Federal Register, Vol. 85, No. 73, Wednesday, April 15, 2020 — Rules and Regulations
Summary
Federal Register pages (Vol. 85, No. 73, Wednesday, April 15, 2020) containing the Small Business Administration interim final rule, Docket No. SBA-2020-0019, RIN 3245-AH35, titled Business Loan Program Temporary Changes; Paycheck Protection Program, which supplements SBA's Initial Rule with guidance on how affiliation rules apply to eligibility for the Paycheck Protection Program. The text includes regulatory compliance sections, a question-and-answer discussion of how a borrower is generally considered together with its affiliates, and discussion of faith-based organizations and other categories. It states that SBA is proceeding under the emergency provision of Executive Order 12866 and dispensing with the 30-day delayed effective date. The rule carries the name of Jovita Carranza, Administrator.
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“Federal Register, Vol. 85, No. 73, Wednesday, April 15, 2020 — Rules and Regulations.”
Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/department-of-the-treasury-interim-final-rule-on-applicable-affiliation-rules-home-treasury-gov-syst-191bb7ab20/
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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20817
Compliance With Executive Orders Section 1102 Lender Agreement), and unnecessary, or contrary to the public
12866, 12988, 13132, and 13771, the SBA Form 3507 (CARES Act Section interest. Small Business
Paperwork Reduction Act (44 U.S.C. 1102 Lender Agreement—Non-Bank and Administration’s Office of Advocacy
Ch. 35), and the Regulatory Flexibility Non-Insured Depository Institution guide: How to Comply with the
Act (5 U.S.C. 601–612) Lender). The collection is approved for Regulatory Flexibility Ac. Ch.1. p.9.
use until September 30, 2020. Accordingly, SBA is not required to
E.O. 12866 and E.O. 13563 conduct a regulatory flexibility analysis.
This interim final rule is Regulatory Flexibility Act (RFA) Authority: 15 U.S.C. 636(a)(36);
economically significant for the The Regulatory Flexibility Act (RFA) Coronavirus Aid, Relief, and Economic
purposes of Executive Orders 12866 and generally requires that when an agency Security Act, Public Law 116–136,
13563. SBA, however, is proceeding issues a proposed rule, or a final rule Section 1114.
under the emergency provision at pursuant to section 553(b) of the APA or
another law, the agency must prepare a Jovita Carranza,
Executive Order 12866 Section
regulatory flexibility analysis that meets Administrator.
6(a)(3)(D) based on the need to move
expeditiously to mitigate the current the requirements of the RFA and [FR Doc. 2020–07672 Filed 4–10–20; 4:15 pm]
economic conditions arising from the publish such analysis in the Federal BILLING CODE P
COVID–19 emergency. This rule’s Register. 5 U.S.C. 603, 604. Specifically,
designation under Executive Order the RFA normally requires agencies to
13771 will be informed by public describe the impact of a rulemaking on SMALL BUSINESS ADMINISTRATION
comment. small entities by providing a regulatory
13 CFR Part 121
This rule is necessary to implement impact analysis. Such analysis must
Sections 1102 and 1106 of the CARES address the consideration of regulatory [Docket No. SBA–2020–0019]
Act in order to provide economic relief options that would lessen the economic RIN 3245–AH35
to small businesses nationwide effect of the rule on small entities. The
adversely impacted under the COVID– RFA defines a ‘‘small entity’’ as (1) a Business Loan Program Temporary
19 Emergency Declaration. We proprietary firm meeting the size Changes; Paycheck Protection
anticipate that this rule will result in standards of the Small Business Program
substantial benefits to small businesses, Administration (SBA); (2) a nonprofit
organization that is not dominant in its AGENCY: U.S. Small Business
their employees, and the communities
they serve. However, we lack data to field; or (3) a small government Administration.
estimate the effects of this rule. jurisdiction with a population of less ACTION: Interim final rule.
