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.

Rules and Regulations Federal Register

13149 

Vol. 86, No. 43 

Monday, March 8, 2021 

1 86 FR 3692 (Jan. 14, 2021) (which we refer to 

as the ‘‘consolidated interim final rule 

implementing updates to the PPP’’); 86 FR 3712 

(Jan. 14, 2021) (which we refer to as the ‘‘interim 

final rule on second draw PPP loans’’). 

2 86 FR 8283 (Feb. 5, 2021) (which we refer to as 

the ‘‘consolidated interim final rule on loan 

forgiveness requirements and loan review 

procedures’’). 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 120 

[Docket Number SBA–2021–0010] 

RIN 3245–AH67 

Business Loan Program Temporary 

Changes; Paycheck Protection 

Program—Revisions to Loan Amount 

Calculation and Eligibility 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Interim final rule. 

SUMMARY: This interim final rule 

implements changes related to 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). On December 

27, 2020, the Economic Aid to Hard-Hit 

Small Businesses, Nonprofits, and 

Venues Act (Economic Aid Act) was 

enacted, extending the authority to 

make PPP loans through March 31, 

2021, revising certain PPP requirements, 

and permitting second draw PPP loans. 

This interim final rule allows 

individuals who file an IRS Form 1040, 

Schedule C to calculate their maximum 

loan amount using gross income, 

removes the eligibility restriction that 

prevents businesses with owners who 

have non-financial fraud felony 

convictions in the last year from 

obtaining PPP loans, and removes the 

eligibility restriction that prevents 

businesses with owners who are 

delinquent or in default on their Federal 

student loans from obtaining PPP loans. 

DATES:

Effective date: Unless otherwise 

specified in this interim final rule, the 

provisions of this interim final rule are 

effective March 4, 2021. 

Applicability date: Unless otherwise 

specified, this interim final rule applies 

to Paycheck Protection Programs loans 

approved after the effective date of this 

rule. 

Comment date: Comments must be 

received on or before April 7, 2021. 

ADDRESSES: You may submit comments, 

identified by number SBA–2021–0010 

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 ppp-ifr@sba.gov. 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. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

On March 27, 2020, the Coronavirus 

Aid, Relief, and Economic Security Act 

(the 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 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 eligible 

borrowers under generally the same 

terms and conditions available under 

section 7(a)(36) of the Small Business 

Act through March 31, 2021. 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. 

SBA, in consultation with the 

Department of the Treasury (Treasury), 

initially published an interim final rule 

implementing the PPP on April 15, 2020 

and subsequently issued additional 

interim final rules. On January 14, 2021, 

SBA published interim final rules 

implementing the Economic Aid Act 

amendments to the PPP.1 On February 

5, 2021, SBA published an additional 

interim final rule implementing 

Economic Aid Act changes related to 

the forgiveness and review of PPP 

loans.2 As described below, this interim 

final rule revises the consolidated 

interim final rule implementing updates 

to the PPP, the interim final rule on 

second draw PPP loans, and the 

consolidated interim final rule on loan 

forgiveness requirements and loan 

review procedures, to allow individuals 

who file an IRS Form 1040, Schedule C 

to calculate their maximum loan 

amount using gross income. This 

interim final rule also revises the 

consolidated interim final rule 

implementing updates to the PPP to 

remove the eligibility restriction that 

prevents businesses with owners who 

have non-financial fraud felony 

convictions in the last year from 

obtaining PPP loans and remove the 

eligibility restriction that prevents 

businesses with owners who are 

delinquent or in default on their Federal 

student loans from obtaining PPP loans. 

The changes apply to both First Draw 

PPP Loans and Second Draw PPP Loans. 


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13150 Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Rules and Regulations 

3 15 U.S.C. 636(a)(36)(A)(viii)(I)(bb). 

4See A Look at Nonemployer Businesses, SBA 

Office of Advocacy, August, 2018, A Look at 

Nonemployer Businesses (sba.gov). 

5See 15 U.S.C. 636(a)(36)(P)(iv). 

6For a Schedule C filer without employees, 

owner compensation is the only component of the 

borrower’s payroll costs. For a Schedule C filer with 

employees, owner compensation is added to 

employee payroll costs to determine the borrower’s 

total payroll costs. 

7This is consistent with the approach for 

calculating payroll costs for farmers and ranchers in 

subsection B.4.d. of the consolidated interim final 

rule implementing updates to the PPP. 

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. In 

addition, this rule is being issued to 

allow for immediate implementation of 

these changes. The intent of both the 

CARES Act and the Economic Aid Act 

is that SBA provide relief to America’s 

small businesses expeditiously. Given 

the urgent need to provide borrowers 

with timely relief and the short period 

of time before the program ends on 

March 31, 2021, SBA in consultation 

with Treasury 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 give small 

businesses affected by this interim final 

rule the maximum amount of time to 

apply for loans and lenders the 

maximum amount of time to process 

applications before the program ends. 

This good cause justification also 

supports waiver of the 60-day delayed 

effective date for major rules under 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 April 7, 2021. SBA will 

consider these comments and the need 

for making any revisions as a result of 

these comments. 

III. Paycheck Protection Program— 

Revisions to Rules Implementing the 

Economic Aid Act 

1. Gross Income 

The statutory definition of ‘‘payroll 

costs’’ applicable to sole proprietors and 

independent contractors refers to ‘‘a 

wage, commission, income, net earnings 

from self-employment, or similar 

compensation and that is in an amount 

that is not more than $100,000 on an 

annualized basis, as prorated for the 

period during which the payments are 

made or the obligation to make the 

payments is incurred.’’ 3 Previously, 

PPP rules defined payroll costs for 

individuals who file an IRS Form 1040, 

Schedule C as payroll costs (if 

employees exist) plus net profits, which 

is net earnings from self-employment. 

SBA is aware of significant concerns 

with this definition, because it does not 

take into account fixed and other 

business expenses that a small business 

must cover to stay in operation and 

therefore keep the owner employed. 

Thus, the support for employment for 

sole proprietors includes covering 

business expenses as well as net profits. 

