This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

8283 

Vol. 86, No. 23 

Friday, February 5, 2021 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1026 

[Docket No. CFPB–2020–0028] 

RIN 3170–AA98 

Qualified Mortgage Definition Under 

the Truth in Lending Act (Regulation 

Z): Seasoned QM Loan Definition; 

Correction 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Final rule; correction. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) recently 

published ‘‘Qualified Mortgage 

Definition Under the Truth in Lending 

Act (Regulation Z): Seasoned QM Loan 

Definition,’’ which appeared in the 

Federal Register on December 29, 2020. 

This document corrects a scrivener’s 

error in an amendatory instruction in 

that document. 

DATES: Effective March 1, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Amanda Quester, Senior Counsel, Office 

of Regulations, at (202) 435–7700. If you 

require this document in an alternative 

electronic format, please contact CFPB_

Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: In FR Doc. 

2020–27571 appearing on page 86402 in 

the Federal Register of Tuesday, 

December 29, 2020, the following 

correction is made: 

§ 1026.43 [Corrected]

■ On page 86452, in the second column, 

in amendment 2, the instruction

‘‘Amend § 1026.43 by revising

paragraphs (e)(1) and (e)(2) introductory

text and adding paragraph (e)(7) to read

as follows: ’’ is corrected to read:

‘‘Amend § 1026.43 by revising the

headings for paragraphs (e) and (e)(1)

and paragraphs (e)(1)(i) and (e)(2)

introductory text and adding paragraph

(e)(7) to read as follows:’’.

Dated: January 15, 2021. 

Grace Feola, 

Federal Register Liaison, Bureau of Consumer 

Financial Protection. 

[FR Doc. 2021–01387 Filed 2–4–21; 8:45 am] 

BILLING CODE 4810–AM–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 120 

[Docket Number SBA–2021–0006] 

RIN 3245–AH65 

DEPARTMENT OF THE TREASURY 

RIN 1505–AC75 

Business Loan Program Temporary 

Changes; Paycheck Protection 

Program—Loan Forgiveness 

Requirements and Loan Review 

Procedures as Amended by Economic 

Aid Act 

AGENCY: U.S. Small Business 

Administration; Department of the 

Treasury. 

ACTION: Interim final rule. 

SUMMARY: This interim final rule 

implements changes related to the 

forgiveness and review of loans made 

under the Paycheck Protection Program 

(PPP), which was originally established 

under the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act) to 

provide economic relief to small 

businesses nationwide adversely 

impacted by the Coronavirus Disease 

2019 (COVID–19). On December 27, 

2020, the Economic Aid to Hard-Hit 

Small Businesses, Nonprofits, and 

Venues Act (Economic Aid Act) was 

enacted, extending the authority to 

make PPP loans through March 31, 

2021, revising certain PPP requirements, 

and permitting second draw PPP loans. 

This interim final rule consolidates 

prior rules related to forgiveness and 

reviews of PPP loans and incorporates 

changes made by the Economic Aid Act, 

including with respect to forgiveness of 

second draw PPP loans. 

DATES: 

Effective date: Unless otherwise 

specified in the Economic Aid Act, the 

provisions of this interim final rule are 

effective February 3, 2021. 

Applicability date: This interim final 

rule applies to Paycheck Protection 

Programs loans for which a loan 

forgiveness payment had not been 

remitted by SBA as of December 27, 

2020. Parts IV.6.c., IV.7 and V of this 

interim final rule, Paycheck Protection 

Program SBA Loan Review Procedures 

and Related Borrower and Lender 

Responsibilities, apply to all Paycheck 

Protection Program loans. 

Comment date: Comments must be 

received on or before March 8, 2021. 

ADDRESSES: You may submit comments, 

identified by number SBA–2021–0006 

through the Federal eRulemaking Portal: 

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

instructions for submitting comments. 

SBA will post all comments on 

www.regulations.gov. If you wish to 

submit confidential business 

information (CBI) as defined in the User 

Notice at www.regulations.gov, please 

send an email to ppp-ifr@sba.gov. All 

other comments must be submitted 

through the Federal eRulemaking Portal 

described above. Highlight the 

information that you consider to be CBI 

and explain why you believe SBA 

should hold this information as 

confidential. SBA will review the 

information and make the final 

determination whether it will publish 

the information. 

FOR FURTHER INFORMATION CONTACT: A 

Call Center Representative at 833–572– 

0502, or the local SBA Field Office; the 

list of offices can be found at https://

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

districtoffices. 

SUPPLEMENTARY INFORMATION: 

I. Background Information

On March 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 continue to experience 

economic hardship as a direct result of 

the Federal, State, and local public 

health measures that continue to be 

taken to minimize the public’s exposure 

to the virus. In addition, based on the 

advice of public health officials, other 

voluntary measures continue to be 

observed, resulting in a 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 


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8284 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 

1Because section 1106 of the CARES Act is now 

codified as section 7A of the Small Business Act, 

any reference to section 1106 of the CARES Act in 

the rules that are being restated herein will refer to 

section 7A. 

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 permitted SBA to guarantee 

100 percent of 7(a) loans under a new 

program titled the ‘‘Paycheck Protection 

Program,’’ pursuant to section 7(a)(36) 

of the Small Business Act (15 U.S.C. 

636(a)(36)). Section 1106 of the CARES 

Act provided for forgiveness of up to the 

full principal amount of qualifying 

loans guaranteed under the Paycheck 

Protection Program (PPP). On 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 Paycheck Protection 

Program. 

On June 5, 2020, the President signed 

the Paycheck Protection Program 

Flexibility Act of 2020 (Flexibility Act) 

(Pub. L. 116–142), which changed 

provisions of the PPP relating to the 

maturity of PPP loans, the deferral of 

PPP loan payments, and the forgiveness 

of PPP loans. On July 4, 2020, Public 

Law 116–147 extended the authority for 

SBA to guarantee PPP loans to August 

8, 2020. 

On December 27, 2020, the President 

signed the Economic Aid to Hard-Hit 

Small Businesses, Nonprofits and 

Venues Act (Economic Aid Act) (Pub. L. 

116–260), which reauthorizes lending 

under the PPP through March 31, 2021, 

and among other things, modifies the 

PPP, including provisions relating to 

forgiveness of PPP loans. The Economic 

Aid Act added a new temporary section 

7(a)(37) to the Small Business Act, 

which authorizes SBA to guarantee 

additional PPP loans to eligible 

borrowers under generally the same 

terms and conditions available under 

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

Act through March 31, 2021. The 

Economic Aid Act also redesignates 

section 1106 of the CARES Act as 

section 7A and transfers that section to 

the Small Business Act, to appear after 

section 7 of the Small Business Act.1

As described below, this interim final 

rule (1) provides borrowers and lenders 

with guidance on requirements 

governing forgiveness of PPP loans, and 

(2) informs borrowers and lenders of 

SBA’s process for reviewing loan 

applications and loan forgiveness 

applications. SBA is incorporating and 

restating the prior interim final rules 

relating to loan forgiveness and loan 

reviews and making revisions to 

conform these prior interim final rules 

to the amendments made by the 

Economic Aid Act, including for PPP 

loans made under section 7(a)(37) of the 

Small Business Act. The prior interim 

final rules relating to loan forgiveness 

and loan reviews that are incorporated 

in this interim final rule are: The first 

interim final rule on loan forgiveness 

(85 FR 33004) (June 1, 2020); the first 

interim final rule on SBA loan review 

procedures and related borrower and 

lender responsibilities (85 FR 33010) 

(June 1, 2020); the interim final rule 

incorporating Flexibility Act 

Amendments (85 FR 38304) (June 26, 

2020); the interim final rule on 

Treatment of Owners and Forgiveness of 

Certain Nonpayroll Costs (85 FR 52881) 

(August 27, 2020); and the interim final 

rule on Additional Revisions to Loan 

Forgiveness and Loan Review 

Procedures Interim Final Rules (85 FR 

66214) (October 19, 2020). The rule also 

incorporates the forgiveness portions of 

the interim final rules regarding 

individuals with self-employment 

income (85 FR 21747 (April 20, 2020) 

and 85 FR 36997 (June 19, 2020)) and 

fishing boat owners (85 FR 39066) (June 

30, 2020). 

This rule should be interpreted 

consistently with the sets of Frequently 

Asked Questions (FAQs) regarding the 

PPP that are posted on SBA’s and the 

Department of the Treasury’s (Treasury) 

websites, the consolidated interim final 

rule implementing updates to the 

Paycheck Protection Program (86 FR 

3692 (January 14, 2021)) and the interim 

final rule on second draw PPP loans (86 

FR 3712 (January 14, 2021)); however, 

the Economic Aid Act overrides any 

conflicting guidance in the FAQs, and 

SBA will be revising the FAQs to fully 

conform to the Economic Aid Act as 

quickly as feasible. 

Most of this document restates 

existing regulatory provisions to provide 

PPP lenders and new and existing PPP 

borrowers a single regulation to consult 

on loan forgiveness and loan review 

requirements and processes. To enhance 

the readability of this document, SBA 

has not reproduced the policy and legal 

justifications for existing regulatory 

provisions restated here, except to the 

extent that those justifications may be 

helpful to the borrower or lender. 

However, those justifications from the 

original interim final rules are adopted 

here. 

Six provisions of this interim final 

rule are an exercise of rulemaking 

authority by Treasury either jointly with 

SBA or by Treasury alone: (1) The 

additional reference period option 

provided for seasonal employers, (2) the 

de minimis exemption provided with 

respect to certain offers of rehire, (3) the 

de minimis exemption from the fulltime equivalent employee reduction 

penalty when an employee is, for 

example, fired for cause, (4) the de 

minimis exemption from the full-time 

equivalent employee reduction penalty 

when the borrower eliminates 

reductions by December 31, 2020 or, for 

a PPP loan made after December 27, 

2020, the last day of the loan’s covered 

period, (5) the de minimis exemption 

from the full-time equivalent (FTE) 

employee reduction penalty for certain 

PPP loans of $50,000 or less, and (6) the 

de minimis exemption from the 

employee salary and wages reduction 

penalty for certain PPP loans of $50,000 

or less. Otherwise, all provisions in this 

rule are an exercise of rulemaking 

authority by SBA alone. 

II. Comments and Immediate Effective 

Date 

This interim final rule is being issued 

without advance notice and public 

comment because section 303 of the 

Economic Aid Act authorizes SBA to 

issue regulations to implement the 

Economic Aid Act without regard to 

notice requirements. In addition, this 

rule is being issued to allow for 

immediate implementation of this 

program. The intent of both the CARES 

Act and the Economic Aid Act is that 

SBA provides relief to America’s small 

businesses expeditiously. The Economic 

Aid Act provided that several of the 

changes relating to loan forgiveness are 

effective as if included in the CARES 

Act and apply to any loan made 

pursuant to section 7(a)(36) of the Small 

Business Act before, on, or after 

December 27, 2020, including 

forgiveness of such a loan. Accordingly, 

loans that were made in 2020 but for 

which SBA has not yet remitted 

forgiveness to the lender will be 

forgiven based on changes made in the 

Economic Aid Act, as implemented in 

this interim final rule. Given the urgent 

need to provide borrowers that are 

eligible for loan forgiveness with timely 

relief, the Administrator in consultation 

with the Secretary has determined that 

it is impractical and not in the public 

interest to provide a 30-day delayed 

effective date. An immediate effective 

date will allow SBA to continue 

remitting forgiveness payments to 


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2See, e.g., section 303 of the Economic Aid Act; 

section 7(a)(37)(M) of the Small Business Act. 

3 15 U.S.C. 634(b)(11). 

4 15 U.S.C. 636(a). 

5 15 U.S.C. 634(b)(6) and (b)(7). 

6 13 CFR 120.524. 

7This interim final rule is an exercise of SBA’s 

rulemaking authority under 15 U.S.C. 634(b), 15 

U.S.C. 633(d), and 5 U.S.C. App., Reorg. Plan No. 

4 of 1965, 11(b), 13(a) (abolishing Loan Policy 

Board and transferring functions to the 

Administrator); sections 1106(k) (now section 7A(k) 

of the Small Business Act) and 1114 of the CARES 

Act, and section 307 of the Economic Aid Act. 

lenders without disruption and in 

accordance with the amendments made 

by the Economic Aid Act. This good 

cause justification also supports waiver 

of the 60-day delayed effective date for 

major rules under the Congressional 

Review Act at 5 U.S.C. 808(2). Although 

this interim final rule is effective 

immediately, comments are solicited 

from interested members of the public 

on all aspects of the interim final rule. 

