Appeals of SBA Loan Review Decisions Under the Paycheck Protection Program

Summary

A Small Business Administration interim final rule, "Appeals of SBA Loan Review Decisions Under the Paycheck Protection Program", published in the Federal Register, Vol. 85, No. 167, on Thursday, August 27, 2020, under docket number SBA–2020–0042 and RIN 3245–AH55, effective August 25, 2020. It sets out the process for a PPP borrower to appeal certain SBA loan review decisions to the SBA Office of Hearings and Appeals (OHA). It states that only final SBA loan review decisions, as defined in the rule, can be appealed to OHA, and that a borrower cannot file an OHA appeal of any decision made by a lender concerning a PPP loan.

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Federal Register / Vol. 85, No. 167 / Thursday, August 27, 2020 / Rules and Regulations 52883

the States, or on the distribution of Rules that are exempt from notice and Applicability date: This interim final
power and responsibilities among the comment are also exempt from the RFA rule applies to certain loan review
various layers of government. Therefore, requirements, including conducting a decisions made by SBA under the
SBA has determined that this rule has regulatory flexibility analysis, when Paycheck Protection Program.
no federalism implications warranting among other things the agency for good Comment date: Comments must be
preparation of a federalism assessment. cause finds that notice and public received on or before September 28,
procedure are impracticable, 2020.
Paperwork Reduction Act, 44 U.S.C.
Chapter 35 unnecessary, or contrary to the public ADDRESSES: You may submit comments,
interest. SBA Office of Advocacy guide: identified by number SBA–2020–0042
SBA has determined that this rule How to Comply with the Regulatory through the Federal eRulemaking Portal:
will not impose new or modify existing Flexibility Act, Ch.1. p.9. Accordingly, http://www.regulations.gov. Follow the
recordkeeping or reporting requirements SBA is not required to conduct a instructions for submitting comments.
under the Paperwork Reduction Act. regulatory flexibility analysis. SBA will post all comments on
Regulatory Flexibility Act (RFA) Jovita Carranza, www.regulations.gov. If you wish to
The Regulatory Flexibility Act (RFA) Administrator. submit confidential business
generally requires that when an agency information (CBI) as defined in the User
[FR Doc. 2020–18940 Filed 8–25–20; 1:00 pm]
issues a proposed rule, or a final rule Notice at www.regulations.gov, please
BILLING CODE P
pursuant to Section 553(b) of the APA send an email to ppp-ifr@sba.gov.
or another law, the agency must prepare Highlight the information that you
a regulatory flexibility analysis that SMALL BUSINESS ADMINISTRATION consider to be CBI and explain why you
meets the requirements of the RFA and believe SBA should hold this
publish such analysis in the Federal 13 CFR Part 134 information as confidential. SBA will
Register. 5 U.S.C. 603, 604. Specifically, review the information and make the
the RFA normally requires agencies to [Docket Number SBA–2020–0042] final determination whether it will
describe the impact of a rulemaking on RIN 3245–AH55
publish the information.
small entities by providing a regulatory FOR FURTHER INFORMATION CONTACT: A
impact analysis. Such analysis must Appeals of SBA Loan Review Call Center Representative at 833–572–
address the consideration of regulatory Decisions Under the Paycheck 0502, or the local SBA Field Office; the
options that would lessen the economic Protection Program list of offices can be found at https://
effect of the rule on small entities. The www.sba.gov/tools/localassistance/
RFA defines a ‘‘small entity’’ as (1) a AGENCY: U.S. Small Business districtoffices.
proprietary firm meeting the size Administration. SUPPLEMENTARY INFORMATION:
standards of the Small Business ACTION: Interim final rule.
Administration (SBA); (2) a nonprofit I. Background Information
organization that is not dominant in its SUMMARY: On April 2, 2020, the U.S. On March 13, 2020, President Trump
field; or (3) a small government Small Business Administration (SBA) declared the ongoing Coronavirus
jurisdiction with a population of less posted on its website an interim final Disease 2019 (COVID–19) pandemic of
than 50,000. 5 U.S.C. 601(3)–(6). Except rule relating to the implementation of sufficient severity and magnitude to
for such small government jurisdictions, sections 1102 and 1106 of the warrant an emergency declaration for all
neither State nor local governments are Coronavirus Aid, Relief, and Economic States, territories, and the District of
‘‘small entities.’’ Similarly, for purposes Security Act (CARES Act or the Act) Columbia. With the COVID–19
of the RFA, individual persons are not (published in the Federal Register on emergency, many small businesses
small entities. April 15, 2020). Section 1102 of the Act nationwide are experiencing economic
The requirement to conduct a temporarily adds a new product, titled hardship as a direct result of the
regulatory impact analysis does not the ‘‘Paycheck Protection Program,’’ to Federal, State, tribal, and local public
apply if the head of the agency ‘‘certifies the U.S. Small Business health measures that have been taken to
that the rule will not, if promulgated, Administration’s (SBA’s) 7(a) Loan minimize the public’s exposure to the
have a significant economic impact on Program. Subsequently, SBA issued a virus. These measures, some of which
a substantial number of small entities.’’ number of interim final rules are government-mandated, have been
5 U.S.C. 605(b). The agency must, implementing the Paycheck Protection implemented nationwide and include
however, publish the certification in the Program (PPP). This interim final rule the closures of restaurants, bars, and
Federal Register at the time of supplements the interim final rule on gyms. In addition, based on the advice
publication of the rule, ‘‘along with a Loan Review Procedures and Related of public health officials, other
statement providing the factual basis for Borrower and Lender Responsibilities measures, such as keeping a safe
such certification.’’ If the agency head posted on SBA’s website on May 22, distance from others or even stay-at-
has not waived the requirements for a 2020 (published on June 1, 2020, in the home orders, are being implemented,
regulatory flexibility analysis in Federal Register), as revised by the resulting in a dramatic decrease in
accordance with the RFA’s waiver interim final rule posted on SBA’s economic activity as the public avoids
provision, and no other RFA exception website on June 22, 2020, in order to malls, retail stores, and other
applies, the agency must prepare the inform PPP borrowers and lenders of the businesses.
regulatory flexibility analysis and process for a PPP borrower to appeal On March 27, 2020, the President

