Document Drafting Handbook At the same time, these procedures do not disqualify an eligible unresolved borrower from receiving a Second Draw PPP Loan, in recognition that many flags will be resolved in the borrower's favor. [16] Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. Gross receipts do not include the following: Taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees); proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker. However, if a concern acquired a segregable division of another business concern during 2020, gross receipts do not include the receipts of the acquired division prior to the acquisition. documents in the last year, 10 By Matthew Rambaran, Manager CLA T. 267.419.1145 Email. 04/17/2023, 209 20. documents in the last year, 296 Subsection (i) of the IFR establishes procedures relating to the handling of a Second Draw PPP Loan application by a borrower whose First Draw PPP Loan is under review by SBA (unresolved borrower). 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. For second-draw loans, the SBA's system reviews a borrower's prior PPP application, as well as business databases, which may include Dun & Bradstreet and LexisNexis. (Emphasis added). Which program provides small businesses with funds in pay up to 8 weeks of payroll costs including benefits. [12] This clarification ensures the effectiveness of the second draw loan program by ensuring that a borrower is not disqualified from receiving a Second Draw PPP Loan because it received forgiveness on a First Draw PPP Loan. [29] The Administrator, in consultation with the Secretary, determined that limiting the amount of Second Draw PPP Loans that a single corporate group may receive will promote the availability of PPP loans to the largest possible number of borrowers, consistent with the CARES and Economic Aid Act. (2)(i) Gross receipts includes all revenue in whatever form received or accrued (in accordance with the entity's accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Until the ACFR grants it official status, the XML 5 U.S.C. on FederalRegister.gov Similarly, local municipalities throughout the country will have to deal with revenue loss created by COVID-19. (D) All terms in this subsection shall have the meaning attributed to them by the IRS. As a result, if each hotel or restaurant location owned by a parent business is a separate legal business entity and employs not more than 500 employees, each hotel or restaurant location is permitted to apply for a separate PPP loan provided it uses its unique EIN. Section 311 of the Economic Aid Act adds a second temporary program to SBA's 7(a) Loan Program titled, Paycheck Protection Program Second Draw Loans. This interim final rule implements the key provisions of section 311 of the Economic Aid Act and requests public comment. These methodologies are based on the corresponding methodologies for self-employed individuals and partnerships that are used for First Draw PPP Loans. A brilliantly original and fascinating story with many . rendition of the daily Federal Register on FederalRegister.gov does not (B) An applicant that was in operation in all four quarters of 2019 is deemed to have experienced the revenue reduction in subsection (c)(1)(iv)(A)(1) if it experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019 and the borrower submits copies of its annual tax forms substantiating the revenue decline. (The revenue reduction requirement is addressed in subsection (c)(1)(iv) of this IFR.) documents in the last year, by the International Trade Commission 1. In place to avoid making superfluous PPP loan payments, loan must submit loan forgiveness applications to their lenders within 10 months free the end of their respective covered periods. See paragraph 7(a)(37)(I)(i) of the Small Business Act. These categories of prohibited borrowers are listed in subsection (e) of the IFR: In addition, subsection (e)(9) of this IFR provides that an entity that has previously received a Second Draw PPP Loan may not receive another Second Draw PPP Loan, as required by the Economic Aid Act. The award is Bologna FQ-EHEA second cycle degree or diploma compatible Name and level of intermediate awards Postgraduate Diploma (Pg Dip) - Diplomacy and Global Politics . L. 116-136, section 1114; and Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, Pub. Further, although military procurers . Subsection (c)(2) also adapts the methodology for calculating affiliate receipts from 13 CFR 121.104. This summary provides additional information and explains the key terms in the IFR. headings within the legal text of Federal Register documents. In addition, for a Second Draw PPP Loan greater than $150,000, the lender must 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. [28] Second Draw PPP Loans are eligible for loan forgiveness on the same terms and conditions as First Draw PPP Loans, except that Second Draw PPP Loan borrowers with a principal amount of $150,000 or less are required to provide documentation of revenue reduction if such documentation was not provided at the time of the loan application as specified in subsections (g)(2)(iv) and (v) of this section. that: (i) Previously received a First Draw PPP loan in accordance with the eligibility criteria in the Consolidated First Draw PPP IFR; (ii) has 