These comments must be submitted 

on or before March 8, 2021. SBA will 

consider these comments and the need 

for making any revisions as a result of 

these comments. 

III. Paycheck Protection Program— 

Loan Forgiveness and Loan Review 

Procedures as Amended by Economic 

Aid Act 

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 may 

qualify for loan forgiveness. 

Under the CARES Act, as amended by 

the Economic Aid Act, SBA is 

authorized to guarantee loans under the 

PPP, a new temporary 7(a) program, 

through March 31, 2021. PPP loans 

made under section 7(a)(36) of the Small 

Business Act may be referred to as 

‘‘First Draw PPP Loans,’’ and PPP loans 

made under section 7(a)(37) of the Small 

Business Act may be referred to as 

‘‘Second Draw PPP Loans.’’ (Any 

reference to ‘‘PPP loans’’ or ‘‘PPP loan’’ 

herein refers to both First Draw PPP 

Loans and Second Draw PPP Loans.) 

The intent of the CARES Act and the 

Economic Aid Act is that SBA provide 

relief to America’s small businesses 

expeditiously, which is expressed in the 

CARES Act by giving all lenders 

delegated authority and streamlining the 

requirements of the regular 7(a) loan 

program. This intent is also expressed in 

the Economic Aid Act through the 

statutory deadlines requiring that the 

Administrator issue certain guidance 

and regulations within 10 days of 

enactment.2

The Small Business Act authorizes 

the Administrator to conduct 

investigations to determine whether a 

recipient or participant in any 

assistance under a 7(a) program, 

including the PPP, is ineligible for a 

loan, or has violated section 7(a), or any 

rule, regulation or order issued 

thereunder.3 Additionally, under 

section 7(a), the Administrator is 

empowered to make loans in 

cooperation with lenders through 

agreements to participate on a deferred 

(guaranteed) basis.4 Further, the 

Administrator may make such rules and 

regulations as deemed necessary and 

take any and all actions determined to 

be necessary or desirable with respect to 

7(a) loans.5 Pursuant to these provisions 

of the Small Business Act, SBA has 

issued regulations establishing the 

standards by which it will investigate 

whether a loan met program 

requirements and the circumstances 

under which SBA will be released from 

liability on a guarantee for such a loan.6

Additionally, section 7A(l)(1)(E) of the 

Small Business Act expressly provides 

that SBA may review and audit PPP 

loans of $150,000 or less and access any 

records the borrower is required to 

retain. 

In light of the structure of the PPP 

program established by the CARES Act 

and the PPP Interim Final Rules, in 

which loans and loan forgiveness are 

provided based on the borrower’s 

certifications and documentation 

provided by the borrower, the 

Administrator, in consultation with the 

Secretary of the Treasury (Secretary), 

previously determined that it was 

appropriate to adopt additional 

procedures and criteria through which 

SBA will review whether an action by 

the borrower has resulted in its receipt 

of a PPP loan that did not meet program 

requirements.7 SBA’s review of 

borrower certifications and 

representations regarding the borrower’s 

eligibility for a PPP loan and loan 

forgiveness, and the borrower’s use of 

PPP loan proceeds, is essential to ensure 

that PPP loans are directed to the 

entities Congress intended, and that PPP 

loan proceeds are used for the purposes 

Congress required, including the CARES 

Act’s and the Economic Aid Act’s 

central purposes of keeping workers 

paid and employed. 

Table of Contents 

IV. Paycheck Protection Program Loan 

Forgiveness Requirements 

1. General 

a. What amounts are eligible for 

forgiveness? 

b. For borrowers that are individuals with 

self-employment income who file a Form 

1040, Schedule C or F, what amounts are 

eligible for forgiveness? 

2. Loan Forgiveness Process 

a. What is the general process to obtain 

loan forgiveness? 

b. When must a borrower apply for loan 

forgiveness or start making payments on 

a loan? 

3. Payroll Costs Eligible for Loan 

Forgiveness 

a. When must payroll costs be incurred 

and/or paid to be eligible for forgiveness? 

b. Are salary, wages, or commission 

payments to furloughed employees; 

bonuses; or hazard pay during the 

covered period eligible for loan 

forgiveness? 

c. Are there caps on the amount of loan 

forgiveness available for owneremployees and self-employed 

individuals’ own payroll compensation? 

d. Are any individuals with an ownership 

stake in a PPP borrower exempt from 

application of the PPP owner-employee 

compensation rule when determining the 

amount of their compensation that is 

eligible for loan forgiveness? 

e. May a fishing boat owner include as 

payroll costs in its application for loan 

forgiveness any compensation paid to a 

crewmember who received his or her 

own PPP loan and is seeking forgiveness 

for amounts of compensation the 

crewmember received for performing 

services described in Section 3121(b)(20) 

of the Internal Revenue Code with 

respect to that owner’s fishing boat? 

4. Nonpayroll Costs Eligible for Loan 

Forgiveness 

a. When must nonpayroll costs be incurred 

and/or paid to be eligible for forgiveness? 

b. Are advance payments of interest on 

mortgage obligations eligible for loan 

forgiveness? 

c. Are amounts attributable to the business 

operation of a tenant or sub-tenant of the 

PPP borrower or, in the context of homebased businesses, household expenses, 

eligible for forgiveness? 

d. Are rent payments to a related party 

eligible for loan forgiveness? 

5. Reductions to Loan Forgiveness Amount 

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? 

b. What effect does a reduction in a 

borrower’s number of full-time 

equivalent (FTE) employees have on the 

loan forgiveness amount? 

c. What does ‘‘full-time equivalent 

employee’’ mean? 

d. How should a borrower calculate its 

number of FTE employees? 

e. What effect does a borrower’s reduction 

in employees’ salary or wages have on 

the loan forgiveness amount? 


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8This subsection was originally published at 85 

FR 33004, section III.1. (June 1, 2020) and has been 

modified to conform to section 304 of the Economic 

Aid Act. 

9 ‘‘Payroll costs’’ has the same meaning as in 

subsections III.B.4.g. and h. of the consolidated 

interim final rule implementing updates to the 

Paycheck Protection Program. 86 FR 3692, 3702 

(Jan. 14, 2021). 

10Section 7(a)(37)(J)(iii) of the Small Business Act 

provides these amounts are not eligible for 

forgiveness for Second Draw PPP Loans. This 

provision similarly provides that these amounts are 

not eligible for forgiveness for First Draw PPP Loans 

in order to provide consistent treatment and to 

prevent a borrower from receiving forgiveness for 

amounts for which the borrower will also receive 

a tax credit. 

11This eligible nonpayroll cost was added by 

section 304 of the Economic Aid Act. 

12This eligible nonpayroll cost was added by 

section 304 of the Economic Aid Act. 

13This eligible nonpayroll cost was added by 

section 304 of the Economic Aid Act. 

f. How should borrowers seeking loan 

forgiveness account for the reduction 

based on a reduction in the number of 

employees (section 7A(d)(2)) relative to 

the reduction relating to salary and 

wages (section 7A(d)(3))? 

g. If a borrower restores reductions made 

to employee salaries and wages or FTE 

employees, can the borrower avoid a 

reduction in its loan forgiveness amount? 

h. Will a borrower’s loan forgiveness 

amount be reduced if an employee is 

fired for cause, voluntarily resigns, or 

voluntarily requests a schedule 

reduction? 

i. Is a borrower with a loan of $50,000 or 

less exempt from any reductions to the 

loan forgiveness amount? 

6. Documentation Requirements 

a. What must borrowers submit for 

forgiveness of their PPP loans? 

b. What documentation must borrowers 

who are individuals with selfemployment income who file a Form 

1040, Schedule C or F, submit to their 

lender with their request for loan 

forgiveness? 

c. What additional documentation must a 

borrower submit when the President of 

the United States, Vice President of the 

United States, the head of an Executive 

department, or a Member of Congress, or 

the spouse of any of the preceding, 

directly or indirectly holds a controlling 

interest in the borrower? 

7. Lender Hold Harmless 

V. Paycheck Protection Program SBA Loan 

Review Procedures and Related 

Borrower and Lender Responsibilities 

1. SBA Reviews of Individual PPP Loans 

a. Will SBA review individual PPP loans? 

b. What borrower representations and 

statements will SBA review? 

c. When will SBA undertake a loan review? 

d. Will I have the opportunity to respond 

to SBA’s questions in a review? 

e. If SBA determines that a borrower is 

ineligible for a PPP loan, can the loan be 

forgiven? 

f. May a borrower appeal SBA’s 

determination that the borrower is 

ineligible for a PPP loan or ineligible for 

the loan amount or the loan forgiveness 

amount claimed by the borrower? 

2. The Loan Forgiveness Process for 

Lenders 

a. What should a lender review? 

b. What is the timeline for the lender’s 

decision on a loan forgiveness 

application? 

c. What should a lender do if it receives 

notice that SBA is reviewing a loan? 

d. What should a lender do if a borrower 

submits documentation of eligible costs 

that exceed a borrower’s PPP Loan 

Amount? 

3. Lender Fees 

IV. Paycheck Protection Program Loan 

Forgiveness Requirements 

1. General 

a. What amounts are eligible for 

forgiveness? 8

Section 7A(b) of the Small Business 

Act provides that, subject to several 

important limitations, borrowers shall 

be eligible for forgiveness of their PPP 

loan in an amount equal to the sum of 

the following costs incurred and 

payments made during the covered 

period (as described in section IV.3. 

below). 

(1) Payroll costs.9 Payroll costs consist 

of compensation to employees (whose 

principal place of residence is the 

United States) in the form of salary, 

wages, commissions, or similar 

compensation; cash tips or the 

equivalent (based on employer records 

of past tips or, in the absence of such 

records, a reasonable, good-faith 

employer estimate of such tips); 

payment for vacation, parental, family, 

medical, or sick leave; allowance for 

separation or dismissal; payment for the 

provision of employee benefits 

consisting of group health care or group 

life, disability, vision, or dental 

insurance, including insurance 

premiums, and retirement; payment of 

state and local taxes assessed on 

compensation of employees; and for an 

independent contractor or sole 

proprietor, wages, commissions, 

income, or net earnings from selfemployment, or similar compensation. 

Payroll costs that are qualified wages 

taken into account in determining the 

Employer Retention Credit are not 

eligible for loan forgiveness.10

(2) Interest payments on any business 

mortgage obligation on real or personal 

property that was incurred before 

February 15, 2020 (but not any 

prepayment or payment of principal). 

(3) Payments on business rent 

obligations on real or personal property 

under a lease agreement in force before 

February 15, 2020. 

(4) Business utility payments for the 

distribution of electricity, gas, water, 

transportation, telephone, or internet 

access for which service began before 

February 15, 2020. 

(5) Covered operations expenditures. 

A covered operations expenditure is a 

payment for any business software or 

cloud computing service that facilitates 

business operations, product or service 

delivery, the processing, payment, or 

tracking of payroll expenses, human 

resources, sales and billing functions, or 

accounting or tracking of supplies, 

inventory, records and expenses.11

(6) Covered property damage costs. A 

covered property damage cost is a cost 

related to property damage and 

vandalism or looting due to public 

disturbances that occurred during 2020 

that was not covered by insurance or 

other compensation.12

(7) Covered supplier costs. A covered 

supplier cost means an expenditure 

made by a borrower to a supplier of 

goods for the supply of goods that—(A) 

are essential to the operations of the 

borrower at the time at which the 

expenditure is made; and (B) is made 

pursuant to a contract, order, or 

purchase order—(i) in effect at any time 

before the covered period with respect 

to the applicable covered loan; or (ii) 

with respect to perishable goods, in 

effect before or at any time during the 

covered period with respect to the 

applicable covered loan.13

(8) Covered worker protection 

expenditures. A covered worker 

protection expenditure: 

(A) Means an operating or a capital 

expenditure to facilitate the adaptation 

of the business activities of an entity to 

comply with requirements established 

or guidance issued by the Department of 

Health and Human Services, the Centers 

for Disease Control, or the Occupational 

Safety and Health Administration, or 

any equivalent requirements established 

or guidance issued by a State or local 

government related to the maintenance 

of standards for sanitation, social 

distancing, or any other worker or 

customer safety requirement related to 

COVID–19, during the period beginning 

on March 1, 2020 and ending the date 

on which the national emergency 

declared by the President under the 

National Emergencies Act (50 U.S.C. 

