Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations 21747 

Where: 

m ̇ SD = dry air mass flow rate of infiltration 

air for single-duct portable air 

conditioners, in pounds per minute (lb/ 

m). 

m ̇ 95 and m ̇ 83 = dry air mass flow rate of 

infiltration air for dual-duct portable air 

conditioners, as calculated based on 

testing according to the test conditions in 

Table 1 of this appendix, in lb/m. 

Vco_SD, Vco_95, and Vco_83 = average 

volumetric flow rate of the condenser 

outlet air during cooling mode testing for 

single-duct portable air conditioners; and 

at the 95 °F and 83 °F dry-bulb outdoor 

conditions for dual-duct portable air 

conditioners, respectively, in cubic feet 

per minute (cfm). 

Vci_95 and Vci_83 = average volumetric flow 

rate of the condenser inlet air during 

cooling mode testing at the 95 °F and 

83 °F dry-bulb outdoor conditions for 

dual-duct portable air conditioners, 

respectively, in cfm. 

rco_SD, rco_95, and rco_83 = average density of 

the condenser outlet air during cooling 

mode testing for single-duct portable air 

conditioners, and at the 95 °F and 83 °F 

dry-bulb outdoor conditions for dualduct portable air conditioners, 

respectively, in pounds mass per cubic 

foot (lbm/ft3). 

rci_95 and rci_83 = average density of the 

condenser inlet air during cooling mode 

testing at the 95 °F and 83 °F dry-bulb 

outdoor conditions for dual-duct 

portable air conditioners, respectively, in 

lbm/ft3. 

wco_SD, wco_95, and wco_83 = average humidity 

ratio of condenser outlet air during 

cooling mode testing for single-duct 

portable air conditioners, and at the 95 °F 

and 83 °F dry-bulb outdoor conditions 

for dual-duct portable air conditioners, 

respectively, in pounds mass of water 

vapor per pounds mass of dry air (lbw/ 

lbda). 

wci_95 and wci_83 = average humidity ratio of 

condenser inlet air during cooling mode 

testing at the 95 °F and 83 °F dry-bulb 

outdoor conditions for dual-duct 

portable air conditioners, respectively, in 

lbw/lbda. 

For single-duct and dual-duct portable air 

conditioners, calculate the sensible 

component of infiltration air heat 

contribution according to: 

Qs_95 = m ̇ × 60 × [(cp_da × (Tia_95¥Tindoor)) + 

(cp_wv × (wia_95 × Tia_95¥windoor × Tindoor))] 

Qs_83 = m ̇ × 60 × [(cp_da × (Tia_83¥Tindoor)) + 

(cp_wv × (wia_83 × Tia_83¥windoor × Tindoor))] 

Where: 

Qs_95 and Qs_83 = sensible heat added to the 

room by infiltration air, calculated at the 

95 °F and 83 °F dry-bulb outdoor 

conditions in Table 1 of this appendix, 

in Btu/h. 

m ̇ = dry air mass flow rate of infiltration air, 

m ̇ SD or m ̇ 95 when calculating Qs_95 and 

m ̇ SD or m ̇ 83 when calculating Qs_83, in lb/ 

m. 

cp_da = specific heat of dry air, 0.24 Btu/lbm- 

°F. 

cp_wv = specific heat of water vapor, 0.444 

Btu/lbm-°F. 

Tindoor = indoor chamber dry-bulb 

temperature, 80 °F. 

Tia_95 and Tia_83 = infiltration air dry-bulb 

temperatures for the two test conditions 

in Table 1 of this appendix, 95 °F and 

83 °F, respectively. 

wia_95 and wia_83 = humidity ratios of the 

95 °F and 83 °F dry-bulb infiltration air, 

0.0141 and 0.01086 lbw/lbda, 

respectively. 

windoor = humidity ratio of the indoor chamber 

air, 0.0112 lbw/lbda. 

60 = conversion factor from minutes to hours. 

Calculate the latent heat contribution of the 

infiltration air according to: 

Ql_95 = m ̇ × 60 × Hfg × (wia_95¥windoor) 

Ql_83 = m ̇ × 60 × Hfg × (wia_83¥windoor) 

Where: 

Ql_95 and Ql_83 = latent heat added to the 

room by infiltration air, calculated at the 

95 °F and 83 °F dry-bulb outdoor 

conditions in Table 1 of this appendix, 

in Btu/h. 

m ̇ = mass flow rate of infiltration air, m ̇ SD or 

m ̇ 95 when calculating Ql_95 and m ̇ SD or 

m ̇ 83 when calculating Ql_83, in lb/m. 

