of the CARES options that would lessen the economic Act and the Flexibility Act in order to effect of the rule on small entities. The DEPARTMENT OF THE TREASURY provide economic relief to small RFA defines a ‘‘small entity’’ as (1) a RIN 1505–AC70 businesses nationwide adversely proprietary firm meeting the size impacted under the COVID–19 standards of the Small Business Business Loan Program Temporary Emergency Declaration. We anticipate Administration (SBA); (2) a nonprofit Changes; Paycheck Protection that this rule will result in substantial organization that is not dominant in its Program—Revisions to Loan benefits to small businesses, their field; or (3) a small government Forgiveness and Loan Review employees, and the communities they jurisdiction with a population of less Procedures Interim Final Rules serve. However, we lack data to estimate than 50,000. 5 U.S.C. 601(3)–(6). Except the effects of this rule. for such small government jurisdictions, AGENCY: U.S. Small Business Administration; Department of the Executive Order 12988 neither State nor local governments are ‘‘small entities.’’ Similarly, for purposes Treasury. SBA has drafted this rule, to the of the RFA, individual persons are not ACTION: Interim final rule. extent practicable, in accordance with small entities. the standards set forth in section 3(a) The requirement to conduct a SUMMARY: On April 2, 2020, the U.S. and 3(b)(2) of Executive Order 12988, to regulatory impact analysis does not Small Business Administration (SBA) minimize litigation, eliminate apply if the head of the agency ‘‘certifies posted on its website an interim final ambiguity, and reduce burden. The rule that the rule will not, if promulgated, rule relating to the implementation of has no preemptive effect but does have have a significant economic impact on sections 1102 and 1106 of the a limited retroactive effect consistent a substantial number of small entities.’’ Coronavirus Aid, Relief, and Economic with section 3(d) of the Flexibility Act. 5 U.S.C. 605(b). The agency must, Security Act (CARES Act or the Act) Executive Order 13132 however, publish the certification in the (published in the Federal Register on Federal Register at the time of April 15, 2020). Section 1102 of the Act SBA has determined that this rule temporarily adds a new product, titled will not have substantial direct effects publication of the rule, ‘‘along with a statement providing the factual basis for the ‘‘Paycheck Protection Program,’’ to on the States, on the relationship the SBA’s 7(a) Loan Program. between the National Government and such certification.’’ If the agency head has not waived the requirements for a Subsequently, SBA and Treasury issued the States, or on the distribution of additional interim final rules power and responsibilities among the regulatory flexibility analysis in accordance with the RFA’s waiver implementing the Paycheck Protection various layers of government. Therefore, Program. On June 5, 2020, the Paycheck SBA has determined that this rule has provision, and no other RFA exception applies, the agency must prepare the Protection Program Flexibility Act of no federalism implications warranting 2020 (Flexibility Act) was signed into preparation of a federalism assessment. regulatory flexibility analysis and publish it in the Federal Register at the law, amending the CARES Act. This Paperwork Reduction Act, 44 U.S.C. time of promulgation or, if the rule is interim final rule revises interim final Chapter 35 promulgated in response to an rules posted on SBA’s and the Department of the Treasury’s websites SBA has determined that this rule emergency that makes timely compliance impracticable, within 180 on May 22, 2020 (published on June 1, will require modification to the existing 2020, in the Federal Register), by PPP information collection that is days of publication of the final rule. 5 U.S.C. 604(a), 608(b). changing key provisions to conform to approved under OMB Control Number the Flexibility Act. Several of these Rules that are exempt from notice and 3245–0407 as an emergency request amendments are retroactive to the date comment are also exempt from the RFA until October 31, 2020. As discussed of enactment of the CARES Act, as requirements, including conducting a above, this rule amends the PPP required by section 3(d) of the regulatory flexibility analysis, when eligibility requirements regarding Flexibility Act. certain criminal activity. As a result of among other things the agency for good these amendments, conforming changes cause finds that notice and public DATES: will be made to Questions 5 and 6 of procedure are impracticable, Effective Date: This interim final rule Form 2483, Borrower Application Form, unnecessary, or contrary to the public is effective March 27, 2020, except for and Section H of Form 2484, Lender interest. Small Business the provision relating to the maturity Application Form. SBA will submit the Administration’s Office of Advocacy date of PPP loans, which is effective revisions to these forms to the Office of guide: How to Comply with the June 5, 2020, and the provision relating Management and Budget for approval. Regulatory Flexibility Act, Ch.1. p.9. to the cap on the amount of loan Accordingly, SBA is not required to forgiveness for owner-employees and Regulatory Flexibility Act (RFA) conduct a regulatory flexibility analysis. self-employed individuals, which is The Regulatory Flexibility Act (RFA) effective on June 24, 2020. Authority: 15 U.S.C. 636(a)(36); Comment Date: Comments must be generally requires that when an agency Coronavirus Aid, Relief, and Economic issues a proposed rule, or a final rule Security Act, Pub. L. 116–136, Section 1114. received on or before July 27, 2020. pursuant to section 553(b) of the APA or ADDRESSES: You may submit comments, another law, the agency must prepare a Jovita Carranza, identified by number SBA–2020–0038, regulatory flexibility analysis that meets Administrator. through the Federal eRulemaking Portal: the requirements of the RFA and [FR Doc. 2020–13942 Filed 6–24–20; 4:15 pm] http://www.regulations.gov. Follow the publish such analysis in the Federal BILLING CODE 8026–03–P instructions for submitting comments.

VerDate Sep<11>2014 16:24 Jun 25, 2020 Jkt 250001 PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 E:\FR\FM\26JNR1.SGM 26JNR1 jbell on DSKJLSW7X2PROD with RULES Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38305

