Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 29847 

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 has drafted this rule, to the 

extent practicable, in accordance with 

the standards set forth in section 3(a) 

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

minimize litigation, eliminate 

ambiguity, and reduce burden. The rule 

has no preemptive or retroactive effect. 

Executive Order 13132 

SBA has determined that this rule 

will not have substantial direct effects 

on the States, on the relationship 

between the National Government and 

the States, or on the distribution of 

power and responsibilities among the 

various layers of government. Therefore, 

SBA has determined that this rule has 

no federalism implications warranting 

preparation of a federalism assessment. 

Paperwork Reduction Act, 44 U.S.C. 

Chapter 35 

SBA has determined that this rule 

will not impose new or modify existing 

recordkeeping or reporting requirements 

under the Paperwork Reduction Act. 

Regulatory Flexibility Act (RFA) 

The Regulatory Flexibility Act (RFA) 

generally requires that when an agency 

issues a proposed rule, or a final rule 

pursuant to section 553(b) of the APA or 

another law, the agency must prepare a 

regulatory flexibility analysis that meets 

the requirements of the RFA and 

publish such analysis in the Federal 

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

the RFA normally requires agencies to 

describe the impact of a rulemaking on 

small entities by providing a regulatory 

impact analysis. Such analysis must 

address the consideration of regulatory 

options that would lessen the economic 

effect of the rule on small entities. The 

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

proprietary firm meeting the size 

standards of the Small Business 

Administration (SBA); (2) a nonprofit 

organization that is not dominant in its 

field; or (3) a small government 

jurisdiction with a population of less 

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

for such small government jurisdictions, 

neither State nor local governments are 

‘‘small entities.’’ Similarly, for purposes 

of the RFA, individual persons are not 

small entities. The requirement to 

conduct a regulatory impact analysis 

does not apply if the head of the agency 

‘‘certifies that the rule will not, if 

promulgated, have a significant 

economic impact on a substantial 

number of small entities.’’ 5 U.S.C. 

605(b). The agency must, however, 

publish the certification in the Federal 

Register at the time of publication of the 

rule, ‘‘along with a statement providing 

the factual basis for such certification.’’ 

If the agency head has not waived the 

requirements for a regulatory flexibility 

analysis in accordance with the RFA’s 

waiver provision, and no other RFA 

exception applies, the agency must 

prepare the regulatory flexibility 

analysis and publish it in the Federal 

Register at the time of promulgation or, 

if the rule is promulgated in response to 

an emergency that makes timely 

compliance impracticable, within 180 

days of publication of the final rule. 5 

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

exempt from notice and comment are 

also exempt from the RFA requirements, 

including conducting a regulatory 

flexibility analysis, when among other 

things the agency for good cause finds 

that notice and public procedure are 

impracticable, unnecessary, or contrary 

to the public interest. SBA Office of 

Advocacy guide: How to Comply with 

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

Accordingly, SBA is not required to 

conduct a regulatory flexibility analysis. 

Jovita Carranza, 

Administrator. 

[FR Doc. 2020–10649 Filed 5–18–20; 8:45 am] 

BILLING CODE P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Parts 120 and 121 

[Docket Number SBA–2020–0029] 

RIN 3245–AH43 

Business Loan Program Temporary 

Changes; Paycheck Protection 

Program—Eligibility of Certain Electric 

Cooperatives 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Interim final rule. 

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

Small Business Administration (SBA) 

posted an interim final rule announcing 

the implementation of the Coronavirus 

Aid, Relief, and Economic Security Act 

(CARES Act). The CARES Act 

temporarily adds a new program, titled 

the ‘‘Paycheck Protection Program,’’ to 

the SBA’s 7(a) Loan Program. The 

CARES Act also provides for forgiveness 

of up to the full principal amount of 

qualifying loans guaranteed under the 

Paycheck Protection Program (PPP). The 

PPP is intended to provide economic 

relief to small businesses nationwide 

adversely impacted by the Coronavirus 

Disease 2019 (COVID–19). SBA posted 

additional interim final rules on April 3, 

2020, April 14, 2020, April 24, 2020, 

April 28, 2020, April 30, 2020, May 5, 

2020, and May 8, 2020, and the 

Department of the Treasury posted an 

additional interim final rule on April 

28, 2020. This interim final rule 

supplements the previously posted 

interim final rules by providing 

guidance on additional eligibility 

requirements for certain electric 

cooperatives, and requests public 

comment. 

DATES: 

Effective date: This rule is effective 

May 19, 2020. 

Applicability date: This interim final 

rule applies to applications submitted 

under the Paycheck Protection Program 

through June 30, 2020, or until funds 

made available for this purpose are 

exhausted. 

