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

the current economic conditions arising 

from the COVID–19 emergency. This 

rule’s designation under Executive 

Order 13771 will be informed by public 

comment. 

This rule is necessary to implement 

Sections 1102 and 1106 of the CARES 

Act and the Flexibility Act in order to 

provide economic relief to small 

businesses nationwide adversely 

impacted under the COVID–19 

Emergency Declaration. We anticipate 

that this rule will result in substantial 

benefits to small businesses, their 

employees, and the communities they 

serve. However, we lack data to estimate 

the effects of this rule. 

Executive Order 12988 

SBA has drafted this rule, to the 

extent practicable, in accordance with 

the standards set forth in section 3(a) 

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

minimize litigation, eliminate 

ambiguity, and reduce burden. The rule 

has no preemptive effect but does have 

a limited retroactive effect consistent 

with section 3(d) of the Flexibility Act. 

Executive Order 13132 

SBA has determined that this rule 

will not have substantial direct effects 

on the States, on the relationship 

between the National Government and 

the States, or on the distribution of 

power and responsibilities among the 

various layers of government. Therefore, 

SBA has determined that this rule has 

no federalism implications warranting 

preparation of a federalism assessment. 

Paperwork Reduction Act, 44 U.S.C. 

Chapter 35 

SBA has determined that this rule 

will require modification to the existing 

PPP information collection that is 

approved under OMB Control Number 

3245–0407 as an emergency request 

until October 31, 2020. As discussed 

above, this rule amends the PPP 

eligibility requirements regarding 

certain criminal activity. As a result of 

these amendments, conforming changes 

will be made to Questions 5 and 6 of 

Form 2483, Borrower Application Form, 

and Section H of Form 2484, Lender 

Application Form. SBA will submit the 

revisions to these forms to the Office of 

Management and Budget for approval. 

Regulatory Flexibility Act (RFA) 

The Regulatory Flexibility Act (RFA) 

generally requires that when an agency 

issues a proposed rule, or a final rule 

pursuant to section 553(b) of the APA or 

another law, the agency must prepare a 

regulatory flexibility analysis that meets 

the requirements of the RFA and 

publish such analysis in the Federal 

Register. 5 U.S.C. 603, 604. Specifically, 

the RFA normally requires agencies to 

describe the impact of a rulemaking on 

small entities by providing a regulatory 

impact analysis. Such analysis must 

address the consideration of regulatory 

options that would lessen the economic 

effect of the rule on small entities. The 

RFA defines a ‘‘small entity’’ as (1) a 

proprietary firm meeting the size 

standards of the Small Business 

Administration (SBA); (2) a nonprofit 

organization that is not dominant in its 

field; or (3) a small government 

jurisdiction with a population of less 

than 50,000. 5 U.S.C. 601(3)–(6). Except 

for such small government jurisdictions, 

neither State nor local governments are 

‘‘small entities.’’ Similarly, for purposes 

of the RFA, individual persons are not 

small entities. 

The requirement to conduct a 

regulatory impact analysis does not 

apply if the head of the agency ‘‘certifies 

that the rule will not, if promulgated, 

have a significant economic impact on 

a substantial number of small entities.’’ 

5 U.S.C. 605(b). The agency must, 

however, publish the certification in the 

Federal Register at the time of 

publication of the rule, ‘‘along with a 

statement providing the factual basis for 

such certification.’’ If the agency head 

has not waived the requirements for a 

regulatory flexibility analysis in 

accordance with the RFA’s waiver 

provision, and no other RFA exception 

applies, the agency must prepare the 

regulatory flexibility analysis and 

publish it in the Federal Register at the 

time of promulgation or, if the rule is 

promulgated in response to an 

emergency that makes timely 

compliance impracticable, within 180 

days of publication of the final rule. 5 

U.S.C. 604(a), 608(b). 

Rules that are exempt from notice and 

comment are also exempt from the RFA 

requirements, including conducting a 

regulatory flexibility analysis, when 

among other things the agency for good 

cause finds that notice and public 

procedure are impracticable, 

unnecessary, or contrary to the public 

interest. Small Business 

Administration’s Office of Advocacy 

guide: How to Comply with the 

Regulatory Flexibility Act, Ch.1. p.9. 

Accordingly, SBA is not required to 

conduct a regulatory flexibility analysis. 

Authority: 15 U.S.C. 636(a)(36); 

Coronavirus Aid, Relief, and Economic 

Security Act, Pub. L. 116–136, Section 1114. 

Jovita Carranza, 

Administrator. 

[FR Doc. 2020–13942 Filed 6–24–20; 4:15 pm] 

BILLING CODE 8026–03–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 120 

[Docket No. SBA–2020–0038] 

RIN 3245–AH52 

DEPARTMENT OF THE TREASURY 

RIN 1505–AC70 

Business Loan Program Temporary 

Changes; Paycheck Protection 

Program—Revisions to Loan 

Forgiveness and Loan Review 

Procedures Interim Final Rules 

AGENCY: U.S. Small Business 

Administration; Department of the 

Treasury. 

ACTION: Interim final rule. 

SUMMARY: On April 2, 2020, the U.S. 

Small Business Administration (SBA) 

posted on its website an interim final 

rule relating to the implementation of 

sections 1102 and 1106 of the 

Coronavirus Aid, Relief, and Economic 

Security Act (CARES Act or the Act) 

(published in the Federal Register on 

April 15, 2020). Section 1102 of the Act 

temporarily adds a new product, titled 

the ‘‘Paycheck Protection Program,’’ to 

the SBA’s 7(a) Loan Program. 

Subsequently, SBA and Treasury issued 

additional interim final rules 

implementing the Paycheck Protection 

Program. On June 5, 2020, the Paycheck 

Protection Program Flexibility Act of 

2020 (Flexibility Act) was signed into 

law, amending the CARES Act. This 

interim final rule revises interim final 

rules posted on SBA’s and the 

Department of the Treasury’s websites 

on May 22, 2020 (published on June 1, 

2020, in the Federal Register), by 

changing key provisions to conform to 

the Flexibility Act. Several of these 

amendments are retroactive to the date 

of enactment of the CARES Act, as 

required by section 3(d) of the 

Flexibility Act. 

DATES:

Effective Date: This interim final rule 

is effective March 27, 2020, except for 

the provision relating to the maturity 

date of PPP loans, which is effective 

June 5, 2020, and the provision relating 

to the cap on the amount of loan 

forgiveness for owner-employees and 

self-employed individuals, which is 

effective on June 24, 2020. 

Comment Date: Comments must be 

received on or before July 27, 2020. 

ADDRESSES: You may submit comments, 

identified by number SBA–2020–0038, 

through the Federal eRulemaking Portal: 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 


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Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38305 

SBA and Treasury 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. 

Highlight the information that you 

consider to be CBI and explain why you 

believe SBA and Treasury should hold 

this information as confidential. SBA 

and Treasury will review the 

information and make the final 

determination whether it will publish 

the information. 

FOR FURTHER INFORMATION CONTACT: A 

Call Center Representative at 833–572– 

0502, or the local SBA Field Office; the 

list of offices can be found at https://

www.sba.gov/tools/local-assistance/ 

districtoffices. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

On March 13, 2020, President Trump 

declared the ongoing Coronavirus 

Disease 2019 (COVID–19) pandemic of 

sufficient severity and magnitude to 

warrant an emergency declaration for all 

states, territories, and the District of 

Columbia. With the COVID–19 

emergency, many small businesses 

nationwide are experiencing economic 

hardship as a direct result of the 

Federal, State, and local public health 

measures that are being taken to 

minimize the public’s exposure to the 

virus. These measures, some of which 

are government-mandated, have been 

implemented nationwide and include 

the closures of restaurants, bars, and 

gyms. In addition, based on the advice 

of public health officials, other 

measures, such as keeping a safe 

distance from others or even stay-athome orders, have been implemented, 

resulting in a dramatic decrease in 

economic activity as the public avoids 

malls, retail stores, and other 

businesses. 