This change would affect many sole 

proprietors who have been effectively 

excluded from the PPP, especially those 

with very little or negative net profit, 

many of which are located in 

underserved communities. Businesses 

that file Schedule C have higher 

concentrations of ownership by 

members of underserved groups. An 

analysis by the SBA Office of Advocacy 

of Census data found that firms with no 

employees are 70 percent owned by 

women and minorities, compared to 40 

percent for businesses with employees.4

SBA has determined that changing the 

calculation for sole proprietors, 

independent contractors, and selfemployed individuals will reduce 

barriers to accessing the PPP and 

expand funding among the smallest 

businesses. 

Based on the statutory language of the 

CARES Act, SBA, in consultation with 

Treasury, has determined that SBA has 

discretion to establish an alternative 

calculation methodology for payroll 

costs for sole proprietors and 

independent contractors. For these 

borrowers, the statutory definition of 

‘‘payroll costs’’ includes both ‘‘income’’ 

as well as ‘‘net earnings from selfemployment.’’ The inclusion of both 

these terms in the statutory language 

indicates that they may have different 

meanings. Therefore, the term ‘‘income’’ 

as used in the definition of payroll costs 

for sole proprietors and independent 

contractors may be construed broadly to 

encompass a borrower’s net income and 

a borrower’s gross income. 

Defining ‘‘income’’ to include gross 

income is consistent with Congress’s 

intent that the PPP provide broad relief 

to small businesses and keep 

individuals employed, and that the PPP 

prioritize loans to, among others, small 

business concerns and entities in 

underserved markets, and small 

business concerns owned and 

controlled by socially and economically 

disadvantaged individuals and women.5

As described above, under the prior 

rules, many of these borrowers may not 

have received meaningful amounts from 

the PPP to support their own 

employment due to having small net 

profits. Allowing a borrower to receive 

a loan amount based on their gross 

business income will provide the 

borrower a loan amount that is 

sufficient to meet the borrower’s fixed 

expenses that are necessary to stay in 

business and keep the owner employed. 

SBA is implementing this change with 

respect to PPP loans that are approved 

after the effective date of this rule. A 

borrower whose PPP loan has already 

been approved as of the effective date of 

this rule cannot increase its PPP loan 

amount based on the new calculation 

methodology. 

Therefore, SBA, in consultation with 

Treasury, has determined that a 

Schedule C filer may elect to calculate 

the owner compensation share of its 

payroll costs—that is, the share of its 

payroll costs that represents 

compensation of the owner—based on 

either (i) net profit or (ii) gross income, 

as calculated under the rule below.6

Gross income is the amount the 

borrower reports on line 7 of Schedule 

C. If a Schedule C filer has no 

employees, the borrower may elect 

simply to calculate its loan amount 

based on either net profit or gross 

income. If a Schedule C filer has 

employees, the borrower may elect to 

calculate the owner compensation share 

of its payroll costs based on either (i) net 

profit or (ii) gross income minus 

expenses reported on lines 14 

(employee benefit programs), 19 

(pension and profit-sharing plans), and 

26 (wages (less employment credits)) of 

IRS Form 1040, Schedule C. Expenses 

reported on lines 14, 19, and 26 of the 

IRS Form 1040, Schedule C represent 

employee payroll costs and are 

subtracted from the owner 

compensation share of payroll costs if 

the owner uses gross income to 

calculate its loan amount in order to 

avoid double-counting these costs.7 In 

the context of determining a borrower’s 

eligible expenses and forgiveness 

amount, this interim final rule refers to 

the owner compensation share of a 

Schedule C filer’s loan amount as 

‘‘proprietor expenses.’’ Proprietor 

expenses encompass an owner’s 

business expenses and own 

compensation but do not include 

employee payroll costs. This proprietor 

expenses calculation limits a Schedule 


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Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Rules and Regulations 13151 

8SBA is not applying this safe harbor exclusion 

to Second Draw PPP Loans, because those 

applicants are required to certify that they have 

realized a reduction in gross receipts in excess of 

25% relative to the relevant comparison time 

period. 9SBA has developed a new borrower application 

form, SBA Form 2483–C, for First Draw PPP Loan 

borrowers that elect to use the new gross income 

calculation. Borrowers will be required to disclose 

their total amount of gross income on the form. 

10See part V. of the consolidated interim final 

rule on loan forgiveness requirements and loan 

review procedures. 

53This subsection was originally published at 85 

FR 21747, subsection III.1.b. (April 20, 2020) and 

has been modified to conform to additional rules or 

guidance and the Economic Aid Act. 

C filer that included employee payroll 

costs in determining the PPP loan 

amount from taking the full loan 

amount as owner compensation. This 

promotes Congress’s goal of keeping 

workers paid and employed. However, 

the use of gross income by Schedule C 

filers may, in some cases, increase the 

risk of waste, fraud, or abuse, because it 

will substantially increase the 

maximum loan amount for relevant 

applicants, and in some cases an 

applicant’s gross income may not 

accurately reflect the extent to which a 

PPP loan is necessary to support the 

ongoing operations of the applicant’s 

business. To mitigate this risk, if a 

Schedule C filer elects to use gross 

income to calculate its loan amount on 

a First Draw PPP Loan and the borrower 

reported more than $150,000 in gross 

income on the Schedule C that was used 

to calculate the borrower’s loan amount, 

the borrower will not automatically be 

deemed to have made the statutorily 

required certification concerning the 

necessity of the loan request in good 

faith, and the borrower may be subject 

to a review by SBA of its certification.8

The safe harbor that SBA previously 

provided for borrowers that, together 

with their affiliates, receive PPP Loans 

with an original principal amount of 

less than $2 million, will not apply to 

Schedule C filers that elect to use gross 

income to calculate their loan amount 

on a First Draw PPP Loan if they report 

more than $150,000 in gross income on 

the Schedule C that was used to 

calculate the borrower’s loan amount. 