Hfg = latent heat of vaporization for water 

vapor, 1061 Btu/lbm. 

wia_95 and wia_83 = humidity ratios of the 

95 °F and 83 °F dry-bulb infiltration air, 

0.0141 and 0.01086 lbw/lbda, 

respectively. 

windoor = humidity ratio of the indoor chamber 

air, 0.0112 lbw/lbda. 

60 = conversion factor from minutes to hours. 

The total heat contribution of the 

infiltration air is the sum of the sensible and 

latent heat: 

Qinfiltration_95 = Qs_95 + Ql_95

Qinfiltration_83 = Qs_83 + Ql_83

Where: 

Qinfiltration_95 and Qinfiltration_83 = total 

infiltration air heat in cooling mode, 

calculated at the 95 °F and 83 °F dry-bulb 

outdoor conditions in Table 1 of this 

appendix, in Btu/h. 

Qs_95 and Qs_83 = sensible heat added to the 

room by infiltration air, calculated at the 

95 °F and 83 °F dry-bulb outdoor 

conditions in Table 1 of this appendix, 

in Btu/h. 

Ql_95 and Ql_83 = latent heat added to the 

room by infiltration air, calculated at the 

95 °F and 83 °F dry-bulb outdoor 

conditions in Table 1 of this appendix, 

in Btu/h. 

* * * * * 

[FR Doc. 2020–07733 Filed 4–17–20; 8:45 am] 

BILLING CODE 6450–01–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 120 

[Docket Number SBA–2020–0020] 

RIN 3245–AH36 

Business Loan Program Temporary 

Changes; Paycheck Protection 

Program—Additional Eligibility Criteria 

and Requirements for Certain Pledges 

of Loans 

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 (the First 

PPP Interim Final Rule) announcing the 

implementation of sections 1102 and 

1106 of the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act or 

the Act). Section 1102 of the Act 

temporarily adds a new program, titled 

the ‘‘Paycheck Protection Program,’’ to 

the SBA’s 7(a) Loan 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 (PPP). The 

PPP is intended to provide economic 

relief to small businesses nationwide 

adversely impacted by the Coronavirus 

Disease 2019 (COVID–19). This interim 

final rule supplements the First PPP 

Interim Final Rule with guidance for 

individuals with self-employment 

income who file a Form 1040, Schedule 

C. This rule also addresses eligibility 

issues for certain business concerns and 

requirements for certain pledges of PPP 

loans. This interim final rule 

supplements SBA’s implementation of 

sections 1102 and 1106 of the Act and 

requests public comment. 

DATES: 

Effective Date: This rule is effective 

April 20, 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 May 20, 2020. 

ADDRESSES: You may submit comments, 

identified by number SBA–2020–0020 

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. 


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21748 Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations 

Highlight the information that you 

consider to be CBI and explain why you 

believe SBA should hold this 

information as confidential. SBA will 

review the information and make the 

final determination whether it will 

publish the information. 

FOR FURTHER INFORMATION CONTACT: A 

Call Center Representative at 833–572– 

0502, or the local SBA Field Office; the 

list of offices can be found at https://

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

districtoffices. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

On March 13, 2020, President Trump 

declared the ongoing Coronavirus 

Disease 2019 (COVID–19) pandemic of 

sufficient severity and magnitude to 

warrant an emergency declaration for all 

States, territories, and the District of 

Columbia. With the COVID–19 

emergency, many small businesses 

nationwide are experiencing economic 

hardship as a direct result of the 

Federal, State, tribal, and local public 

health measures that are being taken to 

minimize the public’s exposure to the 

virus. These measures, some of which 

are government-mandated, are being 

implemented nationwide and include 

the closures of restaurants, bars, and 

gyms. In addition, based on the advice 

of public health officials, other 

measures, such as keeping a safe 

distance from others or even stay-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 

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. 

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, small businesses need to be 

informed on whether they are eligible to 

apply for a loan, how to apply for a 

loan, and the terms of the loan under 

section 1102 of the Act as soon as 

possible because the last day to apply 

for and receive a loan is June 30, 2020. 

The immediate effective date of this 

interim final rule will benefit small 

businesses so that they can immediately 

determine their eligibility and apply for 

the loan with a full understanding of 

loan terms and conditions. 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 May 20, 2020. 

SBA will consider these comments and 

the need for making any revisions as a 

result of these comments. 

III. Additional Paycheck Protection 

Program Eligibility Criteria and 

Requirements for Certain Pledges of 

Loans 

Overview 

The CARES Act was enacted to 

provide immediate assistance to 

individuals, families, and organizations 

affected by the COVID–19 emergency. 

Among the provisions contained in the 

CARES Act are provisions authorizing 

SBA to temporarily guarantee loans 

under the Paycheck Protection Program 

(PPP). Loans under the PPP 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 the First 

PPP Interim Final Rule (85 FR 20811) 

and a second interim final rule (85 FR 

20817) posted April 3, 2020. 

1. Individuals With Self-Employment 

Income Who File a Form 1040, 

Schedule C 

a. I have income from selfemployment and file a Form 1040, 

Schedule C. Am I eligible for a PPP 

Loan? 

You are eligible for a PPP loan if: (i) 

You were in operation on February 15, 

2020; (ii) you are an individual with 

self-employment income (such as an 

independent contractor or a sole 

proprietor); (iii) your principal place of 

residence is in the United States; and 

(iv) you filed or will file a Form 1040 

Schedule C for 2019. However, if you 

are a partner in a partnership, you may 

not submit a separate PPP loan 

application for yourself as a selfemployed individual. Instead, the selfemployment income of general active 

partners may be reported as a payroll 

cost, up to $100,000 annualized, on a 

PPP loan application filed by or on 

behalf of the partnership. Partnerships 

are eligible for PPP loans under the Act, 

and the Administrator has determined, 

in consultation with the Secretary of the 

Treasury (Secretary), that limiting a 

partnership and its partners (and an LLC 

filing taxes as a partnership) to one PPP 

loan is necessary to help ensure that as 

many eligible borrowers as possible 

obtain PPP loans before the statutory 

deadline of June 30, 2020. This 

limitation will allow lenders to more 

quickly process applications and lower 

the burdens of applying for 

partnerships/partners. The 

Administrator has further determined 

that permitting partners to apply as selfemployed individuals would create 

unnecessary confusion regarding which 

entity, the partner or the partnership, 

applies for partner and LLC member 

income, and would generate loan 

proceeds use coordination and 

allocation issues. Rent, mortgage 

interest, utilities, and other debt service 

are generally incurred at the partnership 

level, not partner level, so it is most 

natural to provide the funds for these 

expenses to the partnership, not 

individual partners. In addition, you 

should be aware that participation in 

the PPP may affect your eligibility for 

state-administered unemployment 

compensation or unemployment 

assistance programs, including the 

programs authorized by Title II, Subtitle 

A of the CARES Act, or CARES Act 

Employee Retention Credits. SBA will 

issue additional guidance for those 

individuals with self-employment 

income who: (i) Were not in operation 

in 2019 but who were in operation on 

February 15, 2020, and (ii) will file a 

Form 1040 Schedule C for 2020. 


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Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations 21749 

b. How do I calculate the maximum 

amount I can borrow and what 

documentation is required? 

How you calculate your maximum 

loan amount depends upon whether or 

not you employ other individuals. If you 

have no employees, the following 

methodology should be used to 

calculate your maximum loan amount: 

i. Step 1: Find your 2019 IRS Form 

1040 Schedule C line 31 net profit 

amount (if you have not yet filed a 2019 

return, fill it out and compute the 

value). If this amount is over $100,000, 

reduce it to $100,000. If this amount is 

zero or less, you are not eligible for a 

PPP loan. 

ii. Step 2: Calculate the average 

monthly net profit amount (divide the 

amount from Step 1 by 12). 

iii. Step 3: Multiply the average 

monthly net profit amount from Step 2 

by 2.5. 

iv. Step 4: Add the outstanding 

amount of any Economic Injury Disaster 

Loan (EIDL) made between January 31, 

2020 and April 3, 2020 that you seek to 

refinance, less the amount of any 

advance under an EIDL COVID–19 loan 

(because it does not have to be repaid). 

Regardless of whether you have filed 

a 2019 tax return with the IRS, you must 

provide the 2019 Form 1040 Schedule C 

with your PPP loan application to 

substantiate the applied-for PPP loan 

amount and a 2019 IRS Form 1099– 

MISC detailing nonemployee 

compensation received (box 7), invoice, 

bank statement, or book of record that 

establishes you are self-employed. You 

must provide a 2020 invoice, bank 

statement, or book of record to establish 

you were in operation on or around 

February 15, 2020. 