On March 27, 2020, the President 

signed the Coronavirus Aid, Relief, and 

Economic Security Act (the CARES Act 

or the Act) (Pub. L. 116–136) to provide 

emergency assistance and health care 

response for individuals, families, and 

businesses affected by the coronavirus 

pandemic. The Small Business 

Administration (SBA) received funding 

and authority through the Act to modify 

existing loan programs and establish a 

new loan program to assist small 

businesses nationwide adversely 

impacted by the COVID–19 emergency. 

Section 1102 of the Act temporarily 

permits SBA to guarantee 100 percent of 

7(a) loans under a new program titled 

the ‘‘Paycheck Protection Program.’’ 

Section 1106 of the Act provides for 

forgiveness of up to the full principal 

amount of qualifying loans guaranteed 

under the Paycheck Protection Program. 

On April 24, 2020, the President 

signed the Paycheck Protection Program 

and Health Care Enhancement Act (Pub. 

L. 116–139), which provided additional 

funding and authority for the PPP. On 

June 5, 2020, the President signed the 

Paycheck Protection Program Flexibility 

Act of 2020 (Flexibility Act) (Pub. L. 

116–142), which changes key provisions 

of the Paycheck Protection Program, 

including provisions relating to the 

maturity of PPP loans, the deferral of 

PPP loan payments, and the forgiveness 

of PPP loans. Section 3(d) of the 

Flexibility Act provides that the 

amendments relating to PPP loan 

forgiveness and extension of the deferral 

period for PPP loans shall be effective 

as if included in the CARES Act, which 

means that they are retroactive to March 

27, 2020. Section 2 of the Flexibility Act 

provides that the amendment relating to 

the extension of the maturity date for 

PPP loans shall take effect on the date 

of enactment (June 5, 2020). Under the 

Flexibility Act, the extension of the 

maturity date for PPP loans is applicable 

to PPP loans made on or after that date, 

and lenders and borrowers may 

mutually agree to modify PPP loans 

made before such date to reflect the 

longer maturity. 

II. Comments and Retroactive/ 

Immediate Effective Date 

This interim final rule is effective 

without advance notice and public 

comment because section 1114 of the 

CARES Act authorizes SBA to issue 

regulations to implement Title I of the 

Act without regard to notice 

requirements. In addition, SBA has 

determined that there is good cause for 

dispensing with advance public notice 

and comment on the grounds that it 

would be contrary to the public interest. 

Specifically, advance public notice and 

comment would defeat the purpose of 

this interim final rule given that SBA’s 

authority to guarantee PPP loans expires 

on June 30, 2020, and that many PPP 

borrowers can now apply for loan 

forgiveness following the end of their 

eight-week covered period. Providing 

borrowers and lenders with certainty on 

both loan requirements and loan 

forgiveness requirements following the 

enactment of the Flexibility Act will 

enhance the ability of lenders to make 

loans and process loan forgiveness 

applications, particularly in light of the 

fact that most of the Flexibility Act’s 

provisions are retroactive to March 27, 

2020. Specifically, small businesses that 

have yet to apply for and receive a PPP 

loan need to be informed of the terms 

of PPP loans as soon as possible, 

because the last day on which a lender 

can obtain an SBA loan number for a 

PPP loan is June 30, 2020. Borrowers 

that have already applied for and 

received a PPP loan need certainty 

regarding how loan proceeds must be 

used during the covered period, as 

amended by the Flexibility Act, so that 

they can maximize the amount of loan 

forgiveness. Additionally, because some 

borrowers can apply for loan forgiveness 

now, those borrowers need updated 

direction on how to do so. These same 

reasons provide good cause for SBA to 

dispense with the 30-day delayed 

effective date provided in the 

Administrative Procedure Act. Although 

this interim final rule is effective on or 

before date of filing, comments are 

solicited from interested members of the 

public on all aspects of the interim final 

rule, including section III below. These 

comments must be submitted on or 

before July 27, 2020. The SBA and 

Treasury will consider these comments, 

comments received on the two interim 

final rules amended by this interim final 

rule, which were posted on SBA’s 

website May 22, 2020 and published on 

June 1, 2020, in the Federal Register, 

and the need for making any revisions 

as a result of these comments. 

III. Paycheck Protection Program— 

Revisions to Loan Forgiveness Interim 

Final Rule and SBA Loan Review 

Procedures and Related Borrower and 

Lender Responsibilities Interim Final 

Rule 

Overview 

The CARES Act was enacted to 

provide immediate assistance to 

individuals, families, and businesses 

affected by the COVID–19 emergency. 

Among the provisions contained in the 

CARES Act are provisions authorizing 

SBA to temporarily guarantee loans 

under a new 7(a) loan program titled the 

‘‘Paycheck Protection Program.’’ Loans 

guaranteed under the Paycheck 

Protection Program (PPP) will be 100 

percent guaranteed by SBA, and the full 

principal amount of the loans may 

qualify for loan forgiveness. 

SBA and Treasury have posted several 

documents on the loan forgiveness 

provisions in the CARES Act on their 

websites. On April 2, 2020, SBA posted 

its first PPP interim final rule (85 FR 

20811) covering in part loan forgiveness. 

On April 8, 2020 and April 26, 2020, 

SBA also posted Frequently Asked 

Questions relating to loan forgiveness. 

On April 14, 2020, SBA posted an 

interim final rule covering in part loan 

forgiveness for individuals with selfemployment income. On May 22, 2020, 


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1See https://www.sba.gov/document/support-- 

faq-lenders-borrowers. 

2See https://www.sba.gov/funding-programs/ 

loans/coronavirus-relief-options/paycheckprotection-program. 

SBA and Treasury jointly posted an 

additional interim final rule on loan 

forgiveness (85 FR 33004) (First Loan 

Forgiveness Rule). The SBA also posted 

an interim final rule on May 22, 2020 

on SBA loan review procedures and 

related borrower and lender 

responsibilities (85 FR 33010) (First 

Loan Review Rule). On June 11, 2020, 

SBA posted an interim final rule 

revising the first PPP interim final rule 

to incorporate Flexibility Act 

amendments, including those relating to 

loan forgiveness. On June 17, 2020, SBA 

posted an interim final rule revising the 

interim final rule covering individuals 

with self-employment income to 

incorporate Flexibility Act amendments, 

including those relating to loan 

forgiveness. 

The Flexibility Act amends the 

CARES Act, including its provisions 

relating to loan terms and loan 

forgiveness. The purpose of this interim 

final rule is to update the First Loan 

Forgiveness Rule and the First Loan 

Review Rule in light of the amendments 

under the Flexibility Act. The First Loan 

Forgiveness Rule and First Loan Review 

Rule, as amended by this interim final 

rule, should be interpreted consistent 

with the frequently asked questions 

(FAQs) regarding the PPP that are 

posted on SBA’s website 1 and the other 

interim final rules issued regarding the 

PPP.2

1. Changes to the First Loan Forgiveness 

Rule 

a. General 

Section 3(b) of the Flexibility Act 

amended the requirements regarding 

forgiveness of PPP loans to reduce, from 

75 percent to 60 percent, the portion of 

PPP loan proceeds that must be used for 

payroll costs for the full amount of the 

PPP loan to be eligible for forgiveness. 

Therefore, Part III.1 of the First Loan 

Forgiveness Rule (85 FR 33004, 33005) 

is revised by striking ‘‘25 percent’’ in 

the last sentence and replacing it with 

‘‘40 percent’’. 

b. Maturity 

Section 2(a) of the Flexibility Act 

provides a minimum maturity of five 

years for all PPP loans made on or after 

the date of enactment of the Flexibility 

Act (June 5, 2020), and permits lenders 

and borrowers to extend the maturity 

date of earlier PPP loans by mutual 

agreement. Section 3(c) of the Flexibility 

Act extended the deferral period for PPP 

loans to the date that SBA remits the 

forgiveness amount to the lender. 

Further, SBA has issued an alternative 

Loan Forgiveness Application Form, 

SBA Form 3508EZ. Therefore, in Part 

III.2 of the First Loan Forgiveness Rule 

(85 FR 33004, 33005), the introductory 

question is redesignated as paragraph a. 

and revised to read as follows: 

2. Loan Forgiveness Process 

a. What is the general process to obtain 

loan forgiveness? 