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publish it in the Federal Register at the certain SBA loan review decisions signed the Coronavirus Aid, Relief, and
time of promulgation or, if the rule is under the PPP to the SBA Office of Economic Security Act (the CARES Act)
promulgated in response to an Hearings and Appeals, and requests (Pub. L. 116–136) to provide emergency
emergency that makes timely public comment. assistance and health care response for
compliance impracticable, within 180 DATES: individuals, families, and businesses
days of publication of the final rule. 5 Effective date: This rule is effective affected by the coronavirus pandemic.
U.S.C. 604(a), 608(b). August 25, 2020. The Small Business Administration

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52884 Federal Register / Vol. 85, No. 167 / Thursday, August 27, 2020 / Rules and Regulations

(SBA) received funding and authority good cause for SBA to dispense with the for a PPP loan; (2) was ineligible for the
through the CARES Act to modify 30-day delayed effective date provided PPP loan amount received or used the
existing loan programs and establish a in the Administrative Procedure Act. PPP loan proceeds for unauthorized
new loan program to assist small Specifically, it is critical to meet uses; (3) is ineligible for PPP loan
businesses nationwide adversely lenders’ and borrowers’ need for clarity forgiveness in the amount determined
impacted by the COVID–19 emergency. concerning the OHA appeal process as by the lender in its full or partial
Section 1102 of the CARES Act rapidly as possible because SBA can approval decision issued to SBA (except
temporarily permits SBA to guarantee review a PPP loan and make for the deduction of any Economic
100 percent of 7(a) loans under a new determinations as to a borrower’s Injury Disaster Loan advance in
program titled the ‘‘Paycheck Protection eligibility at any time. This interim final accordance with section 1110(e)(6) of
Program’’ (PPP). Section 1106 of the rule supplements the previous the CARES Act); and/or (4) is ineligible
CARES Act provides for forgiveness of regulation on the discrete issues related for PPP loan forgiveness in any amount
up to the full principal amount of to SBA’s process for reviewing a when the lender has issued a full denial
qualifying loans guaranteed under the borrower’s eligibility for a PPP loan, the decision to SBA.
PPP. PPP loan amount received, the use of For a PPP loan of any size, SBA may
On April 2, 2020, SBA posted its first the PPP loan proceeds and/or the PPP undertake a loan review at any time in
PPP interim final rule (85 FR 20811) loan forgiveness amount claimed by the SBA’s discretion, and this subpart L
(the First Interim Final Rule). borrower. applies to loan review decisions made
Subsequently, SBA issued a number of This interim final rule is effective by SBA after SBA completes a review of
other interim final rules implementing without advance notice and public a PPP loan as set forth in Part III.1 and
the PPP. On April 24, 2020, the comment because section 1114 of the Part III.2c. of the Loan Review IFR, as
President signed the Paycheck CARES Act authorizes SBA to issue amended. Only final SBA loan review
Protection Program and Health Care regulations to implement title I of the decisions (as defined in this rule) can be
Enhancement Act (Pub. L. 116–139), CARES Act without regard to notice appealed to OHA; a PPP borrower
which provided additional funding and requirements. In addition, SBA has cannot file an OHA appeal of any
authority for the PPP. determined that there is good cause for decision made by a lender concerning a
On May 22, 2020, SBA and Treasury dispensing with advance public notice PPP loan. A PPP borrower can request
posted an interim final rule on Loan and comment on the ground that it an SBA review of a lender decision to
Review Procedures and Related would be contrary to the public interest. deny the borrower’s loan forgiveness
Borrower and Lender Responsibilities Specifically, SBA has determined that
application in full, in accordance with
(85 FR 33010) (Loan Review Interim advance notice and public comment
Part III.2.b. of the Loan Review IFR, as
Final Rule (IFR)). The rule stated that would delay the ability of PPP
SBA would be issuing a separate interim amended, but that request is for a
borrowers to understand with certainty
final rule addressing the process for review by SBA, not an OHA appeal. A
the process for appealing certain SBA
appealing certain SBA loan review borrower may exercise any other rights
loan review decisions under the PPP.
decisions under the PPP. On June 5, it has under applicable law against a
This rule is being issued to allow for
2020, the Paycheck Protection Program PPP lender regarding a lender decision.
immediate implementation of the OHA
Flexibility Act of 2020 (Pub. L. 116–142) appeal feature of this program. Although In addition, this section sets forth
(Flexibility Act) was signed into law, this interim final rule is effective other types of decisions and
amending the CARES Act. On June 22, immediately, comments are solicited determinations that are not covered by
2020, SBA and Treasury posted an from interested members of the public this subpart L, and makes clear that
interim final rule that in part revised the on all aspects of this interim final rule, subpart C of this part, Rules of Practice
Loan Review IFR to incorporate the including section III below. These for Appeals From Size Determinations
relevant Flexibility Act amendments, comments must be submitted on or and NAICS Code Designations, is not
address revisions to the Loan before September 28, 2020. SBA will applicable to appeals from SBA loan
Forgiveness Application (SBA Form consider these comments and the need review decisions. Lastly, this section
3508), and include a new alternative for making any revisions as a result of sets forth the specific provisions from
Loan Forgiveness Application (SBA these comments. subpart B of this part, OHA’s general
Form 3508EZ). On July 4, 2020, Public Rules of Practice, that are applicable to
III. Subpart L—Rules of Practice for this subpart L. Other provisions from
Law 116–147 was enacted, extending
Appeals of Certain SBA Loan Review subpart B of this part do not apply to
the authority for SBA to guarantee PPP
Decisions Under the Paycheck this subpart L. Because a PPP borrower
loans to August 8, 2020.
As described below, this interim final Protection Program must begin making payments of
rule informs PPP borrowers and lenders This interim final rule establishes a principal and interest on the remaining
of the process for a PPP borrower to new subpart L for 13 CFR part 134, balance of its PPP loan at the end of the
appeal certain SBA loan review establishing rules of practice for appeals loan payment deferral period or when
decisions under the PPP to the SBA of certain SBA loan review decisions SBA remits the loan forgiveness amount
Office of Hearings and Appeals (OHA) under the Paycheck Protection Program to the PPP lender (or notifies the lender
by establishing a new subpart L for 13 (PPP). that no loan forgiveness is allowed), an
CFR part 134, and requests public Section 134.1201, Scope of rules in appeal by a PPP borrower of any SBA
comment. this subpart L, provides a process for loan review decision does not extend
appeal to OHA of certain SBA loan the deferral period of the PPP loan.

