Business Loan Program Temporary Changes; Paycheck Protection Program-Nondiscrimination and Additional Eligibility Criteria, 27287-27290 [2020-09963]
Download as PDF
27287
Rules and Regulations
Federal Register
Vol. 85, No. 90
Friday, May 8, 2020
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 113 and 120
[Docket Number SBA–2020–0024]
RIN 3245–AH40
Business Loan Program Temporary
Changes; Paycheck Protection
Program—Nondiscrimination and
Additional Eligibility Criteria
U.S. Small Business
Administration.
ACTION: Interim final rule.
AGENCY:
On April 2, 2020, the U.S.
Small Business Administration (SBA)
posted an interim final rule announcing
the implementation of the Coronavirus
Aid, Relief, and Economic Security Act
(CARES Act). The CARES Act
temporarily adds a new program, titled
the ‘‘Paycheck Protection Program,’’ to
the SBA’s 7(a) Loan Program. The
CARES Act also provides for forgiveness
of up to the full principal amount of
qualifying loans guaranteed under the
Paycheck Protection Program (PPP). The
PPP is intended to provide economic
relief to small businesses nationwide
adversely impacted by the Coronavirus
Disease 2019 (COVID–19). SBA posted
additional interim final rules on April 3,
2020, April 14, 2020, April 24, 2020,
April 28, 2020, and April 30, 2020 and
the Department of the Treasury posted
an additional interim final rule on April
28, 2020. This interim final rule
supplements the previously posted
interim final rules by providing
guidance on nondiscrimination
obligations and additional eligibility
requirements, and requests public
comment.
SUMMARY:
DATES:
Effective date: This rule is effective
May 8, 2020.
Applicability date: This interim final
rule applies to applications submitted
under the Paycheck Protection Program
through June 30, 2020, or until funds
VerDate Sep<11>2014
15:57 May 07, 2020
Jkt 250001
made available for this purpose are
exhausted.
Comment date: Comments must be
received on or before June 8, 2020.
ADDRESSES: You may submit comments,
identified by number SBA–2020–0024
through the Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
instructions for submitting comments.
SBA will post all comments on
www.regulations.gov. If you wish to
submit confidential business
information (CBI) as defined in the User
Notice at www.regulations.gov, please
send an email to ppp-ifr@sba.gov.
Highlight the information that you
consider to be CBI and explain why you
believe SBA should hold this
information as confidential. SBA will
review the information and make the
final determination whether it will
publish the information.
FOR FURTHER INFORMATION CONTACT: A
Call Center Representative at 833–572–
0502, or the local SBA Field Office; the
list of offices can be found at https://
www.sba.gov/tools/local-assistance/
districtoffices.
SUPPLEMENTARY INFORMATION:
I. Background Information
On March 13, 2020, President Trump
declared the ongoing Coronavirus
Disease 2019 (COVID–19) pandemic of
sufficient severity and magnitude to
warrant an emergency declaration for all
States, territories, and the District of
Columbia. With the COVID–19
emergency, many small businesses
nationwide are experiencing economic
hardship as a direct result of the
Federal, State, tribal, and local public
health measures that are being taken to
minimize the public’s exposure to the
virus. These measures, some of which
are government-mandated, are being
implemented nationwide and include
the closures of restaurants, bars, and
gyms. In addition, based on the advice
of public health officials, other
measures, such as keeping a safe
distance from others or even stay-athome orders, are being implemented,
resulting in a dramatic decrease in
economic activity as the public avoids
malls, retail stores, and other
businesses.
On March 27, 2020, the President
signed the Coronavirus Aid, Relief, and
Economic Security Act (the CARES Act)
(Pub. L. 116–136) to provide emergency
assistance and health care response for
PO 00000
Frm 00001
Fmt 4700
Sfmt 4700
individuals, families, and businesses
affected by the coronavirus pandemic.
The Small Business Administration
(SBA) received funding and authority
through the CARES Act to modify
existing loan programs and establish a
new loan program to assist small
businesses nationwide adversely
impacted by the COVID–19 emergency.
Section 1102 of the CARES Act
temporarily permits SBA to guarantee
100 percent of 7(a) loans under a new
program titled the ‘‘Paycheck Protection
Program.’’ Section 1106 of the CARES
Act provides for forgiveness of up to the
full principal amount of qualifying
loans guaranteed under the Paycheck
Protection Program (PPP). On April 24,
2020, the President signed the Paycheck
Protection Program and Health Care
Enhancement Act (Pub. L. 116–139),
which provided additional funding and
authority for the PPP.