To receive loan forgiveness, a borrower 

must complete and submit the Loan 

Forgiveness Application (SBA Form 3508, 

3508EZ, or lender equivalent) to its lender (or 

the lender servicing its loan). As a general 

matter, the lender will review the application 

and make a decision regarding loan 

forgiveness. The lender has 60 days from 

receipt of a complete application to issue a 

decision to SBA. If the lender determines that 

the borrower is entitled to forgiveness of 

some or all of the amount applied for under 

the statute and applicable regulations, the 

lender must request payment from SBA at the 

time the lender issues its decision to SBA. 

SBA will, subject to any SBA review of the 

loan or loan application, remit the 

appropriate forgiveness amount to the lender, 

plus any interest accrued through the date of 

payment, not later than 90 days after the 

lender issues its decision to SBA. If 

applicable, SBA will deduct EIDL Advance 

Amounts from the forgiveness amount 

remitted to the Lender as required by section 

1110(e)(6) of the CARES Act. If SBA 

determines in the course of its review that 

the borrower was ineligible for the PPP loan 

based on the provisions of the CARES Act, 

SBA rules or guidance available at the time 

of the borrower’s loan application, or the 

terms of the borrower’s PPP loan application 

(for example, because the borrower lacked an 

adequate basis for the certifications that it 

made in its PPP loan application), the loan 

will not be eligible for loan forgiveness. The 

lender is responsible for notifying the 

borrower of the forgiveness amount. If only 

a portion of the loan is forgiven, or if the 

forgiveness request is denied, any remaining 

balance due on the loan must be repaid by 

the borrower on or before the maturity date 

of the loan. The lender is responsible for 

notifying the borrower of remittance by SBA 

of the loan forgiveness amount (or that SBA 

determined that no amount of the loan is 

eligible for forgiveness) and the date on 

which the borrower’s first payment is due, if 

applicable. If SBA determines that the full 

amount of the loan is eligible for forgiveness 

and remits the full amount of the loan to the 

lender, the lender must mark the PPP loan 

note as ‘‘paid in full’’ and report the status 

of the loan as ‘‘paid in full’’ on the next 

monthly 1502 report filed by the lender. 

The general loan forgiveness process 

described above applies only to loan 

forgiveness applications that are not 

reviewed by SBA prior to the lender’s 

decision on the forgiveness application. A 

separate interim final rule on SBA Loan 

Review Procedures and Related Borrower 

and Lender Responsibilities describes SBA’s 

procedures for reviewing PPP loan 

applications and loan forgiveness 

applications. 

c. Deferral Period and Forgiveness 

Section 3(c) of the Flexibility Act 

provides that if the borrower does not 

apply for forgiveness of a loan within 10 

months after the last day of the covered 

period, the PPP loan is no longer 

deferred and the borrower must begin 

paying principal and interest. Therefore, 

the following text is added as a new 

paragraph b. at the end of Part III.2: 

b. When must a borrower apply for loan 

forgiveness or start making payments on a 

loan? 

A borrower may submit a loan forgiveness 

application any time on or before the 

maturity date of the loan—including before 

the end of the covered period—if the 

borrower has used all of the loan proceeds for 

which the borrower is requesting forgiveness. 

If the borrower applies for forgiveness before 

the end of the covered period and has 

reduced any employee’s salaries or wages in 

excess of 25 percent, the borrower must 

account for the excess salary reduction for 

the full 8-week or 24-week covered period, as 

described in Part III.5. If the borrower does 

not apply for loan forgiveness within 10 

months after the last day of the covered 

period, or if SBA determines that the loan is 

not eligible for forgiveness (in whole or in 

part), the PPP loan is no longer deferred and 

the borrower must begin paying principal 

and interest. If this occurs, the lender must 

notify the borrower of the date the first 

payment is due. The lender must report that 

the loan is no longer deferred to SBA on the 

next monthly SBA Form 1502 report filed by 

the lender. 

d. Payroll Costs Eligible for Loan 

Forgiveness 

Under section 1106 of the CARES Act, 

certain provisions regarding the 

forgiveness of PPP loans are limited to 

the ‘‘covered period.’’ ‘‘Covered 

period,’’ as that term is used in section 

1106 of the CARES Act, was originally 

defined as the eight-week period 

beginning on the date of the origination 

of a covered loan. However, section 3(b) 

of the Flexibility Act extended the 

length of the covered period as defined 

in section 1106 of the CARES Act from 

eight to 24 weeks, while allowing 

borrowers that received PPP loans 

before June 5, 2020 to elect to use the 

original eight-week covered period. As 

set forth below, several provisions in 

Part III.3 of the First Loan Forgiveness 

Rule require revisions to conform to 

these amendments under Flexibility 

Act. 

Part III.3.a of the First Loan 

Forgiveness Rule (85 FR 33004, 33006) 

is revised to read as follows: 

a. When must payroll costs be incurred 

and/or paid to be eligible for forgiveness? 

In general, payroll costs paid or incurred 

during the covered period are eligible for 


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3Under section 3(b)(1) of the Paycheck Protection 

Program Flexibility Act of 2020, the loan 

forgiveness covered period of any borrower will end 

no later than December 31, 2020. 4See 85 FR 21747, 21749 (April 20, 2020). 

forgiveness. For purposes of loan forgiveness, 

the covered period is the 24-week period 

beginning on the date the lender disburses 

the PPP loan.3 Alternatively, a borrower that 

received a PPP loan before June 5, 2020 may 

elect for the covered period to end eight 

weeks after the date of disbursement of the 

PPP loan. Borrowers may seek forgiveness for 

payroll costs for the applicable covered 

period beginning on either: 

i. the date of disbursement of the 

borrower’s PPP loan proceeds from the 

Lender (i.e., the start of the covered period); 

or 

ii. the first day of the first payroll cycle in 

the covered period (the ‘‘alternative payroll 

covered period’’). 

Payroll costs are considered paid on the 

day that paychecks are distributed or the 

borrower originates an ACH credit 

transaction. Payroll costs incurred during the 

borrower’s last pay period of the covered 

period or the alternative payroll covered 

period are eligible for forgiveness if paid on 

or before the next regular payroll date; 

otherwise, payroll costs must be paid during 

the covered period (or alternative payroll 

covered period) to be eligible for forgiveness. 

Payroll costs are generally incurred on the 

day the employee’s pay is earned (i.e., on the 

day the employee worked). For employees 

who are not performing work but are still on 

the borrower’s payroll, payroll costs are 

incurred based on the schedule established 

by the borrower (typically, each day that the 

employee would have performed work). 

The Administrator of the Small Business 

Administration (Administrator), in 

consultation with the Secretary of the 

Treasury (Secretary), recognizes that the 

covered period will not always align with a 

borrower’s payroll cycle. For administrative 

convenience of the borrower, a borrower with 

a bi-weekly (or more frequent) payroll cycle 

may elect to use an alternative payroll 

covered period that begins on the first day of 

the first payroll cycle in the covered period 

and continues for either (a) eight weeks, in 

the case of a borrower that received its PPP 

loan before June 5, 2020 and elects to use an 

eight-week covered period, or (b) 24 weeks, 

in the case of all other borrowers. If payroll 

costs are incurred during this alternative 

payroll covered period, but paid after the end 

of the alternative payroll covered period, 

such payroll costs will be eligible for 

forgiveness if they are paid no later than the 

first regular payroll date thereafter. 

The Administrator, in consultation with 

the Secretary, determined that this 

alternative computational method for payroll 

costs is justified by considerations of 

administrative feasibility for borrowers, as it 

will reduce burdens on borrowers and their 

payroll agents while achieving the paycheck 

protection purposes manifest throughout the 

CARES Act, including section 1102. Because 

this alternative computational method is 

limited to payroll cycles that are bi-weekly or 

more frequent, this computational method 

will yield a calculation that the 

Administrator does not expect to materially 

differ from the actual covered period, while 

avoiding unnecessary administrative burdens 

and enhancing auditability. 