SBA is eliminating the loan necessity 

safe harbor for these borrowers as they 

may be more likely to have other 

available sources of liquidity to support 

their business’s operations than 

Schedule C filers with lower levels of 

gross income. SBA will review a sample 

of the population of First Draw PPP 

Loans made to Schedule C filers using 

the gross income calculation if the gross 

income on the Schedule C used to 

calculated the borrower’s loan amount 

exceeds the threshold of $150,000.9 If 

the borrower exceeds this threshold, 

then SBA will, for the sample drawn, 

assess whether these borrowers 

complied with the PPP eligibility 

criteria, including the good faith loan 

necessity certification. This will serve as 

an additional deterrent to fraud, waste, 

and abuse because higher income 

borrowers that elect to use gross income 

rather than net profit to calculate their 

loan amount will face the prospect of a 

heightened review, which would 

include a review of their good faith loan 

necessity certification. The $150,000 

gross income threshold is necessary in 

light of the potentially large volume of 

applications SBA will receive from First 

Draw PPP Loan applicants that are 

eligible to use the gross income 

calculation. Maintaining the safe harbor 

for borrowers under this threshold is 

also necessary in light of the deterrent 

effect of auditing risk for many 

underresourced borrowers whose fixed 

cost of bookkeeping is higher in 

proportion to their income. This 

approach will enable SBA to conserve 

its finite audit resources and focus its 

reviews of First Draw PPP Loans using 

the new calculation on larger loans, 

where the compliance effort may yield 

higher returns. The reviews of loans to 

Schedule C filers that used the gross 

income calculation will follow the same 

processes that apply to PPP loans 

generally, except as specified above.10

Therefore, the following changes are 

made to PPP rules: 

a. Subsection B.4.b of the 

consolidated interim final rule 

implementing updates to the PPP (86 FR 

3692, 3700) is revised to read as follows: 

b. I have income from selfemployment and file an IRS Form 1040, 

Schedule C. How do I calculate the 

maximum amount I can borrow, and 

what documentation is required? 53

How you calculate your maximum 

loan amount depends upon whether you 

employ other individuals. If you have 

no employees, use the following 

methodology to calculate your 

maximum loan amount: 

i. Step 1: From your 2019 or 2020 IRS 

Form 1040, Schedule C, you may elect 

to use either your line 31 net profit 

amount or your line 7 gross income 

amount. (If you are using 2020 to 

calculate payroll costs and have not yet 

filed a 2020 return, fill it out and 

compute the value.) If this amount is 

over $100,000, reduce it to $100,000. If 

both your net profit and gross income 

are zero or less, you are not eligible for 

a PPP loan. 

ii. Step 2: Calculate the average 

monthly net profit or gross income 

amount (divide the amount from Step 1 

by 12). 

iii. Step 3: Multiply the average 

monthly net profit or gross income 

amount from Step 2 by 2.5. This amount 

cannot exceed $20,833. 

iv. Step 4: Add the outstanding 

amount of any Economic Injury Disaster 

Loan (EIDL) made between January 31, 

2020 and April 3, 2020 that you seek to 

refinance. Do not include the amount of 

any advance under an EIDL COVID–19 

loan (because it does not have to be 

repaid). 

You must provide the 2019 or 2020 

(whichever you used to calculate your 

loan amount) IRS Form 1040, Schedule 

C with your PPP loan application to 

substantiate the applied-for PPP loan 

amount and a 2019 or 2020 (whichever 

you used to calculate your loan amount) 

IRS Form 1099–MISC detailing 

nonemployee compensation received 

(box 7), invoice, bank statement, or book 

of record that establishes you are selfemployed. If using 2020 to calculate 

your loan amount, this is required 

regardless of whether you have filed a 

2020 tax return with the IRS. You must 

provide a 2020 invoice, bank statement, 

or book of record to establish you were 

in operation on or around February 15, 

2020. 

If you have employees, use the 

following methodology to calculate your 

maximum loan amount: 

i. Step 1: Compute 2019 or 2020 

payroll (using the same year for all 

items) by adding the following: 

a. At your election, either (1) the net 

profit amount from line 31 of your 2019 

or 2020 IRS Form 1040, Schedule C, or 

(2) your 2019 or 2020 gross income 

minus employee payroll costs, 

calculated as your gross income 

reported on IRS Form 1040, Schedule C, 

line 7, minus your employee payroll 

costs reported on lines 14, 19, and 26 of 

IRS Form 1040, Schedule C (for either 

option, if you are using 2020 amounts 

and have not yet filed a 2020 return, fill 

it out and compute the value), up to 

$100,000 on an annualized basis, as 

prorated for the period during which the 

payments are made or the obligation to 

make the payments is incurred (if this 

amount is over $100,000, reduce it to 

$100,000, or if this amount is less than 

zero, set this amount at zero); 

b. 2019 or 2020 gross wages and tips 

paid to your employees whose principal 

place of residence is in the United 

States, computed using 2019 or 2020 

IRS Form 941 Taxable Medicare wages 

& tips (line 5c, Column 1) from each 

quarter plus any pre-tax employee 

contributions for health insurance or 

other fringe benefits excluded from 

Taxable Medicare wages & tips; subtract 


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13152 Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Rules and Regulations 

80This subsection was originally published at 85 

FR 21747, subsection III.1.d. (April 20, 2020) and 

has been modified to conform to the Economic Aid 

Act. 

81Under section 7(a)(36)(Q) of the Small Business 

Act, as amended by section 341 of the Economic 

Aid Act, an EIDL loan used for purposes other than 

paying payroll costs and other eligible PPP 

expenditures is not considered a duplication of the 

assistance available under the PPP. 

82 Items vi. through ix. were added to conform to 

section 304 of the Economic Aid Act. These 

provisions are effective as if included in the CARES 

Act and apply to any loan made before, on, or after 

December 27, 2020, including forgiveness of such 

loan, unless SBA has remitted a loan forgiveness 

payment to the lender on the PPP loan. 