If you have employees, the following 

methodology should be used to 

calculate your maximum loan amount: 

i. Step 1: Compute 2019 payroll by 

adding the following: 

a. Your 2019 Form 1040 Schedule C 

line 31 net profit amount (if you have 

not yet filed a 2019 return, fill it out and 

compute the value), up to $100,000 

annualized, if this amount is over 

$100,000, reduce it to $100,000, if this 

amount is less than zero, set this 

amount at zero; 

b. 2019 gross wages and tips paid to 

your employees whose principal place 

of residence is in the United States 

computed using 2019 IRS Form 941 

Taxable Medicare wages & tips (line 

5c—column 1) from each quarter plus 

any pre-tax employee contributions for 

health insurance or other fringe benefits 

excluded from Taxable Medicare wages 

& tips; subtract any amounts paid to any 

individual employee in excess of 

$100,000 annualized and any amounts 

paid to any employee whose principal 

place of residence is outside the United 

States; and 

c. 2019 employer health insurance 

contributions (health insurance 

component of Form 1040 Schedule C 

line 14), retirement contributions (Form 

1040 Schedule C line 19), and state and 

local taxes assessed on employee 

compensation (primarily under state 

laws commonly referred to as the State 

Unemployment Tax Act or SUTA from 

state quarterly wage reporting forms). 

ii. Step 2: Calculate the average 

monthly amount (divide the amount 

from Step 1 by 12). 

iii. Step 3: Multiply the average 

monthly amount from Step 2 by 2.5. 

iv. Step 4: Add the outstanding 

amount of any EIDL made between 

January 31, 2020 and April 3, 2020 that 

you seek to refinance, less the amount 

of any advance under an EIDL COVID– 

19 loan (because it does not have to be 

repaid). 

You must supply your 2019 Form 

1040 Schedule C, Form 941 (or other tax 

forms or equivalent payroll processor 

records containing similar information) 

and state quarterly wage unemployment 

insurance tax reporting forms from each 

quarter in 2019 or equivalent payroll 

processor records, along with evidence 

of any retirement and health insurance 

contributions, if applicable. A payroll 

statement or similar documentation 

from the pay period that covered 

February 15, 2020 must be provided to 

establish you were in operation on 

February 15, 2020. 

d. How can PPP loans be used by 

individuals with income from selfemployment who file a 2019 Form 1040, 

Schedule C? 

The proceeds of a PPP loan are to be 

used for the following. 

i. Owner compensation replacement, 

calculated based on 2019 net profit as 

described in Paragraph 1.b. above. 

ii. Employee payroll costs (as defined 

in the First PPP Interim Final Rule) for 

employees whose principal place of 

residence is in the United States, if you 

have employees. 

iii. Mortgage interest payments (but 

not mortgage prepayments or principal 

payments) on any business mortgage 

obligation on real or personal property 

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

the warehouse you purchased to store 

business equipment or the interest on an 

auto loan for a vehicle you use to 

perform your business), business rent 

payments (e.g., the warehouse where 

you store business equipment or the 

vehicle you use to perform your 

business), and business utility payments 

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

warehouse you rent or gas you use 

driving your business vehicle). You 

must have claimed or be entitled to 

claim a deduction for such expenses on 

your 2019 Form 1040 Schedule C for 

them to be a permissible use during the 

eight-week period following the first 

disbursement of the loan (the ‘‘covered 

period’’). For example, if you did not 

claim or are not entitled to claim 

utilities expenses on your 2019 Form 

1040 Schedule C, you cannot use the 

proceeds for utilities during the covered 

period. 

iv. Interest payments on any other 

debt obligations that were incurred 

before February 15, 2020 (such amounts 

are not eligible for PPP loan 

forgiveness). 

v. Refinancing an SBA EIDL loan 

made between January 31, 2020 and 

April 3, 2020 (maturity will be reset to 

PPP’s maturity of two years). If you 

received an SBA EIDL loan from January 

31, 2020 through April 3, 2020, you can 

apply for a PPP loan. If your EIDL loan 

was not used for payroll costs, it does 

not affect your eligibility for a PPP loan. 