Example: A borrower that received a PPP 

loan before June 5, 2020 and elects to use an 

eight-week covered period has a bi-weekly 

payroll schedule (with payments made every 

other week). The borrower’s eight-week 

covered period begins on June 1 and ends on 

July 26. The first day of the borrower’s first 

payroll cycle that starts in the covered period 

is June 7. The borrower may elect an 

alternative payroll covered period for payroll 

cost purposes that starts on June 7 and ends 

55 days later (for a total of 56 days), on 

August 1. Payroll costs paid during this 

alternative payroll covered period are eligible 

for forgiveness. In addition, payroll costs 

incurred during this alternative payroll 

covered period are eligible for forgiveness if 

they are paid on or before the first regular 

payroll date occurring after August 1. Payroll 

costs that were both paid and incurred 

during the covered period (or alternative 

payroll covered period) may only be counted 

once. 

Part III.3.c of the First Loan 

Forgiveness Rule (85 FR 33004, 33006) 

is revised to read as follows: 

c. Are there caps on the amount of loan 

forgiveness available for owner-employees 

and self-employed individuals’ own payroll 

compensation? 

Yes. For borrowers that received a PPP 

loan before June 5, 2020 and elect to use an 

eight-week covered period, the amount of 

loan forgiveness requested for owneremployees and self-employed individuals’ 

payroll compensation is capped at eight 

weeks’ worth (8/52) of 2019 compensation 

(i.e., approximately 15.38 percent of 2019 

compensation) or $15,385 per individual, 

whichever is less, in total across all 

businesses. For all other borrowers, the 

amount of loan forgiveness requested for 

owner-employees and self-employed 

individuals’ payroll compensation is capped 

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

compensation (i.e., approximately 20.83 

percent of 2019 compensation) or $20,833 

per individual, whichever is less, in total 

across all businesses. 

In particular, C-corporation owneremployees are capped by the amount of their 

2019 employee cash compensation and 

employer retirement and health insurance 

contributions made on their behalf. Scorporation owner-employees are capped by 

the amount of their 2019 employee cash 

compensation and employer retirement 

contributions made on their behalf, but 

employer health insurance contributions 

made on their behalf cannot be separately 

added because those payments are already 

included in their employee cash 

compensation. Schedule C or F filers are 

capped by the amount of their owner 

compensation replacement, calculated based 

on 2019 net profit.4 General partners are 

capped by the amount of their 2019 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 

insurance contributions are included in their 

net self-employment income and therefore 

cannot be separately added to their payroll 

calculation. 

The Administrator, in consultation with 

the Secretary, determined that it is 

appropriate to limit the forgiveness of owner 

compensation to either eight weeks’ worth 

(8/52) of their 2019 compensation (up to 

$15,385) for an eight-week covered period or 

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

compensation (up to $20,833) for a 24-week 

covered period per owner in total across all 

businesses. This approach is consistent with 

the structure of the CARES Act and its 

overarching focus on keeping workers paid, 

and will prevent windfalls that Congress did 

not intend. Specifically, Congress determined 

that the maximum loan amount is generally 

based on 2.5 months of a borrower’s average 

monthly payroll costs during the one-year 

period preceding the loan. 15 U.S.C. 

636(a)(36)(E). For example, a borrower with 

one other employee would receive a 

maximum loan amount equal to 5 months of 

payroll (2.5 months of payroll for the owner 

plus 2.5 months of payroll for the employee). 

If the owner laid off the employee and 

availed itself of the exemption in the 

Paycheck Protection Program Flexibility Act 

of 2020 (Flexibility Act) related to reductions 

in business activity described in e. below, the 

owner could treat the entire amount of the 

PPP loan as payroll, with the entire loan 

being forgiven. This would not only result in 

a windfall for the owner, by providing the 

owner with five months of payroll instead of 

2.5 months, but also defeat the purpose of the 

CARES Act of protecting the paycheck of the 

employee. For owners with no employees, 

this limitation will have no effect, because 

the maximum loan amount for such 

borrowers already includes only 2.5 months 

of their payroll. 

e. Nonpayroll Costs Eligible for Loan 

Forgiveness 

Part III.4.a of the First Loan 

Forgiveness Rule (85 FR 33004, 33007) 

is revised to read as follows: 

a. When must nonpayroll costs be incurred 

and/or paid to be eligible for forgiveness? 

A nonpayroll cost is eligible for forgiveness 

if it was: 

i. Paid during the covered period; or 

ii. incurred during the covered period and 

paid on or before the next regular billing 

date, even if the billing date is after the 

covered period. 

Example: A borrower that received a loan 

before June 5, 2020 uses a 24-week covered 

period that begins on June 1 and ends on 

November 15. The borrower pays its 

electricity bills for June through October 

during the covered period and pays its 

November electricity bill on December 10, 

which is the next regular billing date. The 

borrower may seek loan forgiveness for its 

June through October electricity bills, 

because they were paid during the covered 


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38308 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 

period. In addition, the borrower may seek 

loan forgiveness for the portion of its 

November electricity bill through November 

15 (the end of the covered period), because 

it was incurred during the covered period 

and paid on the next regular billing date. The 

Administrator, in consultation with the 

Secretary, has determined that this 

interpretation provides an appropriate degree 

of borrower flexibility while remaining 

consistent with the text of section 1106(b). 

The Administrator believes that this 

simplified approach to calculation of 

forgivable nonpayroll costs is also supported 

by considerations of administrative 

convenience for borrowers, and the 

Administrator notes that the 40 percent cap 

on nonpayroll costs as a portion of the total 

loan forgiveness amount will avoid excessive 

inclusion of nonpayroll costs. 

f. Reductions to Loan Forgiveness 

Amount 

As described above, section 3(b) of the 

Flexibility Act amended provisions of 

the CARES Act regarding the covered 

period and the portion of PPP loan 

proceeds that must be used for payroll 

costs for the full amount of the PPP loan 

to be eligible for forgiveness. As set 

forth below, these amendments 

necessitate several revisions to Part III.5 

of the First Loan Forgiveness Rule. First, 

the introductory paragraph in Part III.5 

of the First Loan Forgiveness Rule (85 

FR 33004, 33007) is revised to read as 

follows: 

5. Reductions to Loan Forgiveness 

Amount 

Section 1106 of the CARES Act, as 

amended by Section 3(b)(2) of the 

Flexibility Act, specifically requires 

certain reductions in a borrower’s loan 

forgiveness amount based on reductions 

in full-time equivalent employees or in 

employee salary and wages, subject to 

an important statutory exemption for 

borrowers that have eliminated the 

reduction on or before December 31, 

2020. Section 3(b)(2) of the Flexibility 

Act also adds exemptions from 

reductions in loan forgiveness amounts 

based on employee availability and 

business activity. In addition, SBA and 

Treasury have adopted a regulatory 

exemption to the reduction rules for 

borrowers that have offered to restore 

employee hours at the same salary or 

wages, even if the employees have not 

accepted. The instructions to the loan 

forgiveness applications and the 

guidance below explains how the 

statutory forgiveness reduction formulas 

work. 

Section 1106(d)(2) of the CARES Act 

reduces the amount of the PPP loan that 

may be forgiven if the borrower reduces 

full-time equivalent employees during 

the covered period as compared to a 

base period selected by the borrower. 

Section 1106(d)(5) of the CARES Act 

originally waived this reduction in the 

forgiveness amount if the borrower 

eliminates the reduction in full-time 

equivalent employees occurring during 

a different statutory reference period by 

not later than June 30, 2020. Section 

3(b)(2) of the Flexibility Act amended 

this provision to replace ‘‘June 30’’ with 

‘‘December 31.’’ To conform the First 

Loan Forgiveness Rule to this 

amendment under the Flexibility Act, 

Part III.5.a of the First Loan Forgiveness 

Rule (85 FR 33004, 33007) is revised by 

striking ‘‘June 30, 2020’’ and replacing 

it with ‘‘December 31, 2020.’’ Section 

3(d) of the Flexibility Act provides that 

this amendment shall be effective as if 

included in the CARES Act, which was 

enacted on March 27, 2020. 