87This subsection has been added to codify the 

safe harbor contained in FAQ 46 (posted May 13, 

2020). 

any amounts paid to any individual 

employee in excess of $100,000 on an 

annualized basis, as prorated for the 

period during which the payments are 

made or the obligation to make the 

payments is incurred, and any amounts 

paid to any employee whose principal 

place of residence is outside the United 

States; and 

c. 2019 or 2020 employer 

contributions to employee group health, 

life, disability, vision and dental 

insurance (portion of IRS Form 1040, 

Schedule C line 14 attributable to those 

contributions); retirement contributions 

(IRS Form 1040, Schedule C, line 19); 

and state and local taxes assessed on 

employee compensation (primarily 

under state laws commonly referred to 

as the State Unemployment Tax Act or 

SUTA from state quarterly wage 

reporting forms). 

ii. Step 2: Calculate the average 

monthly amount (divide the amount 

from Step 1 by 12). 

iii. Step 3: Multiply the average 

monthly amount from Step 2 by 2.5. 

iv. Step 4: Add the outstanding 

amount of any EIDL made between 

January 31, 2020 and April 3, 2020 that 

you seek to refinance. Do not include 

the amount of any advance under an 

EIDL COVID–19 loan (because it does 

not have to be repaid). 

You must supply your 2019 or 2020 

(whichever you used to calculate your 

loan amount) IRS Form 1040, Schedule 

C; Form 941 (or other tax forms or 

equivalent payroll processor records 

containing similar information); and 

state quarterly wage unemployment 

insurance tax reporting forms from each 

quarter in 2019 or 2020 (whichever you 

used to calculate your loan amount) or 

equivalent payroll processor records, 

along with evidence of any retirement 

and health insurance contributions, if 

applicable. A payroll statement or 

similar documentation from the pay 

period that covered February 15, 2020 

must be provided to establish you were 

in operation on February 15, 2020. 

b. Subsection B.11.b of the 

consolidated interim final rule 

implementing updates to the PPP (86 FR 

3692, 3704) is revised to read as follows 

(footnotes are not restated): 

b. How can PPP loans be used by 

individuals with income from selfemployment who file an IRS Form 1040, 

Schedule C? 80

The proceeds of a PPP loan are to be 

used for the following: 

i. For borrowers that use net profit to 

calculate loan amount, owner 

compensation replacement, calculated 

based on 2019 or 2020 (using the same 

year that was used to calculate the loan 

amount) net profit as described in 

subsection B.4.b. For borrowers that use 

gross income to calculate loan amount, 

proprietor expenses (business expenses 

plus owner compensation), calculated 

based on 2019 or 2020 (using the same 

year that was used to calculate the loan 

amount) gross income as described in 

subsection B.4.b (this amount cannot 

exceed $20,833). For borrowers who 

used gross income to calculate the loan 

amount and have no employees, 

proprietor expenses equal gross income. 

For borrowers who used gross income to 

calculate the loan amount and have 

employees, proprietor expenses equal 

the difference between gross income 

and employee payroll costs. 

ii. Employee payroll costs (as defined 

in subsection B.4.g. of the consolidated 

interim final rule implementing updates 

to the PPP) for employees whose 

principal place of residence is in the 

United States, if you have employees. 

iii. Mortgage interest payments (but 

not mortgage prepayments or principal 

payments) on any business mortgage 

obligation on real or personal property 

(e.g., the interest on your mortgage for 

the warehouse you purchased to store 

business equipment or the interest on an 

auto loan for a vehicle you use to 

perform your business), business rent 

payments (e.g., the warehouse where 

you store business equipment or the 

vehicle you use to perform your 

business), and business utility payments 

(e.g., the cost of electricity in the 

warehouse you rent or gas you use 

driving your business vehicle). You 

must have claimed or be entitled to 

claim a deduction for such expenses on 

your 2019 or 2020 (whichever you used 

to calculate loan amount) IRS Form 

1040, Schedule C for them to be a 

permissible use. For example, if you did 

not claim or are not entitled to claim 

utilities expenses on your 2019 or 2020 

IRS Form 1040, Schedule C, you cannot 

use the proceeds for utilities. 

iv. Interest payments on any other 

debt obligations that were incurred 

before February 15, 2020 (such amounts 

are not eligible for PPP loan 

forgiveness). 

v. Refinancing an SBA EIDL loan 

made between January 31, 2020 and 

April 3, 2020 (maturity will be reset to 

PPP’s maturity of two years for PPP 

loans made before June 5, 2020 unless 

the borrower and lender mutually agree 

to extend the maturity of such loans to 

five years, or PPP’s maturity of five 

years for PPP loans made on or after 

June 5).81

vi. Covered operations expenditures, 

as defined in section 7A(a) of the Small 

Business Act, to the extent they are 

deductible on IRS Form 1040, Schedule 

C. 

vii. Covered property damage costs, as 

defined in section 7A(a) of the Small 

Business Act, to the extent they are 

deductible on IRS Form 1040, Schedule 

C. 

viii. Covered supplier costs, as 

defined in section 7A(a) of the Small 

Business Act, to the extent they are 

deductible on IRS Form 1040, Schedule 

C. 

ix. Covered worker protection 

expenditures, as defined in section 

7A(a) of the Small Business Act, to the 

extent they are deductible on Form IRS 

1040, Schedule C.82

c. Subsection B.13 of the consolidated 

interim final rule implementing updates 

to the PPP (86 FR 3692, 3706) is revised 

to read as follows: 

13. Limited safe harbor with respect to 

certification concerning need for PPP 

loan request.87

The CARES 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. SBA, in 

consultation with Treasury, issued 

additional guidance concerning how 

SBA will review the required good-faith 

certification. See FAQ 46 (as originally 

posted May 13, 2020). This guidance 

included a 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. In light of the 

additional flexibility being provided to 

certain borrowers to use their gross 

income amount, as reported on line 7 of 

IRS Form 1040, Schedule C, borrowers 

that elect to use gross income to 

calculate their maximum loan amount 


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19For First Draw PPP loans made in 2020, 

borrowers use 2019. For First Draw PPP loans made 

in 2021 and Second Draw PPP Loans, borrowers use 

the year (2019 or 2020) that was used to calculate 

the borrower’s loan amount. 

20For self-employed borrowers with no 

employees that file IRS Form 1040, Schedule C, 

who used gross income to calculate the loan 

amount, proprietor expenses equal gross income. 