SBA and Treasury will post all forgiveness of up to the full principal of PPP loans as soon as possible, comments on www.regulations.gov. If amount of qualifying loans guaranteed because the last day on which a lender you wish to submit confidential under the Paycheck Protection Program. can obtain an SBA loan number for a business information (CBI) as defined in On April 24, 2020, the President PPP loan is June 30, 2020. Borrowers the User Notice at www.regulations.gov, signed the Paycheck Protection Program that have already applied for and please send an email to [email protected]. and Health Care Enhancement Act (Pub. received a PPP loan need certainty Highlight the information that you L. 116–139), which provided additional regarding how loan proceeds must be consider to be CBI and explain why you funding and authority for the PPP. On used during the covered period, as believe SBA and Treasury should hold June 5, 2020, the President signed the amended by the Flexibility Act, so that this information as confidential. SBA Paycheck Protection Program Flexibility they can maximize the amount of loan and Treasury will review the Act of 2020 (Flexibility Act) (Pub. L. forgiveness. Additionally, because some information and make the final 116–142), which changes key provisions borrowers can apply for loan forgiveness determination whether it will publish of the Paycheck Protection Program, now, those borrowers need updated the information. including provisions relating to the direction on how to do so. These same FOR FURTHER INFORMATION CONTACT: A maturity of PPP loans, the deferral of reasons provide good cause for SBA to Call Center Representative at 833–572– PPP loan payments, and the forgiveness dispense with the 30-day delayed 0502, or the local SBA Field Office; the of PPP loans. Section 3(d) of the effective date provided in the list of offices can be found at https:// Flexibility Act provides that the Administrative Procedure Act. Although www.sba.gov/tools/local-assistance/ amendments relating to PPP loan this interim final rule is effective on or districtoffices. forgiveness and extension of the deferral before date of filing, comments are period for PPP loans shall be effective solicited from interested members of the SUPPLEMENTARY INFORMATION: as if included in the CARES Act, which public on all aspects of the interim final I. Background Information means that they are retroactive to March rule, including section III below. These 27, 2020. Section 2 of the Flexibility Act On March 13, 2020, President Trump comments must be submitted on or provides that the amendment relating to before July 27, 2020. The SBA and declared the ongoing Coronavirus the extension of the maturity date for Disease 2019 (COVID–19) pandemic of Treasury will consider these comments, PPP loans shall take effect on the date comments received on the two interim sufficient severity and magnitude to of enactment (June 5, 2020). Under the warrant an emergency declaration for all final rules amended by this interim final Flexibility Act, the extension of the rule, which were posted on SBA’s states, territories, and the District of maturity date for PPP loans is applicable Columbia. With the COVID–19 website May 22, 2020 and published on to PPP loans made on or after that date, June 1, 2020, in the Federal Register, emergency, many small businesses and lenders and borrowers may nationwide are experiencing economic and the need for making any revisions mutually agree to modify PPP loans as a result of these comments. hardship as a direct result of the made before such date to reflect the Federal, State, and local public health longer maturity. III. Paycheck Protection Program— measures that are being taken to Revisions to Loan Forgiveness Interim minimize the public’s exposure to the II. Comments and Retroactive/ Final Rule and SBA Loan Review virus. These measures, some of which Immediate Effective Date Procedures and Related Borrower and are government-mandated, have been This interim final rule is effective Lender Responsibilities Interim Final implemented nationwide and include without advance notice and public Rule the closures of restaurants, bars, and comment because section 1114 of the gyms. In addition, based on the advice CARES Act authorizes SBA to issue Overview of public health officials, other regulations to implement Title I of the The CARES Act was enacted to measures, such as keeping a safe Act without regard to notice provide immediate assistance to distance from others or even stay-at- requirements. In addition, SBA has individuals, families, and businesses home orders, have been implemented, determined that there is good cause for affected by the COVID–19 emergency. resulting in a dramatic decrease in dispensing with advance public notice Among the provisions contained in the economic activity as the public avoids and comment on the grounds that it CARES Act are provisions authorizing malls, retail stores, and other would be contrary to the public interest. SBA to temporarily guarantee loans businesses. Specifically, advance public notice and under a new 7(a) loan program titled the On March 27, 2020, the President comment would defeat the purpose of ‘‘Paycheck Protection Program.’’ Loans signed the Coronavirus Aid, Relief, and this interim final rule given that SBA’s guaranteed under the Paycheck Economic Security Act (the CARES Act authority to guarantee PPP loans expires Protection Program (PPP) will be 100 or the Act) (Pub. L. 116–136) to provide on June 30, 2020, and that many PPP percent guaranteed by SBA, and the full emergency assistance and health care borrowers can now apply for loan principal amount of the loans may response for individuals, families, and forgiveness following the end of their qualify for loan forgiveness. businesses affected by the coronavirus eight-week covered period. Providing SBA and Treasury have posted several pandemic. The Small Business borrowers and lenders with certainty on documents on the loan forgiveness Administration (SBA) received funding both loan requirements and loan provisions in the CARES Act on their and authority through the Act to modify forgiveness requirements following the websites. On April 2, 2020, SBA posted existing loan programs and establish a enactment of the Flexibility Act will its first PPP interim final rule (85 FR new loan program to assist small enhance the ability of lenders to make 20811) covering in part loan forgiveness. businesses nationwide adversely loans and process loan forgiveness On April 8, 2020 and April 26, 2020, impacted by the COVID–19 emergency. applications, particularly in light of the SBA also posted Frequently Asked Section 1102 of the Act temporarily fact that most of the Flexibility Act’s Questions relating to loan forgiveness. permits SBA to guarantee 100 percent of provisions are retroactive to March 27, On April 14, 2020, SBA posted an 7(a) loans under a new program titled 2020. Specifically, small businesses that interim final rule covering in part loan the ‘‘Paycheck Protection Program.’’ have yet to apply for and receive a PPP forgiveness for individuals with self- Section 1106 of the Act provides for loan need to be informed of the terms employment income. On May 22, 2020,

VerDate Sep<11>2014 16:24 Jun 25, 2020 Jkt 250001 PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 E:\FR\FM\26JNR1.SGM 26JNR1 jbell on DSKJLSW7X2PROD with RULES 38306 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations

SBA and Treasury jointly posted an loans to the date that SBA remits the applications and loan forgiveness additional interim final rule on loan forgiveness amount to the lender. applications. forgiveness (85 FR 33004) (First Loan Further, SBA has issued an alternative c. Deferral Period and Forgiveness Forgiveness Rule). The SBA also posted Loan Forgiveness Application Form, an interim final rule on May 22, 2020 SBA Form 3508EZ. Therefore, in Part Section 3(c) of the Flexibility Act on SBA loan review procedures and III.2 of the First Loan Forgiveness Rule provides that if the borrower does not related borrower and lender (85 FR 33004, 33005), the introductory apply for forgiveness of a loan within 10 responsibilities (85 FR 33010) (First question is redesignated as paragraph a. months after the last day of the covered period, the PPP loan is no longer Loan Review Rule). On June 11, 2020, and revised to read as follows: SBA posted an interim final rule deferred and the borrower must begin 2. Loan Forgiveness Process paying principal and interest. Therefore, revising the first PPP interim final rule a. What is the general process to obtain to incorporate Flexibility Act the following text is added as a new loan forgiveness? paragraph b. at the end of Part III.2: amendments, including those relating to To receive loan forgiveness, a borrower loan forgiveness. On June 17, 2020, SBA must complete and submit the Loan b. When must a borrower apply for loan posted an interim final rule revising the Forgiveness Application (SBA Form 3508, forgiveness or start making payments on a interim final rule covering individuals 3508EZ, or lender equivalent) to its lender (or loan? A borrower may submit a loan forgiveness with self-employment income to the lender servicing its loan). As a general matter, the lender will review the application application any time on or before the incorporate Flexibility Act amendments, and make a decision regarding loan maturity date of the loan—including before including those relating to loan forgiveness. The lender has 60 days from the end of the covered period—if the forgiveness. receipt of a complete application to issue a borrower has used all of the loan proceeds for The Flexibility Act amends the decision to SBA. If the lender determines that which the borrower is requesting forgiveness. CARES Act, including its provisions the borrower is entitled to forgiveness of If the borrower applies for forgiveness before relating to loan terms and loan some or all of the amount applied for under the end of the covered period and has forgiveness. The purpose of this interim the statute and applicable regulations, the reduced any employee’s salaries or wages in lender must request payment from SBA at the excess of 25 percent, the borrower must final rule is to update the First Loan account for the excess salary reduction for Forgiveness Rule and the First Loan time the lender issues its decision to SBA. SBA will, subject to any SBA review of the the full 8-week or 24-week covered period, as Review Rule in light of the amendments loan or loan application, remit the described in Part III.5. If the borrower does under the Flexibility Act. The First Loan appropriate forgiveness amount to the lender, not apply for loan forgiveness within 10 Forgiveness Rule and First Loan Review plus any interest accrued through the date of months after the last day of the covered Rule, as amended by this interim final payment, not later than 90 days after the period, or if SBA determines that the loan is rule, should be interpreted consistent lender issues its decision to SBA. If not eligible for forgiveness (in whole or in with the frequently asked questions applicable, SBA will deduct EIDL Advance part), the PPP loan is no longer deferred and Amounts from the forgiveness amount the borrower must begin paying principal (FAQs) regarding the PPP that are and interest. If this occurs, the lender must posted on SBA’s website 1 and the other remitted to the Lender as required by section 1110(e)(6) of the CARES Act. If SBA notify the borrower of the date the first interim final rules issued regarding the determines in the course of its review that payment is due. The lender must report that PPP.2 the borrower was ineligible for the PPP loan the loan is no longer deferred to SBA on the next monthly SBA Form 1502 report filed by 1. Changes to the First Loan Forgiveness based on the provisions of the CARES Act, SBA rules or guidance available at the time the lender. Rule of the borrower’s loan application, or the d. Payroll Costs Eligible for Loan a. General terms of the borrower’s PPP loan application Forgiveness (for example, because the borrower lacked an Section 3(b) of the Flexibility Act adequate basis for the certifications that it Under section 1106 of the CARES Act, amended the requirements regarding made in its PPP loan application), the loan certain provisions regarding the forgiveness of PPP loans to reduce, from will not be eligible for loan forgiveness. The forgiveness of PPP loans are limited to 75 percent to 60 percent, the portion of lender is responsible for notifying the the ‘‘covered period.’’ ‘‘Covered PPP loan proceeds that must be used for borrower of the forgiveness amount. If only period,’’ as that term is used in section a portion of the loan is forgiven, or if the payroll costs for the full amount of the 1106 of the CARES Act, was originally PPP loan to be eligible for forgiveness. forgiveness request is denied, any remaining balance due on the loan must be repaid by defined as the eight-week period Therefore, Part III.1 of the First Loan the borrower on or before the maturity date beginning on the date of the origination Forgiveness Rule (85 FR 33004, 33005) of the loan. The lender is responsible for of a covered loan. However, section 3(b) is revised by striking ‘‘25 percent’’ in notifying the borrower of remittance by SBA of the Flexibility Act extended the the last sentence and replacing it with of the loan forgiveness amount (or that SBA length of the covered period as defined ‘‘40 percent’’. determined that no amount of the loan is in section 1106 of the CARES Act from eligible for forgiveness) and the date on eight to 24 weeks, while allowing b. Maturity which the borrower’s first payment is due, if borrowers that received PPP loans Section 2(a) of the Flexibility Act applicable. If SBA determines that the full amount of the loan is eligible for forgiveness before June 5, 2020 to elect to use the provides a minimum maturity of five original eight-week covered period. As years for all PPP loans made on or after and remits the full amount of the loan to the lender, the lender must mark the PPP loan set forth below, several provisions in the date of enactment of the Flexibility note as ‘‘paid in full’’ and report the status Part III.3 of the First Loan Forgiveness Act (June 5, 2020), and permits lenders of the loan as ‘‘paid in full’’ on the next Rule require revisions to conform to and borrowers to extend the maturity monthly 1502 report filed by the lender. these amendments under Flexibility date of earlier PPP loans by mutual The general loan forgiveness process Act. agreement. Section 3(c) of the Flexibility described above applies only to loan Part III.3.a of the First Loan Act extended the deferral period for PPP forgiveness applications that are not reviewed by SBA prior to the lender’s Forgiveness Rule (85 FR 33004, 33006) is revised to read as follows: 1 See https://www.sba.gov/document/support-- decision on the forgiveness application. A faq-lenders-borrowers. separate interim final rule on SBA Loan a. When must payroll costs be incurred 2 See https://www.sba.gov/funding-programs/ Review Procedures and Related Borrower and/or paid to be eligible for forgiveness? loans/coronavirus-relief-options/paycheck- and Lender Responsibilities describes SBA’s In general, payroll costs paid or incurred protection-program. procedures for reviewing PPP loan during the covered period are eligible for

VerDate Sep<11>2014 16:24 Jun 25, 2020 Jkt 250001 PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 E:\FR\FM\26JNR1.SGM 26JNR1 jbell on DSKJLSW7X2PROD with RULES Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38307