As described above, section 3(b) of the 

Flexibility Act extended the length of 

the covered period as defined in section 

1106 of the CARES Act from eight to 24 

weeks, while allowing borrowers that 

received PPP loans before June 5, 2020 

to elect to use the original eight-week 

covered period. For consistency with 

this amendment, the paragraph 

consisting of the example in Part III.5.e 

of the First Loan Forgiveness Rule (85 

FR 33004, 33008) is revised to provide 

two examples that read as follows: 

Example: A borrower is using a 24-week 

covered period. This borrower reduced a fulltime employee’s weekly salary from $1,000 

per week during the reference period to $700 

per week during the covered period. The 

employee continued to work on a full-time 

basis during the covered period, with an FTE 

of 1.0. In this case, the first $250 (25 percent 

of $1,000) is exempted from the loan 

forgiveness reduction. The borrower seeking 

forgiveness would list $1,200 as the salary/ 

hourly wage reduction for that employee (the 

extra $50 weekly reduction multiplied by 24 

weeks). If the borrower applies for 

forgiveness before the end of the covered 

period, it must account for the salary 

reduction for the full 24-week covered period 

(totaling $1,200). 

Example: A borrower that received a PPP 

loan before June 5, 2020 has elected to use 

an eight-week covered period. This borrower 

reduced a full-time employee’s weekly salary 

from $1,000 per week during the reference 

period to $700 per week during the covered 

period. The employee continued to work on 

a full-time basis during the covered period, 

with an FTE of 1.0. In this case, the first $250 

(25 percent of $1,000) is exempted from the 

loan forgiveness reduction. The borrower 

seeking forgiveness would list $400 as the 

salary/hourly wage reduction for that 

employee (the extra $50 weekly reduction 

multiplied by eight weeks). 

In light of the amendments under the 

Flexibility Act described above, Part 

III.5.g of the First Loan Forgiveness Rule 

(85 FR 33004, 33009) is revised by 

striking ‘‘June 30, 2020’’ each place that 

it appears and replacing it with 

‘‘December 31, 2020,’’ and by striking 

‘‘75 percent’’ and replacing it with ‘‘60 

percent.’’ Section 3(d) of the Flexibility 

Act provides that these amendments 

shall be effective as if included in the 

CARES Act, which was enacted on 

March 27, 2020. 

Lastly, section 3(b)(2)(B) of the 

Flexibility Act established two new 

exemptions based on employee 

availability and business activity, 

respectively, that would eliminate a 

reduction in the loan forgiveness 

amount that would otherwise be 

required due to a reduction in full-time 

equivalent (FTE) employees. 

Specifically, that section of the 

Flexibility Act states that the amount of 

loan forgiveness ‘‘shall be determined 

without regard to a proportional 

reduction in the number of full-time 

equivalent employees’’ if an eligible 

recipient, in good faith, (A) is able to 

document (i) an inability to rehire 

individuals who were employees of the 

eligible recipient on February 15, 2020; 

and (ii) an inability to hire similarly 

qualified employees for unfilled 

positions on or before December 31, 

2020; or (B) is able to document an 

inability to return to the same level of 

business activity as such business was 

operating at before February 15, 2020, 

due to compliance with requirements 

established or guidance issued by the 

Secretary of Health and Human 

Services, the Director of the Centers for 

Disease Control and Prevention, or the 

Occupational Safety and Health 

Administration during the period 

beginning on March 1, 2020, and ending 

December 31, 2020, related to the 

maintenance of standards for sanitation, 

social distancing, or any other worker or 

customer safety requirement related to 

COVID–19. The new exemption 

pertaining to individuals who refuse an 

offer to be rehired is very similar, but 

not identical, to a de minimis exemption 

that was provided in the First Loan 

Forgiveness Rule; therefore, the 

Administrator and the Secretary have 

determined that this new statutory 

exemption should supersede the 

previous de minimis exemption relating 

to reductions in FTE employees. 

However, a related de minimis 

exemption in the First Loan Forgiveness 

Rule for borrowers that have reduced 

the hours of an employee and offered to 

restore the reduction in hours, but the 

employee declined the offer, is not 

addressed in the Flexibility Act and is 

therefore being retained. 

In order to implement these 

exemptions, Part III.5.a of the First Loan 

Forgiveness Rule (85 FR 33004, 33007) 

is revised to read: 


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Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38309 

5Section 1106(d)(6) is the sole joint rulemaking 

authority exercised in this interim final rule. All 

other provisions of this interim final rule are an 

exercise of rulemaking authority by SBA, except as 

expressly noted otherwise. 

6Section 1106(d)(5) specifies that this reference 

period is between February 15, 2020 and 30 days 

after the date of enactment of the CARES Act or 

April 26, 2020 (the safe harbor period). 

7Further information regarding how borrowers 

will report information concerning rejected rehire 

offers to state unemployment insurance offices will 

be provided on SBA’s website. 

a. Will a borrower’s loan forgiveness 

amount be reduced if the borrower reduced 

the hours of an employee, then offered to 

restore the reduction in hours, but the 

employee declined the offer? 

No. In calculating the loan forgiveness 

amount, a borrower may exclude any 

reduction in full-time equivalent employee 

headcount that is attributable to an 

individual employee if: 

i. The borrower made a good faith, written 

offer to restore the reduced hours of such 

employee; 

ii. the offer was for the same salary or 

wages and same number of hours as earned 

by such employee in the last pay period prior 

to the reduction in hours; 

iii. the offer was rejected by such 

employee; and 

iv. the borrower has maintained records 

documenting the offer and its rejection. 

The Administrator and the Secretary 

determined that this exemption is an 

appropriate exercise of their joint rulemaking 

authority to grant a de minimis exemption 

under section 1106(d)(6).5 Section 1106(d)(2) 

of the CARES Act reduces the amount of the 

PPP loan that may be forgiven if the borrower 

reduces full-time equivalent employees 

during the covered period as compared to a 

base period selected by the borrower. Section 

1106(d)(5) of the CARES Act waives this 

reduction in the forgiveness amount if the 

borrower eliminates the reduction in fulltime equivalent employees occurring during 

a different statutory reference period 6 by not 

later than December 31, 2020. The 

Administrator and the Secretary believe that 

the additional exemption set forth above is 

consistent with the purposes of the CARES 

Act and provides borrowers appropriate 

flexibility in the current economic climate. 

The Administrator, in consultation with the 

Secretary, has determined that the exemption 

is de minimis for two reasons. First, it is 

reasonable to anticipate that most employees 

will accept the offer of restored hours in light 

of current labor market conditions. Second, 

to the extent this exemption allows 

employers to cure FTE reductions 

attributable to reductions in hours that 

occurred before February 15, 2020 (the start 

of the statutory FTE reduction safe harbor 

period), it is reasonable to anticipate those 

reductions will represent a relatively small 

portion of aggregate employees given the 

historically strong labor market conditions 

before the COVID–19 emergency. 

In addition, Part III.5.b of the First 

Loan Forgiveness Rule (85 FR 33004, 

33007–08) is revised by adding the 

following at the end thereof: 

Borrowers are exempted from the loan 

forgiveness reduction arising from a 

proportional reduction in FTE employees 

during the covered period if the borrower is 

able to document in good faith the following: 

(1) An inability to rehire individuals who 

were employees of the borrower on February 

15, 2020; and (2) an inability to hire similarly 

qualified individuals for unfilled positions 

on or before December 31, 2020. Borrowers 

are required to inform the applicable state 

unemployment insurance office of any 

employee’s rejected rehire offer within 30 

days of the employee’s rejection of the offer.7

The documents that borrowers should 

maintain to show compliance with this 

exemption include, but are not limited to, the 

written offer to rehire an individual, a 

written record of the offer’s rejection, and a 

written record of efforts to hire a similarly 

qualified individual. 