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II. Comments and Immediate Effective review decisions under the PPP and any Additionally, if SBA remits to the
Date other PPP matter referred to OHA by the lender the PPP loan forgiveness amount
The intent of the CARES Act is that Administrator. This subpart defines the set forth in the decision issued by the
SBA provide relief to America’s small term SBA loan review decision as an lender to SBA (except for the deduction
businesses expeditiously. This intent, official written decision by SBA, after of any Economic Injury Disaster Loan
along with the dramatic decrease in SBA completes a review of a PPP loan, advance), the borrower may not file an
economic activity nationwide, provides that finds a borrower (1) was ineligible appeal with OHA, and the borrower

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Federal Register / Vol. 85, No. 167 / Thursday, August 27, 2020 / Rules and Regulations 52885

must begin repayment of any remaining to move for a motion for more definite however, contain all documents
balance of its PPP loan. statement or otherwise comply with the pertaining to the appellant. In addition,
Section 134.1202, The appeal requirements of this section. SBA may claim privilege as to certain
petition, provides that an appeal Section 134.1203, Standing, provides materials. The administrative record
petition must include the following that only the borrower on a loan for must be certified and authenticated that
information: (1) The basis for OHA’s which SBA has issued a final SBA loan it is, to the best of the signatory’s
jurisdiction, including, but not limited review decision has standing to appeal knowledge, complete and correct. SBA
to, evidence that the appeal is timely the SBA loan review decision to OHA. will file the administrative record with
filed in accordance with § 134.1204; (2) Individual owners of a borrower and OHA and serve it on appellant. This
A copy of the SBA loan review decision lenders do not have standing to appeal section permits the appellant to object
that is being appealed, or a description an SBA loan review decision. to the absence of any document from the
Section 134.1204, Deadline for filing administrative record that the appellant
of that decision if a copy is unavailable;
appeal petition, prescribes that an believes should have been included in
(3) A full and specific statement as to
appeal petition must be filed within 30 the administrative record. An appellant
why the SBA loan review decision is
calendar days after (i) the appellant’s also may object to any claim that
alleged to be erroneous, together with
receipt of the final SBA loan review documents in the administrative record
all factual information and legal
decision, or (ii) notification by the are privileged. Such objections must be
arguments supporting the allegations;
lender of the final SBA loan review filed with OHA and served on SBA no
(4) The relief being sought; (5) Signed
decision, whichever is earlier. later than 10 calendar days after
copies of payroll tax filings actually Section 134.1205, Dismissal, provides
reported to the Internal Revenue Service appellant’s receipt of the administrative
that the Judge must dismiss the appeal record. The Judge will rule upon such
(IRS), and State quarterly business and if: (1) The appeal is beyond OHA’s
individual employee wage reporting and objections and may direct or permit that
jurisdiction as set forth under the administrative record be
unemployment insurance tax filings § 134.1201; (2) the appellant lacks
actually reported to the relevant state, supplemented.
standing to appeal under § 134.1203; or Section 134.1208, Response to an
for the relevant periods of time, if not (3) the appeal is untimely under appeal petition, prescribes that only
provided with the PPP Loan Forgiveness § 134.1204, or is premature because SBA SBA may respond to an appeal and the
Application (SBA Form 3508, SBA has not yet made a final SBA loan response should set forth the relevant
Form 3508EZ, or lender’s equivalent), or review decision. This section also facts and legal arguments to the issues
an explanation as to why they are not provides that the Judge may dismiss the presented on appeal. Except for good
relevant or not available; (6) Signed appeal if, among other things, the cause shown, a response filed after the
copies of applicable federal tax returns appeal does not, on its face, allege close of record established by the Judge
actually filed with the IRS with specific facts that if proven to be true, will not be considered. SBA must file its
appropriate schedules (e.g., IRS Form warrant reversal or remand of the SBA response with OHA, and serve a copy of
1040 with Schedule C/F) documenting loan review decision. the response upon the appellant and
income for self-employed individuals or Section 134.1206, Notice and order, upon each of the persons identified in
partners in a partnership, if not provides that upon receipt of an appeal the certificate of service attached to the
provided with the PPP Borrower challenging a final SBA loan review appellant’s appeal petition. No reply to
Application Form (SBA Form 2483 or decision, OHA will assign the matter to a response will be permitted unless the
lender’s equivalent), or an explanation either an Administrative Law Judge or Judge directs otherwise.
as to why they are not relevant or not an Administrative Judge in accordance Section 134.1209, Evidence beyond
available; and (7) The name, address, with § 134.218. Unless the appeal will the record, discovery and oral hearings,
telephone number, email address and be dismissed under § 134.1205, the provides that, generally, the Judge may
signature of the appellant or its attorney. Judge will issue a notice and order not admit evidence beyond the written
This provision is consistent with OHA’s establishing a deadline for production of administrative record or permit any
general rules of practice in subpart B, the administrative record and specifying form of discovery. Discovery will be
with the addition of the requirement for a date for the close of record. Typically, permitted in OHA’s appellate
submission of certain financial the administrative record will be due 20 proceedings only if the Judge
information. SBA has determined that calendar days after issuance of the determines that SBA, upon written
submission by the appellant of financial notice and order unless additional time submission, has made a showing of
information, or an explanation as to is requested and granted, and the record good cause for discovery. An oral
why they are not relevant or not will close 45 calendar days from the hearing will not be held on an appeal of
available, is appropriate to support date of OHA’s receipt of the appeal an SBA loan review decision, unless,
SBA’s efforts to assess compliance with unless additional time is requested and following the motion of a party, or at the
the PPP requirements set forth in the granted. With this timeframe, SBA seeks Judge’s own initiative, the Judge orders
statute, rules, and guidance. The to provide a timely and judicious an oral hearing upon concluding that
appellant must serve a copy of the processing of the appeal petition, while there is a genuine dispute of material
appeal petition with attachments on the also affording additional time if, for fact that cannot be resolved except by
Associate General Counsel for example, the volume of appeals or other the taking of testimony and the
Litigation, U.S. Small Business matters require additional time for confrontation of witnesses. SBA has
Administration, 409 Third Street SW, compilation of the administrative record determined that allowing an oral
Washington, DC 20416, OLITService@ and the close of record. hearing under limited circumstances,