For self-employed borrowers with employees that 

file IRS Form 1040, Schedule C, who used gross 

income to calculate the loan amount, proprietor 

expenses equal the difference between gross income 

and employee payroll costs. See subsections B.4.b 

and B.11.b of the consolidated interim final rule 

implementing updates to the PPP as amended by 

this interim final rule. For self-employed borrowers 

that file IRS Form 1040, Schedule F and have no 

employees, gross income may be used instead of net 

profit throughout this calculation. For selfemployed borrowers that file IRS Form 1040, 

Schedule F and have employees, the difference 

between gross income and employee payroll costs 

may be used instead of net profit throughout this 

calculation. See section 313 of the Economic Aid 

Act. This calculation for Schedule F filers is 

equivalent to proprietor expenses for Schedule C 

filers. 

21Section 306 of the Economic Aid Act allows the 

borrower to select a covered period between 8 

weeks and 24 weeks. 

37This subsection was originally published at 85 

FR 33004, subsection III.3.c. (June 1, 2020) and 

amended by 85 FR 38304, subsection III.1.d (June 

26, 2020) and has been modified to conform to 

sections 308 and 344 of the Economic Aid Act and 

for readability. 

38For First Draw PPP loans made in 2020, 

borrowers use 2019. For First Draw PPP loans made 

in 2021 and Second Draw PPP loans, borrowers use 

the year (2019 or 2020) that was used to calculate 

the borrower’s loan amount. 

39Use whichever year was used to calculate the 

borrower’s loan amount. 

40Use whichever year was used to calculate the 

borrower’s loan amount. 

for a First Draw PPP Loan and that 

report more than $150,000 in gross 

income on the Schedule C that was used 

to calculate the borrower’s loan amount 

will not automatically be deemed to 

have made the required certification 

concerning the necessity of the loan 

request in good faith. SBA may review 

their certification that ‘‘Current 

economic uncertainty makes this loan 

request necessary to support the 

ongoing operations of the Applicant.’’ If 

SBA determines that a borrower lacked 

an adequate basis for the required 

certification concerning the necessity of 

the loan request, SBA may determine 

that the borrower was not eligible for 

the loan, for the loan amount, or for loan 

forgiveness. 

d. Subsection (f)(7) of the interim final 

rule for Second Draw PPP Loans (86 FR 

3712, 3720) is revised to read as follows: 

(7) The maximum amount of a Second 

Draw PPP Loan to a borrower that has 

income from self-employment and files 

an IRS Form 1040, Schedule C, is 

calculated as follows, depending on 

whether the borrower has employees: 

(i) For a borrower that has income 

from self-employment and does not 

have any employees, the maximum loan 

amount is the lesser of: 

(A) The product obtained by 

multiplying: 

(1) The net profit or gross income of 

the borrower in 2019 or 2020, as 

reported on IRS Form 1040, Schedule C, 

that is not more than $100,000, divided 

by 12; and 

(2) 2.5 (or, only for a borrower 

assigned a NAICS code beginning with 

72 as defined in subsection (f)(10) at the 

time of disbursement, 3.5). This amount 

cannot exceed $29,167 for NAICS code 

72 borrowers and $20,833 for all other 

borrowers. 

(ii) For a borrower that has income 

from self-employment and has 

employees, the maximum loan amount 

is the lesser of: 

(A) The product obtained by 

multiplying: 

(1) The sum of (i) one of the two 

following options, up to $100,000; if 

this amount is less than zero, set this 

amount at zero (if you are using 2020 

and have not yet filed a 2020 return, fill 

it out and compute the value): 

• The borrower’s net profit reported 

on IRS Form 1040, Schedule C for 2019 

or 2020, divided by 12; or 

• line 7 from the borrower’s 2019 or 

2020 IRS Form 1040, Schedule C, minus 

lines 14, 19, and 26, divided by 12; and 

(ii) the average total monthly payment 

for employee payroll costs incurred or 

paid by the borrower during the same 

year elected by the borrower; by 

(2) 2.5 (or, only for a borrower 

assigned a NAICS code beginning with 

72 at the time of disbursement as 

defined in subsection (f)(10), 3.5); or 

(B) $2,000,000. 

e. Subsection IV.1.b.ii of the interim 

final rule on loan forgiveness 

requirements and loan review 

procedures (86 FR 8283, 8287) is revised 

to read as follows: 

ii. Owner compensation replacement, 

calculated based on 2019 or 2020 19 net 

profit or proprietor expenses, if 

applicable,20 as described in subsection 

3.c. below; forgiveness of such amounts 

is limited to either (a) the prorated 

portion of 2019 or 2020 net profit or 

gross income, if applicable, for a 

covered period up to 2.5 months, or (b) 

2.5 months’ worth (2.5/12) of 2019 or 

2020 net profit or gross income, if 

applicable, (up to $20,833) for a covered 

period greater than 2.5 months,21

excluding any qualified sick leave 

equivalent amount for which a credit is 

claimed under section 7002 of the 

Families First Coronavirus Response 

Act (FFCRA) (Pub. L. 116–127) or 

qualified family leave equivalent 

amount for which a credit is claimed 

under section 7004 of FFCRA; 

f. Subsection IV.3.c of the interim 

final rule on loan forgiveness 

requirements and loan review 

procedures (86 FR 8283, 8289) is revised 

to read as follows: 

c. Are there caps on the amount of 

loan forgiveness available for owneremployees and self-employed 

individuals’ own payroll 

compensation? 37

Yes. Forgiveness is capped at 2.5 

months’ worth (2.5/12) of an owneremployee or self-employed individual’s 

2019 or 2020 38 compensation (up to a 

maximum $20,833 per individual in 

total across all businesses). The 

individual’s total compensation may not 

exceed $100,000 on an annualized basis, 

as prorated for the period during which 

the payments are made or the obligation 

to make the payments is incurred. For 

example, for borrowers that elect to use 

an eight-week covered period, the 

amount of loan forgiveness requested for 

owner-employees and self-employed 

individuals’ payroll compensation is 

capped at eight weeks’ worth (8/52) of 

2019 or 2020 compensation (i.e., 

approximately 15.38 percent of 2019 or 

2020 compensation) or $15,385 per 

individual, whichever is less, in total 

across all businesses. For borrowers that 

elect to use a ten-week covered period, 

the cap is ten weeks’ worth (10/52) of 

2019 or 2020 compensation 

(approximately 19.23 percent) or 

$19,231 per individual, whichever is 

less, in total across all businesses. For 

a covered period longer than 2.5 

months, the amount of loan forgiveness 

requested for owner-employees and selfemployed individuals’ payroll 

compensation is capped at 2.5 months’ 

worth (2.5/12) of 2019 or 2020 

compensation (up to $20,833) in total 

across all businesses. 