than 50,000. 5 U.S.C. 601(3)–(6). Except
Executive Order 12988 SUMMARY: Elsewhere in this issue of the
for such small government jurisdictions,
neither State nor local governments are Federal Register, the U.S. Small
SBA has drafted this rule, to the
‘‘small entities.’’ Similarly, for purposes Business Administration (SBA) is
extent practicable, in accordance with
of the RFA, individual persons are not publishing an interim final rule (the
the standards set forth in section 3(a)
small entities. Initial Rule) announcing the
and 3(b)(2) of Executive Order 12988, to
The requirement to conduct a implementation of sections 1102 and
minimize litigation, eliminate
regulatory impact analysis does not 1106 of the Coronavirus Aid, Relief, and
ambiguity, and reduce burden. The rule
apply if the head of the agency ‘‘certifies Economic Security Act (CARES Act or
has no preemptive or retroactive effect.
that the rule will not, if promulgated, the Act). Section 1102 of the Act
Executive Order 13132 have a significant economic impact on temporarily adds a new program, titled
SBA has determined that this rule a substantial number of small entities.’’ the ‘‘Paycheck Protection Program,’’ to
will not have substantial direct effects 5 U.S.C. 605(b). The agency must, the SBA’s 7(a) Loan Program. Section
on the States, on the relationship however, publish the certification in the 1106 of the Act provides for forgiveness
between the National Government and Federal Register at the time of of up to the full principal amount of
the States, or on the distribution of publication of the rule, ‘‘along with a qualifying loans guaranteed under the
power and responsibilities among the statement providing the factual basis for Paycheck Protection Program. The
various layers of government. Therefore, such certification.’’ If the agency head Paycheck Protection Program and loan
SBA has determined that this rule has has not waived the requirements for a forgiveness are intended to provide
no federalism implications warranting regulatory flexibility analysis in economic relief to small businesses
preparation of a federalism assessment. accordance with the RFA’s waiver nationwide adversely impacted by the
provision, and no other RFA exception Coronavirus Disease 2019 (COVID–19).
Paperwork Reduction Act, 44 U.S.C. applies, the agency must prepare the This interim final rule supplements the
Chapter 35 regulatory flexibility analysis and Initial Rule with additional guidance
SBA has determined that this rule publish it in the Federal Register at the regarding the application of certain
will impose recordkeeping or reporting time of promulgation or, if the rule is affiliate rules applicable to SBA’s
requirements under the Paperwork promulgated in response to an implementation of sections 1102 and
Reduction Act (‘‘PRA’’). SBA has emergency that makes timely 1106 of the Act and requests public
obtained emergency approval under compliance impracticable, within 180 comment.
OMB Control Number 3245–0407 for the days of publication of the final rule. 5 DATES:
information collection (IC) required to U.S.C. 604(a), 608(b). Effective date: This interim final rule
implement the program described Rules that are exempt from notice and is effective April 15, 2020.
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above. This IC consists of Form 2483 comment are also exempt from the RFA Applicability date: This interim final
(Paycheck Protection Program requirements, including conducting a rule applies to applications submitted
Application Form), SBA Form 2484 regulatory flexibility analysis, when under the Paycheck Protection Program
(Paycheck Protection Program Lender’s among other things the agency for good through June 30, 2020, or until funds
Application for 7(a) Loan Guaranty), cause finds that notice and public made available for this purpose are
and SBA Form 3506 (CARES Act procedure are impracticable, exhausted.
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20818 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations
Comment Date: Comments must be businesses nationwide adversely III. Affiliate Rules for Paycheck
received on or before May 15, 2020. impacted by the COVID–19 emergency. Protection Program
ADDRESSES: You may submit comments, Section 1102 of the Act temporarily Overview
identified by number SBA–2020–0019 permits SBA to guarantee 100 percent of The CARES Act was enacted to
through the Federal eRulemaking Portal: 7(a) loans under a new program titled provide immediate assistance to
http://www.regulations.gov. Follow the the ‘‘Paycheck Protection Program.’’ individuals, families, and organizations
instructions for submitting comments. Section 1106 of the Act provides for affected by the COVID–19 emergency.