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 under subsection (B)(11) of the Consolidated First Draw PPP IFR on or before the expected date on which the Second Draw PPP Loan will be disbursed;[34], (iii) employs not more than 300 employees, unless it satisfies the alternative criteria for businesses with a North American Industry Classification System (NAICS) code beginning with 72 and eligible news organizations with more than one physical location described in subsection (c)(3) or (c)(4) of this section; and. Both First Draw PPP Loans and Second Draw PPP Loans can be used to help fund an expanded list of forgivable expenses, including payroll costs, rent, and utilities, as well as uninsured property damage costs caused by looting or vandalism, certain supplier costs, worker protection expenditures related to COVID-19, and certain operations A representative of the applicant can certify for the business as a whole if the representative is legally authorized to do so. ), that has more than one physical location and that employs not more than 300 employees per physical location is eligible to receive a Second Draw PPP Loan if it meets the eligibility criteria in subsection (c)(1) and: (1) Is majority owned or controlled by a business concern that is assigned a NAICS code beginning with 511110 or 5151 or, with respect to a public broadcasting entity (as defined in section 397(11) of the Communications Act of 1934 (47 U.S.C. These include, but are not limited to the following terms: The guarantee percentage is 100 percent. of the issuing agency. L. 116-260) into law to provide continued assistance to individuals and businesses that have been financially impacted by the ongoing coronavirus pandemic. The bigger issue, of course, is resolving baseless loan rejections before the second round of PPP funding runs out of money. 23. The Act also provided tailored methodologies for certain categories of borrowers. Section 311 of the Economic Aid Act added a new temporary section 7(a)(37) to the Small Business Act (15 U.S.C. 636(a)(37)). Paragraph 7(a)(37)(E) of the Small Business Act. Subsection (c)(1)(iv)(A) of the IFR reflects this methodology. A lender must make disbursement of the loan within ten calendar days of loan approval. (iv) The interest rate will be 100 basis points or one percent, calculated on a non-compounding, non-adjustable basis. (5) The maximum amount of a Second Draw PPP Loan made to a borrower assigned a NAICS code beginning with 72 at the time of disbursement as defined in subsection (f)(10) (that is not a seasonal employer or new entity addressed in subsection (f)(3) or (f)(4) or a borrower with self-employment income or a partnership addressed in subsection (f)(7) or (f)(8) of this section) is calculated as the lesser of: (A) The average total monthly payment for payroll costs incurred or paid by the borrower during either 2019 or 2020 (at the borrower's election) by, (6) (i) The maximum amount of a Second Draw PPP Loan to a farmer or rancher that:Start Printed Page 3720. (4) if the applicant was not in business during 2019, but was in operation on February 15, 2020, the applicant had gross receipts during the second, third, or fourth quarter of 2020 that demonstrate at least a 25 percent reduction from the gross receipts of the entity during the first quarter of 2020 (for example, an applicant that had gross receipts of $50,000 in the first quarter of 2020 and had gross receipts of $30,000 in the fourth quarter of 2020demonstrating a reduction of 40 percent from the applicant's gross receipts during the first quarter in 2020). Subsection (f) of the IFR uses calendar year 2020 to refer to the twelve-month period prior to when the loan is made. Calculating payroll costs based on calendar year 2020 rather than the twelve months preceding the date the loan is made will simplify the calculations and documentation requirements for borrowers because payroll records are more commonly created and retained on a calendar-year basis. 301 et seq.) This aggregation applies for the entire period of measurement, not just the period after the affiliation arose. electronic version on GPOs govinfo.gov. Chapter 35, https://www.federalregister.gov/d/2021-00452, MODS: Government Publishing Office metadata, https://www.sba.gov/tools/local-assistance/districtoffices, section 101 of title 5, United States Code, https://www.sba.gov/sites/default/files/2020-12/Final%20PPP%20FAQs%20%28December%209%202020%29-508.pdf. (vi) All loans will be processed by all lenders under delegated authority and lenders will be permitted to rely on certifications of the borrower in order to determine eligibility of the borrower and the use of loan proceeds. 