Comment date: Comments must be 

received on or before June 18, 2020. 

ADDRESSES: You may submit comments, 

identified by number SBA–2020–0029 

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. 

Highlight the information that you 

consider to be CBI and explain why you 

believe SBA should hold this 

information as confidential. SBA will 

review the information and make the 

final determination whether it will 

publish the information. 

FOR FURTHER INFORMATION CONTACT: A 

Call Center Representative at 833–572– 

0502, or the local SBA Field Office; the 

list of offices can be found at https://

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

districtoffices. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

On March 13, 2020, President Trump 

declared the ongoing Coronavirus 

Disease 2019 (COVID–19) pandemic of 

sufficient severity and magnitude to 

warrant an emergency declaration for all 

States, territories, and the District of 

Columbia. With the COVID–19 

emergency, many small businesses 

nationwide are experiencing economic 

hardship as a direct result of the 

Federal, State, tribal, and local public 

health measures that are being taken to 

minimize the public’s exposure to the 

virus. These measures, some of which 

29848 Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 

are government-mandated, are being 

implemented nationwide and include 

the closures of restaurants, bars, and 

gyms. In addition, based on the advice 

of public health officials, other 

measures, such as keeping a safe 

distance from others or even stay-athome orders, are being implemented, 

resulting in a dramatic decrease in 

economic activity as the public avoids 

malls, retail stores, and other 

businesses. 

On March 27, 2020, the President 

signed the Coronavirus Aid, Relief, and 

Economic Security Act (the CARES Act) 

(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 CARES 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 CARES 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 CARES 

Act provides for forgiveness of up to the 

full principal amount of qualifying 

loans guaranteed under the Paycheck 

Protection Program (PPP). 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. 

Among the categories of entities that 

are eligible PPP borrowers are business 

concerns and certain nonprofit 

organizations described in section 

501(c)(3) of the Internal Revenue Code 

(the Code). This interim final rule 

addresses the eligibility of electric 

cooperatives as PPP borrowers. Existing 

SBA regulations define a ‘‘business 

concern’’ as ‘‘a business entity 

organized for profit,’’ subject to certain 

limitations. 13 CFR 121.105(a)(1). 

Generally, electric cooperatives are 

organizations that are owned and 

controlled by members who receive 

services from the cooperative. Electric 

cooperatives periodically return any 

excess of net operating revenues over 

their cost of operations—generally 

referred to as ‘‘savings’’—to their 

member-owners. In addition, electric 

cooperatives meeting the description of 

section 501(c)(12) of the Code may be 

exempt from Federal income taxation 

under section 501(a) of the Code. To 

qualify for the exemption, an electric 

cooperative must receive at least 85 

percent of its income each year from its 

members. The 85 percent member 

income test is computed annually. An 

electric cooperative may be exempt in 

one year, lose exemption in another year 

if it does not derive at least 85 percent 

of its income from members, and 

become exempt in a third year. Because 

of their potential tax exemption under 

section 501(c)(12) of the Code, electric 

cooperatives have faced uncertainty 

about their eligibility to receive PPP 

loans. 

The Administrator, in consultation 

with the Secretary, understands that 

electric cooperatives are unusual in that 

they may be exempt from taxation or 

organized under state nonprofit statutes 

in certain jurisdictions, while they 

operate as businesses. For example, 

electric cooperatives provide utility 

services and distribute savings to their 

member-owners. Accordingly, as 

described below, to provide certainty to 

potential PPP loan applicants, this 

interim final rule provides that, for 

purposes of the PPP, an electric 

cooperative that is exempt from Federal 

income taxation under section 

501(c)(12) of the Code will be 

considered to be ‘‘a business entity 

organized for profit’’ under 13 CFR 

121.105(a)(1). As a result, such electric 

cooperatives are eligible PPP borrowers, 

as long as other eligibility requirements 

are met. 

II. Comments and Immediate Effective 

Date 

The intent of the Act is that SBA 

provide relief to America’s small 

businesses expeditiously. This intent, 

along with the dramatic decrease in 

economic activity nationwide, provides 

good cause for SBA to dispense with the 

30-day delayed effective date provided 

in the Administrative Procedure Act. 

Specifically, it is critical to meet 

lenders’ and borrowers’ need for clarity 

concerning program requirements as 

rapidly as possible because the last day 

eligible borrowers can apply for and 

receive a loan is June 30, 2020. 

