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Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Rules and Regulations
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or 2020 net profit or proprietor expenses calculated based on 2019 or 2020 gross income.41 General partners are capped by the prorated amount of their 2019 or 2020 net earnings from self-employment 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 LLCs tax filing status in the reference year used to determine their loan amount.
g. Subsection IV.6.b of the interim final rule on loan forgiveness requirements and loan review procedures 86 FR 8283, 8293 is revised to read as follows:
b. What documentation are borrowers who are individuals with selfemployment income who file an IRS
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 7Al1A 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 7Ae3 of the Small Business Act, and if the borrower has employees IRS Form 941 and state quarterly 41 For self-employed borrowers with no employees that file IRS Form 1040, Schedule C, who used gross income to calculate the loan amount, proprietor expenses equal gross income.
For self-employed borrowers with employees that file IRS Form 1040, Schedule C, who used gross income to calculate the loan amount, proprietor expenses equal the difference between gross income and employee payroll costs. See subsections B.4.b and B.11.b of the consolidated interim final rule implementing updates to the PPP as amended by this interim final rule. For self-employed borrowers that file IRS Form 1040, Schedule F and have no employees, gross income may be used instead of net profit. For self-employed borrowers that file IRS
Form 1040, Schedule F and have employees, the difference between gross income and employee payroll costs may be used. See section 313 of the Economic Aid Act.
67 This 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.
68 See subsection g2v of the interim final rule on Second Draw PPP Loans. 86 FR 3712, 3721 Jan.
14, 2021.

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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 IRS
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 or proprietor expenses allocated to the owner for the covered period.69
h. SBA has developed new Borrower Application Forms for use by borrowers that are Schedule C filers and elect to calculate their loan amount using gross income, as allowed under this interim final rule. SBA Form 2483C will be used by such borrowers when applying for First Draw PPP Loans and SBA Form 2483SDC will be used by such borrowers when applying for Second Draw PPP Loans. All references to the Borrower Application Form in the consolidated interim final rule implementing updates to the PPP, the interim final rule on second draw PPP
loans, and the consolidated interim final rule on loan forgiveness requirements and loan review procedures include the SBA Form 2483C and the SBA Form 2483SDC, as applicable.
69 For self-employed borrowers with no employees that file IRS Form 1040, Schedule C, who used gross income to calculate the loan amount, proprietor expenses equal gross income.
For self-employed borrowers with employees that file IRS Form 1040, Schedule C, who used gross income to calculate the loan amount, proprietor expenses equal the difference between gross income and employee payroll costs. See subsections B.4.b and B.11.b of the consolidated interim final rule implementing updates to the PPP as amended by this interim final rule. For self-employed borrowers that file IRS Form 1040, Schedule F and have no employees, gross income may be used instead of net profit. For self-employed borrowers that file IRS
Form 1040, Schedule F and have employees, the difference between gross income and employee payroll costs may be used instead of net profit.

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2. Eligibility The consolidated interim final rule implementing updates to the PPP
provided, among other things, that a PPP loan applicant is ineligible if an owner of 20 percent or more of the equity of the applicant has been convicted of, pleaded guilty or nolo contendere to, or commenced any form of parole or probation including probation before judgment for 1 a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years, or 2 any other felony within the last year. This provision reflected the PPP eligibility requirements as revised in an interim final rule titled Business Loan Program Temporary Changes; Paycheck Protection ProgramAdditional Revisions to First Interim Final Rule, published on June 18, 2020 85 FR
36717. SBA has further reviewed these eligibility restrictions and, in consultation with Treasury, has determined that modification to the consolidated interim final rule implementing updates to the PPP is appropriate to ensure consistency with Congressional intent to provide relief to small businesses and their employees, expand access to the PPP, and remove barriers people with prior convictions face when working to restart their lives and contribute to our economy. SBA has determined that the one-year lookback restriction related to non-financial fraud felonies should be removed and only the five-year lookback restriction for those felonies involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance will limit an applicants eligibility for the PPP.
Removing the one-year lookback restriction related to non-financial fraud felonies is consistent with Congressional support for reducing criminal background checks in the PPP 11 and the important policies underlying recent criminal justice reforms in Congress, such as last years Fair Chance to Compete for Jobs Act of 2019 Pub. L. 11692, Div. A, Tit. XI, Subtit. B, and the First Step Act of 2018
Pub. L. 115391.
In light of the unique, emergency nature of the PPP and the higher fraud risk that exists due to the PPPs emphasis on speed in loan approvals and disbursements, the remaining restrictions on eligibility related to an applicant or owners criminal history 11 See Paycheck Protection Program Second Chance Act, S. 3865, 116th Congress introduced in the Senate on June 2, 2020.

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