7. A borrower must calculate this revenue reduction by comparing the borrower's quarterly gross receipts for one quarter in 2020 with the borrower's gross receipts for the corresponding quarter of 2019. Corporate group has the same meaning as in subsection (B)(4)(f) of the Consolidated First Draw PPP IFR. (C) was in business as of February 15, 2020; is calculated according to (ii) or (iii) of this subsection(e)(6), depending on whether the borrower has employees. FAQ #63 and subsection (c) of the interim final rule for Second Draw PPP Loans. daily Federal Register on FederalRegister.gov will remain an unofficial 35), and the Regulatory Flexibility Act (, Paperwork Reduction Act, 44 U.S.C. (B) If a borrower has acquired an affiliate or been acquired as an affiliate during 2020, gross receipts includes the receipts of the acquired or acquiring concern. SBA may provide further guidance, if needed, through SBA notices and a program guide which will be posted on SBA's website at www.sba.gov. 15 U.S.C. the official SGML-based PDF version on govinfo.gov, those relying on it for Rules that are exempt from notice and comment are also exempt from the RFA requirements, including conducting a regulatory flexibility analysis, when among other things the agency for good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to the public interest. Second Draw PPP Loans are subject to SBA's and the Department of the Treasury's (Treasury's) Under section 317 of the Economic Aid Act, the same standard applies to certain news organizations. To be eligible for a Second Draw PPP Loan, a borrower must certify on SBA Form 2483-SD that, before the Second Draw PPP Loan is disbursed, the borrower will have used the full loan amount (including any increase) of its First Draw PPP Loan "only for eligible expenses." 4. The President of the United States communicates information on holidays, commemorations, special observances, trade, and policy through Proclamations. maturity of five years 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. 13. This article includes those changes as they affect Second Draw PPP Loans. Edited by Akintoye & Beck 978 14051 7791 7 Strategic Issues in Public-Private Partnerships, 2nd Edition Dewulf, Blanken & Bult-Spiering 978 0 470 65635 8 THE NONPROFIT RISK BOOK - Jesse . Additional resources pertaining to the Economic Aid Act and PPP - including application forms, Lender guidance, and PPP program rules - can be found on . About the Federal Register Tick your Download Entire Update checkbox. These applications and the guidance can be found on the Treasury's website ( www.treasury.gov ). On April 6, 2021, the FAQs were further updated. These credits are available to employers (except state and local governments and their instrumentalities and small business who . Accordingly, a single business entity that is assigned a NAICS code beginning with 72 is eligible to receive a Second Draw PPP Loan if it employs no more than 300 employees per physical location and meets the revenue reduction requirements and otherwise satisfies the eligibility criteria described in this IFR. (2) Frequently Asked Questions and other guidance issued by SBA or by SBA in consultation with the Department of the Treasury with respect to PPP loans under section 7(a)(36) of the Small Business Act (15 U.S.C. An unresolved hold issue does not prohibit a borrower from receiving a second draw loan, but it may affect the timing of a second draw funding. (g) How do I submit an application for a Second Draw PPP Loan and what documentation must I provide to demonstrate eligibility? For borrowers assigned a NAICS code beginning with 72 at the time of disbursement, the Economic Aid Act provides that the maximum loan amount is equal to three-and-a-half (3.5) months of payroll costs rather than two-and-a-half (2.5) months. (1) The applicant must submit to the lender SBA Form 2483-SD (Paycheck Protection Program Second Draw Borrower Application Form) or the lender's equivalent form including the required certifications and the documentation in subsection (g)(2). However, if a borrower sold a segregable division during 2020, the gross receipts will continue to include the receipts of the division that was sold. Effective Date: This interim final rule is effective January 12, 2021. Congress designated $137 billion for PPP second draw loans as part of a larger funding and relief package. Although this IFR is effective immediately, comments are solicited from interested members of the public on all aspects of the interim final rule. Unlike First Draw PPP Loans, the Economic Aid Act provides that the relevant time period for calculating a borrower's payroll costs for a Second Draw PPP Loan is either the twelve-month period prior to when the loan is made or calendar year 2019. Consistent with the Economic Aid Act, subsections (f)(3) and (f)(4) of the IFR include tailored calculation methodologies for seasonal businesses, new entities that did not exist for the full twelve-month period preceding the Second Draw PPP Loan, and borrowers assigned a NAICS code beginning with 72 at the time of disbursement. These procedures are designed to promote compliance with the eligibility requirements for Second Draw PPP Loans by preventing additional loans from being made to borrowers that were not eligible for a First Draw PPP Loan or received an impermissible loan amount. All references to subsections refer to section IV. Subsections (c)(3) and (c)(4) of the IFR implement these statutory provisions. (9) an entity that has permanently closed. Second draw PPP loans are intentionally narrower and smaller in terms of eligibility and amount. By Adam Sweet, J.D., LL.M. 1602), including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy or Start Printed Page 3719otherwise describes itself as a think tank in any public documents; (i) For which an entity created in or organized under the laws of the People's Republic of China or the Special Administrative Region of Hong