This interim final rule supplements 

previous regulations and guidance on an 

important, discrete issue. The 

immediate effective date of this interim 

final rule will benefit lenders so that 

they can swiftly close and disburse 

loans to small businesses. This interim 

final rule is effective without advance 

notice and public comment because 

section 1114 of the Act authorizes SBA 

to issue regulations to implement Title 

I of the Act without regard to notice 

requirements. This rule is being issued 

to allow for immediate implementation 

of this program. Although this interim 

final rule is effective immediately, 

comments are solicited from interested 

members of the public on all aspects of 

the interim final rule, including section 

III below. These comments must be 

submitted on or before June 18, 2020. 

SBA will consider these comments and 

the need for making any revisions as a 

result of these comments. 

III. Paycheck Protection Program 

Additional Eligibility Criteria 

Overview 

The CARES Act was enacted to 

provide immediate assistance to 

individuals, families, and organizations 

affected by the COVID–19 emergency. 

Among the provisions contained in the 

CARES Act are provisions authorizing 

SBA to temporarily guarantee loans 

under the PPP. Loans under the PPP 

will be 100 percent guaranteed by SBA, 

and the full principal amount of the 

loans and any accrued interest may 

qualify for loan forgiveness. Additional 

information about the PPP is available 

in interim final rules published by SBA 

and the Department of the Treasury in 

the Federal Register (85 FR 20811, 85 

FR 20817, 85 FR 21747, 85 FR 23450, 

85 FR 23917, 85 FR 26321, 85 FR 26324, 

and 85 FR 27287) and the interim rule 

entitled ‘‘Business Loan Program 

Temporary Changes; Paycheck 

Protection Program—Requirements— 

Extension of Limited Safe Harbor with 

Respect to Certification Concerning 

Need for PPP Loan Request,’’ which 

SBA posted on May 8, 2020, and is 

published elsewhere in this issue of the 

Federal Register (collectively, the PPP 

Interim Final Rules). 

1. Eligibility of Certain Electric 

Cooperatives 

Are electric cooperatives that are 

exempt from Federal income taxation 

under section 501(c)(12) of the Internal 

Revenue Code eligible for a PPP loan? 

Yes. Electric cooperatives provide 

utility services and distribute savings to 

their member-owners. Accordingly, for 

purposes of the PPP, the Administrator, 

in consultation with the Secretary, has 

determined that an electric cooperative 

that is exempt from Federal income 

taxation under section 501(c)(12) of the 

Internal Revenue Code will be 

considered to be ‘‘a business entity 

organized for profit’’ for purposes of 13 

CFR 121.105(a)(1). As a result, such 

entities are eligible PPP borrowers, as 

long as other eligibility requirements are 

met. To be eligible, an electric 

cooperative must satisfy the employeebased size standard established in the 

CARES Act, SBA’s employee-based size 

standard corresponding to its primary 

industry, if higher, or both tests in 

Federal Register / Vol. 85, No. 97 / Tuesday, May 19, 2020 / Rules and Regulations 29849 

1Under the alternative size standard, a business 

concern, including an electric cooperative, can 

qualify for the PPP as a small business concern if, 

as of March 27, 2020: (1) The maximum tangible net 

worth of the business was not more than $15 

million; and (2) the average net income after 

Federal income taxes (excluding any carry-over 

losses) of the business for the two full fiscal years 

before the date of the application is not more than 

$5 million. For an electric cooperative that does not 

have net income, the cooperative’s savings 

distributed to its owner-members will be 

considered its net income. 

SBA’s ‘‘alternative size standard.’’ 1 The 

Administrator, in consultation with the 

Secretary, has determined that this 

treatment is appropriate to effectuate the 

purposes of the CARES Act to provide 

assistance to eligible PPP borrowers, 

including business concerns, affected by 

the COVID–19 emergency. 

2. Additional Information 

SBA may provide further guidance, if 

needed, through SBA notices that will 

be posted on SBA’s website at 

www.sba.gov. Questions on the 

Paycheck Protection Program may be 

directed to the Lender Relations 

Specialist in the local SBA Field Office. 

The local SBA Field Office may be 

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

local-assistance/districtoffices. 

Compliance With Executive Orders 

12866, 12988, 13132, 13563, and 13771, 

the Paperwork Reduction Act (44 U.S.C. 

Ch. 35), and the Regulatory Flexibility 

Act (5 U.S.C. 601–612) 

Executive Orders 12866, 13563, and 

13771 

This interim final rule is 

economically significant for the 

purposes of Executive Orders 12866 and 

13563, and is considered a major rule 

under the Congressional Review Act. 

SBA, however, is proceeding under the 

emergency provision at Executive Order 

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

need to move expeditiously to mitigate 

the current economic conditions arising 

from the COVID–19 emergency. This 

rule’s designation under Executive 

Order 13771 will be informed by public 

comment. 