In particular, C-corporation owneremployees are capped by the prorated 

amount of their 2019 or 2020 39

employee cash compensation and 

employer retirement and health, life, 

disability, vision and dental insurance 

contributions made on their behalf. Scorporation owner-employees are 

capped by the prorated amount of their 

2019 or 2020 40 employee cash 

compensation and employer retirement 

contributions made on their behalf. 

However, employer health, life, 

disability, vision and dental insurance 

contributions made on their behalf 

cannot be separately added; those 

payments are already included in their 

employee cash compensation. Schedule 

C or F filers are capped by the prorated 

amount of their owner compensation 

replacement (calculated based on 2019 


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41For self-employed borrowers with no 

employees that file IRS Form 1040, Schedule C, 

who used gross income to calculate the loan 

amount, proprietor expenses equal gross income. 

For self-employed borrowers with employees that 

file IRS Form 1040, Schedule C, who used gross 

income to calculate the loan amount, proprietor 

expenses equal the difference between gross income 

and employee payroll costs. See subsections B.4.b 

and B.11.b of the consolidated interim final rule 

implementing updates to the PPP as amended by 

this interim final rule. For self-employed borrowers 

that file IRS Form 1040, Schedule F and have no 

employees, gross income may be used instead of net 

profit. For self-employed borrowers that file IRS 

Form 1040, Schedule F and have employees, the 

difference between gross income and employee 

payroll costs may be used. See section 313 of the 

Economic Aid Act. 

67This subsection was originally published at 85 

FR 21747, subsection III.1.g. (Apr. 20, 2020) and has 

been modified to conform to sections 304, 307, 308, 

and 313 of the Economic Aid Act and for 

readability. 

68See subsection (g)(2)(v) of the interim final rule 

on Second Draw PPP Loans. 86 FR 3712, 3721 (Jan. 

14, 2021). 

69For self-employed borrowers with no 

employees that file IRS Form 1040, Schedule C, 

who used gross income to calculate the loan 

amount, proprietor expenses equal gross income. 

For self-employed borrowers with employees that 

file IRS Form 1040, Schedule C, who used gross 

income to calculate the loan amount, proprietor 

expenses equal the difference between gross income 

and employee payroll costs. See subsections B.4.b 

and B.11.b of the consolidated interim final rule 

implementing updates to the PPP as amended by 

this interim final rule. For self-employed borrowers 

that file IRS Form 1040, Schedule F and have no 

employees, gross income may be used instead of net 

profit. For self-employed borrowers that file IRS 

Form 1040, Schedule F and have employees, the 

difference between gross income and employee 

payroll costs may be used instead of net profit. 

11See Paycheck Protection Program Second 

Chance Act, S. 3865, 116th Congress (introduced in 

the Senate on June 2, 2020). 

or 2020 net profit) or proprietor 

expenses (calculated based on 2019 or 

2020 gross income).41 General partners 

are capped by the prorated amount of 

their 2019 or 2020 net earnings from 

self-employment (reduced by claimed 

section 179 expense deduction, 

unreimbursed partnership expenses, 

and depletion from oil and gas 

properties) multiplied by 0.9235. For 

self-employed individuals, including 

Schedule C or F filers and general 

partners, retirement and health, life, 

disability, vision or dental insurance 

contributions are included in their net 

self-employment income and therefore 

cannot be separately added to their 

payroll calculation. LLC members are 

subject to the rules based on their LLC’s 

tax filing status in the reference year 

used to determine their loan amount. 

g. Subsection IV.6.b of the interim 

final rule on loan forgiveness 

requirements and loan review 

procedures (86 FR 8283, 8293) is revised 

to read as follows: 

b. What documentation are borrowers 

who are individuals with selfemployment income who file an IRS 

Form 1040, Schedule C or F required to 

submit to their lender with their request 

for loan forgiveness? 67

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 if such documentation 

was not provided at the time of 

application.68 All other borrowers must 

submit the certification required by 

section 7A(e)(3) of the Small Business 

Act, and (if the borrower has employees) 

IRS Form 941 and state quarterly 

business and individual employee wage 

reporting and unemployment insurance 

tax forms or equivalent payroll 

processor records that best correspond 

to the covered period (with evidence of 

any retirement and group health, life, 

disability, vision, and dental insurance 

contributions). Whether or not the 

borrower has employees, the borrower 

must submit evidence of business rent, 

business mortgage interest payments on 

real or personal property, business 

utility payments, or payments for a 

covered operations expenditure, 

covered property damage cost, covered 

supplier cost, or covered worker 

protection expenditure during the 

covered period if the borrower used 

loan proceeds for those purposes. This 

documentation may include cancelled 

checks, payment receipts, transcripts of 

accounts, purchase orders, orders, 

invoices, or other documents verifying 

payments on nonpayroll costs. 

For all loans, the 2019 or 2020 IRS 

Form 1040, Schedule C or F that the 

borrower provided at the time of the 

PPP loan application must be used to 

determine the amount of net profit or 

proprietor expenses allocated to the 

owner for the covered period.69

h. SBA has developed new Borrower 

Application Forms for use by borrowers 

that are Schedule C filers and elect to 

calculate their loan amount using gross 

income, as allowed under this interim 

final rule. SBA Form 2483–C will be 

used by such borrowers when applying 

for First Draw PPP Loans and SBA Form 

2483–SD–C will be used by such 

borrowers when applying for Second 

Draw PPP Loans. All references to the 

Borrower Application Form in the 

consolidated interim final rule 

implementing updates to the PPP, the 

interim final rule on second draw PPP 

loans, and the consolidated interim final 

rule on loan forgiveness requirements 

and loan review procedures include the 

SBA Form 2483–C and the SBA Form 

2483–SD–C, as applicable. 