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sba.gov. The appellant must attach to Section 134.1207, The administrative and allowing discovery by SBA, only
the appeal petition a signed certificate record, requires that the administrative upon a showing of good cause, balances
of service meeting the requirements of record shall include relevant documents SBA’s potential need for discovery since
§ 134.204(d). This section further that SBA considered in making its final it may not have all relevant documents
provides that an appeal petition which decision or that were before SBA at the from appellant with the efficient use of
does not include the above may be time of the final decision. The limited resources available. If an oral
dismissed by the Judge and permits SBA administrative record need not, hearing is ordered, the proceeding shall

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52886 Federal Register / Vol. 85, No. 167 / Thursday, August 27, 2020 / Rules and Regulations

be conducted in accordance with final decision of SBA 30 calendar days a new appeal is filed as a result of a new
§§ 134.214 and 134.222 in subpart B of after its service. This section allows for SBA loan review decision.
this part as the Judge deems a request for reconsideration pursuant to Section 134.1215, Equal Access to
appropriate. All appeals under this paragraph (c) of § 134.1213 by either Justice Act (EAJA), provides that a
subpart L will be decided solely on a party or by the Judge on his or her own prevailing appellant is not entitled to
review of the written administrative initiative. This section also provides for recover attorney’s fees. Appeals to OHA
record, the appeal petition, response(s) the right to request review by the from SBA loan review decisions under
filed thereto, any admitted evidence, Administrator pursuant to § 134.228(a), the PPP are not proceedings that are
and an oral hearing, if held. in which case the provisions in required to be conducted by an
Section 134.1210, Interlocutory § 134.228 will apply. If a request for Administrative Law Judge under
appeals, provides that either party may review pursuant to § 134.228(a) is filed, § 134.603.
file an interlocutory appeal of a Judge’s the decision of the Administrator is a
ruling which decides an issue of Section 134.1216, Exhaustion of
final decision of SBA appealable to administrative remedies, provides that
privilege. Interlocutory appeals will be
federal district court. In order for a an appeal to OHA and request for
decided by the Administrator or a
borrower to exhaust its administrative review by the Administrator of a
designee. An interlocutory appeal must
remedies and preserve its right to seek disputed initial decision or
be filed and served no later than 20
calendar days after issuance of the judicial review of an SBA final decision reconsidered initial decision are
ruling to which the interlocutory appeal in a federal district court, a borrower administrative remedies that must be
applies. A response to the interlocutory that disputes the initial decision or exhausted before judicial review of an
appeal must be filed 10 calendar days reconsidered initial decision must file SBA loan review decision may be
after the interlocutory appeal is served. and serve a request for review of an sought in a federal district court.
The Judge may stay the proceedings initial decision or reconsidered initial Section 134.1217, Confidential
before OHA, in whole or in part, as he decision by the Administrator pursuant information and protective order,
or she deems appropriate pending to § 134.228(a). If the borrower does not provides that if a filing or other
resolution of the interlocutory appeal. request review by the Administrator submission made pursuant to an appeal
Section 134.1211, Alternative dispute pursuant to § 134.228(a), the borrower’s in this subpart L contains confidential
resolution, provides that at any time right to seek review in federal court is business and financial information;
during the pendency of an appeal, the waived due to the borrower’s failure to personally identifiable information;
parties may submit a joint motion exhaust administrative remedies. This source selection sensitive information;
requesting that the Judge permit the use section also provides that the final OHA income tax returns; documents and
of alternative dispute resolution to assist decision creates precedent only for information covered under § 120.1060 of
in resolving the matter. If the motion is appeals involving the PPP. Any OHA this title; or any other exempt
granted, the Judge will also stay the decision pursuant to this subpart L information, that information is not
proceedings before OHA, in whole or in applies only to the PPP and does not available to the public pursuant to the
part, as he or she deems appropriate, apply to SBA’s 7(a) Loan Program Freedom of Information Act (FOIA), 5
pending the outcome of the alternative generally or to any interpretation or U.S.C. 552. This provision is consistent
dispute resolution. In addition, the application of the regulations in part with the general rule of practice in
Assistant Administrator for Hearings 120 or part 121 of this title. SBA has subpart B of this part. In addition, this
and Appeals (AA/OHA) or a Judge may determined that this is appropriate section permits SBA or appellant to seek
designate another Judge or attorney because the PPP is governed by the a protective order over any document or
assigned to OHA to serve as a neutral in CARES Act, which adds a new information filed pursuant to an appeal
alternative dispute resolution temporary program to SBA’s 7(a) Loan in this subpart L, including any
procedures. If OHA provides the neutral Program, but does not apply to SBA’s document or information exchanged in
and the mediation fails to resolve all 7(a) Loan Program generally. Lastly, this discovery if permitted in accordance
issues in the case, the OHA-provided section provides that, consistent with with § 134.1209.
neutral will not be involved in the the general OHA rules of practice in
adjudication. Compliance With Executive Orders
subpart B of part 134, OHA decisions
Section 134.1212, Standard of review, 12866, 12988, 13132, 13563, and 13771,
are normally published without
provides that the standard of review is the Paperwork Reduction Act (44 U.S.C.
redactions on OHA’s website. A
whether the SBA loan review decision Ch. 35), and the Regulatory Flexibility
decision may contain confidential
was based on clear error of fact or law. Act (5 U.S.C. 601–612)
business and financial information or
The appellant has the burden of proof, personally identifiable information Executive Orders 12866, 13563, and
by a preponderance of the evidence. 13771
where that information is either
Section 134.1213, Decision on appeal,
decisionally-significant or otherwise This interim final rule is
provides that the Judge will issue his or
her decision within 45 calendar days necessary for a comprehensible economically significant for the
after the close of record, as practicable. decision. Where no protective order is purposes of Executive Orders 12866 and
The decision will contain findings of in place, a party may request a redacted 13563, and is considered a major rule
fact and conclusions of law, the reasons public decision by contacting OHA. under the Congressional Review Act.
for such findings and conclusions, and Where a protective order is in place, the SBA, however, is proceeding under the
any relief ordered. The decision will be Judge will usually issue the unredacted emergency provision at Executive Order

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served on each party. The Judge’s decision under the protective order and 12866 Section 6(a)(3)(D) based on the
decision on the appeal is an initial a redacted version for public release. need to move expeditiously to mitigate
decision. However, unless a request for Section 134.1214, Effects of the the current economic conditions arising
review is filed pursuant to § 134.228(a), decision, provides that OHA may affirm, from the COVID–19 emergency. This
or a request for reconsideration is filed reverse, or remand an SBA loan review rule’s designation under Executive
pursuant to paragraph (c) of § 134.1213, decision. If remanded, OHA no longer Order 13771 will be informed by public
an initial decision shall become the has jurisdiction over the matter unless comment.