Executive Order 12988 

SBA has drafted this rule, to the 

extent practicable, in accordance with 

the standards set forth in section 3(a) 

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

minimize litigation, eliminate 

ambiguity, and reduce burden. The rule 

has no preemptive or retroactive effect. 

Executive Order 13132 

SBA has determined that this rule 

will not have substantial direct effects 

on the States, on the relationship 

between the National Government and 

the States, or on the distribution of 

power and responsibilities among the 

various layers of government. Therefore, 

SBA has determined that this rule has 

no federalism implications warranting 

preparation of a federalism assessment. 

Paperwork Reduction Act, 44 U.S.C. 

Chapter 35 

SBA has determined that this rule 

will not impose new or modify existing 

recordkeeping or reporting requirements 

under the Paperwork Reduction Act. 

Regulatory Flexibility Act (RFA) 

The Regulatory Flexibility Act (RFA) 

generally requires that when an agency 

issues a proposed rule, or a final rule 

pursuant to section 553(b) of the APA or 

another law, the agency must prepare a 

regulatory flexibility analysis that meets 

the requirements of the RFA and 

publish such analysis in the Federal 

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

the RFA normally requires agencies to 

describe the impact of a rulemaking on 

small entities by providing a regulatory 

impact analysis. Such analysis must 

address the consideration of regulatory 

options that would lessen the economic 

effect of the rule on small entities. The 

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

proprietary firm meeting the size 

standards of the Small Business 

Administration (SBA); (2) a nonprofit 

organization that is not dominant in its 

field; or (3) a small government 

jurisdiction with a population of less 

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

for such small government jurisdictions, 

neither State nor local governments are 

‘‘small entities.’’ Similarly, for purposes 

of the RFA, individual persons are not 

small entities. The requirement to 

conduct a regulatory impact analysis 

does not apply if the head of the agency 

‘‘certifies that the rule will not, if 

promulgated, have a significant 

economic impact on a substantial 

number of small entities.’’ 5 U.S.C. 

605(b). The agency must, however, 

publish the certification in the Federal 

Register at the time of publication of the 

rule, ‘‘along with a statement providing 

the factual basis for such certification.’’ 

If the agency head has not waived the 

requirements for a regulatory flexibility 

analysis in accordance with the RFA’s 

waiver provision, and no other RFA 

exception applies, the agency must 

prepare the regulatory flexibility 

analysis and publish it in the Federal 

Register at the time of promulgation or, 

if the rule is promulgated in response to 

an emergency that makes timely 

compliance impracticable, within 180 

days of publication of the final rule. 5 

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

exempt from notice and comment are 

also exempt from the RFA requirements, 

including conducting a regulatory 

flexibility analysis, when among other 

things the agency for good cause finds 

that notice and public procedure are 

impracticable, unnecessary, or contrary 

to the public interest. SBA Office of 

Advocacy guide: How to Comply with 

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

Accordingly, SBA is not required to 

conduct a regulatory flexibility analysis. 

Jovita Carranza, 

Administrator. 

[FR Doc. 2020–10674 Filed 5–18–20; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF COMMERCE 

Bureau of Industry and Security 

15 CFR Parts 730, 732, 736, and 744 

[Docket No. 200514–0100] 

RIN 0694–AH99 

Export Administration Regulations: 

Amendments to General Prohibition 

Three (Foreign-Produced Direct 

Product Rule) and the Entity List 

AGENCY: Bureau of Industry and 

Security, Commerce. 

ACTION: Interim final rule; request for 

comments. 

SUMMARY: This rule amends General 

Prohibition Three, also known as the 

foreign-produced direct product rule, by 

exercising existing authority under the 

Export Control Reform Act of 2018 

(ECRA), to impose a new control over 

certain foreign-produced items, when 

there is knowledge that such items are 

destined to a designated entity on the 

Entity List. A foreign-produced item is 

subject to the new control if the entity 

for which the item is destined has a 

footnote 1 designation in the Entity List. 

This rule also applies this new control 

to Huawei Technologies Co., Ltd. 

(Huawei) and its non-U.S. affiliates 

listed as entities. The Bureau of Industry 

and Security (BIS) is requesting 

comments on the impact of this rule. 

DATES: 

Effective date: This rule is effective 

May 15, 2020. 

Comment date: Submit comments on 

or before July 14, 2020. 

ADDRESSES: You may submit comments, 

identified by docket number BIS 2020– 

0011 or RIN 0694–AH99, through the 

Federal eRulemaking Portal: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

All filers using the portal should use 

the name of the person or entity