SBA will post all comments on forgiveness of up to the full principal Among the provisions contained in the
www.regulations.gov. If you wish to amount of qualifying loans guaranteed CARES Act are provisions authorizing
submit confidential business under the Paycheck Protection Program. SBA to temporarily guarantee loans
information (CBI) as defined in the User On April 2, 2020, SBA issued an interim under the Paycheck Protection Program
Notice at www.regulations.gov, please final rule (the Initial Rule) announcing (PPP). Loans under the PPP will be 100
send an email to ppp-ifr@sba.gov. the implementation of sections 1102 percent guaranteed by SBA, and the full
Highlight the information that you and 1106 of the Act. A more detailed principal amount of the loans may
consider to be CBI and explain why you discussion of sections 1102 and 1106 of qualify for loan forgiveness. Additional
believe SBA should hold this the Act is found in section III of the information about the PPP is available
information as confidential. SBA will in the Initial Rule.
Initial Rule.
review the information and make the
final determination whether it will This interim final rule supplements 1. Affiliation Rules Generally
publish the information. the Initial Rule with additional Are affiliates considered together for
FOR FURTHER INFORMATION CONTACT: Call
guidance regarding the application of purposes of determining eligibility?
Center Representative at 833–572–0502, certain affiliate rules applicable to
SBA’s implementation of sections 1102 In most cases, a borrower will be
or the local SBA Field Office; the list of considered together with its affiliates for
offices can be found at https:// and 1106 of the Act and requests public
purposes of determining eligibility for
www.sba.gov/tools/local-assistance/ comment.
the PPP.1 Under SBA rules, entities may
districtoffices. II. Comments and Immediate Effective be considered affiliates based on factors
SUPPLEMENTARY INFORMATION: Date including stock ownership, overlapping
management,2 and identity of interest.
I. Background Information The intent of the Act is that SBA 13 CFR 121.301.
On March 13, 2020, President Trump provide relief to America’s small
How do SBA’s affiliation rules affect my
declared the ongoing Coronavirus businesses expeditiously. This intent,
eligibility and apply to me under the
Disease 2019 (COVID–19) pandemic of along with the dramatic decrease in
PPP?
sufficient severity and magnitude to economic activity nationwide, provides
warrant an emergency declaration for all good cause for SBA to dispense with the An entity generally is eligible for the
States, territories, and the District of 30-day delayed effective date provided PPP if it, combined with its affiliates, is
Columbia. With the COVID–19 in the Administrative Procedure Act (5 a small business as defined in section 3
emergency, many small businesses U.S.C. 553(b)(3)(B)). Specifically, small of the Small Business Act (15 U.S.C.
nationwide are experiencing economic businesses need to be informed on how 632), or (1) has 500 or fewer employees
hardship as a direct result of the whose principal place of residence is in
to apply for a loan and the terms of the
Federal, State, tribal, and local public the United States or is a business that
loan under section 1102 of the Act as
health measures that are being taken to operates in a certain industry and meets
soon as possible because the last day to
minimize the public’s exposure to the applicable SBA employee-based size
apply for and receive a loan is June 30, standards for that industry, and (2) is a
virus. These measures, some of which 2020. The immediate effective date of
are government-mandated, are being this interim final rule will benefit small 1 Section 7(a)(36)(D)(iv) of the Small Business Act
implemented nationwide and include businesses so that they can immediately (15 U.S.C. 636(a)(36)(D)(iv), as added by the Act,
the closures of restaurants, bars, and apply for the loan with a better waives the affiliation rules contained in § 121.103
gyms. In addition, based on the advice for (1) any business concern with not more than 500
understanding of loan terms and employees that, as of the date on which the loan
of public health officials, other
conditions. This interim final rule is is disbursed, is assigned a North American Industry
measures, such as keeping a safe
effective without advance notice and Classification System code beginning with 72; (2)
distance from others or even stay-at- any business concern operating as a franchise that
home orders, are being implemented, public comment because section 1114 of is assigned a franchise identifier code by the
resulting in a dramatic decrease in the Act authorizes SBA to issue Administration; and (3) any business concern that
economic activity as the public avoids regulations to implement Title 1 of the receives financial assistance from a company
Act without regard to notice licensed under section 301 of the Small Business
malls, retail stores, and other Investment Act of 1958 (15 U.S.C. 681). This
businesses. requirements. This rule is being issued interim final rule has no effect on these statutory
On March 27, 2020, the President to allow for immediate implementation waivers, which remain in full force and effect. As
of this program. Although this interim a result, the affiliation rules contained in section
signed the Coronavirus Aid, Relief, and 121.301 also do not apply to these types of entities.