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Federal Register / Vol. 85, No. 167 / Thursday, August 27, 2020 / Rules and Regulations 52887

Executive Order 12988 If the agency head has not waived the Subpart L—Rules of Practice for
SBA has drafted this rule, to the requirements for a regulatory flexibility Appeals of Certain SBA Loan Review
extent practicable, in accordance with analysis in accordance with the RFA’s Decisions Under the Paycheck
the standards set forth in section 3(a) waiver provision, and no other RFA Protection Program
and 3(b)(2) of Executive Order 12988, to exception applies, the agency must
prepare the regulatory flexibility Sec.
minimize litigation, eliminate 134.1201 Scope of rules in this subpart L.
ambiguity, and reduce burden. The rule analysis and publish it in the Federal
134.1202 The appeal petition.
has no preemptive or retroactive effect. Register at the time of promulgation or, 134.1203 Standing.
if the rule is promulgated in response to 134.1204 Deadline for filing appeal
Executive Order 13132 an emergency that makes timely petition.
SBA has determined that this rule compliance impracticable, within 180 134.1205 Dismissal.
will not have substantial direct effects days of publication of the final rule. 5 134.1206 Notice and order.
on the States, on the relationship U.S.C. 604(a), 608(b). Rules that are 134.1207 The administrative record.
between the National Government and exempt from notice and comment are 134.1208 Response to an appeal petition.
the States, or on the distribution of also exempt from the RFA requirements, 134.1209 Evidence beyond the record,
including conducting a regulatory discovery and oral hearings.
power and responsibilities among the
134.1210 Interlocutory appeals.
various layers of government. Therefore, flexibility analysis, when among other 134.1211 Alternative dispute resolution
SBA has determined that this rule has things the agency for good cause finds procedures.
no federalism implications warranting that notice and public procedure are 134.1212 Standard of review.
preparation of a federalism assessment. impracticable, unnecessary, or contrary 134.1213 Decision on appeal.
to the public interest. SBA Office of 134.1214 Effects of the decision.
Paperwork Reduction Act, 44 U.S.C.
Advocacy guide: How to Comply with 134.1215 Equal Access to Justice Act
Chapter 35 (EAJA).
the Regulatory Flexibility Act, Ch.1. p.9.
SBA has determined that this interim Accordingly, SBA is not required to 134.1216 Exhaustion of administrative
final rule does not impose additional conduct a regulatory flexibility analysis. remedies.
reporting or recordkeeping requirements 134.1217 Confidential information and
under the Paperwork Reduction Act. List of Subjects in 13 CFR Part 134 protective order.
Administrative practice and Authority: 15 U.S.C. 636(a)(36); Pub. L.
Regulatory Flexibility Act (RFA) 116–136; Pub. L. 116–139; Pub. L. 116–142;
procedure, Claims, Equal access to
The Regulatory Flexibility Act justice, Lawyers, Organization and Pub. L. 116–147
generally requires that when an agency function (Government agencies). § 134.1201 Scope of the rules in this
issues a proposed rule, or a final rule
For the reasons stated in the subpart L.
pursuant to section 553(b) of the APA or
another law, the agency must prepare a preamble, the Small Business (a) The rules of practice in this
regulatory flexibility analysis that meets Administration amends 13 CFR part 134 subpart L apply to appeals to OHA from
the requirements of the RFA and as set forth below: certain SBA loan review decisions
publish such analysis in the Federal under the Paycheck Protection Program
PART 134—RULES OF PROCEDURE (PPP) as described in paragraph (b) of
Register. 5 U.S.C. 603, 604. Specifically,
the RFA normally requires agencies to GOVERNING CASES BEFORE THE this section, and to any other PPP matter
describe the impact of a rulemaking on OFFICE OF HEARINGS AND APPEALS referred to OHA by the Administrator of
small entities by providing a regulatory SBA. The PPP was established as a
■ 1. The authority citation for part 134 temporary program under section 1102
impact analysis. Such analysis must is revised to read as follows:
address the consideration of regulatory of the Coronavirus Aid, Relief, and
options that would lessen the economic Authority: 5 U.S.C. 504; 15 U.S.C. 632, Economic Security Act (CARES Act)
effect of the rule on small entities. The 634(b)(6), 634(i), 637(a), 648(l), 656(i), 657t (Pub. L. 116–136).
and 687(c); 38 U.S.C. 8127(f); E.O. 12549, 51 (b) A final SBA loan review decision
RFA defines a ‘‘small entity’’ as (1) a
FR 6370, 3 CFR, 1986 Comp., p. 189. that is appealable under this subpart L
proprietary firm meeting the size
Subpart J issued under 38 U.S.C. is an official written decision by SBA,
standards of the Small Business
8127(f)(8)(B). after SBA completes a review of a PPP
Administration (SBA); (2) a nonprofit Subpart K issued under 38 U.S.C.
organization that is not dominant in its loan, that finds a borrower:
8127(f)(8)(A).
field; or (3) a small government Subpart L issued under 15 U.S.C. (1) Was ineligible for a PPP loan;
jurisdiction with a population of less 636(a)(36); Pub. L. 116–136; Pub. L. 116–139; (2) Was ineligible for the PPP loan
than 50,000. 5 U.S.C. 601(3)–(6). Except 116–142; 116–147. amount received or used the PPP loan
for such small government jurisdictions, proceeds for unauthorized uses;
neither State nor local governments are ■ 2. Amend § 134.102 by: (3) Is ineligible for PPP loan
‘‘small entities.’’ Similarly, for purposes ■ a. Removing the word ‘‘and’’ at the forgiveness in the amount determined
of the RFA, individual persons are not end of paragraph (u); by the lender in its full approval or
small entities. The requirement to ■ b. Removing the period at the end of partial approval decision issued to SBA
conduct a regulatory impact analysis paragraph (v) and adding ‘‘; and’’ in its (except for the deduction of any
does not apply if the head of the agency place; and Economic Injury Disaster Loan advance
‘‘certifies that the rule will not, if ■ c. Adding paragraph (w) to read as in accordance with section 1110(e)(6) of
promulgated, have a significant follows: the CARES Act); and/or

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economic impact on a substantial (4) Is ineligible for PPP loan
§ 134.102 Jurisdiction of OHA.
number of small entities.’’ 5 U.S.C. forgiveness in any amount when the
605(b). The agency must, however, * * * * * lender has issued a full denial decision
publish the certification in the Federal (w) Appeals of certain SBA loan to SBA.
Register at the time of publication of the review decisions as defined in 13 CFR (c) A borrower cannot file an OHA
rule, ‘‘along with a statement providing 134.1201. appeal of any decision made by a lender
the factual basis for such certification.’’ ■ 3. Add subpart L to read as follows: concerning a PPP loan.