1601 et seq.) with respect to the 

Coronavirus Disease 2019 (COVID–19) 

expires; 

(B) may include— 


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14This eligible nonpayroll cost was added by 

section 304 of the Economic Aid Act. 

15See section 7A(d)(8) of the Small Business Act. 

16This subsection was originally published at 85 

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

been modified to conform to subsequent rules or 

guidance and sections 306, 313, and 344 of the 

Economic Aid Act. 

17The Economic Aid Act amended the definition 

of the forgiveness covered period. 

18 Due to the amended definition of forgiveness 

covered period in the Economic Aid Act, this 

calculated amount has changed. 

19For First Draw PPP loans made in 2020, 

borrowers use 2019. For First Draw PPP loans made 

in 2021 and Second Draw PPP Loans, borrowers use 

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

the borrower’s loan amount. 

20For self-employed borrowers that file Form 

1040, Schedule F and have no employees, gross 

income may be used instead of net profit 

throughout this calculation. For self-employed 

borrowers that file Schedule F and have employees, 

the difference between gross income and employee 

payroll costs may be used instead of net profit 

throughout this calculation. See section 313 of the 

Economic Aid Act. 

21Section 306 of the Economic Aid Act allows the 

borrower to select a covered period between 8 

weeks and 24 weeks. 

22This eligible nonpayroll cost was added by 

section 304 of the Economic Aid Act. 

23This eligible nonpayroll cost was added by 

section 304 of the Economic Aid Act. 

24This eligible nonpayroll cost was added by 

section 304 of the Economic Aid Act. 

25This eligible nonpayroll cost was added by 

section 304 of the Economic Aid Act. 

26This subsection was originally published at 85 

FR 33004, section III.2. (June 1, 2020) and was 

amended by 85 FR 38304, subsection III.2.a. (June 

26, 2020) and 85 FR 66214, subsections III.2.a. and 

b. (Oct. 19, 2020) and has been modified to conform 

to section 307 of the Economic Aid Act. 

27SBA Form 3508, 3508EZ, 3508S, as applicable, 

or lender equivalent. Loan Forgiveness Application 

forms were amended to conform to the Economic 

Aid Act, including section 307, which requires a 

simplified forgiveness application for loans of not 

more than $150,000. The Simplified Forgiveness 

Application is SBA Form 3508S (as amended). 

28This requirement is necessary to provide 

information relevant to the borrower’s eligibility for 

the Second Draw PPP Loan and loan forgiveness. 

A borrower is eligible for a Second Draw PPP Loan 

Continued 

(i) the purchase, maintenance, or 

renovation of assets that create or 

expand— 

(I) a drive-through window facility; 

(II) an indoor, outdoor, or combined 

air or air pressure ventilation or 

filtration system; 

(III) a physical barrier such as a 

sneeze guard; 

(IV) an expansion of additional 

indoor, outdoor, or combined business 

space; 

(V) an onsite or offsite health 

screening capability; or 

(VI) other assets relating to the 

compliance with the requirements or 

guidance described in subsection (A), as 

determined by the Administrator in 

consultation with the Secretary of 

Health and Human Services and the 

Secretary of Labor; and 

(ii) the purchase of— 

(I) covered materials described in 

§ 328.103(a) of title 44, Code of Federal 

Regulations, or any successor 

regulation; 

(II) particulate filtering facepiece 

respirators approved by the National 

Institute for Occupational Safety and 

Health, including those approved only 

for emergency use authorization; or 

(III) other kinds of personal protective 

equipment, as determined by the 

Administrator in consultation with the 

Secretary of Health and Human Services 

and the Secretary of Labor; and 

(C) does not include residential real 

property or intangible property.14

This interim final rule uses the term 

‘‘nonpayroll costs’’ to refer to the 

payments described in (2)–(8) above. 

Eligible nonpayroll costs cannot exceed 

40 percent of the loan forgiveness 

amount.15 A borrower may receive 

forgiveness for the nonpayroll costs 

described in (5), (6), (7) and (8) only if 

SBA had not yet remitted a forgiveness 

payment on the borrower’s loan to the 

borrower’s PPP lender as of December 

27, 2020 (the date of the Economic Aid 

Act’s enactment). 

b. For borrowers that are individuals 

with self-employment income who file 

a Form 1040, Schedule C or F, what 

amounts are eligible for forgiveness? 16

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 

during the covered period (as described 

in section IV.3 below) 17 on: 

i. Payroll costs including salary, 

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

annualized pay per employee, as 

prorated for the period during which the 

payments are made or the obligation to 

make the payments is incurred 

(maximum per individual is $100,000 

prorated for the covered period, e.g., for 

an 8-week covered period a maximum 

of $15,385 and for a 24-week covered 

period a maximum of $46,154),18 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), 

but excluding any qualified wages taken 

into account in determining the 

Employer Retention Credit; 

ii. owner compensation replacement, 

calculated based on 2019 or 2020 19 net 

profit 20 as described in subsection 3.c. 

below; forgiveness of such amounts is 

limited to either (a) the prorated portion 

of 2019 or 2020 net profit for a covered 

period up to 2.5 months, or (b) 2.5 

months’ worth (2.5/12) of 2019 or 2020 

net profit (up to $20,833) for a covered 

period greater than 2.5 months,21

excluding any qualified sick leave 

equivalent amount for which a credit is 

claimed under section 7002 of the 

Families First Coronavirus Response 

Act (FFCRA) (Pub. L. 116–127) or 

qualified family leave equivalent 

amount for which a credit is claimed 

under section 7004 of FFCRA; 

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 or F (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 or F (business rent 

payments); 

v. utility payments under service 

agreements dated before February 15, 

2020 to the extent they are deductible 

on Form 1040 Schedule C or F (business 

utility payments); 

vi. any covered operations 

expenditures to the extent they are 

deductible on Form 1040 Schedule C or 

F; 22

vii. any covered property damage 

costs to the extent they are deductible 

on Form 1040 Schedule C or F; 23

viii. Any covered supplier costs to the 

extent they are deductible on Form 1040 

Schedule C or F; 24 and 

ix. any covered worker protection 

expenditures to the extent they are 

deductible on Form 1040 Schedule C or 

F.25

A borrower may receive forgiveness 

for the new nonpayroll costs described 

in vi., vii., viii., and ix. only if SBA had 

not yet remitted a forgiveness payment 

on the borrower’s loan to the borrower’s 

PPP lender as of December 27, 2020. 

2. Loan Forgiveness Process 

a. What is the general process to obtain 

loan forgiveness? 26

To receive loan forgiveness on either 

a First Draw PPP Loan or a Second Draw 

PPP Loan, a borrower must complete 

and submit the Loan Forgiveness 

Application 27 to its lender (or to the 

lender servicing its loan). For Second 

Draw PPP Loans in excess of $150,000, 

the borrower must submit its loan 

forgiveness application for the First 

Draw PPP Loan before or 

simultaneously with the loan 

forgiveness application for the Second 

Draw PPP Loan, even if the calculated 

amount of forgiveness on the First Draw 

PPP Loan is zero.28


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8288 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 

if they have used, or will use, the full amount of 

its First Draw PPP Loan (including the amount of 

any increase on such First Draw PPP Loan) on 

authorized uses on or before the expected date on 

which the Second Draw PPP Loan will be 

disbursed. See interim final rule on Second Draw 

PPP Loans. 86 FR 3712, 3717 (Jan. 14, 2021). This 

requirement does not apply to Second Draw PPP 

Loans of $150,000 or less that use the simplified 

forgiveness application (SBA Form 3508S). 

29Section 333 of the Economic Aid Act repealed 

the CARES Act provision requiring SBA to deduct 

EIDL Advance Amounts received by borrowers from 

the forgiveness payment amounts remitted by SBA 

to the lender. Any EIDL Advance Amounts 

previously deducted from a borrower’s forgiveness 

amount will be remitted to the lender, together with 

interest through the remittance date. 

30Although the note is marked ‘‘Paid in Full,’’ the 

forgiven amount is considered canceled 

indebtedness under section 7A(c)(1) of the Small 

Business Act. 

31This subsection was originally published at 85 

FR 38304, section III.1.c. (June 26, 2020) and has 

been modified to conform to sections 306 and 307 

of the Economic Aid Act. 

32Because section 306 of the Economic Aid Act 

allows the borrower to select a covered period 

between 8 weeks and 24 weeks, there is no longer 

a need to allow a borrower to apply for forgiveness 

‘‘before the end of the covered period’’ and that text 

has been deleted. 

33The Economic Aid Act is silent on what 

covered period applies for a borrower who does not 

apply for forgiveness, so SBA will apply the longest 

available covered period to such borrowers. 

34This subsection was originally published at 85 

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

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

26, 2020) and has been modified to conform to 

section 306 of the Economic Aid Act and for 

readability. 

35Amended to conform to the section 306 of 

Economic Aid Act change to definition of covered 

period. The option to elect an alternative covered 

period has been removed because the Economic Aid 

Act provided borrowers flexibility to choose the 

end of their covered period. 

36This subsection was originally published at 85 

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

been modified to conform to section 344 of the 

Economic Aid Act. 

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 

borrower’s loan(s) or loan application(s), 

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. The EIDL 

Advance Amount received by the 

borrower will not reduce the amount of 

forgiveness to which the borrower is 

entitled and will not be deducted from 

the forgiveness payment amount that 

SBA remits to the Lender.29 If SBA 

determines in the course of its review 

that the borrower was ineligible for the 

PPP loan under the statute, the 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 

must notify 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 

must notify the borrower of remittance 

by SBA of (i) the loan forgiveness 

amount (or that SBA determined that no 

amount of the loan is eligible for 

forgiveness), and (ii) 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.30

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. 

Part V of this interim final rule 

describes SBA’s procedures for 

reviewing PPP loan applications and 

loan forgiveness applications. 

b. When must a borrower apply for loan 

forgiveness or start making payments on 

a loan? 31

A borrower may submit a loan 

forgiveness application any time on or 

before the maturity date of the loan if 

the borrower has used all of the loan 

proceeds for which the borrower is 

requesting forgiveness, except that a 

borrower applying for forgiveness of a 

Second Draw PPP Loan that is more 

than $150,000 must submit the loan 

forgiveness application for its First 

Draw PPP Loan before or 

simultaneously with the loan 

forgiveness application for its Second 

Draw PPP Loan.32 If the borrower does 

not apply for loan forgiveness within 10 

months after the last day of the 

maximum covered period of 24 weeks,33

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. 

3. Payroll Costs Eligible for Loan 

Forgiveness 

a. When must payroll costs be incurred 

and/or paid to be eligible for 

forgiveness? 34

In general, payroll costs paid or 

incurred during the covered period are 

eligible for forgiveness. For purposes of 

loan forgiveness, the covered period is 

the period beginning on the date the 

lender disburses the PPP loan and 

ending on a date selected by the 

borrower that occurs during the period 

(i) beginning on the date that is 8 weeks 

after the date of disbursement, and (ii) 

ending on the date that is 24 weeks after 

the date of disbursement.35 The covered 

periods for a First Draw PPP Loan and 

a Second Draw PPP Loan cannot 

overlap; the borrower must use all 

proceeds of the First Draw PPP Loan for 

eligible expenses before disbursement of 

the Second Draw PPP Loan. 

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 are eligible for 

forgiveness if paid on or before the next 

regular payroll date; otherwise, payroll 

costs must be paid during the covered 

period to be eligible for forgiveness. 

Payroll costs generally are 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). 

b. Are salary, wages, or commission 

payments to furloughed employees; 

bonuses; or hazard pay during the 

covered period eligible for loan 

forgiveness? 36

Yes. The CARES Act defines the term 

‘‘payroll costs’’ broadly to include 

compensation in the form of salary, 

wages, commissions, or similar 

compensation. If a borrower pays 

furloughed employees their salary, 


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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8289 

37This subsection was originally published at 85 

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

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

26, 2020) and has been modified to conform to 

sections 308 and 344 of the Economic Aid Act and 

for readability. 

38For First Draw PPP loans made in 2020, 

borrowers use 2019. For First Draw PPP loans made 

in 2021 and Second Draw PPP loans, borrowers use 

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

the borrower’s loan amount. 

39Use whichever year was used to calculate the 

borrower’s loan amount. 

40Use whichever year was used to calculate the 

borrower’s loan amount. 

41For self-employed borrowers that file Form 

1040, Schedule F and have no employees, gross 

income may be used instead of net profit. For selfemployed borrowers that file Schedule F and have 

employees, the difference between gross income 

and employee payroll costs may be used instead of 

net profit. See section 313 of the Economic Aid Act. 

42This subsection was originally published at 85 

FR 52881, section III.1. (Aug. 27, 2020) and has 

been modified for readability. 

43This subsection was originally published at 85 

FR 39066, subsection III.2. (June 30, 2020) and has 

been modified for consistency with the Economic 

Aid Act. 

44This subsection was originally published at 85 

FR 33004, subsection III.4.a. (June 1, 2020) and 

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

26, 2020) and has been modified for readability. 

wages, or commissions during the 

covered period, those payments are 

eligible for forgiveness as long as they 

do not exceed an annual salary of 

$100,000, as prorated for the period 

during which the payments are made or 

the obligation to make the payments is 

incurred. The Administrator, in 

consultation with the Secretary, has also 

determined that, if an employee’s total 

compensation does not exceed $100,000 

on an annualized basis, as prorated for 

the period during which the payments 

are made or the obligation to make the 

payments is incurred, the employee’s 

hazard pay and bonuses are eligible for 

loan forgiveness because they constitute 

a supplement to salary or wages, and are 

thus a similar form of compensation. 

c. Are there caps on the amount of loan 

forgiveness available for owneremployees and self-employed 

individuals’ own payroll 

compensation? 37

Yes. Forgiveness is capped at 2.5 

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

2019 or 2020 38 compensation (up to a 

maximum $20,833 per individual in 

total across all businesses). The 

individual’s total compensation may not 

exceed $100,000 on an annualized basis, 

as prorated for the period during which 

the payments are made or the obligation 

to make the payments is incurred. For 

example, for borrowers that elect to use 

an eight-week covered period, the 

amount of loan forgiveness requested for 

owner-employees and self-employed 

individuals’ payroll compensation is 

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

2019 or 2020 compensation (i.e., 

approximately 15.38 percent of 2019 or 

2020 compensation) or $15,385 per 

individual, whichever is less, in total 

across all businesses. For borrowers that 

elect to use a ten-week covered period, 

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

2019 or 2020 compensation 

(approximately 19.23 percent) or 

$19,231 per individual, whichever is 

less, in total across all businesses. For 

a covered period longer than 2.5 

months, the amount of loan forgiveness 

requested for owner-employees and selfemployed individuals’ payroll 

compensation is capped at 2.5 months’ 

worth (2.5/12) of 2019 or 2020 

compensation (up to $20,833) in total 

across all businesses. 

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

amount of their 2019 or 2020 39

employee cash compensation and 

employer retirement and health, life, 

disability, vision and dental insurance 

contributions made on their behalf. Scorporation owner-employees are 

capped by the prorated amount of their 

2019 or 2020 40 employee cash 

compensation and employer retirement 

contributions made on their behalf. 

However, employer health, life, 

disability, vision and dental insurance 

contributions made on their behalf 

cannot be separately added; those 

payments are already included in their 

employee cash compensation. Schedule 

C or F filers are capped by the prorated 

amount of their owner compensation 

replacement, calculated based on 2019 

or 2020 net profit.41 General partners are 

capped by the prorated amount of their 

2019 or 2020 net earnings from selfemployment (reduced by claimed 

section 179 expense deduction, 

unreimbursed partnership expenses, 

and depletion from oil and gas 

properties) multiplied by 0.9235. For 

self-employed individuals, including 

Schedule C or F filers and general 

partners, retirement and health, life, 

disability, vision or dental insurance 

contributions are included in their net 

self-employment income and therefore 

cannot be separately added to their 

payroll calculation. LLC members are 

subject to the rules based on their LLC’s 

tax filing status in the reference year 

used to determine their loan amount. 

d. Are any individuals with an 

ownership stake in a PPP borrower 

exempt from application of the PPP 

owner-employee compensation rule 

when determining the amount of their 

compensation that is eligible for loan 

forgiveness? 42

Yes, owner-employees with less than 

a 5 percent ownership stake in a C- or 

S-corporation are not subject to the 

owner-employee compensation rule in 

subsection IV.3.c. above. 

e. May a fishing boat owner include as 

payroll costs in its application for loan 

forgiveness any compensation paid to a 

crewmember who received his or her 

own PPP loan and is seeking forgiveness 

for amounts of compensation the 

crewmember received for performing 

services described in Section 

3121(b)(20) of the Internal Revenue 

Code with respect to that owner’s 

fishing boat? 43

No. If a fishing boat crewmember 

obtains his or her own PPP loan during 

the fishing boat owner’s covered period 

and seeks forgiveness of that loan based 

in part on compensation from a 

particular fishing boat owner, the 

fishing boat owner cannot also obtain 

PPP loan forgiveness based on 

compensation paid to that same 

crewmember. This restriction applies 

only if the crewmember is performing 

services described in section 3121(b)(20) 

of the Internal Revenue Code for the 

particular fishing boat owner. The 

fishing boat owner is responsible for 

determining whether any of its 

crewmembers received their own PPP 

loans during the fishing boat owner’s 

loan forgiveness covered period. 

4. Nonpayroll Costs Eligible for Loan 

Forgiveness 

a. When must nonpayroll costs be 

incurred and/or paid to be eligible for 

forgiveness? 44

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 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 


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8290 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 

45This subsection was originally published at 85 

FR 33004, subsection III.4.b. (June 1, 2020). 

46This subsection was originally published at 85 

FR 52881, subsection III.2.a. (Aug. 27, 2020). 

47This subsection was originally published at 85 

FR 52881, subsection III.2.b. (Aug. 27, 2020) and 

has been modified for readability. 

48 In this context, the related party itself would 

not also be eligible to request forgiveness for this 

amount. 

49This subsection was originally published at 85 

FR 33004, subsection III.5. (June 1, 2020) and 

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

26, 2020), and has been modified to conform to 

subsequent rules or guidance and section 311 of the 

Economic Aid Act. 

50This subsection was originally published at 85 

FR 33004, subsection III.5.a. (June 1, 2020) and 

amended by 85 FR 38304, section III.5. (June 26, 

2020) and has been modified for readability. 

51This subsection was originally published at 85 

FR 33004, subsection III.5.b. (June 1, 2020) and 

amended by 85 FR 38304, section III.1.f. (June 26, 

2020) and has been modified to conform to sections 

306, 311 and 336 of the Economic Aid Act and for 

readability. 

52The term ‘‘seasonal employer’’ is defined in 

section 7(a)(36)(A)(xiii) of the Small Business Act. 

53This decision to permit seasonal employers to 

use, as a reference period, any consecutive 12-week 

period between February 15, 2019 and February 15, 

2020 is an exercise of the Secretary’s rulemaking 

authority under section 1109 of the CARES Act. 

This reference period is consistent with section 336 

of the Economic Aid Act, which amends the 

calculation of the maximum loan amount for 

seasonal employers. 

incurred during the covered period and 

paid on the next regular billing date. 

b. Are advance payments of interest on 

mortgage obligations eligible for loan 

forgiveness? 45

No. Advance payments of interest on 

a covered mortgage obligation are not 

eligible for loan forgiveness because the 

CARES Act’s loan forgiveness 

provisions regarding mortgage 

obligations specifically exclude 

‘‘prepayments.’’ Principal on mortgage 

obligations is not eligible for forgiveness 

under any circumstances. 

c. Are amounts attributable to the 

business operation of a tenant or subtenant of the PPP borrower or, in the 

context of home-based businesses, 

household expenses, eligible for 

forgiveness? 46

No, the amount of loan forgiveness 

requested for nonpayroll costs may not 

include any amount attributable to the 

business operation of a tenant or subtenant of the PPP borrower or, for homebased businesses, household expenses. 

The examples below illustrate this rule. 

Example 1: A borrower rents an office 

building for $10,000 per month and subleases out a portion of the space to other 

businesses for $2,500 per month. Only 

$7,500 per month is eligible for loan 

forgiveness. 

Example 2: A borrower has a 

mortgage on an office building it 

operates out of, and it leases out a 

portion of the space to other businesses. 

The portion of mortgage interest that is 

eligible for loan forgiveness is limited to 

the percent share of the fair market 

value of the space that is not leased out 

to other businesses. As an illustration, if 

the leased space represents 25% of the 

fair market value of the office building, 

then the borrower may only claim 

forgiveness on 75% of the mortgage 

interest. 

Example 3: A borrower shares a 

rented space with another business. 

When determining the amount that is 

eligible for loan forgiveness, the 

borrower must prorate rent and utility 

payments in the same manner as on the 

borrower’s 2019 tax filings, or if a new 

business, the borrower’s expected 2020 

tax filings. 

Example 4: A borrower works out of 

his or her home. When determining the 

amount of nonpayroll costs that are 

eligible for loan forgiveness, the 

borrower may include only the share of 

covered expenses that were deductible 

on the borrower’s 2019 tax filings, or if 

a new business, the borrower’s expected 

2020 tax filings. 

d. Are rent payments to a related party 

eligible for loan forgiveness? 47

Yes, as long as (1) the amount of loan 

forgiveness requested for rent or lease 

payments to a related party is no more 

than the amount of mortgage interest 

owed on the property during the 

covered period that is attributable to the 

space being rented by the business, and 

(2) the lease and the mortgage were 

entered into prior to February 15, 

2020.48 Any ownership in common 

between the business and the property 

owner is a related party for these 

purposes. The borrower must provide 

its lender with mortgage interest 

documentation to substantiate these 

payments. While rent or lease payments 

to a related party may be eligible for 

forgiveness, mortgage interest payments 

to a related party are not eligible for 

forgiveness. 

5. Reductions to Loan Forgiveness 

Amount 

Section 7A of the Small Business 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. It includes an 

important statutory exemption for 

borrowers that have eliminated the 

reduction on or before December 31, 

2020 (or, for a PPP loan made on or after 

December 27, 2020, not later than the 

last day of the loan’s covered period).49

Section 7A(d)(7) of the Small Business 

Act also allows exemptions from 

reductions in loan forgiveness amounts 

based on employee availability and 

business activity. In addition, SBA and 

Treasury have adopted regulatory 

exemptions to the reduction rules for 

borrowers that (1) have offered to restore 

employee hours at the same salary or 

wages, even if the employees have not 

accepted, (2) fired an employee for 

cause or have an employee that 

voluntarily resigns or voluntarily 

requests a schedule reduction, (3) 

eliminate reductions by December 31, 

2020 or, for a PPP loan made after 

December 27, 2020, the last day of the 

loan’s covered period, or (4) have a PPP 

loan of $50,000 or less. The instructions 

to the loan forgiveness applications and 

the guidance below explain how the 

statutory forgiveness reduction formulas 

work. 

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? 50

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. 

b. What effect does a reduction in a 

borrower’s number of full-time 

equivalent (FTE) employees have on the 

loan forgiveness amount? 51

In general, a reduction in FTE 

employees during the covered period 

reduces the loan forgiveness amount by 

the same percentage as the percentage 

reduction in FTE employees. For both 

First Draw PPP Loans and Second Draw 

PPP Loans, the borrower must first 

select a reference period: (i) February 

15, 2019 through June 30, 2019; (ii) 

January 1, 2020 through February 29, 

2020; or (iii) in the case of a seasonal 

employer,52 either of the two preceding 

methods or a consecutive 12-week 

period between February 15, 2019 and 

February 15, 2020.53 If the average 

number of FTE employees during the 

covered period is less than during the 


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54This text was originally published at 85 FR 

38304, subsection III.1.f. (June 26, 2020) and has 

been modified to conform to section 311 of the 

Economic Aid Act. 

55This text was originally published at 85 FR 

38304, subsection III.1.f. (June 26, 2020) and has 

been modified to conform to section 311 the 

Economic Aid Act. 