forgiveness. For purposes of loan forgiveness, Administrator does not expect to materially unreimbursed partnership expenses, and the covered period is the 24-week period differ from the actual covered period, while depletion from oil and gas properties) beginning on the date the lender disburses avoiding unnecessary administrative burdens multiplied by 0.9235. For self-employed the PPP loan.3 Alternatively, a borrower that and enhancing auditability. individuals, including Schedule C or F filers received a PPP loan before June 5, 2020 may Example: A borrower that received a PPP and general partners, retirement and health elect for the covered period to end eight loan before June 5, 2020 and elects to use an insurance contributions are included in their weeks after the date of disbursement of the eight-week covered period has a bi-weekly net self-employment income and therefore PPP loan. Borrowers may seek forgiveness for payroll schedule (with payments made every cannot be separately added to their payroll payroll costs for the applicable covered other week). The borrower’s eight-week calculation. period beginning on either: covered period begins on June 1 and ends on The Administrator, in consultation with i. the date of disbursement of the July 26. The first day of the borrower’s first the Secretary, determined that it is borrower’s PPP loan proceeds from the payroll cycle that starts in the covered period appropriate to limit the forgiveness of owner Lender (i.e., the start of the covered period); is June 7. The borrower may elect an compensation to either eight weeks’ worth or alternative payroll covered period for payroll (8/52) of their 2019 compensation (up to ii. the first day of the first payroll cycle in cost purposes that starts on June 7 and ends $15,385) for an eight-week covered period or the covered period (the ‘‘alternative payroll 55 days later (for a total of 56 days), on 2.5 months’ worth (2.5/12) of their 2019 covered period’’). August 1. Payroll costs paid during this compensation (up to $20,833) for a 24-week Payroll costs are considered paid on the alternative payroll covered period are eligible covered period per owner in total across all day that paychecks are distributed or the for forgiveness. In addition, payroll costs businesses. This approach is consistent with borrower originates an ACH credit incurred during this alternative payroll the structure of the CARES Act and its transaction. Payroll costs incurred during the covered period are eligible for forgiveness if overarching focus on keeping workers paid, borrower’s last pay period of the covered they are paid on or before the first regular and will prevent windfalls that Congress did period or the alternative payroll covered payroll date occurring after August 1. Payroll not intend. Specifically, Congress determined period are eligible for forgiveness if paid on costs that were both paid and incurred that the maximum loan amount is generally or before the next regular payroll date; during the covered period (or alternative based on 2.5 months of a borrower’s average otherwise, payroll costs must be paid during payroll covered period) may only be counted monthly payroll costs during the one-year the covered period (or alternative payroll once. period preceding the loan. 15 U.S.C. covered period) to be eligible for forgiveness. Part III.3.c of the First Loan 636(a)(36)(E). For example, a borrower with Payroll costs are generally incurred on the Forgiveness Rule (85 FR 33004, 33006) one other employee would receive a maximum loan amount equal to 5 months of day the employee’s pay is earned (i.e., on the is revised to read as follows: day the employee worked). For employees payroll (2.5 months of payroll for the owner who are not performing work but are still on c. Are there caps on the amount of loan plus 2.5 months of payroll for the employee). the borrower’s payroll, payroll costs are forgiveness available for owner-employees If the owner laid off the employee and incurred based on the schedule established and self-employed individuals’ own payroll availed itself of the exemption in the by the borrower (typically, each day that the compensation? Paycheck Protection Program Flexibility Act employee would have performed work). Yes. For borrowers that received a PPP of 2020 (Flexibility Act) related to reductions The Administrator of the Small Business loan before June 5, 2020 and elect to use an in business activity described in e. below, the Administration (Administrator), in eight-week covered period, the amount of owner could treat the entire amount of the consultation with the Secretary of the loan forgiveness requested for owner- PPP loan as payroll, with the entire loan Treasury (Secretary), recognizes that the employees and self-employed individuals’ being forgiven. This would not only result in covered period will not always align with a payroll compensation is capped at eight a windfall for the owner, by providing the borrower’s payroll cycle. For administrative weeks’ worth (8/52) of 2019 compensation owner with five months of payroll instead of convenience of the borrower, a borrower with (i.e., approximately 15.38 percent of 2019 2.5 months, but also defeat the purpose of the a bi-weekly (or more frequent) payroll cycle compensation) or $15,385 per individual, CARES Act of protecting the paycheck of the may elect to use an alternative payroll whichever is less, in total across all employee. For owners with no employees, covered period that begins on the first day of businesses. For all other borrowers, the this limitation will have no effect, because the first payroll cycle in the covered period amount of loan forgiveness requested for the maximum loan amount for such and continues for either (a) eight weeks, in owner-employees and self-employed borrowers already includes only 2.5 months the case of a borrower that received its PPP individuals’ payroll compensation is capped of their payroll. loan before June 5, 2020 and elects to use an at 2.5 months’ worth (2.5/12) of 2019 eight-week covered period, or (b) 24 weeks, compensation (i.e., approximately 20.83 e. Nonpayroll Costs Eligible for Loan in the case of all other borrowers. If payroll percent of 2019 compensation) or $20,833 Forgiveness costs are incurred during this alternative per individual, whichever is less, in total Part III.4.a of the First Loan payroll covered period, but paid after the end across all businesses. In particular, C-corporation owner- Forgiveness Rule (85 FR 33004, 33007) of the alternative payroll covered period, is revised to read as follows: such payroll costs will be eligible for employees are capped by the amount of their forgiveness if they are paid no later than the 2019 employee cash compensation and a. When must nonpayroll costs be incurred first regular payroll date thereafter. employer retirement and health insurance and/or paid to be eligible for forgiveness? The Administrator, in consultation with contributions made on their behalf. S- A nonpayroll cost is eligible for forgiveness the Secretary, determined that this corporation owner-employees are capped by if it was: alternative computational method for payroll the amount of their 2019 employee cash i. Paid during the covered period; or costs is justified by considerations of compensation and employer retirement ii. incurred during the covered period and administrative feasibility for borrowers, as it contributions made on their behalf, but paid on or before the next regular billing will reduce burdens on borrowers and their employer health insurance contributions date, even if the billing date is after the payroll agents while achieving the paycheck made on their behalf cannot be separately covered period. protection purposes manifest throughout the added because those payments are already Example: A borrower that received a loan CARES Act, including section 1102. Because included in their employee cash before June 5, 2020 uses a 24-week covered this alternative computational method is compensation. Schedule C or F filers are period that begins on June 1 and ends on limited to payroll cycles that are bi-weekly or capped by the amount of their owner November 15. The borrower pays its more frequent, this computational method compensation replacement, calculated based electricity bills for June through October 4 will yield a calculation that the on 2019 net profit. General partners are during the covered period and pays its capped by the amount of their 2019 net November electricity bill on December 10, earnings from self-employment (reduced by 3 Under section 3(b)(1) of the Paycheck Protection which is the next regular billing date. The Program Flexibility Act of 2020, the loan claimed section 179 expense deduction, borrower may seek loan forgiveness for its forgiveness covered period of any borrower will end June through October electricity bills, no later than December 31, 2020. 4 See 85 FR 21747, 21749 (April 20, 2020). because they were paid during the covered

VerDate Sep<11>2014 16:24 Jun 25, 2020 Jkt 250001 PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 E:\FR\FM\26JNR1.SGM 26JNR1 jbell on DSKJLSW7X2PROD with RULES 38308 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations

period. In addition, the borrower may seek Section 1106(d)(5) of the CARES Act it appears and replacing it with loan forgiveness for the portion of its originally waived this reduction in the ‘‘December 31, 2020,’’ and by striking November electricity bill through November forgiveness amount if the borrower ‘‘75 percent’’ and replacing it with ‘‘60 15 (the end of the covered period), because percent.’’ Section 3(d) of the Flexibility it was incurred during the covered period eliminates the reduction in full-time and paid on the next regular billing date. The equivalent employees occurring during Act provides that these amendments Administrator, in consultation with the a different statutory reference period by shall be effective as if included in the Secretary, has determined that this not later than June 30, 2020. Section CARES Act, which was enacted on interpretation provides an appropriate degree 3(b)(2) of the Flexibility Act amended March 27, 2020. of borrower flexibility while remaining this provision to replace ‘‘June 30’’ with Lastly, section 3(b)(2)(B) of the consistent with the text of section 1106(b). ‘‘December 31.’’ To conform the First Flexibility Act established two new The Administrator believes that this Loan Forgiveness Rule to this exemptions based on employee simplified approach to calculation of availability and business activity, forgivable nonpayroll costs is also supported amendment under the Flexibility Act, by considerations of administrative Part III.5.a of the First Loan Forgiveness respectively, that would eliminate a convenience for borrowers, and the Rule (85 FR 33004, 33007) is revised by reduction in the loan forgiveness Administrator notes that the 40 percent cap striking ‘‘June 30, 2020’’ and replacing amount that would otherwise be on nonpayroll costs as a portion of the total it with ‘‘December 31, 2020.’’ Section required due to a reduction in full-time loan forgiveness amount will avoid excessive 3(d) of the Flexibility Act provides that equivalent (FTE) employees. inclusion of nonpayroll costs. this amendment shall be effective as if Specifically, that section of the f. Reductions to Loan Forgiveness included in the CARES Act, which was Flexibility Act states that the amount of Amount enacted on March 27, 2020. loan forgiveness ‘‘shall be determined As described above, section 3(b) of the without regard to a proportional As described above, section 3(b) of the Flexibility Act extended the length of reduction in the number of full-time Flexibility Act amended provisions of the covered period as defined in section equivalent employees’’ if an eligible the CARES Act regarding the covered 1106 of the CARES Act from eight to 24 recipient, in good faith, (A) is able to period and the portion of PPP loan weeks, while allowing borrowers that document (i) an inability to rehire proceeds that must be used for payroll received PPP loans before June 5, 2020 individuals who were employees of the costs for the full amount of the PPP loan to elect to use the original eight-week eligible recipient on February 15, 2020; to be eligible for forgiveness. As set covered period. For consistency with and (ii) an inability to hire similarly forth below, these amendments this amendment, the paragraph qualified employees for unfilled necessitate several revisions to Part III.5 consisting of the example in Part III.5.e positions on or before December 31, of the First Loan Forgiveness Rule. First, of the First Loan Forgiveness Rule (85 2020; or (B) is able to document an the introductory paragraph in Part III.5 FR 33004, 33008) is revised to provide inability to return to the same level of of the First Loan Forgiveness Rule (85 two examples that read as follows: business activity as such business was FR 33004, 33007) is revised to read as operating at before February 15, 2020, follows: Example: A borrower is using a 24-week due to compliance with requirements covered period. This borrower reduced a full- 5. Reductions to Loan Forgiveness time employee’s weekly salary from $1,000 established or guidance issued by the Amount per week during the reference period to $700 Secretary of Health and Human per week during the covered period. The Services, the Director of the Centers for Section 1106 of the CARES Act, as employee continued to work on a full-time Disease Control and Prevention, or the amended by Section 3(b)(2) of the basis during the covered period, with an FTE Occupational Safety and Health Flexibility Act, specifically requires of 1.0. In this case, the first $250 (25 percent Administration during the period certain reductions in a borrower’s loan of $1,000) is exempted from the loan beginning on March 1, 2020, and ending forgiveness amount based on reductions forgiveness reduction. The borrower seeking December 31, 2020, related to the in full-time equivalent employees or in forgiveness would list $1,200 as the salary/ maintenance of standards for sanitation, hourly wage reduction for that employee (the employee salary and wages, subject to social distancing, or any other worker or an important statutory exemption for extra $50 weekly reduction multiplied by 24 weeks). If the borrower applies for customer safety requirement related to borrowers that have eliminated the forgiveness before the end of the covered COVID–19. The new exemption reduction on or before December 31, period, it must account for the salary pertaining to individuals who refuse an 2020. Section 3(b)(2) of the Flexibility reduction for the full 24-week covered period offer to be rehired is very similar, but Act also adds exemptions from (totaling $1,200). not identical, to a de minimis exemption reductions in loan forgiveness amounts Example: A borrower that received a PPP that was provided in the First Loan based on employee availability and loan before June 5, 2020 has elected to use Forgiveness Rule; therefore, the business activity. In addition, SBA and an eight-week covered period. This borrower Administrator and the Secretary have Treasury have adopted a regulatory reduced a full-time employee’s weekly salary determined that this new statutory exemption to the reduction rules for from $1,000 per week during the reference period to $700 per week during the covered exemption should supersede the borrowers that have offered to restore period. The employee continued to work on previous de minimis exemption relating employee hours at the same salary or a full-time basis during the covered period, to reductions in FTE employees. wages, even if the employees have not with an FTE of 1.0. In this case, the first $250 However, a related de minimis accepted. The instructions to the loan (25 percent of $1,000) is exempted from the exemption in the First Loan Forgiveness forgiveness applications and the loan forgiveness reduction. The borrower Rule for borrowers that have reduced guidance below explains how the seeking forgiveness would list $400 as the the hours of an employee and offered to statutory forgiveness reduction formulas salary/hourly wage reduction for that restore the reduction in hours, but the work. employee (the extra $50 weekly reduction employee declined the offer, is not Section 1106(d)(2) of the CARES Act multiplied by eight weeks). addressed in the Flexibility Act and is reduces the amount of the PPP loan that In light of the amendments under the therefore being retained. may be forgiven if the borrower reduces Flexibility Act described above, Part In order to implement these full-time equivalent employees during III.5.g of the First Loan Forgiveness Rule exemptions, Part III.5.a of the First Loan the covered period as compared to a (85 FR 33004, 33009) is revised by Forgiveness Rule (85 FR 33004, 33007) base period selected by the borrower. striking ‘‘June 30, 2020’’ each place that is revised to read:

VerDate Sep<11>2014 16:24 Jun 25, 2020 Jkt 250001 PO 00000 Frm 00036 Fmt 4700 Sfmt 4700 E:\FR\FM\26JNR1.SGM 26JNR1 jbell on DSKJLSW7X2PROD with RULES Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38309

a. Will a borrower’s loan forgiveness able to document in good faith the following: activity before February 15, 2020 due to amount be reduced if the borrower reduced (1) An inability to rehire individuals who compliance with COVID Requirements or the hours of an employee, then offered to were employees of the borrower on February Guidance, the borrower satisfies the restore the reduction in hours, but the 15, 2020; and (2) an inability to hire similarly Flexibility Act’s exemption and will not have employee declined the offer? qualified individuals for unfilled positions its forgiveness amount reduced because of a No. In calculating the loan forgiveness on or before December 31, 2020. Borrowers reduction in FTEs during the covered period, amount, a borrower may exclude any are required to inform the applicable state if the borrower in good faith maintains reduction in full-time equivalent employee unemployment insurance office of any records regarding the reduction in business headcount that is attributable to an employee’s rejected rehire offer within 30 activity and the local government’s shutdown individual employee if: days of the employee’s rejection of the offer.7 orders that reference a COVID Requirement i. The borrower made a good faith, written The documents that borrowers should or Guidance as described above. offer to restore the reduced hours of such maintain to show compliance with this employee; exemption include, but are not limited to, the g. Documentation Requirements ii. the offer was for the same salary or written offer to rehire an individual, a Because SBA has issued an alternative wages and same number of hours as earned written record of the offer’s rejection, and a loan forgiveness application, SBA Form by such employee in the last pay period prior written record of efforts to hire a similarly to the reduction in hours; 3508EZ, the parenthetical in the first qualified individual. sentence of Part III.6 of the First Loan iii. the offer was rejected by such Borrowers are also exempted from the loan employee; and forgiveness reduction arising from a Forgiveness Rule (85 FR 33004, 33009) iv. the borrower has maintained records reduction in the number of FTE employees is revised to read as follows: ‘‘(SBA documenting the offer and its rejection. during the covered period if the borrower is Form 3508 or SBA Form 3508EZ, as The Administrator and the Secretary able to document in good faith an inability applicable, or lender equivalent)’’. determined that this exemption is an to return to the same level of business appropriate exercise of their joint rulemaking activity as the borrower was operating at 2. Changes to the First Loan Review authority to grant a de minimis exemption before February 15, 2020, due to compliance Rule under section 1106(d)(6).5 Section 1106(d)(2) with requirements established or guidance of the CARES Act reduces the amount of the a. Alternative Loan Forgiveness issued between March 1, 2020 and December PPP loan that may be forgiven if the borrower Application 31, 2020 by the Secretary of Health and reduces full-time equivalent employees Human Services, the Director of the Centers The First Loan Review Rule informs during the covered period as compared to a for Disease Control and Prevention (CDC), or base period selected by the borrower. Section borrowers and lenders of SBA’s process the Occupational Safety and Health 1106(d)(5) of the CARES Act waives this for reviewing PPP loan applications and Administration related to the maintenance of reduction in the forgiveness amount if the loan forgiveness applications. Because standards for sanitation, social distancing, or borrower eliminates the reduction in full- SBA has issued an alternative Loan time equivalent employees occurring during any other worker or customer safety Forgiveness Application, SBA Form a different statutory reference period 6 by not requirement related to COVID–19 (COVID Requirements or Guidance). Specifically, 3508EZ, the following changes are later than December 31, 2020. The necessary. Administrator and the Secretary believe that borrowers that can certify that they have documented in good faith that their Parts III.1.b and III.1.e are revised by the additional exemption set forth above is striking each reference in those sections consistent with the purposes of the CARES reduction in business activity during the Act and provides borrowers appropriate covered period stems directly or indirectly to ‘‘SBA Form 3508 or lender’s flexibility in the current economic climate. from compliance with such COVID equivalent form’’ and replacing it with The Administrator, in consultation with the Requirements or Guidance are exempt from ‘‘SBA Form 3508, 3508EZ, or lender’s Secretary, has determined that the exemption any reduction in their forgiveness amount equivalent form’’. is de minimis for two reasons. First, it is stemming from a reduction in FTE employees reasonable to anticipate that most employees during the covered period. Such b. The Loan Forgiveness Process for will accept the offer of restored hours in light documentation must include copies of Lenders of current labor market conditions. Second, applicable COVID Requirements or Guidance for each business location and relevant As noted above, SBA has issued an to the extent this exemption allows alternative Loan Forgiveness employers to cure FTE reductions borrower financial records. attributable to reductions in hours that The Administrator, in consultation with Application Form, SBA Form 3508EZ. occurred before February 15, 2020 (the start the Secretary, is interpreting the above Further, Section 3(b)(2) of the Flexibility of the statutory FTE reduction safe harbor statutory exemption to include both direct Act reduced, from 75 percent to 60 period), it is reasonable to anticipate those and indirect compliance with COVID percent, the portion of PPP loan reductions will represent a relatively small Requirements or Guidance, because a proceeds that must be used for payroll portion of aggregate employees given the significant amount of the reduction in costs for the full amount of the PPP loan historically strong labor market conditions business activity stemming from COVID to be eligible for forgiveness. As set before the COVID–19 emergency. Requirements or Guidance is the result of state and local government shutdown orders forth below, these developments In addition, Part III.5.b of the First that are based in part on guidance from the necessitate several revisions to Part III.2 Loan Forgiveness Rule (85 FR 33004, three federal agencies. of the First Loan Review Rule. 33007–08) is revised by adding the Example: A PPP borrower is in the Part III.2.a. is revised to read as following at the end thereof: business of selling beauty products both follows: online and at its physical store. During the Borrowers are exempted from the loan a. What should a lender review? forgiveness reduction arising from a covered period, the local government where proportional reduction in FTE employees the borrower’s store is located orders all non- When a borrower submits SBA Form during the covered period if the borrower is essential businesses, including the 3508 or lender’s equivalent form, the borrower’s business, to shut down their lender shall: 5 stores, based in part on COVID–19 guidance Section 1106(d)(6) is the sole joint rulemaking issued by the CDC in March 2020. Because i. Confirm receipt of the borrower authority exercised in this interim final rule. All the borrower’s business activity during the certifications contained in the SBA Form other provisions of this interim final rule are an 3508 or lender’s equivalent form. exercise of rulemaking authority by SBA, except as covered period was reduced compared to its expressly noted otherwise. ii. Confirm receipt of the documentation 6 Section 1106(d)(5) specifies that this reference 7 Further information regarding how borrowers the borrower must submit to aid in verifying period is between February 15, 2020 and 30 days will report information concerning rejected rehire payroll and nonpayroll costs, as specified in after the date of enactment of the CARES Act or offers to state unemployment insurance offices will the instructions to the SBA Form 3508 or April 26, 2020 (the safe harbor period). be provided on SBA’s website. lender’s equivalent form.

VerDate Sep<11>2014 16:24 Jun 25, 2020 Jkt 250001 PO 00000 Frm 00037 Fmt 4700 Sfmt 4700 E:\FR\FM\26JNR1.SGM 26JNR1 jbell on DSKJLSW7X2PROD with RULES 38310 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations

iii. Confirm the borrower’s calculations on representations. If the lender identifies review of the loan or loan application, the borrower’s SBA Form 3508 or lender’s errors in the borrower’s calculation or remit the appropriate forgiveness equivalent form, including the dollar amount material lack of substantiation in the amount to the lender, plus any interest of the (A) Cash Compensation, Non-Cash Compensation, and Compensation to Owners borrower’s supporting documents, the accrued through the date of payment, claimed on Lines 1, 4, 6, 7, 8, and 9 on PPP lender should work with the borrower not later than 90 days after the lender Schedule A and (B) Business Mortgage to remedy the issue. As stated in issues its decision to SBA. If applicable, Interest Payments, Business Rent or Lease paragraph III.3.c of the First Interim SBA will deduct EIDL Advance Payments, and Business Utility Payments Final Rule, the lender does not need to Amounts from the forgiveness amount claimed on Lines 2, 3, and 4 on the PPP Loan independently verify the borrower’s remitted to the Lender as required by Forgiveness Calculation Form, by reviewing reported information if the borrower section 1110(e)(6) of the CARES Act. the documentation submitted with the SBA submits documentation supporting its The lender is responsible for notifying Form 3508 or lender’s equivalent form. iv. Confirm that the borrower made the request for loan forgiveness and attests the borrower of remittance by SBA of calculation on Line 10 of the SBA Form 3508 that it accurately verified the payments the loan forgiveness amount (or that or lender’s equivalent form correctly, by for eligible costs. SBA determined that no amount of the dividing the borrower’s Eligible Payroll Costs Part III.2.b. is revised to read as loan is eligible for forgiveness) and the claimed on Line 1 by 0.60. follows: date on which the borrower’s first When the borrower submits SBA b. What is the timeline for the lender’s payment is due, if applicable. Form 3508EZ or lender’s equivalent decision on a loan forgiveness application? When the lender issues its decision to form, the lender shall: The lender must issue a decision to SBA SBA determining that the borrower is on a loan forgiveness application not later not entitled to forgiveness in any i. Confirm receipt of the borrower than 60 days after receipt of a complete loan amount, the lender must provide SBA certifications contained in the SBA Form forgiveness application from the borrower. 3508EZ or lender’s equivalent form. with the reason for its denial, together That decision may take the form of an with the following: ii. Confirm receipt of the documentation approval (in whole or in part); denial; or (if the borrower must submit to aid in verifying directed by SBA) a denial without prejudice i. For applications submitted using the payroll and nonpayroll costs, as specified in due to a pending SBA review of the loan for SBA Form 3508 or lender’s equivalent form: the instructions to the SBA Form 3508EZ or which forgiveness is sought. In the case of a (1) the PPP Loan Forgiveness Calculation lender’s equivalent form. denial without prejudice, the borrower may Form; iii. Confirm the borrower’s calculations on subsequently request that the lender (2) PPP Schedule A; and the borrower’s SBA Form 3508EZ or lender’s reconsider its application for loan (3) the (optional) PPP Borrower equivalent form, including the dollar amount forgiveness, unless SBA has determined that Demographic Information Form (if submitted of the Payroll Costs, Business Mortgage the borrower is ineligible for a PPP loan. The to the lender). Interest Payments, Business Rent or Lease Administrator has determined that this iii. For applications submitted using the Payments, and Business Utility Payments process appropriately balances the need for SBA Form 3508EZ or lender’s equivalent claimed on Lines 1, 2, 3, and 4 of the SBA efficient processing of loan forgiveness form: Form 3508EZ or lender’s equivalent form, by applications with considerations of program (1) the SBA Form 3508EZ or lender’s reviewing the documentation submitted with integrity, including affording SBA the equivalent form; and the SBA Form 3508EZ or lender’s equivalent opportunity to ensure that borrower (2) the (optional) Borrower Demographic form. representations and certifications (including Information Form (if submitted to the iv. Confirm that the borrower made the concerning eligibility for a PPP loan) were lender). calculation on Line 7 of the SBA Form accurate. When the lender issues its decision 3508EZ or lender’s equivalent form correctly, to SBA approving the application (in whole The lender must confirm that the by dividing the borrower’s Eligible Payroll or in part), it must include the following: information provided by the lender to Costs claimed on Line 1 by 0.60. i. For applications submitted using the SBA accurately reflects lender’s records Providing an accurate calculation of SBA Form 3508 or lender’s equivalent form: for the loan, and that the lender has the loan forgiveness amount is the (1) the PPP Loan Forgiveness Calculation made its decision in accordance with responsibility of the borrower, and the Form; the requirements set forth in 2.a. The borrower attests to the accuracy of its (2) PPP Schedule A; and lender must also notify the borrower in reported information and calculations (3) the (optional) PPP Borrower writing that the lender has issued a Demographic Information Form (if submitted decision to SBA denying the loan on the Loan Forgiveness Application to the lender). Form. Lenders are expected to perform ii. For applications submitted using the forgiveness application. SBA reserves a good-faith review, in a reasonable SBA Form 3508EZ or lender’s equivalent the right to review the lender’s decision time, of the borrower’s calculations and form: in its sole discretion. Within 30 days of supporting documents concerning (1) the SBA Form 3508EZ or lender’s notice from the lender, a borrower may amounts eligible for loan forgiveness. equivalent form; and notify the lender that it is requesting For example, minimal review of (2) the (optional) Borrower Demographic that SBA review the lender’s decision calculations based on a payroll report by Information Form (if submitted to the by reviewing the loan in accordance a recognized third-party payroll lender). with 2.c. below. Within 5 days of processor would be reasonable. By The lender must confirm that the receipt, the lender must notify SBA of contrast, if payroll costs are not information provided by the lender to the borrower’s request for review. SBA documented with such recognized SBA accurately reflects lender’s records will notify the lender if SBA declines a sources, more extensive review of for the loan, and that the lender has request for review. If the borrower does calculations and data would be made its decision in accordance with not request SBA review or SBA declines appropriate. The borrower shall not the requirements set forth in 2.a. If the the request for review, the lender is receive forgiveness without submitting lender determines that the borrower is responsible for notifying the borrower of all required documentation to the entitled to forgiveness of some or all of the date on which the borrower’s first lender. the amount applied for under the statute payment is due. If SBA accepts a As the First Interim Final Rule 8 and applicable regulations, the lender borrower’s request for review, SBA will indicates, lenders may rely on borrower must request payment from SBA at the notify the borrower and the lender of time the lender issues its decision to the results of the review. If SBA denies 8 85 FR 20811, 20815–20816 (April 15, 2020). SBA. SBA will, subject to any SBA forgiveness in whole or in part, the