Kong, or that has significant operations in the People's Republic of China or the Special Administrative Region of Hong Kong, owns or holds, directly or indirectly, not less than 20 percent of the economic interest of the business concern or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership; or. See . This exclusion of gross receipts of such former affiliate applies during the entire period of measurement, rather than only for the period after which affiliation ceased. An updated PPP application form has been issued by the SBA, together with an application for the new Second Draw Loan program. The end of PPP Millions of other borrowers are in the same position after the $292 billion allocated to the second round of PPP ran out weeks ahead of the May 31 deadline. Second Draw PPP Loans are generally subject to the same terms, conditions and requirements as First Draw PPP Loans. documents in the last year, 492 Paragraph 7(a)(36)(D)(iii)(I) of the Small Business Act. All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts. The PPP is now a $284 billion refundable loan offering aimed at struggling small businesses. This site displays a prototype of a Web 2.0 version of the daily Excluding the forgiveness amount from a borrower's gross receipts is consistent with section 7A(i) of the Small Business Act, which expressly excludes PPP forgiveness amounts from being taxed as income. for better understanding how a document is structured but You may submit comments, identified by number SBA-2021-0002 through the Federal eRulemaking Portal: http://www.regulations.gov. 603, 604. In calculating a borrower's payroll costs, the borrower must subtract any compensation paid to an employee in excess of $100,000 on an annualized basis, as prorated for the time period during which the payments are made or the obligation to make the payments is incurred. Paragraph 7(a)(36)(D)(iv) of the Small Business Act. 605(b). It was viewed 67 times while on Public Inspection. The Public Inspection page may also 636(a)(36) and (37)); and (B) attests that the applicant, eligible recipient, or eligible entity, as applicable, has accurately provided the certification or documentation to the lender in accordance with the statutory requirements, regulations, and guidance related to PPP loans. Therefore, SBA has determined that this rule has no federalism implications warranting preparation of a federalism assessment. are not part of the published document itself. This furthers the purpose of the second draw loan provisions, which is to deliver additional aid to small businesses that previously received a First Draw PPP Loan. On December 27, 2020, President Trump signed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Economic Aid Act) (Pub. (E) Follow applicable BSA requirements (listed in subsection (C)(3)(d) of the Consolidated First Draw PPP IFR); and. If the lender identifies errors in the borrower's calculation or a material lack of substantiation in the borrower's supporting documents, the lender should work with the borrower to remedy the issue. Register documents. Subsection (c)(1)(iv)(B) of the IFR provides that a borrower that was in operation in all four quarters of 2019 is deemed to have experienced the required revenue reduction if it Start Printed Page 3714experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019 and the borrower submits copies of its annual tax forms substantiating the revenue decline. Select Download Latest Update. (ii) For a borrower that has income from self-employment and has employees, the maximum loan amount is the lesser of: (1) The sum of (i) the net profit of the borrower in 2019 or 2020 (at the election of the borrower), as reported on IRS Form 1040 Schedule C, that is not more than $100,000, divided by 12; (ii) the average total monthly payment for employee payroll costs incurred or paid by the borrower during the same year elected by the borrower; by, (2) 2.5 (or, only for a borrower assigned a NAICS code beginning with 72 at the time of disbursement as defined in subsection (f)(10), 3.5); or. Under section 7(a)(37) of the Small Business Act (15 U.S.C. SBA's FAQs on Loan Forgiveness Paragraph 7(a)(37)(A)(iv)(III)(bb) of the Small Business Act. If you do go back into your application and make. [11] Subsection (j) contains forgiveness provisions specific to Second Draw PPP loans. (A) Confirm receipt of borrower certifications contained in Paycheck Protection Program Second Draw Borrower Application Form (SBA Form 2483-SD) or lender's equivalent; (B) Confirm receipt of information demonstrating that a borrower was either an eligible self-employed individual, independent contractor, or sole proprietorship with no employees or had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020; (C) Confirm the dollar amount of average monthly payroll costs for 2019 or 2020 (whichever was used to calculate loan amount) by reviewing the payroll documentation submitted with the borrower's application; (D) For a Second Draw PPP Loan greater than $150,000 or a loan of $150,000 or less where the borrower provides documentation of revenue reduction, 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. , SBA has determined that this rule has no federalism implications warranting preparation of a funding! 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