2. Eligibility 

The consolidated interim final rule 

implementing updates to the PPP 

provided, among other things, that a 

PPP loan applicant is ineligible if an 

owner of 20 percent or more of the 

equity of the applicant has been 

convicted of, pleaded guilty or nolo 

contendere to, or commenced any form 

of parole or probation (including 

probation before judgment) for (1) a 

felony involving fraud, bribery, 

embezzlement, or a false statement in a 

loan application or an application for 

federal financial assistance within the 

last five years, or (2) any other felony 

within the last year. This provision 

reflected the PPP eligibility 

requirements as revised in an interim 

final rule titled ‘‘Business Loan Program 

Temporary Changes; Paycheck 

Protection Program—Additional 

Revisions to First Interim Final Rule,’’ 

published on June 18, 2020 (85 FR 

36717). SBA has further reviewed these 

eligibility restrictions and, in 

consultation with Treasury, has 

determined that modification to the 

consolidated interim final rule 

implementing updates to the PPP is 

appropriate to ensure consistency with 

Congressional intent to provide relief to 

small businesses and their employees, 

expand access to the PPP, and remove 

barriers people with prior convictions 

face when working to restart their lives 

and contribute to our economy. SBA has 

determined that the one-year lookback 

restriction related to non-financial fraud 

felonies should be removed and only 

the five-year lookback restriction for 

those felonies involving fraud, bribery, 

embezzlement, or a false statement in a 

loan application or an application for 

federal financial assistance will limit an 

applicant’s eligibility for the PPP. 

Removing the one-year lookback 

restriction related to non-financial fraud 

felonies is consistent with 

Congressional support for reducing 

criminal background checks in the 

PPP 11 and the important policies 

underlying recent criminal justice 

reforms in Congress, such as last year’s 

Fair Chance to Compete for Jobs Act of 

2019 (Pub. L. 116–92, Div. A, Tit. XI, 

Subtit. B,) and the First Step Act of 2018 

(Pub. L. 115–391). 

In light of the unique, emergency 

nature of the PPP and the higher fraud 

risk that exists due to the PPP’s 

emphasis on speed in loan approvals 

and disbursements, the remaining 

restrictions on eligibility related to an 

applicant or owner’s criminal history 


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Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Rules and Regulations 13155 

12 ‘‘Federal student loans’’ mean programs under 

Parts B, D and E of the Higher Education Act of 

1965, as amended, as well as other programs now 

administered by the Department. These include 

loans under the under the William D. Ford Federal 

Direct Loan program, the Federal Family Education 

Loan (FFEL) program, the Federal Perkins Loan 

program, the Health Education Assistance Loan 

(HEAL) program, and the Teacher Education 

Assistance for College and Higher Education 

(TEACH) Grant program if those awards have 

converted into loans. These delinquencies include 

loans owed directly to the Department of Education 

as well as Federal student loans held by institutions 

of higher education or those guaranteed or insured 

by the Department of Education and which are held 

by private lenders or guaranty agencies. 

13See 15 U.S.C. 636(a)(36)(P)(iv). 

14See letter from Department of Education to 

Department of the Treasury requesting an 

exemption under 31 CFR 285.13 of the ban on 

Federal financial assistance to debtors with 

delinquent Federal student loans, for the PPP 

program, dated February 27, 2021. 

15See Department of Education, Coronavirus and 

Forbearance Info for Students, Borrowers, and 

Parents, https://studentaid.gov/announcementsevents/coronavirus. 

will help mitigate the risk of default, 

fraud, or misuse of PPP loan funds that 

are intended to benefit small business 

employees. By removing barriers for 

applicants with non-financial fraud 

felonies, this interim final rule balances 

the need to increase access to the PPP 

and remove barriers for people with 

prior convictions while still ensuring 

basic guardrails against fraud exist for 

this emergency program. Preserving the 

five-year lookback for financial fraudrelated felonies is one of these 

guardrails. 

The consolidated interim final rule 

implementing updates to the PPP also 

provided that a PPP loan applicant is 

ineligible for a PPP loan if the applicant, 

or any business owned or controlled by 

the applicant or any of its owners, has 

ever obtained a direct or guaranteed 

loan from SBA or any other Federal 

agency that is currently delinquent or 

has defaulted within the last seven years 

and caused a loss to the government. 

SBA, in consultation with Treasury, has 

decided to eliminate the restriction in 

the consolidated interim final rule to the 

extent it applies to Federal student 

loans.12 SBA has determined that 

eliminating consideration of delinquent 

or defaulted Federal student loans is 

appropriate to ensure consistency with 

Congressional intent to provide relief to 

small businesses and their employees 

and expand access to the PPP. This 

change will make PPP loans available to 

more borrowers with financial need and 

is consistent with Congress’s intent that 

PPP loans be prioritized for small 

business concerns owned and 

controlled by socially and economically 

disadvantaged individuals as defined in 

section 8(d)(3)(c) of the Small Business 

Act.13 According to the Department of 

Eduction, ‘‘Black and Brown students 

rely more heavily on student loan debt 

than their peers and experience 

delinquency at disproportionately high 

rates. As a result prohibiting delinquent 

student loan borrowers from obtaining 

PPP loans is more likely to exclude 

business owners of color from access to 

the loans they need.’’ 14 In addition, this 

change is consistent with the policy set 

in section 3513 of the CARES Act and 

the Department of Education’s ongoing 

actions to provide economic relief to 

student loan borrowers whose loans are 

held by the agency by suspending 

Federal student loan payments and 

collections during the pandemic and 

keeping the interest rate at 0 percent.15

At the request of the Department of 

Education by letter dated February 27, 

2021, Treasury also has granted an 

exemption from the bar in 31 U.S.C. 

3720B and 31 CFR 285.13, with respect 

to PPP borrowers with Federal student 

loans in delinquent status. 

The change in PPP regulations 

relating to Federal student loans and the 

Treasury exemption apply to new PPP 

applicants as well as those borrowers 

who have already received a PPP loan. 

In this way, PPP borrowers with 

delinquent or defaulted student loan 

debts are treated equally, without regard 

to when they submitted their PPP 

application. Although PPP applications 

previously required applicants to 

disclose whether they had a delinquent 

Federal debt, student loan borrowers 

may have been confused about the 

status of their loans due to the current 

suspension on the payment and 

collection of Federal student loans or 

uncertain about whether loans not 

directly serviced or held by the 

Department of Education constitute 

Federal debt. This confusion may have 

led some borrowers to make innocent 

errors on their PPP application. For 

these reasons, SBA will apply this 

change to any First Draw PPP Loan or 

Second Draw PPP Loan, regardless of 

when the PPP loan was made. 

Part IV.(e) of the interim final rule 

titled ‘‘Business Loan Program 

Temporary Changes; Paycheck 

Protection Program Second Draw 

Loans,’’ published on January 14, 2021 

(‘‘Second Draw Interim Final Rule’’) (86 

FR 3712), provides that an applicant is 

not eligible for a Second Draw PPP Loan 

if the applicant is excluded from 

eligibility under the consolidated 

interim final rule implementing updates 

to the PPP. The following revisions to 

Part III.B.2.a. of the consolidated interim 

final rule implementing updates to the 

PPP also affect eligibility for Second 

Draw PPP Loans. 

Therefore, subsections B.2.a.iii. and 

B.2.a.iv of the consolidated interim final 

rule implementing updates to the PPP 

(86 FR 3692, 3698) are revised to read 

as follows: 

2. What businesses, organizations, and 

individuals are ineligible? 

a. Could I be ineligible even if I meet the 

eligibility requirements in section 1? 

You are ineligible for a PPP loan if, for 

example: 

* * * * * 

iii. An owner of 20 percent or more 

of the equity of the applicant is 

presently incarcerated or, for any felony, 

presently subject to an indictment, 

criminal information, arraignment, or 

other means by which formal criminal 

charges are brought in any jurisdiction; 

or has been convicted of, pleaded guilty 

or nolo contendere to, or commenced 

any form of parole or probation 

(including probation before judgment) 

for a felony involving fraud, bribery, 

embezzlement, or a false statement in a 

loan application or an application for 

federal financial assistance within the 

last five years; or 

iv. You, or any business owned or 

controlled by you or any of your 

owners, has ever obtained a direct or 

guaranteed loan from SBA or any other 

Federal agency (other than a Federal 

student loan made under Parts B, D, and 

E of the Higher Education Act of 1965, 

as amended, or other programs now 

administered by the U.S. Department of 

Education, which include the William 

D. Ford Federal Direct Loan program, 

the Federal Family Education Loan 

(FFEL) program, the Federal Perkins 

Loan program, the Health Education 

Assistance Loan (HEAL) program, or the 

Teacher Education Assistance for 

College and Higher Education (TEACH) 

program) that is currently delinquent or 

has defaulted within the last seven years 

and caused a loss to the government; 

* * * * * 

Subsection B.2.a. is amended to add 

after subsection B.2.a.ix: 

The exclusion of Federal student 

loans from the restriction on applicants 

with delinquent or defaulted Federal 

debt in subsection (iv) applies to any 

loan made pursuant to section 7(a)(36) 

or 7(a)(37) of the Small Business Act, 

including forgiveness of such a loan, 

regardless of when the loan was made. 

3. 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 


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13156 Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Rules and Regulations 

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 

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 

nationwide adversely impacted under 

the COVID–19 Emergency Declaration. 

We anticipate that this rule will result 

in substantial benefits to small 

businesses, their employees, and the 

communities they serve. However, we 

lack data to estimate the effects of this 

rule. 

The Administrator of the Office of 

Management and Budget’s Office of 

Information and Regulatory Affairs 

(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 § 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). 

The last day to apply for and receive 

a PPP loan is March 31, 2021. Given the 

short duration of this program, and the 

urgent need to issue loans quickly, SBA, 

in consultation with Treasury, has 

determined that it is impractical and not 

in the public interest to provide a 

delayed effective date. An immediate 

effective date will give small businesses 

affected by this interim final rule the 

maximum amount of time to apply for 

loans and lenders the maximum amount 

of time to process applications before 

the program ends. 

Executive Order 12988 

SBA has drafted this rule, to the 

extent practicable, in accordance with 

the standards set forth in section 3(a) 

and 3(b)(2) of Executive Order 12988, to 

minimize litigation, eliminate 

ambiguity, and reduce burden. The rule 

has no preemptive effect but the change 

to remove the eligibility restriction that 

prevents businesses with owners who 

are delinquent on their Federal student 

loans from obtaining PPP loans is 

retroactive to March 27, 2020. 

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 

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 collections (OMB 

Control Numbers 3245–0407 and 3245– 

0417. The revisions will affect SBA 

Form 2483, Borrower Application Form 

Revised February 17, 2021, SBA Form 

2483–SD, Second Draw Borrower 

Application Form Revised February 17, 

2021, SBA Form 2484, Lender’s 

Application—Paycheck Protection 

Program Loan Guaranty Revised January 

8, 2021, and SBA Form 2484–SD, 

Lender’s Application—Second Draw 

Loan Guaranty. SBA Forms 2483 and 

2483–SD were amended to implement 

to the revisions to the criminal history 

and delinquent student loan restrictions 

as set forth in this interim final rule. 

SBA Forms 2484 and 2484–SD were 

amended to implement the new loan 

amount calculation option for Schedule 

C filers, and the revisions to the 

criminal history and delinquent student 

loan restrictions as set forth in this 

interim final rule. 

Additionally, to implement the new 

loan amount calculation option for 

Schedule C filers, SBA has developed 

two new forms, SBA Form 2483–C, PPP 

Borrower Application Form for 

Schedule C Filers Using Gross Income, 

and SBA Form 2483–SD–C, PPP Second 

Draw Borrower Application Form for 

Schedule C Filers Using Gross Income, 

which are required for applicants who 

are Schedule C filers and choose the 

gross income loan amount calculation 

option. 

SBA has requested Office of 

Management and Budget (OMB) 

emergency approval of the revisions to 

the information collections to give small 

businesses affected by this interim final 

rule the maximum amount of time to 

apply for loans and lenders the 

maximum amount of time to process 

applications before the program ends. 

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); 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. 

Tami Perriello, 

Acting Administrator, Small Business 

Administration. 

[FR Doc. 2021–04795 Filed 3–4–21; 8:45 am] 

BILLING CODE 8026–03–P 


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