Prior to the CARES Act, nonprofit
organizations were not eligible to
participate in SBA’s 7(a) Loan Program
(15 U.S.C. 636(a)). Section 1102 of the
CARES Act expanded eligibility, limited
to PPP, to include certain nonprofit
organizations, among other
organizations.
SBA regulations at 13 CFR part 113
impose regulatory requirements ‘‘to
reflect to the fullest extent possible the
nondiscrimination policies of the
Federal Government as expressed in the
several statutes, Executive Orders, and
messages of the President dealing with
civil rights and equality of
opportunity.’’ 13 CFR 113.1(a). But
because SBA’s loan programs previously
served business entities, these
regulations did not restate certain
limitations and exemptions under
federal law primarily pertinent to
certain faith-based or nonprofit
organizations. In particular, Title IX of
the Education Amendments of 1972
permits single-sex admissions practices
by preschools, non-vocational
elementary or secondary schools, and
private undergraduate higher education
institutions. See 20 U.S.C. 1681(a)(1).
Additionally, the Fair Housing Act of
1968 allows religious organizations to
reserve housing for coreligionists, see 42
U.S.C. 3607, and allows for single-sex
emergency shelters that provide refuge
to abused women (or abused men), see
24 CFR 5.106; see also Johnson v. Dixon,
786 F. Supp. 1, 4 (D.D.C. 1991) (‘‘It is
. . . doubtful [that] ‘emergency
E:\FR\FM\08MYR1.SGM
08MYR1
27288
Federal Register / Vol. 85, No. 90 / Friday, May 8, 2020 / Rules and Regulations
overnight shelter,’ . . . can be
characterized as a ‘dwelling’ within the
meaning of the [Fair Housing] Act.’’).
Finally, the Indian Child Welfare Act of
1978 requires certain placement
preferences in the foster care and
adoptions of Indian children. See 25
U.S.C. 1915. The broadly worded SBA
regulations do not articulate these
limitations on the application of the
relevant nondiscrimination provisions.
In addition, there is a technical
discrepancy between SBA’s religious
employer exemption at 13 CFR 113.3–
1(h) and Title VII of the Civil Rights Act,
which allows religious employers to
make hiring decisions according to their
religious beliefs with respect to all
‘‘activities,’’ not just ‘‘religious
activities.’’ See An Act to further
promote equal employment
opportunities for American workers,
Public Law 92–261, 86 Stat. 103, 104
(1972), codified at 42 U.S.C. 2000e–1(a).
Given these various discrepancies,
organizations have accordingly faced
uncertainty about whether their
participation in the PPP program would
require them to substantially change
their operations for a short period of
months. These types of changes are
impossible for some organizations, and
impractical for many. This uncertainty
risks frustrating the purpose of the
CARES Act, which was to afford swift
stopgap relief to Americans who might
otherwise lose their jobs or businesses
because of the economic hardships
wrought by the response to the COVID–
19 public health emergency. To provide
certainty to applicants and recipients of
loans and loan forgiveness under the
PPP, and to address the large-scale
burdens that SBA regulations may
impose on recipients participating only
on a short-term basis, this interim final
rule provides guidance that for purposes
of the PPP, nonprofits must meet their
nondiscrimination obligations under
existing Federal laws and Executive
Orders. This interim final rule also
provides guidance with respect to the
religious employer exemption to ensure
harmony with Section 702 of Title VII.
In addition, as described below, to
enable certain eligible small educational
institutions to participate in PPP, this
interim final rule provides that
institutions of higher education shall
exclude work study students when
determining the number of employees
for purposes of PPP loan eligibility.
II. Comments and Immediate Effective
Date
The intent of the Act is that SBA
provide relief to America’s small
businesses expeditiously. This intent,
along with the dramatic decrease in
VerDate Sep<11>2014
15:57 May 07, 2020
Jkt 250001
economic activity nationwide, provides
good cause for SBA to dispense with the
30-day delayed effective date provided
in the Administrative Procedure Act.
Specifically, it is critical to meet
lenders’ and borrowers’ need for clarity
concerning program requirements as
rapidly as possible because the last day
eligible borrowers can apply for and
receive a loan is June 30, 2020.
