Temporary changes to the business loan program; Paycheck Protection Program as amended by the Economic Aid Act

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B-332918

February 5, 2021

The Honorable Sherrod Brown
Chairperson
Ranking member
Committee on Banking, Housing and Urban Affairs
United States Senate

The Honorable Richard Neal
Chairperson
The Honorable Kevin Brady
Republican leader
Committee on Means and Ways
House of Representatives

Object: Small Business Administration, Treasury Department: Temporary Changes to Business Loan Program; Paycheck Protection Program as amended by the Economic Aid Act

Pursuant to Section 801 (a) (2) (A) of Title 5, United States Code, this is our report on an important rule approved by the Small Business Administration (SBA) entitled “Business Loan Program Temporary Changes; Paycheck Protection Program, as amended by the Economic Aid Act ”(RINs: 3245-AH62, 1505-AC74). We received the rule on January 22nd, 2021. It was published in Federal Register as a preliminary final settlement on January 14, 2021. 86 Fed. Registration number. 3692. The effective date of the provisional definitive rule is January 12, 2021.

According to the SBA, the tentative final ruling includes the amendments to the Economic Aid to Hardly Affected Small Businesses, Nonprofits, and Venues Act, Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, div. N, Title III, 134 Stat. 1187, 1999 (December 27, 2020), must be implemented by ordinance within 10 days of coming into force. To facilitate reference by borrowers and lenders, the SBA stated that the tentative definitive rule also consolidates the tentative definitive rules (and key guidance) that have existed to date on borrower eligibility, lender eligibility, and the application of the paycheck protection program (PPP) and on the new PPP loan allocation requirements, as well as general rules on loan increases and waivers. The SBA further stated that the provisional final rule is intended to regulate new PPP loans granted under the Economic Aid Act, as well as loan waiver requests for existing PPP loans where the loan waiver payment has not been remitted, rather than as an amendment or concern the requirements for PPP loans concluded before its entry into force, unless the provisions apply retrospectively in accordance with the specific applicability provisions of the Economic Aid Act, as stated in this provisional final regulation. In addition, the SBA stated that in this provisional final regulation, the Treasury Department is exercising its power to allow borrowers of PPP loans with initial draw to use 2019 or 2020 to calculate their maximum loan amount.

The Congressional Review Act (CRA) requires a 60-day delay in the entry into force of an important rule from the date it was published in the Federal Register or receipt of rule by Congress, whichever comes later. 5 USC § 801 (a) (3) (A). The 60-day delay of entry into force can, however, be omitted if the agency determines for good cause that the delay is impracticable or contrary to the public interest and the agency includes a description of the findings and their reasons in the enacted regulation. 5 USC § 808 (2). The SBA noted that it had a good reason, as an immediate effect gives small businesses the maximum time to apply for credit and lenders the maximum time to process applications before the end of the program.

Attached is our assessment of SBA’s compliance with procedural steps required under Section 801 (a) (1) (B) (i) through (iv) of Title 5 in relation to the rule. If you have any questions about this report or would like to contact GAO officers responsible for evaluating the subject matter of the regulation, please contact Shari Brewster, Assistant General Counsel at (202) 512-6398.

Shirley A. Jones
Managing Associate General Counsel

Enclosure

cc: Yvonne Walters
Legal advisor
General Counsel’s Office
Small business administration

ENCLOSURE

5 USC SECTION 801 (a) (2) (A) REPORT ON AN IMPORTANT RULE
PUBLISHED BY
SMALL BUSINESS,
DEPARTMENT OF TREASURERS
ENTITLED
“PROGRAM FOR BUSINESS LOANS TEMPORARY CHANGES;
SALARY CHECK PROTECTION PROGRAM CHANGED BY THE ECONOMIC AID ACT “
(RINS: 3245-AH62, 1505-AC74)

(i) cost-benefit analysis

In its submission to us, the Small Business Administration (SBA) stated that it did not carry out a cost-benefit analysis of this preliminary final regulation.

(ii) Agency actions that are applicable to the Regulatory Flexibility Act (RFA), 5 USC Sections 603-605, 607 and 609. are relevant

The SBA has determined that the provisional final regulation is not subject to the law, as the provisional final regulation was not the subject of a notification and comment procedure.

(iii) Agency actions related to Sections 202-205 of the Unfunded Mandates Reform Act of 1995, 2 USC Sections 1532-1535

In its submission to us, the SBA stated that it does not consider the creation of a written declaration to be applicable under the law.

(iv) Other relevant information or requirements under laws and implementing regulations

Administrative Procedure Act, 5 USC §§ 551 ff.

The SBA stated that the tentative final ruling was passed with no notice and commentary process because of Section 303 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act, Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, div. N, Title III, 134 Stat. 1187, 1999 (December 27, 2020), empowers the SBA to enact regulations to implement the law without going through such procedures. SBA waived the required 30-day delay in entry into force for an important reason. The SBA noted that it had a good reason, as an immediate effect gives small businesses the maximum time to apply for credit and lenders the maximum time to process applications before the end of the program.

Paperwork Reduction Act (PRA), 44 USC sections 3501-3520

The SBA has determined that the tentative final rule is revising the Information Collection Requirements (ICRs) related to the Office of Management and Budget (OMB) control number 3245-0407. The SBA announced that the changes will affect the Paycheck Protection Program (PPP) Borrower Application Form (SBA Form 2483), the PPP Lender Application Form (SBA Form 2484), the Lender Application Form for federally insured depository institutions, federally insured Credit unions and farms would impact Credit System Institutions (SBA Form 3506) and the Lender Application Form for Non-Bank and Uninsured Depository Lenders (SBA Form 3507).

Legal approval for the rule

The SBA issued the provisional final rule under Section 636 of Title 15 of the United States Code and Public Laws 116-136 and 116-260.

Executive Order No. 12866 (Regulatory Planning and Review)

The SBA found the provisional final settlement to be economically significant and stated that it had been reviewed by OMB.

Implementing Regulation No. 13132 (Federalism)

The SBA stated that the provisional final ruling will have no material direct impact on the Länder, on the relationship between national government and Länder, or on the distribution of power and responsibilities between the various levels of government, and therefore will not have any federalism impact

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