56This subsection was originally published at 85 

FR 33004, subsection III.5.c. (June 1, 2020) and has 

been modified for readability. 

57This subsection was originally published at 85 

FR 33004, subsection III.5.d. (June 1, 2020) and has 

been modified to conform to section 311 of the 

Economic Aid Act and for readability. 

58This subsection was originally published at 85 

FR 33004, subsection III.5.e. (June 1, 2020) and has 

been modified to conform to section 306 of the 

Economic Aid Act and for readability. 

reference period, the total eligible 

expenses available for forgiveness is 

reduced proportionally by the 

percentage reduction in FTE employees. 

For example, if a borrower had 10.0 FTE 

employees during the reference period 

and this declined to 8.0 FTE employees 

during the covered period, the 

percentage of FTE employees declined 

by 20 percent and thus only 80 percent 

of otherwise eligible expenses are 

available for forgiveness. 

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 (or, for a PPP loan 

made on or after December 27, 2020, not 

later than the last day of the loan’s 

covered period).54 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. 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 (or, for a PPP 

loan made on or after December 27, 

2020, not later than the last day of the 

loan’s covered period) 55 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. 

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 non-essential 

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 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. 

c. What does ‘‘full-time equivalent 

employee’’ mean? 56

Full-time equivalent employee means 

an employee who works 40 hours or 

more, on average, each week. The hours 

of employees who work less than 40 

hours are calculated as proportions of a 

single full-time equivalent employee 

and aggregated, as explained further 

below in subsection IV.5.d. 

d. How should a borrower calculate its 

number of FTE employees? 57

Borrowers seeking forgiveness must 

document their average number of FTE 

employees during the covered period 

and their selected reference period. If 

applicable, a borrower must perform 

this calculation for both its First Draw 

PPP Loan and Second Draw PPP Loan. 

For purposes of this calculation, 

borrowers must divide the average 

number of hours paid for each employee 

per week by 40, capping this quotient at 

1.0. For example, an employee who was 

paid 48 hours per week during the 

covered period would be considered to 

be an FTE employee of 1.0. 

For employees who were paid for less 

than 40 hours per week, borrowers may 

choose to calculate the full-time 

equivalency in one of two ways. First, 

the borrower may calculate the average 

number of hours a part-time employee 

was paid per week during the covered 

period. For example, if an employee was 

paid for 30 hours per week on average 

during the covered period, the employee 

could be considered to be an FTE 

employee of 0.75. Similarly, if an 

employee was paid for ten hours per 

week on average during the covered 

period, the employee could be 

considered to be an FTE employee of 

0.25. Second, for administrative 

convenience, borrowers may elect to use 

a full-time equivalency of 0.5 for each 

part-time employee. The Administrator 

recognizes that not all borrowers 

maintain hours-worked data, and has 

decided to afford such borrowers this 

flexibility in calculating the full-time 

equivalency of their part-time 

employees. 

Borrowers may select only one of 

these two methods, and must apply that 

method consistently to all of their parttime employees for the covered period 

and the selected reference period. In 

either case, the borrower shall provide 

the aggregate total of FTE employees for 

both the selected reference period and 

the covered period by adding together 

all of the employee-level FTE employee 

calculations. The borrower must then 

divide the average FTE employees 

during the covered period by the 

average FTE employees during the 

selected reference period, resulting in 

the reduction quotient. 

e. What effect does a borrower’s 

reduction in employees’ salary or wages 

have on the loan forgiveness amount? 58

Under section 7A(d)(3) of the Small 

Business Act, a reduction in an 

employee’s salary or wages in excess of 

25 percent will generally result in a 

reduction in the loan forgiveness 

amount, unless an exception applies. 

Specifically, for each new employee in 

2020 and 2021, as well as each existing 

employee who was not paid more than 

the annualized equivalent of $100,000 


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8292 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 

59This subsection previously provided that a 

borrower must account for the salary reduction for 

the full 24-week covered period if the borrower 

applies for forgiveness before the end of the covered 

period. 85 FR 38304, 38308 (June 26, 2020). This 

text has been removed because section 306 of the 

Economic Aid Act allows the borrower to select a 

covered period between 8 and 24 weeks and there 

is no need to apply for forgiveness before the end 

of the covered period. 

60This subsection was originally published at 85 

FR 33004, subsection III.5.e. (June 1, 2020) and has 

been modified for readability. 

61This subsection was originally published at 85 

FR 33004, subsection III.5.g. (June 1, 2020) and has 

been modified to conform to section 311 of the 

Economic Aid Act. 

62 In light of the flexibility the Small Business Act 

provides to borrowers with respect to their selection 

of the reference time period for any potential 

reduction in loan forgiveness, and the statutory 

authority for SBA and the Treasury to grant de 

minimis exemptions from this requirement, if the 

borrower meets the requirements for the FTE 

reduction safe harbor, it will not be subject to any 

loan forgiveness reduction based on a reduction in 

FTE employees. 

63This subsection was originally published at 85 

FR 33004, subsection III.5.h. (June 1, 2020) and has 

been modified to conform to section 304 of the 

Economic Aid Act and for readability. 

64This subsection was originally published at 85 

FR 66214, subsection III.1.b. (Oct. 19, 2020) and has 

been modified to conform to sections 304 and 307 

the Economic Aid Act and for readability. As 

described further below in subsection 6.a and 6.b, 

borrowers with loans up to $150,000 may use SBA 

Form 3508S. However, only borrowers with loans 

of $50,000 or less, other than any borrower that 

together with its affiliates received First Draw Loans 

totaling $2 million or more or Second Draw Loans 

totaling $2 million or more, are exempt from any 

reductions to the loan forgiveness amount. 

Accordingly, the exemptions in this subsection are 

in any pay period in 2019, the borrower 

must reduce the total forgiveness 

amount by the total dollar amount of the 

salary or wage reductions that are in 

excess of 25 percent of base salary or 

wages of the employee during the most 

recent full quarter during which the 

employee was employed before the 

covered period (the reference period), 

subject to exceptions for borrowers who 

restore reduced wages or salaries (see g. 

below). This reduction calculation is 

performed on a per employee basis, not 

in the aggregate. Additionally, this 

reduction is performed based on the 

covered period and reference period 

applicable to the First Draw Loan or 

Second Draw Loan. 

Example: A borrower is using a 24- 

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 fulltime 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).59

Example: A borrower 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 fulltime 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). 

f. How should borrowers seeking loan 

forgiveness account for the reduction 

based on a reduction in the number of 

employees (section 7A(d)(2)) relative to 

the reduction relating to salary and 

wages (section 7A(d)(3))? 60

To ensure that borrowers are not 

doubly penalized, the salary/wage 

reduction applies only to the portion of 

the decline in employee salary and 

wages that is not attributable to the FTE 

reduction. 

Example: An hourly wage employee 

had been working 40 hours per week 

during the borrower selected reference 

period (FTE employee of 1.0) and the 

borrower reduced the employee’s hours 

to 20 hours per week during the covered 

period (FTE employee of 0.5). There was 

no change to the employee’s hourly 

wage during the covered period. 

Because the hourly wage did not 

change, the reduction in the employee’s 

total wages is entirely attributable to the 

FTE employee reduction and the 

borrower is not required to conduct a 

salary/wage reduction calculation for 

that employee. 

g. If a borrower restores reductions 

made to employee salaries and wages or 

FTE employees, can the borrower avoid 

a reduction in its loan forgiveness 

amount? 61

Yes. Section 7A(d)(5) of the Small 

Business Act provides that if certain 

employee salaries and wages were 

reduced between February 15, 2020 and 

April 26, 2020 (the safe harbor period) 

but the borrower eliminates those 

reductions by December 31, 2020 (or, for 

a PPP loan made on or after December 

27, 2020, by the last day of the loan’s 

covered period), the borrower is exempt 

from any reduction in loan forgiveness 

amount that would otherwise be 

required due to reductions in salaries 

and wages under section 7A(d)(3) of the 

Small Business Act. Similarly, if a 

borrower eliminates any reductions in 

FTE employees occurring during the 

safe harbor period by December 31, 

2020 (or, for a PPP loan made on or after 

December 27, 2020, by last day of the 

loan’s covered period), the borrower is 

exempt from any reduction in loan 

forgiveness amount that would 

otherwise be required due to reductions 

in FTE employees.62

This provision implements section 

7A(d)(5) of the Small Business Act, 

which gives borrowers an opportunity 

to cure reductions in FTEs, salary/wage 

reductions in excess of 25 percent, or 

both, using the applicable methodology 

set forth in section 7A(d)(5). The Small 

Business Act provides that the 

reduction in FTEs or the reduction in 

salary/hourly wages must be eliminated 

not later than December 31, 2020 (or, for 

a PPP loan made on or after December 

27, 2020, not later than the last day of 

the loan’s covered period). This does 

not change or affect the requirement that 

at least 60 percent of the loan 

forgiveness amount must be attributable 

to payroll costs. 

h. Will a borrower’s loan forgiveness 

amount be reduced if an employee is 

fired for cause, voluntarily resigns, or 

voluntarily requests a schedule 

reduction? 63

No. When an employee of the 

borrower is fired for cause, voluntarily 

resigns, or voluntarily requests a 

reduced schedule during the covered 

period (FTE reduction event), the 

borrower may count such employee at 

the same full-time equivalency level 

before the FTE reduction event when 

calculating the section 7A(d)(2) FTE 

employee reduction penalty. Borrowers 

that avail themselves of this de minimis 

exemption shall maintain records 

demonstrating that each such employee 

was fired for cause, voluntarily 

resigned, or voluntarily requested a 

schedule reduction. The borrower shall 

provide such documentation upon 

request. 

i. Is a borrower with a loan of $50,000 

or less exempt from any reductions to 

the loan forgiveness amount? 64

Yes. A borrower with a loan of 

$50,000 or less, other than any borrower 


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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8293 

limited to qualifying borrowers with loans of 

$50,000 or less. A borrower with a loan greater than 

$50,000 and up to $150,000 must comply with the 

requirements under the Paycheck Protection 

Program, including calculating any reduction in 

forgiveness amounts based on reductions in FTEs 

or employee salary or wages. 65This subsection was originally published at 85 

FR 33004, section III.6. (June 1, 2020) and amended 

at 85 FR 38304, subsection III.1.g. (June 26, 2020) 

and has been modified to conform to sections 304 

and 307 of the Economic Aid Act and for 

readability. 66See interim final rule on Second Draw PPP 

Loans. 86 FR 3712, 3721 (Jan. 14, 2021). Subsection 

(g)(2)(v) of the interim final rule on Second Draw 

PPP Loans implements section 7(a)(37)(J)(v) of the 

Small Business Act. 

67This subsection was originally published at 85 

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

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

and 313 of the Economic Aid Act and for 

readability. 

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

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

14, 2021). 

69For self-employed borrowers that file Form 

1040, Schedule F and have no employees, gross 

income may be used instead of net profit. For selfemployed borrowers that file Schedule F and have 

employees, the difference between gross income 

and employee payroll costs may be used instead of 

net profit. 

70This subsection has been added to conform to 

section 322 of the Economic Aid Act. 

that together with its affiliates received 

First Draw PPP Loans totaling $2 

million or more or Second Draw PPP 

Loans totaling $2 million or more, is 

exempt from any reductions in the 

borrower’s loan forgiveness amount 

based on reductions in FTE employees 

(section 7A(d)(2) of the Small Business 

Act) or reductions in employee salary or 

wages (section 7A(d)(3) of the Small 

Business Act) that would otherwise 

apply. As such, subsections IV.5.a. 

through IV.5.h. above do not apply to 

qualifying borrowers with loans of 

$50,000 or less. 