If your EIDL loan was used for payroll 

costs, your PPP loan must be used to 

refinance your EIDL loan. Proceeds from 

any advance up to $10,000 on the EIDL 

loan will be deducted from the loan 

forgiveness amount on the PPP loan. 

The Administrator, in consultation 

with the Secretary, determined that it is 

appropriate to limit self-employed 

individuals’ (who file a Form 1040 

Schedule C) use of loan proceeds to 

those types of allowable uses for which 

the borrower made expenditures in 

2019. The Administrator has 

determined that this limitation on selfemployed individuals who file a Form 

1040 Schedule C is consistent with the 

borrower certification required by the 

Act; specifically, that the PPP loan is 

necessary ‘‘to support the ongoing 

operations’’ of the borrower. The 

Administrator and the Secretary thus 

believe that this limitation is consistent 

with the structure of the Act to maintain 

existing operations and payroll and not 

for business expansion. This limitation 

on the use of PPP loan proceeds will 

also help to ensure that the finite 

appropriations available for these loans 

are directed toward maintaining existing 

operations and payroll, as each loan that 

is made depletes the appropriation. 

Finally, although the Act makes 

businesses in operation on February 15, 

2020 eligible for PPP loans, the 

Administrator, in consultation with the 

Secretary, has determined that selfemployed individuals will need to rely 

on their 2019 Form 1040 Schedule C, 

which provides verifiable 

documentation on expenses between 

January 1, 2019 and December 31, 2019. 


jbell on DSKJLSW7X2PROD with RULES
21750 Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations 

For individuals with income from selfemployment from 2019 for which they 

have filed or will file a 2019 Form 1040 

Schedule C, expenses incurred between 

January 1, 2020 and February 14, 2020 

may not be considered because of the 

lack of verifiable documentation on 

expenses in this period. SBA will issue 

additional guidance for those 

individuals with self-employment 

income who: (i) Were not in operation 

in 2019 but who were in operation on 

February 15, 2020, and (ii) will file a 

Form 1040 Schedule C for 2020. 

e. Are there any other restrictions on 

how I can use PPP loan proceeds? 

Yes. At least 75 percent of the PPP 

loan proceeds shall be used for payroll 

costs. For purposes of determining the 

percentage of use of proceeds for payroll 

costs (but not for forgiveness purposes), 

the amount of any refinanced EIDL will 

be included. The rationale for this 75 

percent floor is contained in the First 

PPP Interim Final Rule. 

f. What amounts shall be eligible for 

forgiveness? 

The amount of loan forgiveness can be 

up to the full principal amount of the 

loan plus accrued interest. The actual 

amount of loan forgiveness will depend, 

in part, on the total amount spent over 

the covered period on: 

i. Payroll costs including salary, 

wages, and tips, up to $100,000 of 

annualized pay per employee (for eight 

weeks, a maximum of $15,385 per 

individual), as well as covered benefits 

for employees (but not owners), 

including health care expenses, 

retirement contributions, and state taxes 

imposed on employee payroll paid by 

the employer (such as unemployment 

insurance premiums); 

ii. owner compensation replacement, 

calculated based on 2019 net profit as 

described in Paragraph 1.b. above, with 

forgiveness of such amounts limited to 

eight weeks’ worth (8/52) of 2019 net 

profit, but excluding any qualified sick 

leave equivalent amount for which a 

credit is claimed under section 7002 of 

the Families First Coronavirus Response 

Act (FFCRA) (Pub. L. 116–127) or 

qualified family leave equivalent 

amount for which a credit is claimed 

under section 7004 of FFCRA; 

iii. payments of interest on mortgage 

obligations on real or personal property 

incurred before February 15, 2020, to 

the extent they are deductible on Form 

1040 Schedule C (business mortgage 

payments); 

iv. rent payments on lease agreements 

in force before February 15, 2020, to the 

extent they are deductible on Form 1040 

Schedule C (business rent payments); 

and 

v. utility payments under service 

agreements dated before February 15, 

2020 to the extent they are deductible 

on Form 1040 Schedule C (business 

utility payments). 

The Administrator, in consultation 

with the Secretary, has determined that 

it is appropriate to limit the forgiveness 

of owner compensation replacement for 

individuals with self-employment 

income who file a Schedule C to eight 

weeks’ worth (8/52) of 2019 net profit. 

This is most consistent with the 

structure of the Act and its overarching 

focus on keeping workers paid, and will 

prevent windfalls that Congress did not 

intend. 