Economic Security Act (the CARES Act final rule is effective immediately, 2 In order to help potential borrowers identify
or the Act) (Pub. L. 116–136) to provide comments are solicited from interested other businesses with which they may be deemed
emergency assistance and health care members of the public on all aspects of to be affiliated under the common management
the interim final rule. These comments standard, the Borrower Application Form, SBA
response for individuals, families, and Form 2483, released on April 2, 2020, requires
must be submitted on or before May 15,
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businesses affected by the coronavirus applicants to list other businesses with which they
pandemic. The Small Business 2020. The SBA will consider these have common management. The information
Administration (SBA) received funding comments and the need for making any supplied by the applicant in response to that
information request should be used by applicants
and authority through the Act to modify revisions as a result of these comments. as they assess whether they have affiliates that
existing loan programs and establish a should be included in their number of employees
new loan program to assist small reported on SBA Form 2483.
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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20819
tax-exempt nonprofit organization a benefit because of conduct mandated property-holding structures that most
described in section 501(c)(3) of the by religious belief.’’ Id. at 718. For closely mirror their own ecclesiology or
Internal Revenue Code (IRC), a tax- example, in Sherbert v. Verner, 374 U.S. polity.’’). Either affiliation decision falls
exempt veterans organization described 398 (1963), a State denied the plaintiff within the definition of ‘‘religious
in section 501(c)(19) of the IRC, a Tribal unemployment benefits because she exercise’’ that applies to RFRA, which
business concern described in section would not work on Saturday, the ‘‘includes any exercise of religion,
31(b)(2)(C) of the Small Business Act, or Sabbath of her faith. Id. at 400–01. Even whether or not compelled by, or central
any other business concern. Prior to the though no ‘‘sanctions directly to, a system of religious belief.’’ See 42
Act, the nonprofit organizations listed compel[led]’’ her to work on Saturday, U.S.C. 2000cc–5(7)(A); 2000bb–2(4)
above were not eligible for SBA the Supreme Court held that the State’s (‘‘the term ‘exercise of religion’ means
Business Loan Programs under section denial of benefits ‘‘puts the same kind religious exercise, as defined in section
7(a) of the Small Business Act; only for- of burden upon the free exercise of 2000cc–5 of this title’’).
profit small business concerns were religion as would a fine imposed against As applied to these faith-based
eligible. The Act made such nonprofit [her] for her Saturday worship.’’ Id. at organizations, the affiliation rules
organizations not only eligible for the 404. As the Court observed, the State’s would impose a substantial burden. The
PPP, but also subjected them to SBA’s framework ‘‘forces her to choose affiliation rules would deny an
affiliation rules. Specifically, section between following the precepts of her important benefit (participation in a
1102 of the Act provides that the religion and forfeiting benefits, on the program for which they would
provisions applicable to affiliations one hand, and abandoning one of the otherwise be eligible under the CARES
under 13 CFR 121.103 apply with precepts of her religion in order to Act) because of the exercise of sincere
respect to nonprofit organizations and accept work, on the other hand.’’ Id. religious belief (affiliation with other
veterans organizations in the same Consistent with these precedents, RFRA religious entities).