6. Documentation Requirements 

a. What must borrowers submit for 

forgiveness of their PPP loans? 65

The loan forgiveness application form 

details the documentation requirements; 

specifically, documentation each 

borrower must submit with its Loan 

Forgiveness Application (SBA Form 

3508, 3508EZ, 3508S as applicable, or 

lender equivalent), documentation each 

borrower is required to maintain and 

make available upon request, and 

documentation each borrower may 

voluntarily submit with its loan 

forgiveness application. An eligible 

borrower that received a loan of 

$150,000 or less should use the SBA 

Form 3508S and shall not, at the time 

of its application for loan forgiveness, be 

required to submit any application or 

documentation in addition to the 

certification and information required 

by section 7A(l)(1)(A) of the Small 

Business Act. However, an eligible 

borrower that received a Second Draw 

loan of $150,000 or less and is using the 

SBA Form 3508S must, before or at the 

time of its application for loan 

forgiveness, submit documentation 

sufficient to establish that the borrower 

experienced a reduction in revenue as 

provided in subsection (g)(2)(v) of the 

interim final rule on Second Draw PPP 

Loans, unless the borrower already 

provided such documentation at the 

time of its application for the Second 

Draw PPP Loan.66 Such documentation 

may include relevant tax forms, 

including annual tax forms, or, if 

relevant tax forms are not available, a 

copy of the applicant’s quarterly income 

statements or bank statements. 

For Second Draw PPP Loans, all 

borrowers must certify on their loan 

forgiveness application that the 

borrower used all First Draw PPP Loan 

amounts on eligible expense prior to 

disbursement of the Second Draw PPP 

Loan. For Second Draw PPP Loans in 

excess of $150,000, the borrower must 

submit its loan forgiveness application 

for the First Draw PPP Loan before or 

simultaneously with the loan 

forgiveness application for the Second 

Draw PPP Loan, even if the calculated 

forgiveness amount for the First Draw 

PPP Loan is zero. 

b. What documentation are borrowers 

who are individuals with selfemployment income who file a Form 

1040, Schedule C or F required to 

submit to their lender with their request 

for loan forgiveness? 67

For borrowers that received loans of 

$150,000 or less that use the SBA Form 

3508S, the borrower must submit the 

certification and information required 

by section 7A(l)(1)(A) of the Small 

Business Act and, for a Second Draw 

PPP Loan, revenue reduction 

documentation if such documentation 

was not provided at the time of 

application.68 All other borrowers must 

submit the certification required by 

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

Act, and (if the borrower has employees) 

Form 941 and state quarterly business 

and individual employee wage reporting 

and unemployment insurance tax forms 

or equivalent payroll processor records 

that best correspond to the covered 

period (with evidence of any retirement 

and group health, life, disability, vision, 

and dental insurance contributions). 

Whether or not the borrower has 

employees, the borrower must submit 

evidence of business rent, business 

mortgage interest payments on real or 

personal property, business utility 

payments, or payments for a covered 

operations expenditure, covered 

property damage cost, covered supplier 

cost, or covered worker protection 

expenditure during the covered period 

if the borrower used loan proceeds for 

those purposes. This documentation 

may include cancelled checks, payment 

receipts, transcripts of accounts, 

purchase orders, orders, invoices, or 

other documents verifying payments on 

nonpayroll costs. 

For all loans, the 2019 or 2020 Form 

1040 Schedule C or F that the borrower 

provided at the time of the PPP loan 

application must be used to determine 

the amount of net profit allocated to the 

owner for the covered period.69

c. What additional documentation must 

a borrower submit when the President 

of the United States, Vice President of 

the United States, the head of an 

Executive department, or a Member of 

Congress, or the spouse of any of the 

preceding, directly or indirectly holds a 

controlling interest in the borrower? 70

For any First Draw PPP loan made 

before December 27, 2020, if the 

President of the United States, Vice 

President of the United States, the head 

of an Executive department, or a 

Member of Congress, or the spouse of 

any such person as determined under 

applicable common law, directly or 

indirectly held a controlling interest in 

the borrower on the date of the loan 

application, the borrower is required to 

make certain disclosures following 

submission of the borrower’s 

application for loan forgiveness. 

For purposes of this section, the term 

‘‘controlling interest’’ means owning, 

controlling, or holding not less than 20 

percent, by vote or value, of the 

outstanding amount of any class of 

equity interest in a borrower. For 

purposes of making this determination, 

the securities owned, controlled or held 

by the individual and spouse shall be 

aggregated. The term ‘‘equity interest’’ 

means (1) a share in a borrower, without 

regard to whether the share is 

transferable or classified as stock or 

anything similar, (2) a capital or profit 

interest in a limited liability company or 

partnership, or (3) a warrant or right, 

other than a right to convert, to 

purchase, sell, or subscribe to a share of 

interest described in (1) or (2), 

respectively. The term ‘‘Executive 

department’’ has the meaning given the 

term in section 101 of title 5, United 

States Code. The term ‘‘Member of 

Congress’’ means a Member of the 

Senate or House of Representatives, a 

Delegate to the House of 


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8294 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 

71See subsection III.B.2.a. of the consolidated 

interim final rule implementing updates to the 

Paycheck Protection Program, 86 FR 3692, 3698 

(Jan. 14, 2021); subsection III.e.6. of the interim 

final rule for Second Draw PPP loans, 86 FR 3712, 

3719 (Jan. 14, 2021). 

72This section has been added to conform to 

section 305 of the Economic Aid Act. 

73This provision is effective as if included in the 

CARES Act and shall apply to any loan made 

pursuant to section 7(a)(36) or 7(a)(37) of the Small 

Business Act before, on, or after the date of 

enactment of the Economic Aid Act, including 

forgiveness of such a loan. 

74This subsection was originally published at 85 

FR 33010, subsection III.1.a. (June 1, 2020). 

75This subsection was originally published at 85 

FR 33010, subsection III.1.b. (June 1, 2020) and 

amended by 85 FR 38304, subsection III.2.a. (June 

26, 2020) and 85 FR 66214, subsection III.2.a. (Oct. 

19, 2020) and has been modified to conform to 

section 311 of the Economic Aid Act. 

76https://www.sba.gov/document/support—faqlenders-borrowers. 

77This subsection was originally published at 85 

FR 33010, subsection III.1.c. (June 1, 2020) and has 

been modified to conform to sections 307 and 311 

of the Economic Aid Act. 78 13 CFR 120.524(c). 

Representatives, and the Resident 

Commissioner from Puerto Rico. 

If the borrower submitted a loan 

forgiveness application to its PPP lender 

before December 27, 2020, then the 

principal executive officer, or 

individual performing a similar 

function, of the borrower shall submit to 

its PPP lender an SBA Form 3508D 

disclosing the controlling interest(s) not 

later than January 26, 2021. If the PPP 

lender has already submitted a 

forgiveness decision to SBA, the lender 

shall promptly transmit the SBA Form 

3508D to SBA. Otherwise, the PPP 

lender shall transmit the SBA Form 

3508D to SBA at the time the lender 

issues its forgiveness decision to SBA. If 

the borrower submits a loan forgiveness 

application to its PPP lender on or after 

December 27, 2020, then the principal 

executive officer, or individual 

performing a similar function, of the 

borrower shall submit to its PPP lender 

an SBA Form 3508D disclosing the 

controlling interest(s) not later than 30 

days after submitting the application. 

The PPP lender shall transmit the SBA 

Form 3508D to SBA with the PPP 

lender’s forgiveness decision. 

Alternatively, the PPP lender may 

transmit the completed Form 3508D to 

SBA when received. 

An entity is prohibited from receiving 

a PPP loan after December 27, 2020 if 

a controlling interest is held directly or 

indirectly by the President of the United 

States, Vice President of the United 

States, the head of an Executive 

department, or a Member of Congress, or 

the spouse of any of the preceding.71

7. Lender Hold Harmless 72

Under what circumstances may a lender 

rely on a certification or documentation 

submitted by an eligible PPP borrower 

that received a PPP loan? 

A lender may rely on any certification 

or documentation submitted by a PPP 

applicant or an eligible PPP borrower 

that received a PPP loan that—(a) is 

submitted pursuant to all applicable 

statutory requirements, regulations, and 

guidance related to a PPP loan, 

including sections 7(a)(36), 7(a)(37), and 

7A of the Small Business Act; and (b) 

attests that the PPP applicant or eligible 

PPP borrower, as applicable, has 

accurately provided the certification or 

documentation to the lender in 

accordance with the statutory 

requirements, regulations, and guidance 

described in (a). With respect to a lender 

that relies on a borrower certification or 

documentation meeting the 

requirements of this subsection, an 

enforcement action may not be taken 

against the lender related to the PPP 

loan, and the lender shall not be subject 

to any penalties relating to loan 

origination or forgiveness of the PPP 

loan, if: 

(i) The lender acts in good faith 

relating to loan origination or 

forgiveness of the PPP loan based on 

that reliance; and 

(ii) all other relevant Federal, State, 

local, and other statutory and regulatory 

requirements applicable to the lender 

are satisfied with respect to the PPP 

loan.73

V. Paycheck Protection Program SBA 

Loan Review Procedures and Related 

Borrower and Lender Responsibilities 

1. SBA Reviews of Individual PPP Loans 

a. Will SBA review individual PPP 

loans? 74

Yes. SBA may review any PPP loan, 

as the Administrator deems appropriate, 

as described below. 

b. What borrower representations and 

statements will SBA review? 75

The Administrator is authorized to 

review the following: 

Borrower Eligibility: The 

Administrator may review whether a 

borrower is eligible for the PPP loan 

based on the provisions of the CARES 

Act, the Economic Aid Act, the rules 

and guidance available at the time of the 

borrower’s PPP loan application, and 

the terms of the borrower’s loan 

application. See FAQ 17 (posted April 

6, 2020).76 These include, but are not 

limited to, SBA’s regulations under 13 

CFR 120.110 (as modified and clarified 

by the PPP Interim Final Rules) and 13 

CFR 121.301(f) and the information, 

certifications, and representations on 

the Borrower Application Form (SBA 

Form 2483, 2483–SD, or lender’s 

equivalent form) and the Loan 

Forgiveness Application Form (SBA 

Form 3508, 3508EZ, 3508S, or lender’s 

equivalent form). With respect to a 

Second Draw PPP Loan, this may 

include a review of whether the 

borrower experienced the 25 percent 

revenue reduction required under the 

Economic Aid Act. 

Loan Amounts and Use of Proceeds: 

The Administrator may review whether 

a borrower calculated the loan amount 

correctly and used loan proceeds for the 

allowable uses specified in the CARES 

Act and the Economic Aid Act. 

Loan Forgiveness Amounts: The 

Administrator may review whether a 

borrower is entitled to loan forgiveness 

in the amount claimed on the 

borrower’s Loan Forgiveness 

Application (SBA Form 3508, 3508EZ, 

3508S, or lender’s equivalent form). 

c. When will SBA undertake a loan 

review? 77

For a PPP loan of any size, SBA may 

undertake a review at any time in SBA’s 

discretion. For example, SBA may 

review a loan if the loan documentation 

submitted to SBA by the lender or any 

other information indicates that the 

borrower may be ineligible for a PPP 

loan, or may be ineligible to receive the 

loan amount or loan forgiveness amount 

claimed by the borrower.78

Additionally, section 7A(l)(1)(E) of the 

Small Business Act expressly provides 

that SBA may review and audit PPP 

loans of $150,000 or less and access any 

records the borrower is required to 

retain. SBA may, in its discretion, 

review a borrower’s First Draw PPP 

Loan and Second Draw PPP Loan at the 

same time or at different times. For 

loans of more than $150,000, as noted 

on the loan forgiveness application 

forms, the borrower must retain PPP 

documentation in its files for six years 

after the date the loan is forgiven or 

repaid in full. For loans of $150,000 and 

under, the borrower must retain records 

relevant to the form that prove 

compliance with the requirements of 

section 7(a)(36) or 7(a)(37), as 

applicable, of the Small Business Act— 

for employment records, for the 4-year 

period following submission of the loan 

forgiveness application, and for other 

records, for the 3-year period following 

submission of the loan forgiveness 

application. All borrowers must permit 

authorized representatives of SBA, 

including representatives of its Office of 

Inspector General, to access such files 

upon request. Additionally, all 

borrowers must provide documentation 


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79This subsection was originally published at 85 

FR 33010, subsection III.1.d. (June 1, 2020). 

80This subsection was originally published at 85 

FR 33010, subsection III.1.e. (June 1, 2020) and has 

been modified for readability. 

81This subsection was originally published at 85 

FR 33010, subsection III.1.f. (June 1, 2020) and has 

been modified to reflect the issuance of the interim 

final rule on appeals of SBA loan review decisions 

under the Paycheck Protection Program. 85 FR 

52883 (Aug. 27, 2020). 