Congress determined that the 

maximum loan amount is based on 2.5 

months of the borrower’s payroll during 

the one-year period preceding the loan. 

Congress also determined that the 

maximum amount of loan forgiveness is 

based on the borrower’s eligible 

payments—i.e., the sum of payroll costs 

and certain overhead expenses—over 

the eight-week period following the date 

of loan disbursement. For individuals 

with self-employment income who file 

a Schedule C, the Administrator, in 

consultation with the Secretary, has 

determined that it is appropriate to limit 

loan forgiveness to a proportionate 

eight-week share of 2019 net profit, as 

reflected in the individual’s 2019 Form 

1040 Schedule C. This is because many 

self-employed individuals have few of 

the overhead expenses that qualify for 

forgiveness under the Act. For example, 

many such individuals operate out of 

either their homes, vehicles, or sheds 

and thus do not incur qualifying 

mortgage interest, rent, or utility 

payments. As a result, most of their 

receipts will constitute net income. 

Allowing such a self-employed 

individual to treat the full amount of a 

PPP loan as net income would result in 

a windfall. The entire amount of the 

PPP loan (a maximum of 2.5 times 

monthly payroll costs) would be 

forgiven even though Congress designed 

this program to limit forgiveness to 

certain eligible expenses incurred in an 

eight-week covered period. Limiting 

forgiveness to eight weeks of net profit 

from the owner’s 2019 Form 1040 

Schedule C is consistent with the 

structure of the Act, which provides for 

loan forgiveness based on eight weeks of 

expenditures. This limitation will also 

help to ensure that the finite 

appropriations are directed toward 

payroll protection, consistent with the 

Act’s central objective. Finally, 75 

percent of the amount forgiven must be 

attributable to payroll costs for the 

reasons specified in the First PPP 

Interim Final Rule. 

g. What documentation will I be 

required to submit to my lender with my 

request for loan forgiveness? 

In addition to the borrower 

certification required by Section 

1106(e)(3) of the Act, to substantiate 

your request for loan forgiveness, if you 

have employees, you should submit 

Form 941 and state quarterly wage 

unemployment insurance tax reporting 

forms or equivalent payroll processor 

records that best correspond to the 

covered period (with evidence of any 

retirement and health insurance 

contributions). Whether or not you have 

employees, you must submit evidence 

of business rent, business mortgage 

interest payments on real or personal 

property, or business utility payments 

during the covered period if you used 

loan proceeds for those purposes. 

The 2019 Form 1040 Schedule C that 

was provided at the time of the PPP loan 

application must be used to determine 

the amount of net profit allocated to the 

owner for the eight-week covered 

period. The Administrator, in 

consultation with the Secretary, 

determined that for purposes of loan 

forgiveness it is appropriate to require 

self-employed individuals to rely on the 

2019 Form 1040 Schedule C to 

determine the amount of net profit 

allocated to the owner during the 

covered period for the reasons described 

in Paragraph 1.d. above. 

2. Clarification Regarding Eligible 

Businesses 

a. Are eligible businesses owned by 

directors or shareholders of a PPP 

Lender permitted to apply for a PPP 

Loan through the Lender with which 

they are associated? 

The Administrator recognizes that, 

unlike other SBA loan programs, the 

financial terms for PPP Loans are 

uniform for all borrowers, and the 

standard underwriting process does not 

apply because no creditworthiness 

assessment is required for PPP Loans. 

Consequently, there is no meaningful 

risk of underwriting bias or belowmarket rates and terms. The 

Administrator also recognizes that many 

directors and equity holders of PPP 

Lenders are owners of unrelated 

businesses. For those reasons, the 

Administrator, in consultation with the 

Secretary, has determined that SBA 

regulations (including 13 CFR 120.110 

and 120.140) shall not apply to prohibit 

an otherwise eligible business owned 

(in whole or part) by an outside director 

or holder of a less than 30 percent 

equity interest in a PPP Lender from 

obtaining a PPP loan from the PPP 

Lender on whose board the director 

serves or in which the equity owner 


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Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations 21751 

holds an interest, provided that the 

eligible business owned by the director 

or equity holder follows the same 

process as any similarly situated 

customer or account holder of the 

Lender. Favoritism by the Lender in 

processing time or prioritization of the 

director’s or equity holder’s PPP 

application is prohibited. The 

Administrator cautions, however, that 

Lenders should comply with all other 

applicable state and federal regulations 

concerning loans to associates of the 

Lender. Lenders should also consult 

their own internal policies concerning 

lending to individuals or entities 

associated with the Lender. 