manner as with respect to small explicitly contemplates that ‘‘the denial The Administrator has also concluded
business concerns. However, the of government funding, benefits, or that she does not have a compelling
detailed affiliation standards contained exemptions’’ may violate its protections. interest in denying emergency
in § 121.103 currently do not apply to 42 U.S.C. 2000bb–4. assistance to faith-based organizations
PPP borrowers, because § 121.103(a)(8) that are facing the same economic
SBA is aware of the existence of faith- hardship to which the CARES Act
provides that applicants in SBA’s
based organizations that would qualify responded and who would be eligible
Business Loan Programs (which include
for relief under the CARES Act but for for PPP but for their faith-based
the PPP) are subject to the affiliation
their affiliation with other entities as an organizational and associational
rule contained in 13 CFR 121.301.
aspect of their religious practice. decisions. This conclusion is reinforced
2. Faith-Based Organizations Supreme Court precedent has long by the fact that the affiliation rules
This rule exempts otherwise qualified recognized that the organizational already contain numerous exemptions,
faith-based organizations from the structure of faith-based entities may see generally 13 CFR 121.103(b), ranging
SBA’s affiliation rules, including those itself be a matter of significant religious from ‘‘[b]usiness concerns owned and
set forth in 13 CFR part 121, where the concern and that faith-based controlled by Indian Tribes, Alaska
application of the affiliation rules would organizations are therefore guaranteed Native Corporations, [and] Native
substantially burden those the ‘‘power to decide for themselves, Hawaiian Organizations,’’ id.
organizations’ religious exercise. This free from state interference, matters of § 121.103(b)(2)(i) to ‘‘member
exemption is required, or at a minimum church government as well as those of shareholders of a small agricultural
authorized, by the Religious Freedom faith and doctrine.’’ Kedroff v. St. cooperative.’’ Id. § 121.103(b)(7). In light
Restoration Act (RFRA) (Pub. L. 103– Nicholas Cathedral of Russian Orthodox of these exemptions, it is difficult to
141), which provides that the Church in N. Am., 344 U.S. 94, 116 maintain that denying relief to these
‘‘[g]overnment shall not substantially (1952). Moreover, an assessment of the faith-based organizations is necessary to
burden a person’s exercise of religion’’ extent to which questions concerning further a compelling government
unless the government can religious polity rest upon theological or interest, let alone the least restrictive
‘‘demonstrate[] that application of the other religious foundations presents means of doing so. See Church of the
burden’’ to the person is both ‘‘in particular difficulties, for the First Lukumi Babalu Aye, Inc. v. City of
furtherance of a compelling Amendment ‘‘forbids civil courts’’ from Hialeah, 508 U.S. 520, 547 (1993) (‘‘[A]
governmental interest’’ and ‘‘the least ‘‘the interpretation of particular church law cannot be regarded as protecting an
restrictive means of furthering that doctrines and the importance of those interest of the highest order when it
compelling governmental interest.’’ 42 doctrines to the religion.’’ Presbyterian leaves appreciable damage to that
U.S.C. 2000bb–1. Church v. Mary Elizabeth Blue Hull supposedly vital interest
A substantial burden under RFRA Mem’l Presbyterian Church, 393 U.S. unprohibited.’’) (cleaned up); Gonzales
includes both government action that 440, 450 (1969). A number of faith- v. O Centro Espirita Beneficiente Uniao
compels a person to violate his sincere based organizations understand their do Vegetal, 546 U.S. 418, 433 (2006)
religious beliefs or suffer a penalty, see, affiliation with other religious entities (applying same principle under RFRA).
e.g., Burwell v. Hobby Lobby Stores, Inc., as a part of their exercise of religion, as SBA accordingly must exempt faith-
573 U.S. 682, 726 (2014), and the a mandate given the ‘‘hierarchical or based organizations that would
imposition of a substantial burden connectional’’ structure of their church, otherwise be disqualified from the PPP
through ‘‘indirect’’ measures. Thomas v. Jones v. Wolf, 443 U.S. 595, 597 (1979), based on features of those organizations’
Review Bd. of Ind. Emp. Sec. Div., 450 or as an expression of their sincere affiliations that are a matter of sincere
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U.S. 707, 717–18 (1981). Notably, the religious belief. Cf. 1 W. Cole Durham religious exercise as defined in 42
government imposes a substantial & Robert Smith, Religious Organizations U.S.C. 2000bb–2.