82See 85 FR 52883 (Aug. 27, 2020). 

83This subsection was originally published at 85 

FR 33010, subsection III.2.a. (June 1, 2020) and 

amended by 85 FR 38304, subsection III.2.b. (June 

26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. 

19, 2020) and has been modified to conform to 

sections 307 and 311 of the Economic Aid Act. 

independently to a lender to satisfy 

relevant Federal, State, local or other 

statutory or regulatory requirements or 

in connection with an SBA loan review. 

Lenders must comply with applicable 

SBA requirements for records retention, 

which for Federally regulated lenders 

means compliance with the 

requirements of their federal financial 

institution regulator and for SBA 

supervised lenders (as defined in 13 

CFR 120.10 and including PPP lenders 

with authority under SBA Form 3507) 

means compliance with 13 CFR 

120.461. 

d. Will I have the opportunity to 

respond to SBA’s questions in a 

review? 79

Yes. If loan documentation submitted 

to SBA by the lender or any other 

information indicates that the borrower 

may be ineligible for a PPP loan or may 

be ineligible to receive the loan amount 

or loan forgiveness amount claimed by 

the borrower, SBA will require the 

lender to contact the borrower in 

writing to request additional 

information. SBA may also request 

information directly from the borrower. 

The lender will provide any additional 

information provided to it by the 

borrower to SBA. SBA will consider all 

information provided by the borrower in 

response to such an inquiry. 

Failure to respond to SBA’s inquiry 

may result in a determination that the 

borrower was ineligible for a PPP loan 

or ineligible to receive the loan amount 

or loan forgiveness amount claimed by 

the borrower. 

e. If SBA determines that a borrower is 

ineligible for a PPP loan, can the loan 

be forgiven? 80

No. If SBA determines that a borrower 

is ineligible for the PPP loan, SBA will 

direct the lender to deny the loan 

forgiveness application. An SBA 

determination that a borrower is 

ineligible for a First Draw PPP Loan may 

also result in an SBA determination that 

the borrower is ineligible for any 

Second Draw PPP Loan, and SBA may 

direct the lender to deny any loan 

forgiveness application submitted for 

the Second Draw PPP Loan. Further, if 

SBA determines that the borrower is 

ineligible for the loan amount or loan 

forgiveness amount claimed by the 

borrower, SBA will direct the lender to 

deny the loan forgiveness application in 

whole or in part, as appropriate. SBA 

may also seek repayment of the 

outstanding PPP loan balance or pursue 

other available remedies. 

Section 7A(b) of the Small Business 

Act provides for forgiveness of a PPP 

loan only if the borrower is an ‘‘eligible 

recipient.’’ The Administrator has 

determined that to be an eligible 

recipient that is entitled to forgiveness 

under section 7A(b), the borrower must 

be an ‘‘eligible recipient’’ under section 

7(a)(36) and section 7(a)(37) of the Small 

Business Act and rules and guidance 

available at the time of the borrower’s 

loan application. This requirement 

promotes the public interest, aligns 

SBA’s functions with other 

governmental policies, and 

appropriately carries out the PPP 

provisions of the CARES Act and the 

Economic Aid Act, including by 

preventing evasion of the requirements 

for PPP loan eligibility and ensuring 

program integrity with respect to this 

emergency financial assistance program. 

It is also consistent with the CARES 

Act’s nonrecourse provision, 15 U.S.C. 

636(a)(36)(F)(v), which limits SBA’s 

recourse against individual 

shareholders, members, or partners of a 

PPP borrower for nonpayment of a PPP 

loan only if the borrower is an eligible 

recipient of the loan. 

f. May a borrower appeal SBA’s 

determination that the borrower is 

ineligible for a PPP loan or ineligible for 

the loan amount or the loan forgiveness 

amount claimed by the borrower? 81

Yes. SBA has issued a separate 

interim final rule addressing this 

process.82

2. The Loan Forgiveness Process for 

Lenders 

a. What should a lender review? 83

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. 

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, 

Business Utility Payments, Covered 

Operations Expenditures, Covered 

Property Damage Costs, Covered 

Supplier Costs, and Covered Worker 

Protection Expenditures claimed on 

Lines 2 through 8 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 14 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, Business Utility 

Payments, Covered Operations 

Expenditures, Covered Property Damage 

Costs, Covered Supplier Costs, and 

Covered Worker Protection 

Expenditures claimed on Lines 1 

through 8 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 11 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 


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8296 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 

84 85 FR 20811, 20815–20816 (Apr. 15, 2020). 

85See subsection (h)(2)(i)(D) of the interim final 

rule on Second Draw PPP Loans. 86 FR 3712, 3721 

(Jan. 14, 2021). 

86 85 FR 20811, 20815–20816 (Apr. 15, 2020). 

87This subsection was originally published at 85 

FR 33010, subsection III.2.b. (June 1, 2020) and 

amended by 85 FR 38304, subsection III.2.b. (June 

26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. 

19, 2020) and has been modified to conform to 

sections 311, 322, and 333 of the Economic Aid Act 

and for readability. 

88Section 333 of the Economic Aid Act repealed 

the CARES Act provision requiring SBA to deduct 

EIDL Advance Amounts received by borrowers from 

the forgiveness payment amounts remitted by SBA 

to the lender. Any EIDL Advance Amounts 

previously deducted from a borrower’s forgiveness 

amount will be remitted to the lender, together with 

interest to the remittance date. 

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 84 and 

section IV.7 above indicate, 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. 

When a borrower submits SBA Form 

3508S or lender’s equivalent form, the 

lender shall: 

i. Confirm receipt of the borrower 

certifications contained in the SBA 

Form 3508S or lender’s equivalent form. 

ii. In the case of a Second Draw PPP 

Loan for which the borrower did not 

provide documentation of revenue 

reduction with its application and the 

lender did not conduct a review of the 

documentation at the time of 

application, confirm the dollar amount 

and percentage of the borrower’s 

revenue reduction by performing a good 

faith review, in a reasonable time, of the 

borrower’s calculations and supporting 

documents concerning the borrower’s 

revenue reduction.85

If the lender identifies errors in the 

borrower’s calculation or material lack 

of substantiation in the borrower’s 

supporting documents regarding 

revenue reduction, the lender should 

work with the borrower to remedy the 

issue. 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. 

The borrower shall not receive 

forgiveness without submitting all 

required documentation to the lender. 

As the First Interim Final Rule 86 and 

section IV.7 above indicate, lenders may 

rely on borrower representations. 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 (if required) and attests that 

it accurately verified the payments for 

eligible costs. 

b. What is the timeline for the lender’s 

decision on a loan forgiveness 

application? 87

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; 

(3) the (optional) PPP Borrower 

Demographic Information Form (if 

submitted to the lender); and 

(4) the SBA Form 3508D, if 

applicable. 

ii. For applications submitted using 

the SBA Form 3508EZ, 3508S, or 

lender’s equivalent form: 

(1) The SBA Form 3508EZ, 3508S, or 

lender’s equivalent form; 

(2) the (optional) Borrower 

Demographic Information Form (if 

submitted to the lender); and 

(3) the SBA Form 3508D, if 

applicable. 

The lender must confirm that the 

information provided by the lender to 

SBA accurately reflects lender’s records 

for the loan, that the lender has made its 

decision in accordance with the 

requirements set forth in subsection 

V.2.a., and for a Second Draw PPP Loan 

of $150,000 or less, if applicable, the 

lender has reviewed the revenue 

reduction documentation provided by 

the borrower and confirmed the dollar 

amount and percentage of the 

borrower’s revenue reduction. 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 borrower’s loan(s) or loan 

application(s), 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. The 

EIDL Advance Amount received by the 

borrower will not reduce the amount of 

forgiveness to which the borrower is 

entitled and will not be deducted from 

the forgiveness payment amount that 

SBA remits to the Lender.88 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; 


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89This change has been made so that SBA can 

determine whether the borrower requested review 

within the appropriate time frame. 

90This text has been added to clarify the 

information that will be provided to borrowers 

regarding the lender’s forgiveness decision. 

91This subsection was originally published at 85 

FR 33010, subsection III.2.c. (June 1, 2020) and 

amended by 85 FR 38304, subsection III.2.b. (June 

26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. 

19, 2020) and has been modified to conform to 

section 311 of the Economic Aid Act and updates 

to SBA loan review procedures. 

92This subsection was originally published at 85 

FR 66214, subsection III.2.c. (Oct. 19, 2020) and has 

been modified to conform to section 307 of the 

Economic Aid Act. 

93This section was originally published at 85 FR 

33010, subsection III.3. (June 1, 2020) and has been 

modified to conform to section 340 of the Economic 

Aid Act. Section 340 of the Economic Aid Act 

provides that a lender may not be required to repay 

a processing fee unless the lender is found guilty 

of an act of fraud in connection with the PPP loan. 

(3) the (optional) PPP Borrower 

Demographic Information Form (if 

submitted to the lender); and 

(4) the SBA Form 3508D, if 

applicable. 

ii. For applications submitted using 

the SBA Form 3508EZ, 3508S, or 

lender’s equivalent form: 

(1) The SBA Form 3508EZ, 3508S, or 

lender’s equivalent form; 

(2) the (optional) Borrower 

Demographic Information Form (if 

submitted to the lender); and 

(3) the SBA Form 3508D, if 

applicable. 

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 subsection 

V.2.a., and for a Second Draw PPP Loan 

of $150,000 or less, if applicable, the 

lender has reviewed the revenue 

reduction documentation provided by 

the borrower and confirmed the dollar 

amount and percentage of the 

borrower’s revenue reduction. The 

lender must also notify the borrower in 

writing that the lender has issued a 

decision to SBA denying the loan 

forgiveness application and provide 

SBA with a copy of the notice.89 The 

notice to the borrower must include the 

reasons that the lender concluded that 

the borrower is not entitled to loan 

forgiveness in any amount and inform 

the borrower that the borrower has 30 

calendar days from receipt of the 

notification to seek, through the lender, 

SBA review of the lender’s decision.90

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 in accordance with 

subsection V.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 

decides to review the lender’s decision 

or if SBA declines a request for review. 

If the borrower does not timely 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 lender is 

responsible for notifying the borrower of 

the date on which the borrower’s first 

payment is due. 

c. What should a lender do if it receives 

notice that SBA is reviewing a loan? 91

SBA may begin a review of any PPP 

loan of any size at any time in SBA’s 

discretion. SBA may, in its discretion, 

review the borrower’s First Draw PPP 

Loan and Second Draw PPP Loan at the 

same time or at different times. If SBA 

undertakes such a review, SBA will 

notify the lender in writing and the 

lender must notify the borrower in 

writing within five business days of 

receipt. 

Within five business days of receipt of 

such notice, the lender shall transmit to 

SBA electronic copies of the following: 

i. The Borrower Application Form 

(SBA Form 2483, 2483–SD, or lender’s 

equivalent form) and all supporting 

documentation provided by the 

borrower, including revenue reduction 

documentation provided by the 

borrower on a Second Draw PPP Loan. 

ii. The Loan Forgiveness Application 

(SBA Form 3508, 3508EZ, 3508S, or 

lender’s equivalent form), and all 

supporting documentation provided by 

the borrower (if the lender has received 

such application), including revenue 

reduction documentation provided by 

the borrower on a Second Draw PPP 

Loan of $150,000 or less if not provided 

at the time of loan application. If the 

lender receives the borrower’s loan 

forgiveness 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, 3508S, 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’’). 

For Second Draw PPP Loans of 

$150,000 or less where a loan 

forgiveness application has not been 

submitted by the borrower, the lender 

must also request that the borrower 

provide the lender with revenue 

reduction documentation, if not 

previously provided to the lender. 

The lender must submit documents 

received from the borrower to SBA 

within five business days of receipt 

from the borrower. 

iii. A signed and certified transcript of 

account. 

iv. A copy of the executed note 

evidencing the PPP loan. 

v. Any memorandum or other analysis 

that the lender prepared in making its 

decision on the borrower’s loan 

forgiveness application, if applicable. 

vi. Any other documents related to 

the loan requested by SBA. 