The foregoing paragraph does not 

apply to a director or owner who is also 

an officer or key employee of the PPP 

Lender. Officers and key employees of 

a PPP Lender may obtain a PPP Loan 

from a different lender, but not from the 

PPP Lender with which they are 

associated. SBA also reminds Lenders 

that the ‘‘Authorized Lender Official’’ 

for each PPP Loan is subject to the 

limitations described in the Lender 

Application Form, which states in 

relevant part: ‘‘Neither the undersigned 

Authorized Lender Official, nor such 

individual’s spouse or children, has a 

financial interest in the Applicant 

[Borrower].’’ 

b. Are businesses that receive revenue 

from legal gaming eligible for a PPP 

Loan? 

A business that is otherwise eligible 

for a PPP Loan is not rendered ineligible 

due to its receipt of legal gaming 

revenues if the existing standard in 13 

CFR 120.110(g) is met or the following 

two conditions are satisfied: (a) The 

business’s legal gaming revenue (net of 

payouts but not other expenses) did not 

exceed $1 million in 2019; and (b) legal 

gaming revenue (net of payouts but not 

other expenses) comprised less than 50 

percent of the business’s total revenue 

in 2019. Businesses that received illegal 

gaming revenue are categorically 

ineligible. The Administrator, in 

consultation with the Secretary, believes 

this test appropriately balances the 

longstanding policy reasons for limiting 

lending to businesses primarily and 

substantially engaged in gaming activity 

with the policy aim of making the PPP 

Loan available to a broad segment of 

U.S. businesses and their employees. 

3. Requirements for Certain Pledges of 

PPP Loans 

Do the requirements for loan pledges 

under 13 CFR 120.434 apply to PPP 

loans pledged for borrowings from a 

Federal Reserve Bank (FRB) or advances 

by a Federal Home Loan Bank (FHLB)? 

No. Pursuant to SBA regulations at 13 

CFR 120.435(d) and (e), a pledge of 7(a) 

loans to a FRB or FHLB does not require 

SBA’s prior written consent or notice to 

SBA. SBA, in consultation with 

Treasury, has determined that for 

purposes of loans made under the PPP, 

the additional requirements set forth in 

120.434 shall also not apply. This 

would mean, for example, that SBA 

would not have to approve loan 

documents or require a multi-party 

agreement among SBA, the lender, and 

others. 

4. 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 


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21752 Federal Register / Vol. 85, No. 76 / Monday, April 20, 2020 / Rules and Regulations 

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. 

List of Subjects in 13 CFR Part 120 

Community development, 

Environmental protection, Equal 

employment opportunity, Exports, Loan 

programs—business, Reporting and 

recordkeeping requirements, Small 

businesses. 

For the reasons stated above, the 

Small Business Administration amends 

13 CFR part 120 as set forth below. 

PART 120—BUSINESS LOANS 

■ 1. The authority citation for part 120 

continues to read as follows: 

Authority: 15 U.S.C. 634(b)(6), (b)(7), 

(b)(14), (h), and note, 636(a), (h) and (m), and 

note, 650, 657t, and note, 657u, and note, 

687(f), 696(3) and (7), and note, and 697(a) 

and (e), and note. 

■ 2. Revise § 120.435 to read as follows: 

§ 120.435 Which loan pledges do not 

require notice to or consent by SBA? 

(a) Notwithstanding the provisions of 

§ 120.434(e), 7(a) loans may be pledged 

for the following purposes without 

notice to or consent by SBA: 

(1) Treasury tax and loan accounts; 

(2) The deposit of public funds; 

(3) Uninvested trust funds; 

(4) Borrowings from a Federal Reserve 

Bank; or 

(5) Advances by a Federal Home Loan 

Bank. 

(b) For purposes of the Paycheck 

Protection Program (PPP), the other 

provisions of § 120.434 shall also not 

apply to PPP loans pledged under 

paragraph (a)(4) or (5) of this section. 

Jovita Carranza, 

Administrator. 

[FR Doc. 2020–08257 Filed 4–17–20; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2019–1074; Product 

Identifier 2019–NM–191–AD; Amendment 

39–19900; AD 2020–07–21] 

RIN 2120–AA64 

Airworthiness Directives; Yabora ̃

Indu ́ stria Aerona ́utica S.A. (Type 

Certificate Previously Held by Embraer 

S.A.) Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Final rule. 