Borrowers are also exempted from the loan 

forgiveness reduction arising from a 

reduction in the number of FTE employees 

during the covered period if the borrower is 

able to document in good faith an inability 

to return to the same level of business 

activity as the borrower was operating at 

before February 15, 2020, due to compliance 

with requirements established or guidance 

issued between March 1, 2020 and December 

31, 2020 by the Secretary of Health and 

Human Services, the Director of the Centers 

for Disease Control and Prevention (CDC), or 

the Occupational Safety and Health 

Administration related to the maintenance of 

standards for sanitation, social distancing, or 

any other worker or customer safety 

requirement related to COVID–19 (COVID 

Requirements or Guidance). Specifically, 

borrowers that can certify that they have 

documented in good faith that their 

reduction in business activity during the 

covered period stems directly or indirectly 

from compliance with such COVID 

Requirements or Guidance are exempt from 

any reduction in their forgiveness amount 

stemming from a reduction in FTE employees 

during the covered period. Such 

documentation must include copies of 

applicable COVID Requirements or Guidance 

for each business location and relevant 

borrower financial records. 

The Administrator, in consultation with 

the Secretary, is interpreting the above 

statutory exemption to include both direct 

and indirect compliance with COVID 

Requirements or Guidance, because a 

significant amount of the reduction in 

business activity stemming from COVID 

Requirements or Guidance is the result of 

state and local government shutdown orders 

that are based in part on guidance from the 

three federal agencies. 

Example: A PPP borrower is in the 

business of selling beauty products both 

online and at its physical store. During the 

covered period, the local government where 

the borrower’s store is located orders all nonessential businesses, including the 

borrower’s business, to shut down their 

stores, based in part on COVID–19 guidance 

issued by the CDC in March 2020. Because 

the borrower’s business activity during the 

covered period was reduced compared to its 

activity before February 15, 2020 due to 

compliance with COVID Requirements or 

Guidance, the borrower satisfies the 

Flexibility Act’s exemption and will not have 

its forgiveness amount reduced because of a 

reduction in FTEs during the covered period, 

if the borrower in good faith maintains 

records regarding the reduction in business 

activity and the local government’s shutdown 

orders that reference a COVID Requirement 

or Guidance as described above. 

g. Documentation Requirements 

Because SBA has issued an alternative 

loan forgiveness application, SBA Form 

3508EZ, the parenthetical in the first 

sentence of Part III.6 of the First Loan 

Forgiveness Rule (85 FR 33004, 33009) 

is revised to read as follows: ‘‘(SBA 

Form 3508 or SBA Form 3508EZ, as 

applicable, or lender equivalent)’’. 

2. Changes to the First Loan Review 

Rule 

a. Alternative Loan Forgiveness 

Application 

The First Loan Review Rule informs 

borrowers and lenders of SBA’s process 

for reviewing PPP loan applications and 

loan forgiveness applications. Because 

SBA has issued an alternative Loan 

Forgiveness Application, SBA Form 

3508EZ, the following changes are 

necessary. 

Parts III.1.b and III.1.e are revised by 

striking each reference in those sections 

to ‘‘SBA Form 3508 or lender’s 

equivalent form’’ and replacing it with 

‘‘SBA Form 3508, 3508EZ, or lender’s 

equivalent form’’. 

b. The Loan Forgiveness Process for 

Lenders 

As noted above, SBA has issued an 

alternative Loan Forgiveness 

Application Form, SBA Form 3508EZ. 

Further, Section 3(b)(2) of the Flexibility 

Act reduced, from 75 percent to 60 

percent, the portion of PPP loan 

proceeds that must be used for payroll 

costs for the full amount of the PPP loan 

to be eligible for forgiveness. As set 

forth below, these developments 

necessitate several revisions to Part III.2 

of the First Loan Review Rule. 

Part III.2.a. is revised to read as 

follows: 

a. What should a lender review? 

When a borrower submits SBA Form 

3508 or lender’s equivalent form, the 

lender shall: 

i. Confirm receipt of the borrower 

certifications contained in the SBA Form 

3508 or lender’s equivalent form. 

ii. Confirm receipt of the documentation 

the borrower must submit to aid in verifying 

payroll and nonpayroll costs, as specified in 

the instructions to the SBA Form 3508 or 

lender’s equivalent form. 


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8 85 FR 20811, 20815–20816 (April 15, 2020). 

iii. Confirm the borrower’s calculations on 

the borrower’s SBA Form 3508 or lender’s 

equivalent form, including the dollar amount 

of the (A) Cash Compensation, Non-Cash 

Compensation, and Compensation to Owners 

claimed on Lines 1, 4, 6, 7, 8, and 9 on PPP 

Schedule A and (B) Business Mortgage 

Interest Payments, Business Rent or Lease 

Payments, and Business Utility Payments 

claimed on Lines 2, 3, and 4 on the PPP Loan 

Forgiveness Calculation Form, by reviewing 

the documentation submitted with the SBA 

Form 3508 or lender’s equivalent form. 

iv. Confirm that the borrower made the 

calculation on Line 10 of the SBA Form 3508 

or lender’s equivalent form correctly, by 

dividing the borrower’s Eligible Payroll Costs 

claimed on Line 1 by 0.60. 

When the borrower submits SBA 

Form 3508EZ or lender’s equivalent 

form, the lender shall: 

i. Confirm receipt of the borrower 

certifications contained in the SBA Form 

3508EZ or lender’s equivalent form. 

ii. Confirm receipt of the documentation 

the borrower must submit to aid in verifying 

payroll and nonpayroll costs, as specified in 

the instructions to the SBA Form 3508EZ or 

lender’s equivalent form. 

iii. Confirm the borrower’s calculations on 

the borrower’s SBA Form 3508EZ or lender’s 

equivalent form, including the dollar amount 

of the Payroll Costs, Business Mortgage 

Interest Payments, Business Rent or Lease 

Payments, and Business Utility Payments 

claimed on Lines 1, 2, 3, and 4 of the SBA 

Form 3508EZ or lender’s equivalent form, by 

reviewing the documentation submitted with 

the SBA Form 3508EZ or lender’s equivalent 

form. 

iv. Confirm that the borrower made the 

calculation on Line 7 of the SBA Form 

3508EZ or lender’s equivalent form correctly, 

by dividing the borrower’s Eligible Payroll 

Costs claimed on Line 1 by 0.60. 

Providing an accurate calculation of 

the loan forgiveness amount is the 

responsibility of the borrower, and the 

borrower attests to the accuracy of its 

reported information and calculations 

on the Loan Forgiveness Application 

Form. Lenders are expected to perform 

a good-faith review, in a reasonable 

time, of the borrower’s calculations and 

supporting documents concerning 

amounts eligible for loan forgiveness. 

For example, minimal review of 

calculations based on a payroll report by 

a recognized third-party payroll 

processor would be reasonable. By 

contrast, if payroll costs are not 

documented with such recognized 

sources, more extensive review of 

calculations and data would be 

appropriate. The borrower shall not 

receive forgiveness without submitting 

all required documentation to the 

lender. 

As the First Interim Final Rule 8

indicates, lenders may rely on borrower 

representations. If the lender identifies 

errors in the borrower’s calculation or 

material lack of substantiation in the 

borrower’s supporting documents, the 

lender should work with the borrower 

to remedy the issue. As stated in 

paragraph III.3.c of the First Interim 

Final Rule, the lender does not need to 

independently verify the borrower’s 

reported information if the borrower 

submits documentation supporting its 

request for loan forgiveness and attests 

that it accurately verified the payments 

for eligible costs. 

Part III.2.b. is revised to read as 

follows: 

b. What is the timeline for the lender’s 

decision on a loan forgiveness application? 

The lender must issue a decision to SBA 

on a loan forgiveness application not later 

than 60 days after receipt of a complete loan 

forgiveness application from the borrower. 

That decision may take the form of an 

approval (in whole or in part); denial; or (if 

directed by SBA) a denial without prejudice 

due to a pending SBA review of the loan for 

which forgiveness is sought. In the case of a 

denial without prejudice, the borrower may 

subsequently request that the lender 

reconsider its application for loan 

forgiveness, unless SBA has determined that 

the borrower is ineligible for a PPP loan. The 

Administrator has determined that this 

process appropriately balances the need for 

efficient processing of loan forgiveness 

applications with considerations of program 

integrity, including affording SBA the 

opportunity to ensure that borrower 

representations and certifications (including 

concerning eligibility for a PPP loan) were 

accurate. When the lender issues its decision 

to SBA approving the application (in whole 

or in part), it must include the following: 

i. For applications submitted using the 

SBA Form 3508 or lender’s equivalent form: 

(1) the PPP Loan Forgiveness Calculation 

Form; 

(2) PPP Schedule A; and 

(3) the (optional) PPP Borrower 

Demographic Information Form (if submitted 

to the lender). 

ii. For applications submitted using the 

SBA Form 3508EZ or lender’s equivalent 

form: 

(1) the SBA Form 3508EZ or lender’s 

equivalent form; and 

(2) the (optional) Borrower Demographic 

Information Form (if submitted to the 

lender). 