If SBA has notified the lender that 

SBA has commenced a loan review, the 

lender should issue a forgiveness 

decision to SBA not later than 60 days 

after receipt of the complete loan 

forgiveness application from the 

borrower, unless otherwise directed by 

SBA. 

d. What should a lender do if a borrower 

submits documentation of eligible costs 

that exceed a borrower’s PPP Loan 

Amount? 92

The amount of loan forgiveness that a 

borrower may receive cannot exceed the 

principal amount of the PPP loan. 

Whether a borrower submits SBA Form 

3508, 3508EZ, 3508S, or lender’s 

equivalent form, a lender should 

confirm receipt of the documentation 

the borrower is required to submit to aid 

in verifying payroll and nonpayroll 

costs, and, if applicable (for SBA Form 

3508, 3508EZ, or lender’s equivalent 

form), confirm the borrower’s 

calculations on the borrower’s Loan 

Forgiveness Application, up to the 

amount required to reach the requested 

Forgiveness Amount. Supporting 

documentation regarding a borrower’s 

payroll and nonpayroll costs is not 

required to be submitted to the lender 

with the SBA Form 3508S. 

3. Lender Fees 93

Are lender processing fees subject to 

clawback if a lender has not fulfilled its 

obligations under PPP regulations? 

A lender is required to repay the 

processing fee to SBA if a lender is 

found guilty of an act of fraud in 

connection with the PPP loan. In such 


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8298 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 

94See 13 CFR 120.524. 

case, the loan is not eligible for a 

guaranty.94

VI. 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 Congressional Review Act, the 

Administrative Procedure Act, the 

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

35), and the Regulatory Flexibility Act (5 

U.S.C. 601–612) 

Executive Orders 12866, 13563, and 

13771 

This interim final rule is 

economically significant for the 

purposes of Executive Orders 12866 and 

13563. SBA, however, is proceeding 

under the emergency provision at 

Executive Order 12866 section 6(a)(3)(D) 

based on the need to move 

expeditiously to mitigate the current 

economic conditions arising from the 

COVID–19 emergency. This rule’s 

designation under Executive Order 

13771 will be informed by public 

comment. 

This rule is necessary to implement 

the Economic Aid 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. 

The Administrator of the Office of 

Management and Budget’s Office of 

Information and Regulatory Affairs 

(OIRA) has determined that this is a 

major rule for purposes of Subtitle E of 

the Small Business Regulatory 

Enforcement and Fairness Act of 1996 

(also known as the Congressional 

Review Act or CRA) (5 U.S.C. 804(2) et 

seq.). Under the CRA, a major rule takes 

effect 60 days after the rule is published 

in the Federal Register. 5 U.S.C. 

801(a)(3). 

Notwithstanding this requirement, the 

CRA allows agencies to dispense with 

the requirements of section 801 when 

the agency for good cause finds that 

such procedure would be impracticable, 

unnecessary, or contrary to the public 

interest and the rule shall take effect at 

such time as the agency promulgating 

the rule determines. 5 U.S.C. 808(2). 

Pursuant to § 808(2), SBA for good cause 

finds that a 60-day delay to provide 

public notice is impracticable and 

contrary to the public interest. Likewise, 

for the same reasons, SBA for good 

cause finds that there are grounds to 

waive the 30-day effective date delay 

under the Administrative Procedure 

Act. 5 U.S.C. 553(d)(3). 

As discussed elsewhere in this 

interim final rule, the Economic Aid Act 

provided that several of the changes 

relating to loan forgiveness are effective 

as if included in the CARES Act and 

apply to any loan made pursuant to 

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

Act before, on, or after December 27, 

2020, including forgiveness of such a 

loan. Accordingly, loans that were made 

in 2020 but that have not yet received 

forgiveness will be forgiven based on 

changes made in the Economic Aid Act, 

as implemented in this interim final 

rule. Given the urgent need to provide 

borrowers that are eligible for loan 

forgiveness with timely relief, the 

Administrator in consultation with the 

Secretary has determined that it is 

impractical and not in the public 

interest to provide a delayed effective 

date. An immediate effective date will 

allow SBA to continue remitting 

forgiveness payments to lenders without 

disruption and in accordance with the 

amendments made by the Economic Aid 

Act. 

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 

some retroactive effect consistent with 

specific applicability provisions of the 

Economic Aid 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 revisions to existing 

recordkeeping or reporting requirements 

of the Paycheck Protection Program 

(PPP) information collection (OMB 

Control Number 3245–0407) as a result 

of amendments made to the PPP by the 

Economic Aid Act and implemented in 

this interim final rule. The revisions 

will affect the PPP Loan Forgiveness 

Application Form 3508, PPP Loan 

Forgiveness Application Form 3508EZ, 

and PPP Loan Forgiveness Application 

Form 3508S. 

Further, to address the conflict of 

interest provisions in section 322 of the 

Economic Aid Act, SBA has developed 

a new form, Paycheck Protection 

Program—Borrower’s Disclosure of 

Certain Controlling Interests Form 

3508D, which is required for certain 

borrowers who have disclosure 

requirements under the Economic Aid 

Act. 

SBA Form 3508S was amended to 

conform to section 307 of the Economic 

Aid Act, which requires a simplified 

forgiveness application for loans of not 

more than $150,000. SBA Forms 3508, 

3508EZ and 3508S were also amended 

to address the new Second Draw PPP 

Loan program under section 311 of the 

Economic Aid Act, include the 

additional expenses that are eligible for 

forgiveness under section 304 of the 

Economic Aid Act, address the changes 

to the covered period definition in 

section 306 of the Economic Aid Act, 

and implement the EIDL advance 

deduction repeal in section 333 of the 

Economic Aid Act. SBA Form 3508D 

will be used by borrowers where a 

covered individual, as defined in 

section 322 of the Economic Aid Act, 

holds a controlling interest in the 

borrower. 

SBA has requested Office of 

Management and Budget (OMB) 

emergency approval of the revisions to 

the information collection to enable 

borrowers to begin submitting loan 

forgiveness applications with the 

Economic Aid Act changes as quickly as 

possible and to enable borrowers with 

disclosure requirements to meet the 

statutory deadline for disclosure. 

Regulatory Flexibility Act (RFA) 

The Regulatory Flexibility Act (RFA) 

generally requires that when an agency 

issues a proposed rule, or a final rule 

pursuant to section 553(b) of the 

Administrative Procedure Act or 

another law, the agency must prepare a 

regulatory flexibility analysis that meets 

the requirements of the RFA and 

publish such analysis in the Federal 

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

Rules that are exempt from notice and 

comment are also exempt from the RFA 

requirements, including conducting a 


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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Rules and Regulations 8299 

regulatory flexibility analysis, when 

among other things the agency for good 

cause finds that notice and public 

procedure are impracticable, 

unnecessary, or contrary to the public 

interest. SBA Office of Advocacy guide: 

How to Comply with the Regulatory 

Flexibility Act, Ch.1. p.9. Since this rule 

is exempt from notice and comment, 

SBA is not required to conduct a 

regulatory flexibility analysis. 

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

Coronavirus Aid, Relief, and Economic 

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

and Economic Aid to Hard-Hit Small 

Businesses, Nonprofits, and Venues Act (Pub. 

L. 116–260), section 303. 

Tami Perriello, 

Acting Administrator, Small Business 

Administration. 

Andy P. Baukol, 

Principal Deputy Assistant Secretary for 

International Monetary Policy (performing the 

delegable duties of the Deputy Secretary), 

Department of the Treasury. 

[FR Doc. 2021–02314 Filed 2–3–21; 11:15 am] 

BILLING CODE P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2020–1177; Project 

Identifier MCAI–2020–01336–R; Amendment 

39–21403; AD 2021–02–20] 

RIN 2120–AA64 

Airworthiness Directives; He ́licopte`res 

Guimbal Helicopters 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule; request for 

comments. 

SUMMARY: The FAA is adopting a new 

airworthiness directive (AD) for all 

He ́licopte`res Guimbal Model Cabri G2 

helicopters. This AD was prompted by 

a report of a crack in a rotating scissor 

fitting. This AD requires an initial and 

repetitive inspections of certain rotating 

and non-rotating scissor fittings, and 

depending on the results, replacing the 

affected assembly. This AD also 

prohibits installing certain main rotor 

hubs (MRHs) and swashplate guides 

unless the initial inspection has been 

accomplished. The FAA is issuing this 

AD to address the unsafe condition on 

these products. 

DATES: This AD becomes effective 

February 22, 2021. 

The Director of the Federal Register 

approved the incorporation by reference 

of certain documents listed in this AD 

as of February 22, 2021. 

The FAA must receive comments on 

this AD by March 22, 2021. 

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: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

For service information identified in 

this final rule, contact He ́licopte`res 

Guimbal, Basile Ginel, 1070, rue du 

Lieutenant Parayre, Ae ́rodrome d’Aixen-Provence, 13290 Les Milles, France; 

telephone 33–04–42–39–10–88; email 

basile.ginel@guimbal.com; web https://

www.guimbal.com. You may view this 

service information at the FAA, Office 

of the Regional Counsel, Southwest 

Region, 10101 Hillwood Pkwy., Room 

6N–321, Fort Worth, TX 76177. For 

information on the availability of this 

material at the FAA, call (817) 222– 

5110. It is also available at https://

www.regulations.gov by searching for 

and locating Docket No. FAA–2020– 

1177. 

Examining the AD Docket 

You may examine the AD docket at 

https://www.regulations.gov by 

searching for and locating Docket No. 

FAA–2020–1177; 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 European Union Aviation 

Safety Agency (EASA) AD, any 

comments received, and other 

information. The street address for 

Docket Operations is listed above. 

FOR FURTHER INFORMATION CONTACT: Fred 

Guerin, Aerospace Engineer, General 

Aviation & Rotorcraft Section, 

International Validation Branch, FAA, 

2200 South 216th St. Des Moines, WA 

98198; telephone (206) 231–3500; email 

fred.guerin@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

The EASA, which is the Technical 

Agent for the Member States of the 

European Union, has issued EASA AD 

No. 2020–0199, dated September 21, 

2020, and corrected September 24, 2020 

(EASA AD 2020–0199), to correct an 

unsafe condition for He ́licopte`res 

Guimbal (HG) Model Cabri G2 

helicopters. EASA advises of a report of 

a crack in a rotating scissor fitting 

discovered during maintenance. 

According to EASA, the suspected root 

cause of the crack was corrosion under 

residual stress. This condition, if not 

addressed, could result in failure of the 

rotating or non-rotating scissor fitting on 

either the MRH or the swashplate guide, 

and subsequent loss of control of the 

helicopter. 

Accordingly, EASA AD 2020–0199 

requires an initial and repetitive 

inspections of the rotating and nonrotating scissor fittings part number (P/ 

N) G12–00–200 installed on the MRH or 

swashplate guide, respectively. If a 

crack is detected, the EASA AD requires 

replacing the affected MRH or 

swashplate guide with a serviceable 

part. The EASA AD prohibits installing 

certain MRHs and swashplate guides 

unless the initial inspection has been 

accomplished. The EASA AD also 

requires reporting certain information to 

HG. 

FAA’s Determination 

These helicopters have been approved 

by EASA and are approved for operation 

in the United States. Pursuant to the 

FAA’s bilateral agreement with the 

European Union, EASA has notified the 

FAA about the unsafe condition 

described in its AD. The FAA is 

proposing this AD after evaluating all 

known relevant information and 

determining that the unsafe condition 

described previously is likely to exist or 

develop on other helicopters of the same 

type design. 

Related Service Information Under 1 

CFR Part 51 

The FAA reviewed Guimbal Service 

Bulletin SB 20–011, Revision C, and SB 

20–012, Revision B, each dated October 

5, 2020 (SB 20–011 Rev C and SB 20– 

012 Rev B). SB 20–012 Rev B specifies 

removing the bolts connecting the two 

scissor fittings P/N G12–00–200 and 

accomplishing a one-time detailed 

inspection for a crack in certain areas. 

SB 20–012 Rev B also specifies 

reassembling the two scissor fittings 

using correct bolt torque limits, 

installing new cotter pins, and reporting 

any findings to HG customer service. SB 

20–011 Rev C specifies procedures for a 

recurring inspection after 

accomplishment of SB 20–012 Rev B of 

the same areas of the scissor fittings for 

a crack as SB 20–012 Rev B, except 

without removing the bolts which 

connect the two scissor fittings. SB 20– 


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