SUMMARY: The FAA is adopting a new 

airworthiness directive (AD) for certain 

Yabora ̃ Indu ́ stria Aerona ́utica S.A. 

Model ERJ–170 airplanes and Model ERJ 

190–100 STD, –100 LR, –100 ECJ, –100 

IGW, –200 STD, –200 LR, and –200 IGW 

airplanes. This AD was prompted by a 

determination that certain main landing 

gear (MLG) aft pintle pins repaired 

using a sulphamate nickel plating have 

a life limit that is less than the certified 

life limit. This AD requires a one-time 

records review or a general visual 

inspection (GVI) of the MLG aft pintle 

pins to determine if certain repairs were 

done, and replacement of certain MLG 

aft pintle pins with serviceable MLG aft 

pintle pins, as specified in an Ageˆncia 

Nacional de Aviac ̧a ̃o Civil (ANAC) 

Brazilian AD, which is incorporated by 

reference. The FAA is issuing this AD 

to address the unsafe condition on these 

products. 

DATES: This AD is effective May 26, 

2020. 

The Director of the Federal Register 

approved the incorporation by reference 

of a certain publication listed in this AD 

as of May 26, 2020. 

ADDRESSES: For the material 

incorporated by reference (IBR) in this 

AD contact National Civil Aviation 

Agency, Aeronautical Products 

Certification Branch (GGCP), Rua 

Laurent Martins, n° 209, Jardim 

Esplanada, CEP 12242–431—Sa ̃o Jose ́

dos Campos—SP, Brazil; telephone 55 

(12) 3203–6600; email pac@anac.gov.br; 

internet www.anac.gov.br/en/. You may 

find this IBR material on the ANAC 

website at https://sistemas.anac.gov.br/ 

certificacao/DA/DAE.asp. You may 

view this IBR material at the FAA, 

Transport Standards Branch, 2200 

South 216th St., Des Moines, WA. For 

information on the availability of this 

material at the FAA, call 206–231–3195. 

It is also available in the AD docket on 

the internet at https://

www.regulations.gov by searching for 

and locating Docket No. FAA–2019– 

1074. 

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–2019– 

1074; 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 regulatory evaluation, any 

comments received, and other 

information. The address for Docket 

Operations is U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

FOR FURTHER INFORMATION CONTACT: 

Krista Greer, Aerospace Engineer, 

International Section, Transport 

Standards Branch, FAA, 2200 South 

216th St., Des Moines, WA 98198; 

telephone and fax 206–231–3221; email 

krista.greer@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Discussion 

The ANAC, which is the aviation 

authority for Brazil, has issued Brazilian 

AD 2019–11–07, effective November 18, 

2019 (‘‘Brazilian AD 2019–11–07’’) (also 

referred to as the Mandatory Continuing 

Airworthiness Information, or ‘‘the 

MCAI’’), to correct an unsafe condition 

for certain Yabora ̃ Indu ́ stria Aerona ́utica 

S.A. Model ERJ 170–100 LR, –100 STD, 

–100 SE, and –100 SU airplanes; Model 

ERJ 170–200 LR, –200 SU, –200 STD, 

and –200 LL airplanes; and Model ERJ 

190–100 STD, –100 LR, –100 ECJ, –100 

IGW, –100 SR, –200 STD, –200 LR, and 

–200 IGW airplanes. Model ERJ 190–100 

SR airplanes are not certified by the 

FAA and are not included on the U.S. 

type certificate data sheet; this AD, 

therefore, does not include those 

airplanes in the applicability. 

The FAA issued a notice of proposed 

rulemaking (NPRM) to amend 14 CFR 

part 39 by adding an AD that would 

apply to certain Yabora ̃ Indu ́ stria 

Aerona ́utica S.A. Model ERJ 170–100 

LR, –100 STD, –100 SE, and –100 SU 

airplanes; Model ERJ 170–200 LR, –200 

SU, –200 STD, and –200 LL airplanes; 

and Model ERJ 190–100 STD, –100 LR, 

–100 ECJ, –100 IGW, –200 STD, –200 

LR, and –200 IGW airplanes. The NPRM 

published in the Federal Register on 

January 17, 2020 (85 FR 2909). The 

NPRM was prompted by a 

determination that certain MLG aft 

pintle pins repaired using a sulphamate 


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