CARES Act: SBA Issues Guidance on Nondiscrimination and Additional Eligibility Criteria for PPP Loans | Practical Law

CARES Act: SBA Issues Guidance on Nondiscrimination and Additional Eligibility Criteria for PPP Loans | Practical Law

The Small Business Administration (SBA) issued an interim final rule (IFR) providing guidance on nondiscrimination policies under the Payroll Protection Program (PPP) and the treatment of student workers in calculating PPP eligibility criteria.

CARES Act: SBA Issues Guidance on Nondiscrimination and Additional Eligibility Criteria for PPP Loans

by Practical Law Finance
Published on 06 May 2020 • USA (National/Federal)
The Small Business Administration (SBA) issued an interim final rule (IFR) providing guidance on nondiscrimination policies under the Payroll Protection Program (PPP) and the treatment of student workers in calculating PPP eligibility criteria.
On March 27, 2020, the US government passed the CARES Act in response to the COVID-19 crisis. Under the CARES Act, the Small Business Administration (SBA) is offering loans under the Paycheck Protection Program (PPP). On April 2, 2020, the SBA issued an interim final rule (Initial Rule) outlining the key provisions for implementing the PPP. The SBA has issued subsequent interim final rules with additional guidance for implementing the PPP.
On May 5, 2020, the SBA issued an interim final rule (IFR) providing guidance on nondiscrimination policies under the PPP and the treatment of student workers in calculating PPP eligibility criteria. This IFR is effective immediately. Public comment on the proposed rule must be received on or before June 8, 2020.

Non-Discrimination

The IFR provides that for any PPP loan or PPP loan forgiveness, the nondiscrimination provisions in the applicable SBA regulations incorporate the limitations and exemptions in corresponding Federal statutory or regulatory nondiscrimination provisions for:
  • Sex-specific admissions practices at preschools, non-vocational elementary or secondary schools, and private undergraduate higher education institutions under Title IX of the Education Amendments of 1972 (20 U.S.C. 1681).
  • Sex-specific emergency shelters and coreligionist housing under the Fair Housing Act of 1968 (42 U.S.C. 3601).
  • Adoption or foster care practices giving child placement preferences to Indian tribes under the Indian Child Welfare Act of 1978 (25 U.S.C. 1901).
Under the PPP, SBA regulations do not bar a religious nonprofit entity from making decisions about its membership or employment of individuals of a particular religion to perform work connected with the entity's activities.

Student Workers and PPP Loan Eligibility

The IFR provides that student workers are counted when determining the number of employees for PPP loan eligibility unless both:
  • The applicant is an institution of higher education, as defined in the Department of Education’s Federal Work-Study regulations, 34 C.F.R. § 675.2 (DOE Regulations).
  • The student worker’s services are performed as part of a Federal Work-Study Program (as defined in the DOE Regulations) or a substantially similar program of a State or a State political subdivision.
Institutions of higher education must exclude work study students and payroll costs for those students when determining the number of employees for PPP loan eligibility and payroll costs used to determine the institution's PPP loan amount.
Educational institutions that filed a PPP loan application prior to the IFR are not bound by this interpretation but may rely on it. Lenders may continue to rely on borrower certifications as part of their good faith review process.

More Information

For summaries of the SBA PPP, see:
Checklist, CARES Act: Stimulus for Small Businesses Under the SBA.
Checklist, CARES Act: Small Business Administration Payroll Protection Program: Lender Guidance.
For additional guidance from the Treasury Department, see: