Business Loan Program Temporary Changes; Paycheck Protection Program — Affiliation Rules

Record facts

Summary

An interim final rule of the U.S. Small Business Administration, effective April 15, 2020, published in the Federal Register at Vol. 85, No. 73 under Docket No. SBA–2020–0019 and RIN 3245–AH35 and amending 13 CFR Part 121. It supplements the agency's initial Paycheck Protection Program rule with guidance on the affiliation rules applicable to sections 1102 and 1106 of the CARES Act, Pub. L. 116–136. The rule states that a borrower is generally considered together with its affiliates for eligibility and points to the affiliation standard at 13 CFR 121.301. It exempts qualified faith-based organizations where those rules would substantially burden religious exercise, citing the Religious Freedom Restoration Act, Pub. L. 103–141, and adds an appendix A with a sample Addendum A. It applies to applications submitted through June 30, 2020 and requests comments on or before May 15, 2020.

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20817 
Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 
Compliance With Executive Orders 
12866, 12988, 13132, and 13771, the 
Paperwork Reduction Act (44 U.S.C. 
Ch. 35), and the Regulatory Flexibility 
Act (5 U.S.C. 601–612) 
E.O. 12866 and E.O. 13563 
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 
Sections 1102 and 1106 of the CARES 
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. 
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 or retroactive effect. 
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 impose recordkeeping or reporting 
requirements under the Paperwork 
Reduction Act (‘‘PRA’’). SBA has 
obtained emergency approval under 
OMB Control Number 3245–0407 for the 
information collection (IC) required to 
implement the program described 
above. This IC consists of Form 2483 
(Paycheck Protection Program 
Application Form), SBA Form 2484 
(Paycheck Protection Program Lender’s 
Application for 7(a) Loan Guaranty), 
and SBA Form 3506 (CARES Act 
Section 1102 Lender Agreement), and 
SBA Form 3507 (CARES Act Section 
1102 Lender Agreement—Non-Bank and 
Non-Insured Depository Institution 
Lender). The collection is approved for 
use until September 30, 2020. 
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 APA 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. Specifically, 
the RFA normally requires agencies to 
describe the impact of a rulemaking on 
small entities by providing a regulatory 
impact analysis. Such analysis must 
address the consideration of regulatory 
options that would lessen the economic 
effect of the rule on small entities. The 
RFA defines a ‘‘small entity’’ as (1) a 
proprietary firm meeting the size 
standards of the Small Business 
Administration (SBA); (2) a nonprofit 
organization that is not dominant in its 
field; or (3) a small government 
jurisdiction with a population of less 
than 50,000. 5 U.S.C. 601(3)–(6). Except 
for such small government jurisdictions, 
neither State nor local governments are 
‘‘small entities.’’ Similarly, for purposes 
of the RFA, individual persons are not 
small entities. 
The requirement to conduct a 
regulatory impact analysis does not 
apply if the head of the agency ‘‘certifies 
that the rule will not, if promulgated, 
have a significant economic impact on 
a substantial number of small entities.’’ 
5 U.S.C. 605(b). The agency must, 
however, publish the certification in the 
Federal Register at the time of 
publication of the rule, ‘‘along with a 
statement providing the factual basis for 
such certification.’’ If the agency head 
has not waived the requirements for a 
regulatory flexibility analysis in 
accordance with the RFA’s waiver 
provision, and no other RFA exception 
applies, the agency must prepare the 
regulatory flexibility analysis and 
publish it in the Federal Register at the 
time of promulgation or, if the rule is 
promulgated in response to an 
emergency that makes timely 
compliance impracticable, within 180 
days of publication of the final rule. 5 
U.S.C. 604(a), 608(b). 
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. Small Business 
Administration’s Office of Advocacy 
guide: How to Comply with the 
Regulatory Flexibility Ac. Ch.1. p.9. 
Accordingly, 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, Public Law 116–136, 
Section 1114. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–07672 Filed 4–10–20; 4:15 pm] 
BILLING CODE P 
SMALL BUSINESS ADMINISTRATION 
13 CFR Part 121 
[Docket No. SBA–2020–0019] 
RIN 3245–AH35 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program 
AGENCY: U.S. Small Business 
Administration. 
ACTION: Interim final rule. 
SUMMARY: Elsewhere in this issue of the 
Federal Register, the U.S. Small 
Business Administration (SBA) is 
publishing an interim final rule (the 
Initial Rule) announcing the 
implementation of sections 1102 and 
1106 of the Coronavirus Aid, Relief, and 
Economic Security Act (CARES Act or 
the Act). Section 1102 of the Act 
temporarily adds a new program, titled 
the ‘‘Paycheck Protection Program,’’ to 
the SBA’s 7(a) Loan Program. Section 
1106 of the Act provides for forgiveness 
of up to the full principal amount of 
qualifying loans guaranteed under the 
Paycheck Protection Program. The 
Paycheck Protection Program and loan 
forgiveness are intended to provide 
economic relief to small businesses 
nationwide adversely impacted by the 
Coronavirus Disease 2019 (COVID–19). 
This interim final rule supplements the 
Initial Rule with additional guidance 
regarding the application of certain 
affiliate rules applicable to SBA’s 
implementation of sections 1102 and 
1106 of the Act and requests public 
comment. 
DATES: 
Effective date: This interim final rule 
is effective April 15, 2020. 
Applicability date: This interim final 
rule applies to applications submitted 
under the Paycheck Protection Program 
through June 30, 2020, or until funds 
made available for this purpose are 
exhausted. 
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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 
1 Section 7(a)(36)(D)(iv) of the Small Business Act 
(15 U.S.C. 636(a)(36)(D)(iv), as added by the Act, 
waives the affiliation rules contained in § 121.103 
for (1) any business concern with not more than 500 
employees that, as of the date on which the loan 
is disbursed, is assigned a North American Industry 
Classification System code beginning with 72; (2) 
any business concern operating as a franchise that 
is assigned a franchise identifier code by the 
Administration; and (3) any business concern that 
receives financial assistance from a company 
licensed under section 301 of the Small Business 
Investment Act of 1958 (15 U.S.C. 681). This 
interim final rule has no effect on these statutory 
waivers, which remain in full force and effect. As 
a result, the affiliation rules contained in section 
121.301 also do not apply to these types of entities. 
2 In order to help potential borrowers identify 
other businesses with which they may be deemed 
to be affiliated under the common management 
standard, the Borrower Application Form, SBA 
Form 2483, released on April 2, 2020, requires 
applicants to list other businesses with which they 
have common management. The information 
supplied by the applicant in response to that 
information request should be used by applicants 
as they assess whether they have affiliates that 
should be included in their number of employees 
reported on SBA Form 2483. 
Comment Date: Comments must be 
received on or before May 15, 2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0019 
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. 
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: 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 are experiencing economic 
hardship as a direct result of the 
Federal, State, tribal, and local public 
health measures that are being taken to 
minimize the public’s exposure to the 
virus. These measures, some of which 
are government-mandated, are being 
implemented nationwide and include 
the closures of restaurants, bars, and 
gyms. In addition, based on the advice 
of public health officials, other 
measures, such as keeping a safe 
distance from others or even stay-at- 
home orders, are being implemented, 
resulting in a dramatic 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 
Economic Security Act (the CARES Act 
or the 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 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 Act temporarily 
permits SBA to guarantee 100 percent of 
7(a) loans under a new program titled 
the ‘‘Paycheck Protection Program.’’ 
Section 1106 of the Act provides for 
forgiveness of up to the full principal 
amount of qualifying loans guaranteed 
under the Paycheck Protection Program. 
On April 2, 2020, SBA issued an interim 
final rule (the Initial Rule) announcing 
the implementation of sections 1102 
and 1106 of the Act. A more detailed 
discussion of sections 1102 and 1106 of 
the Act is found in section III of the 
Initial Rule. 
This interim final rule supplements 
the Initial Rule with additional 
guidance regarding the application of 
certain affiliate rules applicable to 
SBA’s implementation of sections 1102 
and 1106 of the Act and requests public 
comment. 