VerDate Sep<11>2014 16:24 Jun 25, 2020 Jkt 250001 PO 00000 Frm 00038 Fmt 4700 Sfmt 4700 E:\FR\FM\26JNR1.SGM 26JNR1 jbell on DSKJLSW7X2PROD with RULES Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38311

lender is responsible for notifying the Compliance With Executive Orders currently approved as an emergency borrower of the date on which the 12866, 12988, 13132, 13563, and 13771, request under OMB Control Number borrower’s first payment is due. the Paperwork Reduction Act (44 3245–0407 until October 31, 2020. U.S.C. Ch. 35), and the Regulatory Enabling SBA to use the statutory 90- Regulatory Flexibility Act (RFA) Flexibility Act (5 U.S.C. 601–612) day period to review the PPP loan and The Regulatory Flexibility Act (RFA) forgiveness documentation is an Executive Orders 12866, 13563, and generally requires that when an agency appropriate procedural protection to 13771 issues a proposed rule, or a final rule prevent fraud or misuse of PPP funds, This interim final rule is pursuant to section 553(b) of the APA or ensure that recipients of PPP loans are economically significant for the another law, the agency must prepare a within the scope of entities that the purposes of Executive Orders 12866 and regulatory flexibility analysis that meets CARES Act is intended to assist, and 13563, and is considered a major rule the requirements of the RFA and confirm compliance with the PPP under the Congressional Review Act. publish such analysis in the Federal requirements set forth in the statute, SBA, however, is proceeding under the Register. 5 U.S.C. 603, 604. Specifically, rules, and guidance. This protection is emergency provision at Executive Order the RFA normally requires agencies to also important in light of the large 12866 Section 6(a)(3)(D), based on the describe the impact of a rulemaking on number and diverse types of PPP need to move expeditiously to mitigate small entities by providing a regulatory lenders, many of which were not the current economic conditions arising impact analysis. Such analysis must previously SBA participating lenders from the COVID–19 emergency. This address the consideration of regulatory and which were approved rapidly in rule’s designation under Executive options that would lessen the economic order to enable financial assistance to be Order 13771 will be informed by public effect of the rule on small entities. The RFA defines a ‘‘small entity’’ as (1) a provided as rapidly as feasible to comment. proprietary firm meeting the size millions of small businesses. SBA will Executive Order 12988 standards of the Small Business use the 90-day period to help ensure SBA and Treasury have drafted this Administration (SBA); (2) a nonprofit that applicable legal requirements have rule, to the extent practicable, in organization that is not dominant in its been satisfied. accordance with the standards set forth field; or (3) a small government Part III.2.c.ii. is revised to read as in section 3(a) and 3(b)(2) of Executive jurisdiction with a population of less follows: Order 12988, to minimize litigation, than 50,000. 5 U.S.C. 601(3)–(6). Except for such small government jurisdictions, ii. The Loan Forgiveness Application (SBA eliminate ambiguity, and reduce neither State nor local governments are Form 3508, 3508EZ, or lender’s equivalent burden. The rule has no preemptive or form), and all supporting documentation retroactive effect. ‘‘small entities.’’ Similarly, for purposes of the RFA, individual persons are not provided by the borrower (if the lender has Executive Order 13132 received such application). If the lender small entities. The requirement to SBA and Treasury have determined receives such application after it receives conduct a regulatory impact analysis that this rule will not have substantial notice that SBA has commenced a loan does not apply if the head of the agency direct effects on the States, on the review, the lender shall transmit electronic ‘‘certifies that the rule will not, if copies of the application and all supporting relationship between the National promulgated, have a significant documentation provided by the borrower to Government and the States, or on the economic impact on a substantial SBA within five business days of receipt. distribution of power and number of small entities.’’ 5 U.S.C. The lender must also request that the responsibilities among the various 605(b). The agency must, however, borrower provide the lender with the layers of government. Therefore, SBA publish the certification in the Federal applicable documentation that the has determined that this rule has no Register at the time of publication of the instructions to the Loan Forgiveness federalism implications warranting rule, ‘‘along with a statement providing Application Form (SBA Form 3508, 3508EZ, preparation of a federalism assessment. the factual basis for such certification.’’ If the agency head has not waived the or lender’s equivalent) instruct the borrower Paperwork Reduction Act, 44 U.S.C. requirements for a regulatory flexibility to maintain but not submit (documentation Chapter 35 listed under ‘‘Documents that Each Borrower analysis in accordance with the RFA’s Must Maintain but is Not Required to SBA and Treasury have determined waiver provision, and no other RFA Submit’’). The lender must submit that this rule modifies existing exception applies, the agency must documents received from the borrower to information collection. The prepare the regulatory flexibility SBA within five business days of receipt amendments to the PPP made by the analysis and publish it in the Federal from the borrower. Flexibility Act and implemented in this Register at the time of promulgation or, interim final rule require conforming if the rule is promulgated in response to 3. Additional Information revisions to the Paycheck Protection an emergency that makes timely Program—Loan Forgiveness Application compliance impracticable, within 180 SBA may provide further guidance, if (SBA Form 3508), for use in collecting days of publication of the final rule. 5 needed, through SBA notices which will the information required to determine U.S.C. 604(a), 608(b). Rules that are be posted on SBA’s website at whether a borrower is eligible for loan exempt from notice and comment are www.sba.gov. Questions on the forgiveness. In addition, SBA has also exempt from the RFA requirements, Paycheck Protection Program may be developed a streamlined Paycheck including conducting a regulatory directed to the Lender Relations Protection Program—PPP Loan flexibility analysis, when among other Specialist in the local SBA Field Office. Forgiveness Application Form 3508EZ things the agency for good cause finds The local SBA Field Office may be (SBA Form 3508 EZ), which is available that notice and public procedure are found at https://www.sba.gov/tools/ for borrowers meeting criteria described impracticable, unnecessary, or contrary local-assistance/districtoffices. in the instructions accompanying the to the public interest. SBA Office of form. SBA has obtained OMB approval Advocacy guide: How to Comply with of the modification to the existing the Regulatory Flexibility Act, Ch.1. p.9. information collection, which is Accordingly, SBA and Treasury are not