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(d) Any determination by SBA’s than twenty cases, regulations, or (1) The appeal is beyond OHA’s
Office of Inspector General concerning a statutes. jurisdiction as set forth under
PPP loan is not appealable to OHA. (c) Service of the appeal petition. In § 134.1201;
(e) This subpart L does not create any addition to filing an appeal with OHA (2) The appellant lacks standing to
right to appeal any SBA decision on any in accordance with § 134.204(b), the appeal under § 134.1203; or
7(a) loans other than PPP loans. appellant must serve a copy of the (3) The appeal is untimely under
(f) The Rules of Practice for Appeals appeal petition with attachments on the § 134.1204, or is premature because SBA
From Size Determinations and NAICS Associate General Counsel for has not yet made a final SBA loan
Code Designations in subpart C of this Litigation, U.S. Small Business review decision.
part do not apply to appeals of SBA loan Administration, 409 Third Street SW, (b) The Judge may dismiss the appeal
review decisions or to the PPP. Washington, DC 20416, OLITService@ in accordance with § 134.1202(e) or
(g) In addition to the subpart B of this sba.gov. (f)(2), or if the appeal does not, on its
part provisions specifically referenced (d) Certificate of service. The face, allege specific facts that if proven
in this subpart L, the following appellant must attach to the appeal to be true, warrant reversal or remand of
regulations from subpart B of this part petition a signed certificate of service the SBA loan review decision.
also apply to this subpart L: 13 CFR meeting the requirements of
§ 134.204(d). § 134.1206 Notice and order.
134.207 through 134.209, 134.211, Upon receipt of an appeal challenging
(e) Dismissal. An appeal petition
134.212, and 134.217 through 134.221. a final SBA loan review decision, OHA
which does not contain all of the
§ 134.1202 The appeal petition. information required by paragraphs (a) will assign the matter to either an
(a) Contents. The appeal petition must through (d) of this section may be Administrative Law Judge or an
include the following information: dismissed, with or without prejudice, at Administrative Judge in accordance
(1) The basis for OHA’s jurisdiction, the Judge’s own initiative, or upon with § 134.218. Unless the appeal is
including, but not limited to, evidence motion of SBA. dismissed under § 134.1205, the Judge
(f) Motion for more definite statement. will issue a notice and order
that the appeal is timely filed in
SBA may, not later than five days after establishing a deadline for production of
accordance with § 134.1204;
receiving an appeal petition, move for the administrative record and specifying
(2) A copy of the SBA loan review an order to the appellant to provide a a date for the close of record. The notice
decision that is being appealed, or a more definite appeal petition or and order will be served upon all
description of that decision if a copy is otherwise comply with this section. A known parties (or their attorneys).
unavailable; Judge may order a more definite appeal Typically, the administrative record will
(3) A full and specific statement as to petition on his or her own initiative. be due 20 calendar days after issuance
why the SBA loan review decision is (1) A motion for a more definite of the notice and order unless additional
alleged to be erroneous, together with appeal petition stays SBA’s time for time is requested and granted, and the
all factual information and legal filing a response. The Judge will record will close 45 calendar days from
arguments supporting the allegations; establish the time for filing and serving the date of OHA’s receipt of the appeal
(4) The relief being sought; a response and will extend the close of unless additional time is requested and
(5) Signed copies of payroll tax filings the record as appropriate. granted.
actually filed with the Internal Revenue (2) If the appellant does not comply
Service (IRS), and State quarterly with the Judge’s order to provide a more § 134.1207 The administrative record.
business and individual employee wage definite appeal petition or otherwise (a) Contents. The administrative
reporting and unemployment insurance fails to comply with applicable record shall include relevant documents
tax filings actually reported to the regulations, the Judge may dismiss the that SBA considered in making its final
relevant state, for the relevant periods of petition with prejudice. decision or that were before SBA at the
time, if not provided with the PPP Loan (g) Calculation of a deadline when the time of the final decision. The
Forgiveness Application (SBA Form time period is given in days. Do not administrative record need not,
3508, SBA Form 3508EZ, or lender’s count the day the time period begins, however, contain all documents
equivalent), or an explanation as to why but do count the last day of the time pertaining to the appellant. In addition,
they are not relevant or not available; period. If the last day is Saturday, SBA may claim privilege as to certain
(6) Signed copies of applicable federal Sunday, or a Federal holiday, the time materials. The administrative record
tax returns actually filed with the IRS period ends on the next business day. must be certified and authenticated that
with appropriate schedules (e.g., IRS it is, to the best of the signatory’s
Form 1040 with Schedule C/F) § 134.1203 Standing.
knowledge, complete and correct.
documenting income for self-employed Only the borrower on a loan for which (b) Filing. SBA will file the
individuals or partners in a partnership, SBA has issued a final SBA loan review administrative record with OHA and
if not provided with the PPP Borrower decision has standing to appeal the SBA serve it on appellant.
Application Form (SBA Form 2483 or loan review decision to OHA. (c) Objection. The appellant may
lender’s equivalent), or an explanation § 134.1204 Deadline for filing appeal object to the absence of any document
as to why they are not relevant or not petition. from the administrative record that the
available; and An appeal petition must be filed with appellant believes should have been
(7) The name, address, telephone OHA within 30 calendar days after the included in the administrative record.
number, email address and signature of appellant’s receipt of the final SBA loan An appellant also may object to any

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the appellant or its attorney. review decision, or notification by the claim that documents in the
(b) Format. The maximum length of lender of the final SBA loan review administrative record are privileged.
an appeal petition (not including decision, whichever is earlier. Such objections must be filed with OHA
attachments) is 20 pages, unless leave is and served on SBA no later than 10
sought by the appellant and granted by § 134.1205 Dismissal. calendar days after the appellant’s
the Judge. A table of authorities is (a) The Judge must dismiss the appeal receipt of the administrative record. The
required only for petitions citing more if: Judge will rule upon such objections