II. Comments and Immediate Effective 
Date 
The intent of the Act is that SBA 
provide relief to America’s small 
businesses expeditiously. This intent, 
along with the dramatic decrease in 
economic activity nationwide, provides 
good cause for SBA to dispense with the 
30-day delayed effective date provided 
in the Administrative Procedure Act (5 
U.S.C. 553(b)(3)(B)). Specifically, small 
businesses need to be informed on how 
to apply for a loan and the terms of the 
loan under section 1102 of the Act as 
soon as possible because the last day to 
apply for and receive a loan is June 30, 
2020. The immediate effective date of 
this interim final rule will benefit small 
businesses so that they can immediately 
apply for the loan with a better 
understanding of loan terms and 
conditions. This interim final rule is 
effective without advance notice and 
public comment because section 1114 of 
the Act authorizes SBA to issue 
regulations to implement Title 1 of the 
Act without regard to notice 
requirements. This rule is being issued 
to allow for immediate implementation 
of this program. 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 May 15, 
2020. The SBA will consider these 
comments and the need for making any 
revisions as a result of these comments. 
III. Affiliate Rules for Paycheck 
Protection Program 
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. Additional 
information about the PPP is available 
in the Initial Rule. 
1. Affiliation Rules Generally 
Are affiliates considered together for 
purposes of determining eligibility? 
In most cases, a borrower will be 
considered together with its affiliates for 
purposes of determining eligibility for 
the PPP.1 Under SBA rules, entities may 
be considered affiliates based on factors 
including stock ownership, overlapping 
management,2 and identity of interest. 
13 CFR 121.301. 
How do SBA’s affiliation rules affect my 
eligibility and apply to me under the 
PPP? 
An entity generally is eligible for the 
PPP if it, combined with its affiliates, is 
a small business as defined in section 3 
of the Small Business Act (15 U.S.C. 
632), or (1) has 500 or fewer employees 
whose principal place of residence is in 
the United States or is a business that 
operates in a certain industry and meets 
applicable SBA employee-based size 
standards for that industry, and (2) is a 
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tax-exempt nonprofit organization 
described in section 501(c)(3) of the 
Internal Revenue Code (IRC), a tax- 
exempt veterans organization described 
in section 501(c)(19) of the IRC, a Tribal 
business concern described in section 
31(b)(2)(C) of the Small Business Act, or 
any other business concern. Prior to the 
Act, the nonprofit organizations listed 
above were not eligible for SBA 
Business Loan Programs under section 
7(a) of the Small Business Act; only for- 
profit small business concerns were 
eligible. The Act made such nonprofit 
organizations not only eligible for the 
PPP, but also subjected them to SBA’s 
affiliation rules. Specifically, section 
1102 of the Act provides that the 
provisions applicable to affiliations 
under 13 CFR 121.103 apply with 
respect to nonprofit organizations and 
veterans organizations in the same 
manner as with respect to small 
business concerns. However, the 
detailed affiliation standards contained 
in § 121.103 currently do not apply to 
PPP borrowers, because § 121.103(a)(8) 
provides that applicants in SBA’s 
Business Loan Programs (which include 
the PPP) are subject to the affiliation 
rule contained in 13 CFR 121.301. 
2. Faith-Based Organizations 
This rule exempts otherwise qualified 
faith-based organizations from the 
SBA’s affiliation rules, including those 
set forth in 13 CFR part 121, where the 
application of the affiliation rules would 
substantially burden those 
organizations’ religious exercise. This 
exemption is required, or at a minimum 
authorized, by the Religious Freedom 
Restoration Act (RFRA) (Pub. L. 103– 
141), which provides that the 
‘‘[g]overnment shall not substantially 
burden a person’s exercise of religion’’ 
unless the government can 
‘‘demonstrate[] that application of the 
burden’’ to the person is both ‘‘in 
furtherance of a compelling 
governmental interest’’ and ‘‘the least 
restrictive means of furthering that 
compelling governmental interest.’’ 42 
U.S.C. 2000bb–1. 