burden on religious exercise when it and the Law section 8.19 (Westlaw rev. This action is also supported by 15
‘‘conditions receipt of an important ed. 2017) (‘‘Religious organizations, U.S.C. 634(b)(6), which authorizes the
benefit upon conduct proscribed by a such as parishes or mission centers, Administrator to ‘‘make such rules and
religious faith, or where it denies such normally tend to choose the civil- regulations as he deems necessary to
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20820 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations
carry out the authority vested in him by approach issues analogous to affiliation need to move expeditiously to mitigate
or pursuant to this chapter.’’ As relevant differently for religious organizations. the current economic conditions arising
here, the CARES Act expanded See, e.g., 26 U.S.C. 512 (b)(12). from the COVID–19 emergency. This
eligibility for the covered loans during For these reasons, in addition to the rule’s designation under Executive
the covered period for nonprofit RFRA mandate, the Administrator has Order 13771 will be informed by public
organizations that employ not more than determined that it is appropriate to comment.
500 employees or, if applicable, the size exercise the authority granted under 15 Executive Order 12988
standard in number of employees U.S.C. 634(b)(6) to exempt from
established by the Administrator for the application of SBA’s affiliation rules SBA has drafted this rule, to the
industry in which the nonprofit faith-based organizations that would extent practicable, in accordance with
organization operates. 15 U.S.C. otherwise be disqualified from the standards set forth in section 3(a)
636(a)(36)(D)(i). That expansion posed participation in PPP because of and 3(b)(2) of Executive Order 12988, to
unique concerns for the Administrator, affiliations that are a part of their minimize litigation, eliminate
who is tasked with applying the religious exercise. ambiguity, and reduce burden. The rule
‘‘provisions applicable to affiliations Accordingly, the SBA’s affiliation has no preemptive or retroactive effect.
under section 121.103 of title 13, Code rules, including those set forth in 13 Executive Order 13132
of Federal Regulations, or any successor CFR part 121, do not apply to the
SBA has determined that this rule
thereto, . . . with respect to a nonprofit relationship of any church, convention
will not have substantial direct effects
organization and a veterans or association of churches, or other
on the States, on the relationship
organizations in the same manner as faith-based organization or entity to any
between the National Government and
with respect to a small business other person, group, organization, or
the States, or on the distribution of
concern.’’ Id. 636(a)(36)(D)(vi). entity that is based on a sincere
power and responsibilities among the
Although these rules may easily be religious teaching or belief or otherwise
various layers of government. Therefore,
applied to faith-based organizations in constitutes a part of the exercise of
SBA has determined that this rule has
many cases, their application to certain religion. This includes any relationship
no federalism implications warranting
faith-based organizations presents to a parent or subsidiary and other
preparation of a federalism assessment.
significant challenges, in particular applicable aspects of organizational
because of the large number of faith- structure or form. A faith-based Paperwork Reduction Act, 44 U.S.C.
based organizations who would now be organization seeking loans under this Chapter 35
eligible for the PPP but for their program may rely on a reasonable, good SBA has determined that this rule
religious exercise. faith interpretation in determining will impose recordkeeping or reporting
As discussed above, carrying the whether its relationship to any other requirements under the Paperwork
affiliation rules over to all faith-based person, group, organization, or entity is Reduction Act (‘‘PRA’’). SBA has
organizations without modification exempt from the affiliation rules under obtained emergency approval under
would raise concerns under RFRA. this provision, and SBA will not assess, OMB Control Number 3245–0407 for the
Moreover, application of the affiliation and will not require participating information collection (IC) required to
rules, which, for example, provide for lenders to assess, the reasonableness of implement the program described
assessment of whether one faith-based the faith-based organization’s above. This IC consists of Form 2483
organization ‘‘controls or has the power determination. (Paycheck Protection Program
to control’’ another organization, 13 CFR 3. Additional Information Application Form) and SBA Form 2484
121.103(a)(1), could involve SBA in (Paycheck Protection Program Lender’s
questions of church governance SBA may provide further guidance, if Application for 7(a) Loan Guaranty)
concerning ‘‘the allocation of power needed, through SBA notices and a SBA Form 3506 (CARES Act Section
within a (hierarchical) church so as to program guide which will be posted on 1102 Lender Agreement), and SBA Form
decide . . . religious law (governing SBA’s website at www.sba.gov. 3507 (CARES Act Section 1102 Lender
church polity),’’ in violation of the First Questions on the Paycheck Protection
Agreement—Non-Bank and Non-Insured
Amendment. Serbian E. Orthodox Program 7(a) Loans may be directed to
Depository Institution Lender). The
Diocese for the U.S.A. & Canada v. the Lender Relations Specialist in the
collection is approved for use until
Milivojevich, 426 U.S. 696, 709 (1979) local SBA Field Office. The local SBA
October 31, 2020.
(internal quotation marks omitted)). Field Office may be found at https:// The Regulatory Flexibility Act (RFA)
Finally, affiliation rules developed in www.sba.gov/tools/local-assistance/ generally requires that when an agency
the context of for-profit enterprises districtoffices. issues a proposed rule, or a final rule
present significant administrative Compliance With Executive Orders pursuant to section 553(b) of the APA or
difficulties where faith-based 12866, 12988, 13132, and 13771, the another law, the agency must prepare a
organizations are concerned. For Paperwork Reduction Act (44 U.S.C. regulatory flexibility analysis that meets
example, ‘‘the notion of corporate Ch. 35), and the Regulatory Flexibility the requirements of the RFA and
subsidiarity or affiliation in civil law is Act (5 U.S.C. 601–612) publish such analysis in the Federal
entirely foreign to the polity of religious Register. 5 U.S.C. 603, 604. Specifically,
organizations,’’ and there is a significant Executive Orders 12866, 13563, and the RFA normally requires agencies to
risk that civil authorities will 13771 describe the impact of a rulemaking on
‘‘mischaracterize or misinterpret the This interim final rule is small entities by providing a regulatory
polity of a religious body.’’ 1 W. Cole economically significant for the impact analysis. Such analysis must
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Durham & Robert Smith, Religious purposes of Executive Orders 12866 and address the consideration of regulatory
Organizations and the Law sections 13563, and is considered a major rule options that would lessen the economic
8.19, 8.21 (discussing examples of under the Congressional Review Act. effect of the rule on small entities. The
judicial mischaracterizations). SBA, however, is proceeding under the RFA defines a ‘‘small entity’’ as (1) a
Consistent with these concerns, it is also emergency provision at Executive Order proprietary firm meeting the size
notable that other areas of federal law 12866 Section 6(a)(3)(D) based on the standards of the Small Business
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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20821
Administration (SBA); (2) a nonprofit Administration amends 13 CFR part 121 affiliation, if the organization would be
organization that is not dominant in its as set forth below: an eligible borrower but for application
field; or (3) a small government of SBA affiliation rules and if the
jurisdiction with a population of less PART 121—SMALL BUSINESS SIZE organization falls within the terms of
than 50,000. 5 U.S.C. 601(3)–(6). Except REGULATIONS the exemption described in paragraph
for such small government jurisdictions, (b)(10)(i) of this section. If a faith-based
■ 1. The authority citation for part 121
neither State nor local governments are organization indicates any relationship
is revised to read as follows:
‘‘small entities.’’ Similarly, for purposes that may pertain to affiliation, such as
of the RFA, individual persons are not Authority: 15 U.S.C. 632, 634(b)(6), ownership of, ownership by, or common
small entities. 636(a)(36), 662, and 694a(9); Pub. L. 116–136, management with any other
Section 1114.