VerDate Sep<11>2014 16:24 Jun 25, 2020 Jkt 250001 PO 00000 Frm 00039 Fmt 4700 Sfmt 4700 E:\FR\FM\26JNR1.SGM 26JNR1 jbell on DSKJLSW7X2PROD with RULES 38312 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations

required to conduct a regulatory 30, West Building Ground Floor, Room instructions for replacement of the affected flexibility analysis. W12–140, 1200 New Jersey Avenue SE, parts before exceeding reduced life limits. Washington, DC 20590, between 9 a.m. For the reasons described above, this Jovita Carranza, and 5 p.m., Monday through Friday, [EASA] AD requires removal from service of the affected parts. Administrator,Small Business except Federal holidays. Administration. For service information identified in You may obtain further information Michael Faulkender, this final rule, contact Rolls-Royce by examining the MCAI in the AD Assistant Secretary for Economic Policy Deutschland Ltd & Co KG, Eschenweg docket on the internet at https:// Department of the Treasury. 11, 15827 Blankenfelde-Mahlow, www.regulations.gov by searching for [FR Doc. 2020–13782 Filed 6–24–20; 8:45 am] Germany; phone: +49 (0) 33 708 6 0; and locating Docket No. FAA–2020– BILLING CODE 8026–03–P email: https://www.rolls-royce.com/ 0612. contact-us.aspx. You may view this Related Service Information service information at the FAA, DEPARTMENT OF TRANSPORTATION Airworthiness Products Section, The FAA reviewed Rolls-Royce plc Operational Safety Branch, 1200 District (RR) Alert Non-Modification Service Federal Aviation Administration Avenue, Burlington, MA 01803. For Bulletin (NMSB) Trent 1000 73–AK581, information on the availability of this dated May 12, 2020. The Alert NMSB 14 CFR Part 39 material at the FAA, call 781–238–7759. introduces a reduced life limit for fuel [Docket No. FAA–2020–0612; Project It is also available on the internet at pumps installed on affected engines. Identifier MCAI–2020–00674–E; Amendment https://www.regulations.gov by FAA’s Determination 39–21152; AD 2020–13–07] searching for and locating Docket No. FAA–2020–0612. This product has been approved by RIN 2120–AA64 EASA and is approved for operation in Examining the AD Docket the United States. Pursuant to our Airworthiness Directives; Rolls-Royce bilateral agreement with the European Deutschland Ltd & Co KG (Type You may examine the AD docket on Community, EASA has notified us of Certificate Previously Held by Rolls- the internet at https:// the unsafe condition described in the Royce plc) Turbofan Engines www.regulations.gov by searching for and locating Docket No. FAA–2020– MCAI. The FAA is issuing this AD AGENCY: Federal Aviation 0612; or in person at Docket Operations because it evaluated all the relevant Administration (FAA), DOT. between 9 a.m. and 5 p.m., Monday information provided by EASA and ACTION: Final rule; request for through Friday, except Federal holidays. determined the unsafe condition comments. The AD docket contains this final rule, described previously is likely to exist or the mandatory continuing airworthiness develop in other products of the same SUMMARY: The FAA is adopting a new information (MCAI), any comments type design. airworthiness directive (AD) for all received, and other information. The AD Requirements Rolls-Royce Deutschland Ltd. & Co KG street address for Docket Operations is (RRD) Trent 1000–D2, Trent 1000–J2, listed above. Comments will be This AD requires removal of the and Trent 1000–K2 model turbofan available in the AD docket shortly after affected fuel pump and its replacement engines with fuel pump, part number receipt. with a part eligible for installation. G5030FPU01, installed. This AD FOR FURTHER INFORMATION CONTACT: Differences Between This AD and the requires removal and replacement of the Stephen Elwin, Aerospace Engineer, Service Information fuel pump with a part eligible for ECO Branch, FAA, 1200 District RR Alert NMSB Trent 1000 73– installation. This AD was prompted by Avenue, Burlington, MA 01803; phone: the manufacturer’s investigation into an AK581, dated May 12, 2020, 781–238–7236; fax: 781–238–7199; recommends removal of D2-rated engine unexpected reduction in fuel pump email: [email protected]. performance in certain high life fuel fuel pumps with more than 17,000 SUPPLEMENTARY INFORMATION: pumps. The FAA is issuing this AD to hours (or 5,200 cycles) by May 31, 2020, address the unsafe condition on these Discussion and more than 16,000 hours (or 4,900 products. cycles) by June 30, 2020, or within 3 The European Union Aviation Safety engine flight cycles, whichever is later. DATES: This AD is effective July 13, Agency (EASA), which is the Technical Since this AD will become effective 2020. Agent for the Member States of the after the RRD recommended compliance The FAA must receive comments on European Community, has issued EASA date of June 30, 2020, this AD requires this AD by August 10, 2020. AD 2020–0124, dated May 29, 2020 removal of D2-rated engine fuel pumps ADDRESSES: You may send comments, (referred to after this as ‘‘the MCAI’’), to before exceeding 16,000 hours time in using the procedures found in 14 CFR address an unsafe condition for the service or 4,900 engine cycles since new 11.43 and 11.45, by any of the following specified products. The MCAI states: or since last overhaul. This AD also methods: An unexpected reduction in fuel pump provides a 30-day grace period for • Federal eRulemaking Portal: Go to performance has been seen during testing of compliance. https://www.regulations.gov. Follow the high life units. Strip examination of these instructions for submitting comments. fuel pumps has identified that life related FAA’s Justification and Determination • Fax: 202–493–2251. wear-out of the internal components is of the Effective Date • Mail: U.S. Department of causing deterioration in pump efficiency. Section 553(b)(3)(B) of the Transportation, Docket Operations, M– The effect of the loss of fuel pump efficiency Administrative Procedure Act (APA) (5 is more pronounced on higher rated engines. 30, West Building Ground Floor, Room This condition, if not corrected, could lead U.S.C.) authorizes agencies to dispense W12–140, 1200 New Jersey Avenue SE, to reduced engine thrust, possibly resulting with notice and comment procedures Washington, DC 20590. in reduced control of the aeroplane. for rules when the agency, for ‘‘good • Hand Delivery: U.S. Department of To address this potential unsafe condition, cause,’’ finds that those procedures are Transportation, Docket Operations, M– Rolls-Royce published the NMSB to provide ‘‘impracticable, unnecessary, or contrary

VerDate Sep<11>2014 16:24 Jun 25, 2020 Jkt 250001 PO 00000 Frm 00040 Fmt 4700 Sfmt 4700 E:\FR\FM\26JNR1.SGM 26JNR1 jbell on DSKJLSW7X2PROD with RULES