The lender must confirm that the 

information provided by the lender to 

SBA accurately reflects lender’s records 

for the loan, and that the lender has 

made its decision in accordance with 

the requirements set forth in 2.a. If the 

lender determines that the borrower is 

entitled to forgiveness of some or all of 

the amount applied for under the statute 

and applicable regulations, the lender 

must request payment from SBA at the 

time the lender issues its decision to 

SBA. SBA will, subject to any SBA 

review of the loan or loan application, 

remit the appropriate forgiveness 

amount to the lender, plus any interest 

accrued through the date of payment, 

not later than 90 days after the lender 

issues its decision to SBA. If applicable, 

SBA will deduct EIDL Advance 

Amounts from the forgiveness amount 

remitted to the Lender as required by 

section 1110(e)(6) of the CARES Act. 

The lender is responsible for notifying 

the borrower of remittance by SBA of 

the loan forgiveness amount (or that 

SBA determined that no amount of the 

loan is eligible for forgiveness) and the 

date on which the borrower’s first 

payment is due, if applicable. 

When the lender issues its decision to 

SBA determining that the borrower is 

not entitled to forgiveness in any 

amount, the lender must provide SBA 

with the reason for its denial, together 

with the following: 

i. For applications submitted using the 

SBA Form 3508 or lender’s equivalent form: 

(1) the PPP Loan Forgiveness Calculation 

Form; 

(2) PPP Schedule A; and 

(3) the (optional) PPP Borrower 

Demographic Information Form (if submitted 

to the lender). 

iii. For applications submitted using the 

SBA Form 3508EZ or lender’s equivalent 

form: 

(1) the SBA Form 3508EZ or lender’s 

equivalent form; and 

(2) the (optional) Borrower Demographic 

Information Form (if submitted to the 

lender). 

The lender must confirm that the 

information provided by the lender to 

SBA accurately reflects lender’s records 

for the loan, and that the lender has 

made its decision in accordance with 

the requirements set forth in 2.a. The 

lender must also notify the borrower in 

writing that the lender has issued a 

decision to SBA denying the loan 

forgiveness application. SBA reserves 

the right to review the lender’s decision 

in its sole discretion. Within 30 days of 

notice from the lender, a borrower may 

notify the lender that it is requesting 

that SBA review the lender’s decision 

by reviewing the loan in accordance 

with 2.c. below. Within 5 days of 

receipt, the lender must notify SBA of 

the borrower’s request for review. SBA 

will notify the lender if SBA declines a 

request for review. If the borrower does 

not request SBA review or SBA declines 

the request for review, the lender is 

responsible for notifying the borrower of 

the date on which the borrower’s first 

payment is due. If SBA accepts a 

borrower’s request for review, SBA will 

notify the borrower and the lender of 

the results of the review. If SBA denies 

forgiveness in whole or in part, the 


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Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 38311 

lender is responsible for notifying the 

borrower of the date on which the 

borrower’s first payment is due. 

Enabling SBA to use the statutory 90- 

day period to review the PPP loan and 

forgiveness documentation is an 

appropriate procedural protection to 

prevent fraud or misuse of PPP funds, 

ensure that recipients of PPP loans are 

within the scope of entities that the 

CARES Act is intended to assist, and 

confirm compliance with the PPP 

requirements set forth in the statute, 

rules, and guidance. This protection is 

also important in light of the large 

number and diverse types of PPP 

lenders, many of which were not 

previously SBA participating lenders 

and which were approved rapidly in 

order to enable financial assistance to be 

provided as rapidly as feasible to 

millions of small businesses. SBA will 

use the 90-day period to help ensure 

that applicable legal requirements have 

been satisfied. 

Part III.2.c.ii. is revised to read as 

follows: 

ii. The Loan Forgiveness Application (SBA 

Form 3508, 3508EZ, or lender’s equivalent 

form), and all supporting documentation 

provided by the borrower (if the lender has 

received such application). If the lender 

receives such application after it receives 

notice that SBA has commenced a loan 

review, the lender shall transmit electronic 

copies of the application and all supporting 

documentation provided by the borrower to 

SBA within five business days of receipt. 

The lender must also request that the 

borrower provide the lender with the 

applicable documentation that the 

instructions to the Loan Forgiveness 

Application Form (SBA Form 3508, 3508EZ, 

or lender’s equivalent) instruct the borrower 

to maintain but not submit (documentation 

listed under ‘‘Documents that Each Borrower 

Must Maintain but is Not Required to 

Submit’’). The lender must submit 

documents received from the borrower to 

SBA within five business days of receipt 

from the borrower. 

3. Additional Information 

SBA may provide further guidance, if 

needed, through SBA notices which will 

be posted on SBA’s website at 

www.sba.gov. Questions on the 

Paycheck Protection Program may be 

directed to the Lender Relations 

Specialist in the local SBA Field Office. 

The local SBA Field Office may be 

found at https://www.sba.gov/tools/ 

local-assistance/districtoffices. 

Compliance With Executive Orders 

12866, 12988, 13132, 13563, and 13771, 

the Paperwork Reduction Act (44 

U.S.C. Ch. 35), and the Regulatory 

Flexibility Act (5 U.S.C. 601–612) 

Executive Orders 12866, 13563, and 

13771 

This interim final rule is 

economically significant for the 

purposes of Executive Orders 12866 and 

13563, and is considered a major rule 

under the Congressional Review Act. 

SBA, however, is proceeding under the 

emergency provision at Executive Order 

12866 Section 6(a)(3)(D), based on the 

need to move expeditiously to mitigate 

the current economic conditions arising 

from the COVID–19 emergency. This 

rule’s designation under Executive 

Order 13771 will be informed by public 

comment. 

Executive Order 12988 

SBA and Treasury have drafted this 

rule, to the extent practicable, in 

accordance with the standards set forth 

in section 3(a) and 3(b)(2) of Executive 

Order 12988, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. The rule has no preemptive or 

retroactive effect. 

Executive Order 13132 

SBA and Treasury have determined 

that this rule will not have substantial 

direct effects on the States, on the 

relationship between the National 

Government and the States, or on the 

distribution of power and 

responsibilities among the various 

layers of government. Therefore, SBA 

has determined that this rule has no 

federalism implications warranting 

preparation of a federalism assessment. 

Paperwork Reduction Act, 44 U.S.C. 

Chapter 35 

SBA and Treasury have determined 

that this rule modifies existing 

information collection. The 

amendments to the PPP made by the 

Flexibility Act and implemented in this 

interim final rule require conforming 

revisions to the Paycheck Protection 

Program—Loan Forgiveness Application 

(SBA Form 3508), for use in collecting 

the information required to determine 

whether a borrower is eligible for loan 

forgiveness. In addition, SBA has 

developed a streamlined Paycheck 

Protection Program—PPP Loan 

Forgiveness Application Form 3508EZ 

(SBA Form 3508 EZ), which is available 

for borrowers meeting criteria described 

in the instructions accompanying the 

form. SBA has obtained OMB approval 

of the modification to the existing 

information collection, which is 

currently approved as an emergency 

request under OMB Control Number 

3245–0407 until October 31, 2020. 