The requirement to conduct a organization, on or in connection with
■ 2. Amend § 121.103 by adding a loan application, and if the faith-based
regulatory impact analysis does not
apply if the head of the agency ‘‘certifies paragraph (b)(10) to read as follows: organization applying for a loan falls
that the rule will not, if promulgated, § 121.103 How does SBA determine
within the terms of the exemption
have a significant economic impact on affiliation? described in paragraph (b)(10)(i) of this
a substantial number of small entities.’’ section with respect to that relationship,
* * * * *
5 U.S.C. 605(b). The agency must, (b) * * * the faith-based organization may
however, publish the certification in the (10)(i) The relationship of a faith- indicate on a separate sheet that it is
Federal Register at the time of based organization to another entitled to the exemption. That sheet
publication of the rule, ‘‘along with a organization is not considered an may be identified as addendum A, and
statement providing the factual basis for affiliation with the other organization no further listing of the other
such certification.’’ If the agency head under this subpart if the relationship is organization or description of the
has not waived the requirements for a based on a religious teaching or belief or relationship to that organization is
regulatory flexibility analysis in otherwise constitutes a part of the required. See appendix A to this part for
accordance with the RFA’s waiver exercise of religion. In addition, the a sample ‘‘Addendum A’’, but the
provision, and no other RFA exception eligibility criteria set forth in 15 U.S.C. format need not be used as long as the
applies, the agency must prepare the 636(a)(36)(D) are satisfied for any faith- substance is the same.
regulatory flexibility analysis and based organization having not more * * * * *
publish it in the Federal Register at the than 500 employees (including
■ 3. Add appendix A to part 121 to read
time of promulgation or, if the rule is individuals employed on a full-time,
as follows:
promulgated in response to an part-time, or other basis) that pays
emergency that makes timely Federal payroll taxes using its own Appendix A to Part 121—Paycheck
compliance impracticable, within 180 Internal Revenue Service Employer Protection Program Sample Addendum
days of publication of the final rule. 5 Identification Number (EIN) or that A
U.S.C. 604(a), 608(b). would support a deduction under the
second sentence of 26 U.S.C. 512(b)(12) [Sample]
Rules that are exempt from notice and
comment are also exempt from the RFA if the organization generated unrelated ADDENDUM A
requirements, including conducting a business taxable income. For purposes
regulatory flexibility analysis, when of this paragraph (b)(10), the term ✓ The Applicant claims an
among other things the agency for good ‘‘faith-based organization’’ includes, but exemption from all SBA affiliation rules
cause finds that notice and public is not limited to, any organization applicable to Paycheck Protection
procedure are impracticable, associated with a church or convention Program loan eligibility because the
unnecessary, or contrary to the public or association of churches within the Applicant has made a reasonable, good
interest. SBA Office of Advocacy guide: meaning of 26 U.S.C. 414(e)(3)(D). The faith determination that the Applicant
How to Comply with the Regulatory term ‘‘organization’’ has the meaning qualifies for a religious exemption
Flexibility Ac. Ch.1. p.9. Accordingly, given in 26 U.S.C. 414(m)(6)(A). The under 13 CFR 121.103(b)(10), which
SBA is not required to conduct a terms ‘‘church’’ and ‘‘convention or says that ‘‘[t]he relationship of a faith-
regulatory flexibility analysis. association of churches’’ have the same based organization to another
meaning that they have in 26 U.S.C. organization is not considered an
List of Subjects in 13 CFR Part 121 414. affiliation with the other organization
(ii) No specific process or filing is . . . if the relationship is based on a
Administrative practice and necessary to claim the benefit of the
procedure, Authority delegations religious teaching or belief or otherwise
exemption in paragraph (b)(10)(i) of this constitutes a part of the exercise of
(Government agencies), section. In applying for a loan under the
Intergovernmental relations, religion.’’
Paycheck Protection Program (PPP), a
Investigations, Reporting and faith-based organization may make all Jovita Carranza,
recordkeeping requirements. necessary certifications with respect to Administrator.
For the reasons stated in the common ownership or management or [FR Doc. 2020–07673 Filed 4–10–20; 4:15 pm]
preamble, the Small Business other eligibility criteria based upon BILLING CODE P
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