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Federal Register / Vol. 85, No. 167 / Thursday, August 27, 2020 / Rules and Regulations 52889

and may direct or permit that the appeal is served. The Judge may stay the decision. The request for
administrative record be supplemented. proceedings before OHA, in whole or in reconsideration must clearly show an
part, as he or she deems appropriate error of fact or law material to the
§ 134.1208 Response to an appeal petition. pending resolution of the interlocutory decision. The Judge may also reconsider
(a) Who may respond. Only SBA may appeal. a decision on his or her own initiative
respond to an appeal. The response within 20 calendar days after service of
should set forth the relevant facts and § 134.1211 Alternative dispute resolution. the written decision.
legal arguments to the issues presented (a) Joint Motion. At any time during (d) Request for review. Within 30
on appeal. the pendency of an appeal, the parties calendar days after the service of an
(b) Time limit. Except for good cause may submit a joint motion requesting initial decision or a reconsidered initial
shown, a response filed after the close that the Judge permit the use of decision of a Judge, any party, or SBA’s
of record established by the Judge will alternative dispute resolution to assist Office of General Counsel, may file and
not be considered. in resolving the matter. serve a request for review by the
(c) Service. The SBA must file its (b) Procedures. If the motion is Administrator pursuant to § 134.228(a).
response with OHA, and serve a copy of granted, the Judge will also stay the In order for a borrower to exhaust its
the response upon the appellant and proceedings before OHA, in whole or in administrative remedies and preserve its
upon each of the persons identified in part, as he or she deems appropriate, right to seek judicial review of an SBA
the certificate of service attached to the pending the outcome of the alternative final decision in a federal district court,
appeal petition pursuant to dispute resolution. In addition, the AA/ a borrower that disputes an initial
§ 134.1202(d). OHA or a Judge may designate another decision or reconsidered initial decision
(d) Reply to a response. No reply to Judge or attorney assigned to OHA to must file and serve a request for review
a response will be permitted unless the serve as a neutral in alternative dispute of the initial decision or reconsidered
Judge directs otherwise. resolution procedures. If OHA provides initial decision by the Administrator
the neutral and the mediation fails to pursuant to § 134.228(a). If a request for
§ 134.1209 Evidence beyond the record, resolve all issues in the case, the OHA-
discovery and oral hearings. review is filed pursuant to § 134.228(a),
provided neutral will not be involved in the provisions in § 134.228 will apply.
(a) General Rule. Generally, the Judge the adjudication. (e) Publication. OHA decisions are
may not admit evidence beyond the
§ 134.1212 Standard of review. normally published without redactions
written administrative record or permit
on OHA’s website. A decision may
any form of discovery. The standard of review is whether the
(b) Discovery. Discovery will be contain confidential business and
SBA loan review decision was based on
permitted only if the Judge determines financial information or personally
clear error of fact or law. The appellant
that SBA, upon written submission, has identifiable information where that
has the burden of proof, by a
made a showing of good cause for information is either decisionally-
preponderance of the evidence.
discovery. significant or otherwise necessary for a
(c) Oral hearings. Oral hearings will § 134.1213 Decision on appeal. comprehensible decision. Where no
not be held on an appeal of an SBA loan (a) Time limits and contents. The protective order is in place, a party may
review decision, unless, following the Judge will issue his or her decision request a redacted public decision by
motion of a party, or at the Judge’s own within 45 calendar days after the close contacting OHA. Where a protective
initiative, the Judge orders an oral of record, as practicable. The decision order is in place, the Judge will usually
hearing upon concluding that there is a will contain findings of fact and issue the unredacted decision under the
genuine dispute of material fact that conclusions of law, the reasons for such protective order and a redacted version
cannot be resolved except by the taking findings and conclusions, and any relief for public release.
of testimony and the confrontation of ordered. The decision will be served on § 134.1214 Effects of the decision.
witnesses. If an oral hearing is ordered, each party.
(b) Initial decision. The Judge’s OHA may affirm, reverse, or remand
the proceeding shall be conducted in an SBA loan review decision. If
accordance with §§ 134.214 and 134.222 decision on the appeal is an initial
decision. However, unless a request for remanded, OHA no longer has
in subpart B of this part as the Judge jurisdiction over the matter unless a
deems appropriate. review is filed pursuant to § 134.228(a),
or a request for reconsideration is filed new appeal is filed as a result of a new
(d) The record. All appeals under this SBA loan review decision.
subpart L will be decided solely on a pursuant to paragraph (c) of this section,
review of the written administrative an initial decision shall become the § 134.1215 Equal Access to Justice Act
record, the appeal petition, and final decision of SBA 30 calendar days (EAJA), 5 U.S.C. 504.
response(s) filed thereto, any admitted after its service. The final OHA decision A prevailing appellant is not entitled
evidence, and an oral hearing, if held. creates precedent only for appeals to recover attorney’s fees. Appeals to
involving the PPP. Any OHA decision OHA from SBA loan review decisions
§ 134.1210 Interlocutory appeals. pursuant to this subpart L applies only under the PPP are not proceedings that
(a) General. Either party may file an to the PPP and does not apply to SBA’s are required to be conducted by an
interlocutory appeal of a Judge’s ruling 7(a) Loan Program generally or to any Administrative Law Judge under
which decides an issue of privilege. interpretation or application of the § 134.603.
Interlocutory appeals will be decided by regulations in part 120 or part 121 of
the Administrator of SBA or a designee. this title. § 134.1216 Exhaustion of administrative

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(b) Procedures. An interlocutory (c) Reconsideration. An initial remedies.
appeal must be filed and served no later decision of the Judge may be An appeal to OHA and request for
than 20 calendar days after issuance of reconsidered. Either SBA or the review by the Administrator of a
the ruling to which the interlocutory appellant may request reconsideration disputed initial decision or
appeal applies. A response to the by filing with the Judge and serving a reconsidered initial decision are
interlocutory appeal must be filed 10 petition for reconsideration within 10 administrative remedies that must be
calendar days after the interlocutory calendar days after service of the written exhausted before judicial review of an

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52890 Federal Register / Vol. 85, No. 167 / Thursday, August 27, 2020 / Rules and Regulations

SBA loan review decision may be DATES: This AD is effective August 27, 14268 and 14270 through 14286 and
sought in a federal district court. 2020. helicopters with a hose part number (P/
The FAA must receive any comments N) A785–31 installed after April 30,
§ 134.1217 Confidential Information and on this AD by October 13, 2020. 2018, inspecting the inside of the hose
Protective Order.
ADDRESSES: You may send comments, for separation between the outer and
(a) If a filing or other submission inner layers and flexing the hose in all
using the procedures found in 14 CFR
made pursuant to an appeal in this directions while listening for a crinkling
11.43 and 11.45, by any of the following
subpart L contains confidential business sound, which is an indication of
methods:
and financial information; personally
• Federal eRulemaking Portal: Go to separation. If there was any separation
identifiable information; source or a crinkling sound, AD 2019–12–18
https://www.regulations.gov. Follow the
selection sensitive information; income required replacing the hose before
instructions for submitting comments.
tax returns; documents and information
• Fax: 202–493–2251. further flight. If there was no separation
covered under § 120.1060 of this title; or • Mail: U.S. Department of and no crinkling sound, AD 2019–12–18
any other exempt information, that Transportation, Docket Operations, M– required replacing the hose within 50
information is not available to the 30, West Building Ground Floor, Room hours time-in-service (TIS). Finally, AD
public pursuant to the Freedom of W12–140, 1200 New Jersey Avenue SE, 2019–12–18 prohibited installing hose
Information Act (FOIA), 5 U.S.C. 552. Washington, DC 20590. P/N A785–31 marked with code 1Q18
(b) SBA or appellant may seek a on any helicopter.
• Hand Delivery: U.S. Department of
protective order over any document or AD 2019–12–18 resulted from 12
Transportation, Docket Operations, M–
information exchanged in discovery if reports, including an accident on April
30, West Building Ground Floor, Room
permitted in accordance with 4, 2019, of separation between the outer
W12–140, 1200 New Jersey Avenue SE,
§ 134.1209 and any document or and inner layers of the orange silicone
Washington, DC 20590, between 9 a.m.
information filed pursuant to an appeal hose out of a suspected population of
and 5 p.m., Monday through Friday,
in this subpart L. 100 hoses traced to a specific
except Federal holidays.
Jovita Carranza, For service information identified in manufacturing batch marked by code
this final rule, contact Robinson 1Q18 (1st quarter of 2018). The
Administrator.
Helicopter Company, 2901 Airport separation of the silicone layers, if not
[FR Doc. 2020–17895 Filed 8–25–20; 11:15 am] addressed, could result in blockage of
Drive, Torrance, CA 90505; telephone
BILLING CODE P
310–539–0508; fax 310–539–5198; or at air flow to the engine, engine stoppage,
https://robinsonheli.com/. You may and subsequent loss of control of the
view this service information at the helicopter. Accordingly, the FAA issued
DEPARTMENT OF TRANSPORTATION AD 2019–12–18 to address the unsafe
FAA, Office of the Regional Counsel,
Southwest Region, 10101 Hillwood condition on these products.
Federal Aviation Administration
Pkwy, Room 6N–321, Fort Worth, TX Actions Since AD 2019–12–18 Was
14 CFR Part 39 76177. For information on the Issued
availability of this material at the FAA, Since the FAA issued AD 2019–12–
[Docket No. FAA–2020–0786; Project call 817–222–5110.
Identifier AD–2020–00914–R; Amendment 18, an NTSB report of October 2019
39–21229; AD 2020–18–08] Examining the AD Docket concluded from the accident aircraft’s
orange silicone hose marked by code
RIN 2120–AA64 You may examine the AD docket on 1Q18, that contamination was
the internet at https:// introduced during the manufacturing
Airworthiness Directives; Robinson www.regulations.gov by searching for
Helicopter Company process between the silicone layers that
and locating Docket No. FAA–2020– prevented a satisfactory bond.
AGENCY: Federal Aviation
0786; or in person at Docket Operations In addition, a helicopter accident
Administration (FAA), DOT. between 9 a.m. and 5 p.m., Monday occurred on April 6, 2020, and
through Friday, except Federal holidays. preliminary investigation indicated that
ACTION: Final rule; request for
The AD docket contains this final rule, separation between the outer and inner
comments. any comments received, and other layers of the orange silicone hose P/N
SUMMARY: The FAA is superseding information. The street address for A785–31 occurred. This hose was traced
Airworthiness Directive (AD) 2019–12– Docket Operations is listed above. to the manufacturing batch marked by
18 for Robinson Helicopter Company Comments will be available in the AD code 3Q17 (3rd quarter of 2017).
(Robinson) Model R44 II helicopters. AD docket shortly after receipt. Subsequently, the FAA determined
2019–12–18 required inspecting certain FOR FURTHER INFORMATION CONTACT: that any helicopter with an improved
engine air induction hoses (hoses) and Roger Gretler, Aerospace Engineer, Los black neoprene hose P/N A785–31
replacing any hose that was not Angeles ACO Branch, Compliance & installed should not be affected by this
airworthy. AD 2019–12–18 also Airworthiness Division, FAA, 3960 AD. The FAA has also determined that,
prohibited the installation of certain Paramount Blvd., Lakewood, CA 90712; for helicopters with an orange silicone
hoses. This AD continues to require phone 562–627–5251; email hose, repeating the inspection is
inspecting those previously affected roger.gretler@faa.gov. necessary. Accordingly, the FAA is
hoses and amends the applicability, SUPPLEMENTARY INFORMATION: superseding AD 2019–12–18 to amend
clarifies an inspection requirement, the applicability from all Robinson

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adds a requirement to repeat the Discussion Model R44 II helicopters to Model R44
inspection, and expands the installation The FAA issued AD 2019–12–18, II helicopters with an orange silicone
prohibition. This AD was prompted by Amendment 39–19673 (84 FR 32028, hose P/N A785–31 installed. This AD
an additional report of separation July 5, 2019) (‘‘AD 2019–12–18’’), for also clarifies that the hose must be
between the outer and inner hose layers. Robinson Model R44 II helicopters. AD removed to perform the inspection, adds
The FAA is issuing this AD to address 2019–12–18 required, for helicopter a requirement to repeat the inspection,
the unsafe condition on these products. serial numbers (S/Ns) 14248 through and expands the installation prohibition

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