Regulatory Flexibility Act (RFA) 

The Regulatory Flexibility Act (RFA) 

generally requires that when an agency 

issues a proposed rule, or a final rule 

pursuant to section 553(b) of the APA or 

another law, the agency must prepare a 

regulatory flexibility analysis that meets 

the requirements of the RFA and 

publish such analysis in the Federal 

Register. 5 U.S.C. 603, 604. Specifically, 

the RFA normally requires agencies to 

describe the impact of a rulemaking on 

small entities by providing a regulatory 

impact analysis. Such analysis must 

address the consideration of regulatory 

options that would lessen the economic 

effect of the rule on small entities. The 

RFA defines a ‘‘small entity’’ as (1) a 

proprietary firm meeting the size 

standards of the Small Business 

Administration (SBA); (2) a nonprofit 

organization that is not dominant in its 

field; or (3) a small government 

jurisdiction with a population of less 

than 50,000. 5 U.S.C. 601(3)–(6). Except 

for such small government jurisdictions, 

neither State nor local governments are 

‘‘small entities.’’ Similarly, for purposes 

of the RFA, individual persons are not 

small entities. The requirement to 

conduct a regulatory impact analysis 

does not apply if the head of the agency 

‘‘certifies that the rule will not, if 

promulgated, have a significant 

economic impact on a substantial 

number of small entities.’’ 5 U.S.C. 

605(b). The agency must, however, 

publish the certification in the Federal 

Register at the time of publication of the 

rule, ‘‘along with a statement providing 

the factual basis for such certification.’’ 

If the agency head has not waived the 

requirements for a regulatory flexibility 

analysis in accordance with the RFA’s 

waiver provision, and no other RFA 

exception applies, the agency must 

prepare the regulatory flexibility 

analysis and publish it in the Federal 

Register at the time of promulgation or, 

if the rule is promulgated in response to 

an emergency that makes timely 

compliance impracticable, within 180 

days of publication of the final rule. 5 

U.S.C. 604(a), 608(b). Rules that are 

exempt from notice and comment are 

also exempt from the RFA requirements, 

including conducting a regulatory 

flexibility analysis, when among other 

things the agency for good cause finds 

that notice and public procedure are 

impracticable, unnecessary, or contrary 

to the public interest. SBA Office of 

Advocacy guide: How to Comply with 

the Regulatory Flexibility Act, Ch.1. p.9. 

Accordingly, SBA and Treasury are not 


jbell on DSKJLSW7X2PROD with RULES
38312 Federal Register / Vol. 85, No. 124 / Friday, June 26, 2020 / Rules and Regulations 

required to conduct a regulatory 

flexibility analysis. 

Jovita Carranza, 

Administrator,Small Business 

Administration. 

Michael Faulkender, 

Assistant Secretary for Economic Policy 

Department of the Treasury. 

[FR Doc. 2020–13782 Filed 6–24–20; 8:45 am] 

BILLING CODE 8026–03–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2020–0612; Project 

Identifier MCAI–2020–00674–E; Amendment 

39–21152; AD 2020–13–07] 

RIN 2120–AA64 

Airworthiness Directives; Rolls-Royce 

Deutschland Ltd & Co KG (Type 

Certificate Previously Held by RollsRoyce plc) Turbofan Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule; request for 

comments. 

SUMMARY: The FAA is adopting a new 

airworthiness directive (AD) for all 

Rolls-Royce Deutschland Ltd. & Co KG 

(RRD) Trent 1000–D2, Trent 1000–J2, 

and Trent 1000–K2 model turbofan 

engines with fuel pump, part number 

G5030FPU01, installed. This AD 

requires removal and replacement of the 

fuel pump with a part eligible for 

installation. This AD was prompted by 

the manufacturer’s investigation into an 

unexpected reduction in fuel pump 

performance in certain high life fuel 

pumps. The FAA is issuing this AD to 

address the unsafe condition on these 

products. 

DATES: This AD is effective July 13, 

2020. 

The FAA must receive comments on 

this AD by August 10, 2020. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

https://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: 202–493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

• Hand Delivery: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. 

For service information identified in 

this final rule, contact Rolls-Royce 

Deutschland Ltd & Co KG, Eschenweg 

11, 15827 Blankenfelde-Mahlow, 

Germany; phone: +49 (0) 33 708 6 0; 

email: https://www.rolls-royce.com/ 

contact-us.aspx. You may view this 

service information at the FAA, 

Airworthiness Products Section, 

Operational Safety Branch, 1200 District 

Avenue, Burlington, MA 01803. For 

information on the availability of this 

material at the FAA, call 781–238–7759. 

It is also available on the internet at 

https://www.regulations.gov by 

searching for and locating Docket No. 

FAA–2020–0612. 

Examining the AD Docket 

You may examine the AD docket on 

the internet at https://

www.regulations.gov by searching for 

and locating Docket No. FAA–2020– 

0612; or in person at Docket Operations 

between 9 a.m. and 5 p.m., Monday 

through Friday, except Federal holidays. 

The AD docket contains this final rule, 

the mandatory continuing airworthiness 

information (MCAI), any comments 

received, and other information. The 

street address for Docket Operations is 

listed above. Comments will be 

available in the AD docket shortly after 

receipt. 

FOR FURTHER INFORMATION CONTACT: 

Stephen Elwin, Aerospace Engineer, 

ECO Branch, FAA, 1200 District 

Avenue, Burlington, MA 01803; phone: 

781–238–7236; fax: 781–238–7199; 

email: stephen.l.elwin@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Discussion 

The European Union Aviation Safety 

Agency (EASA), which is the Technical 

Agent for the Member States of the 

European Community, has issued EASA 

AD 2020–0124, dated May 29, 2020 

(referred to after this as ‘‘the MCAI’’), to 

address an unsafe condition for the 

specified products. The MCAI states: 

An unexpected reduction in fuel pump 

performance has been seen during testing of 

high life units. Strip examination of these 

fuel pumps has identified that life related 

wear-out of the internal components is 

causing deterioration in pump efficiency. 

The effect of the loss of fuel pump efficiency 

is more pronounced on higher rated engines. 

This condition, if not corrected, could lead 

to reduced engine thrust, possibly resulting 

in reduced control of the aeroplane. 

To address this potential unsafe condition, 

Rolls-Royce published the NMSB to provide 

instructions for replacement of the affected 

parts before exceeding reduced life limits. 

For the reasons described above, this 

[EASA] AD requires removal from service of 

the affected parts. 

You may obtain further information 

by examining the MCAI in the AD 

docket on the internet at https://

www.regulations.gov by searching for 

and locating Docket No. FAA–2020– 

0612. 

Related Service Information 

The FAA reviewed Rolls-Royce plc 

(RR) Alert Non-Modification Service 

Bulletin (NMSB) Trent 1000 73–AK581, 

dated May 12, 2020. The Alert NMSB 

introduces a reduced life limit for fuel 

pumps installed on affected engines. 

FAA’s Determination 

This product has been approved by 

EASA and is approved for operation in 

the United States. Pursuant to our 

bilateral agreement with the European 

Community, EASA has notified us of 

the unsafe condition described in the 

MCAI. The FAA is issuing this AD 

because it evaluated all the relevant 

information provided by EASA and 

determined the unsafe condition 

described previously is likely to exist or 

develop in other products of the same 

type design. 

AD Requirements 

This AD requires removal of the 

affected fuel pump and its replacement 

with a part eligible for installation. 

Differences Between This AD and the 

Service Information 

RR Alert NMSB Trent 1000 73– 

AK581, dated May 12, 2020, 

recommends removal of D2-rated engine 

fuel pumps with more than 17,000 

hours (or 5,200 cycles) by May 31, 2020, 

and more than 16,000 hours (or 4,900 

cycles) by June 30, 2020, or within 3 

engine flight cycles, whichever is later. 

Since this AD will become effective 

after the RRD recommended compliance 

date of June 30, 2020, this AD requires 

removal of D2-rated engine fuel pumps 

before exceeding 16,000 hours time in 

service or 4,900 engine cycles since new 

or since last overhaul. This AD also 

provides a 30-day grace period for 

compliance. 

FAA’s Justification and Determination 

of the Effective Date 

Section 553(b)(3)(B) of the 

Administrative Procedure Act (APA) (5 

U.S.C.) authorizes agencies to dispense 

with notice and comment procedures 

for rules when the agency, for ‘‘good 

cause,’’ finds that those procedures are 

‘‘impracticable, unnecessary, or contrary 


jbell on DSKJLSW7X2PROD with RULES