A substantial burden under RFRA 
includes both government action that 
compels a person to violate his sincere 
religious beliefs or suffer a penalty, see, 
e.g., Burwell v. Hobby Lobby Stores, Inc., 
573 U.S. 682, 726 (2014), and the 
imposition of a substantial burden 
through ‘‘indirect’’ measures. Thomas v. 
Review Bd. of Ind. Emp. Sec. Div., 450 
U.S. 707, 717–18 (1981). Notably, the 
government imposes a substantial 
burden on religious exercise when it 
‘‘conditions receipt of an important 
benefit upon conduct proscribed by a 
religious faith, or where it denies such 
a benefit because of conduct mandated 
by religious belief.’’ Id. at 718. For 
example, in Sherbert v. Verner, 374 U.S. 
398 (1963), a State denied the plaintiff 
unemployment benefits because she 
would not work on Saturday, the 
Sabbath of her faith. Id. at 400–01. Even 
though no ‘‘sanctions directly 
compel[led]’’ her to work on Saturday, 
the Supreme Court held that the State’s 
denial of benefits ‘‘puts the same kind 
of burden upon the free exercise of 
religion as would a fine imposed against 
[her] for her Saturday worship.’’ Id. at 
404. As the Court observed, the State’s 
framework ‘‘forces her to choose 
between following the precepts of her 
religion and forfeiting benefits, on the 
one hand, and abandoning one of the 
precepts of her religion in order to 
accept work, on the other hand.’’ Id. 
Consistent with these precedents, RFRA 
explicitly contemplates that ‘‘the denial 
of government funding, benefits, or 
exemptions’’ may violate its protections. 
42 U.S.C. 2000bb–4. 
SBA is aware of the existence of faith- 
based organizations that would qualify 
for relief under the CARES Act but for 
their affiliation with other entities as an 
aspect of their religious practice. 
Supreme Court precedent has long 
recognized that the organizational 
structure of faith-based entities may 
itself be a matter of significant religious 
concern and that faith-based 
organizations are therefore guaranteed 
the ‘‘power to decide for themselves, 
free from state interference, matters of 
church government as well as those of 
faith and doctrine.’’ Kedroff v. St. 
Nicholas Cathedral of Russian Orthodox 
Church in N. Am., 344 U.S. 94, 116 
(1952). Moreover, an assessment of the 
extent to which questions concerning 
religious polity rest upon theological or 
other religious foundations presents 
particular difficulties, for the First 
Amendment ‘‘forbids civil courts’’ from 
‘‘the interpretation of particular church 
doctrines and the importance of those 
doctrines to the religion.’’ Presbyterian 
Church v. Mary Elizabeth Blue Hull 
Mem’l Presbyterian Church, 393 U.S. 
440, 450 (1969). A number of faith- 
based organizations understand their 
affiliation with other religious entities 
as a part of their exercise of religion, as 
a mandate given the ‘‘hierarchical or 
connectional’’ structure of their church, 
Jones v. Wolf, 443 U.S. 595, 597 (1979), 
or as an expression of their sincere 
religious belief. Cf. 1 W. Cole Durham 
& Robert Smith, Religious Organizations 
and the Law section 8.19 (Westlaw rev. 
ed. 2017) (‘‘Religious organizations, 
such as parishes or mission centers, 
normally tend to choose the civil- 
property-holding structures that most 
closely mirror their own ecclesiology or 
polity.’’). Either affiliation decision falls 
within the definition of ‘‘religious 
exercise’’ that applies to RFRA, which 
‘‘includes any exercise of religion, 
whether or not compelled by, or central 
to, a system of religious belief.’’ See 42 
U.S.C. 2000cc–5(7)(A); 2000bb–2(4) 
(‘‘the term ‘exercise of religion’ means 
religious exercise, as defined in section 
2000cc–5 of this title’’). 
As applied to these faith-based 
organizations, the affiliation rules 
would impose a substantial burden. The 
affiliation rules would deny an 
important benefit (participation in a 
program for which they would 
otherwise be eligible under the CARES 
Act) because of the exercise of sincere 
religious belief (affiliation with other 
religious entities). 
The Administrator has also concluded 
that she does not have a compelling 
interest in denying emergency 
assistance to faith-based organizations 
that are facing the same economic 
hardship to which the CARES Act 
responded and who would be eligible 
for PPP but for their faith-based 
organizational and associational 
decisions. This conclusion is reinforced 
by the fact that the affiliation rules 
already contain numerous exemptions, 
see generally 13 CFR 121.103(b), ranging 
from ‘‘[b]usiness concerns owned and 
controlled by Indian Tribes, Alaska 
Native Corporations, [and] Native 
Hawaiian Organizations,’’ id. 
§ 121.103(b)(2)(i) to ‘‘member 
shareholders of a small agricultural 
cooperative.’’ Id. § 121.103(b)(7). In light 
of these exemptions, it is difficult to 
maintain that denying relief to these 
faith-based organizations is necessary to 
further a compelling government 
interest, let alone the least restrictive 
means of doing so. See Church of the 
Lukumi Babalu Aye, Inc. v. City of 
Hialeah, 508 U.S. 520, 547 (1993) (‘‘[A] 
law cannot be regarded as protecting an 
interest of the highest order when it 
leaves appreciable damage to that 
supposedly vital interest 
unprohibited.’’) (cleaned up); Gonzales 
v. O Centro Espirita Beneficiente Uniao 
do Vegetal, 546 U.S. 418, 433 (2006) 
(applying same principle under RFRA). 
SBA accordingly must exempt faith- 
based organizations that would 
otherwise be disqualified from the PPP 
based on features of those organizations’ 
affiliations that are a matter of sincere 
religious exercise as defined in 42 
U.S.C. 2000bb–2. 
This action is also supported by 15 
U.S.C. 634(b)(6), which authorizes the 
Administrator to ‘‘make such rules and 
regulations as he deems necessary to 
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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 
carry out the authority vested in him by 
or pursuant to this chapter.’’ As relevant 
here, the CARES Act expanded 
eligibility for the covered loans during 
the covered period for nonprofit 
organizations that employ not more than 
500 employees or, if applicable, the size 
standard in number of employees 
established by the Administrator for the 
industry in which the nonprofit 
organization operates. 15 U.S.C. 
636(a)(36)(D)(i). That expansion posed 
unique concerns for the Administrator, 
who is tasked with applying the 
‘‘provisions applicable to affiliations 
under section 121.103 of title 13, Code 
of Federal Regulations, or any successor 
thereto, . . . with respect to a nonprofit 
organization and a veterans 
organizations in the same manner as 
with respect to a small business 
concern.’’ Id. 636(a)(36)(D)(vi). 
Although these rules may easily be 
applied to faith-based organizations in 
many cases, their application to certain 
faith-based organizations presents 
significant challenges, in particular 
because of the large number of faith- 
based organizations who would now be 
eligible for the PPP but for their 
religious exercise. 
As discussed above, carrying the 
affiliation rules over to all faith-based 
organizations without modification 
would raise concerns under RFRA. 
Moreover, application of the affiliation 
rules, which, for example, provide for 
assessment of whether one faith-based 
organization ‘‘controls or has the power 
to control’’ another organization, 13 CFR 
121.103(a)(1), could involve SBA in 
questions of church governance 
concerning ‘‘the allocation of power 
within a (hierarchical) church so as to 
decide . . . religious law (governing 
church polity),’’ in violation of the First 
Amendment. Serbian E. Orthodox 
Diocese for the U.S.A. & Canada v. 
Milivojevich, 426 U.S. 696, 709 (1979) 
(internal quotation marks omitted)). 
Finally, affiliation rules developed in 
the context of for-profit enterprises 
present significant administrative 
difficulties where faith-based 
organizations are concerned. For 
example, ‘‘the notion of corporate 
subsidiarity or affiliation in civil law is 
entirely foreign to the polity of religious 
organizations,’’ and there is a significant 
risk that civil authorities will 
‘‘mischaracterize or misinterpret the 
polity of a religious body.’’ 1 W. Cole 
Durham & Robert Smith, Religious 
Organizations and the Law sections 
8.19, 8.21 (discussing examples of 
judicial mischaracterizations). 
Consistent with these concerns, it is also 
notable that other areas of federal law 
approach issues analogous to affiliation 
differently for religious organizations. 
See, e.g., 26 U.S.C. 512 (b)(12). 
For these reasons, in addition to the 
RFRA mandate, the Administrator has 
determined that it is appropriate to 
exercise the authority granted under 15 
U.S.C. 634(b)(6) to exempt from 
application of SBA’s affiliation rules 
faith-based organizations that would 
otherwise be disqualified from 
participation in PPP because of 
affiliations that are a part of their 
religious exercise. 
Accordingly, the SBA’s affiliation 
rules, including those set forth in 13 
CFR part 121, do not apply to the 
relationship of any church, convention 
or association of churches, or other 
faith-based organization or entity to any 
other person, group, organization, or 
entity that is based on a sincere 
religious teaching or belief or otherwise 
constitutes a part of the exercise of 
religion. This includes any relationship 
to a parent or subsidiary and other 
applicable aspects of organizational 
structure or form. A faith-based 
organization seeking loans under this 
program may rely on a reasonable, good 
faith interpretation in determining 
whether its relationship to any other 
person, group, organization, or entity is 
exempt from the affiliation rules under 
this provision, and SBA will not assess, 
and will not require participating 
lenders to assess, the reasonableness of 
the faith-based organization’s 
determination. 
3. Additional Information 
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. 
Questions on the Paycheck Protection 
Program 7(a) Loans 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, and 13771, 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, and is considered a major rule 
under the Congressional Review Act. 
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. 
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 or retroactive effect. 
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 impose recordkeeping or reporting 
requirements under the Paperwork 
Reduction Act (‘‘PRA’’). SBA has 
obtained emergency approval under 
OMB Control Number 3245–0407 for the 
information collection (IC) required to 
implement the program described 
above. This IC consists of Form 2483 
(Paycheck Protection Program 
Application Form) and SBA Form 2484 
(Paycheck Protection Program Lender’s 
Application for 7(a) Loan Guaranty) 
SBA Form 3506 (CARES Act Section 
1102 Lender Agreement), and SBA Form 
3507 (CARES Act Section 1102 Lender 
Agreement—Non-Bank and Non-Insured 
Depository Institution Lender). The 
collection is approved for use until 
October 31, 2020. 
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 APA 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. Specifically, 
the RFA normally requires agencies to 
describe the impact of a rulemaking on 
small entities by providing a regulatory 
impact analysis. Such analysis must 
address the consideration of regulatory 
options that would lessen the economic 
effect of the rule on small entities. The 
RFA defines a ‘‘small entity’’ as (1) a 
proprietary firm meeting the size 
standards of the Small Business 
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20821 
Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 
Administration (SBA); (2) a nonprofit 
organization that is not dominant in its 
field; or (3) a small government 
jurisdiction with a population of less 
than 50,000. 5 U.S.C. 601(3)–(6). Except 
for such small government jurisdictions, 
neither State nor local governments are 
‘‘small entities.’’ Similarly, for purposes 
of the RFA, individual persons are not 
small entities. 
The requirement to conduct a 
regulatory impact analysis does not 
apply if the head of the agency ‘‘certifies 
that the rule will not, if promulgated, 
have a significant economic impact on 
a substantial number of small entities.’’ 
5 U.S.C. 605(b). The agency must, 
however, publish the certification in the 
Federal Register at the time of 
publication of the rule, ‘‘along with a 
statement providing the factual basis for 
such certification.’’ If the agency head 
has not waived the requirements for a 
regulatory flexibility analysis in 
accordance with the RFA’s waiver 
provision, and no other RFA exception 
applies, the agency must prepare the 
regulatory flexibility analysis and 
publish it in the Federal Register at the 
time of promulgation or, if the rule is 
promulgated in response to an 
emergency that makes timely 
compliance impracticable, within 180 
days of publication of the final rule. 5 
U.S.C. 604(a), 608(b). 
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. SBA Office of Advocacy guide: 
How to Comply with the Regulatory 
Flexibility Ac. Ch.1. p.9. Accordingly, 
SBA is not required to conduct a 
regulatory flexibility analysis. 
List of Subjects in 13 CFR Part 121 
Administrative practice and 
procedure, Authority delegations 
(Government agencies), 
Intergovernmental relations, 
Investigations, Reporting and 
recordkeeping requirements. 
For the reasons stated in the 
preamble, the Small Business 
Administration amends 13 CFR part 121 
as set forth below: 
PART 121—SMALL BUSINESS SIZE 
REGULATIONS 
■1. The authority citation for part 121 
is revised to read as follows: 
Authority: 15 U.S.C. 632, 634(b)(6), 
636(a)(36), 662, and 694a(9); Pub. L. 116–136, 
Section 1114. 
■2. Amend § 121.103 by adding 
paragraph (b)(10) to read as follows: 
§ 121.103
How does SBA determine 
affiliation? 
* 
* 
* 
* 
* 
(b) * * * 
(10)(i) The relationship of a faith- 
based organization to another 
organization is not considered an 
affiliation with the other organization 
under this subpart if the relationship is 
based on a religious teaching or belief or 
otherwise constitutes a part of the 
exercise of religion. In addition, the 
eligibility criteria set forth in 15 U.S.C. 
636(a)(36)(D) are satisfied for any faith- 
based organization having not more 
than 500 employees (including 
individuals employed on a full-time, 
part-time, or other basis) that pays 
Federal payroll taxes using its own 
Internal Revenue Service Employer 
Identification Number (EIN) or that 
would support a deduction under the 
second sentence of 26 U.S.C. 512(b)(12) 
if the organization generated unrelated 
business taxable income. For purposes 
of this paragraph (b)(10), the term 
‘‘faith-based organization’’ includes, but 
is not limited to, any organization 
associated with a church or convention 
or association of churches within the 
meaning of 26 U.S.C. 414(e)(3)(D). The 
term ‘‘organization’’ has the meaning 
given in 26 U.S.C. 414(m)(6)(A). The 
terms ‘‘church’’ and ‘‘convention or 
association of churches’’ have the same 
meaning that they have in 26 U.S.C. 
414. 
(ii) No specific process or filing is 
necessary to claim the benefit of the 
exemption in paragraph (b)(10)(i) of this 
section. In applying for a loan under the 
Paycheck Protection Program (PPP), a 
faith-based organization may make all 
necessary certifications with respect to 
common ownership or management or 
other eligibility criteria based upon 
affiliation, if the organization would be 
an eligible borrower but for application 
of SBA affiliation rules and if the 
organization falls within the terms of 
the exemption described in paragraph 
(b)(10)(i) of this section. If a faith-based 
organization indicates any relationship 
that may pertain to affiliation, such as 
ownership of, ownership by, or common 
management with any other 
organization, on or in connection with 
a loan application, and if the faith-based 
organization applying for a loan falls 
within the terms of the exemption 
described in paragraph (b)(10)(i) of this 
section with respect to that relationship, 
the faith-based organization may 
indicate on a separate sheet that it is 
entitled to the exemption. That sheet 
may be identified as addendum A, and 
no further listing of the other 
organization or description of the 
relationship to that organization is 
required. See appendix A to this part for 
a sample ‘‘Addendum A’’, but the 
format need not be used as long as the 
substance is the same. 
* 
* 
* 
* 
* 
■3. Add appendix A to part 121 to read 
as follows: 
Appendix A to Part 121—Paycheck 
Protection Program Sample Addendum 
A 
[Sample] 
ADDENDUM A 
✓The Applicant claims an 
exemption from all SBA affiliation rules 
applicable to Paycheck Protection 
Program loan eligibility because the 
Applicant has made a reasonable, good 
faith determination that the Applicant 
qualifies for a religious exemption 
under 13 CFR 121.103(b)(10), which 
says that ‘‘[t]he relationship of a faith- 
based organization to another 
organization is not considered an 
affiliation with the other organization 
. . . if the relationship is based on a 
religious teaching or belief or otherwise 
constitutes a part of the exercise of 
religion.’’ 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–07673 Filed 4–10–20; 4:15 pm] 
BILLING CODE P 
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