This interim final rule supplements
previous regulations and guidance on
certain important, discrete issues. The
immediate effective date of this interim
final rule will benefit lenders so that
they can swiftly close and disburse
loans to small businesses. This interim
final rule is effective without advance
notice and public comment because
section 1114 of the Act authorizes SBA
to issue regulations to implement Title
I of the Act without regard to notice
requirements. In addition, SBA has
determined that there is good cause for
dispensing with advance public notice
and comment on the ground that it
would be contrary to the public interest.
Specifically, SBA has determined that
advance public notice and comment
would delay the ability of certain
organizations to implement their
nondiscrimination obligations in a
manner consistent with the limitations
contained in existing Federal laws, and
potentially force such organizations to
change their operations until SBA
adopted a final or interim final rule.
Rather than change their operations, the
affected organizations could elect not to
apply for PPP loans and lay off
employees, which would defeat the
paycheck protection purposes of the
PPP. This rule is being issued to allow
for immediate implementation of this
program. Although this interim final
rule is effective immediately, comments
are solicited from interested members of
the public on all aspects of the interim
final rule, including section III below.
These comments must be submitted on
or before June 8, 2020. SBA will
consider these comments and the need
for making any revisions as a result of
these comments.
III. Paycheck Protection Program
Nondiscrimination and Additional
Eligibility Criteria
Overview
The CARES Act was enacted to
provide immediate assistance to
individuals, families, and organizations
affected by the COVID–19 emergency.
Among the provisions contained in the
CARES Act are provisions authorizing
SBA to temporarily guarantee loans
under the PPP. Loans under the PPP
will be 100 percent guaranteed by SBA,
PO 00000
Frm 00002
Fmt 4700
Sfmt 4700
and the full principal amount of the
loans and any accrued interest may
qualify for loan forgiveness. Additional
information about the PPP is available
in interim final rules published by SBA
and the Department of the Treasury in
the Federal Register (85 FR 20811, 85
FR 20817, 85 FR 21747, 85 FR 23450,
85 FR 23917, 85 FR 26321 and 85 FR
26324) (collectively, the PPP Interim
Final Rules).
1. Non-Discrimination
Are recipients of PPP loans entitled to
exemptions on the grounds provided in
Federal nondiscrimination laws for sexspecific admissions practices, sexspecific domestic violence shelters,
coreligionist housing, or Indian tribal
preferences in connection with adoption
or foster care practices?
Yes. With respect to any loan or loan
forgiveness under the PPP, the
nondiscrimination provisions in the
applicable SBA regulations incorporate
the limitations and exemptions
provided in corresponding Federal
statutory or regulatory
nondiscrimination provisions for sexspecific admissions practices at
preschools, non-vocational elementary
or secondary schools, and private
undergraduate higher education
institutions under Title IX of the
Education Amendments of 1972 (20
U.S.C. 1681 et seq.), for sex-specific
emergency shelters and coreligionist
housing under the Fair Housing Act of
1968 (42 U.S.C. 3601 et seq.), and for
adoption or foster care practices giving
child placement preferences to Indian
tribes under the Indian Child Welfare
Act of 1978 (25 U.S.C. 1901 et seq.).
In addition, for purposes of the PPP,
SBA regulations do not bar a religious
nonprofit entity from making decisions
with respect to the membership or the
employment of individuals of a
particular religion to perform work
connected with the carrying on by such
nonprofit of its activities.
2. Student Workers and PPP Loan
Eligibility
Do student workers count when
determining the number of employees
for PPP loan eligibility?
Yes, student workers generally count
as employees, unless (a) the applicant is
an institution of higher education, as
defined in the Department of
Education’s Federal Work-Study
regulations, 34 675.2, and (b) the
student worker’s services are performed
as part of a Federal Work-Study Program
(as defined in those regulations 1) or a
1 The Department of Education’s Federal WorkStudy Programs described at 34 CFR part 675 are
E:\FR\FM\08MYR1.SGM
08MYR1
Federal Register / Vol. 85, No. 90 / Friday, May 8, 2020 / Rules and Regulations
substantially similar program of a State
or political subdivision thereof.
Institutions of higher education must
exclude work study students when
determining the number of employees
for PPP loan eligibility, and must also
exclude payroll costs for work study
students from the calculation of payroll
costs used to determine their PPP loan
amount.
The Administrator, in consultation
with the Secretary, has determined that
this is a reasonable interpretation of
section 1102(a) of the CARES Act’s
reference to ‘‘individuals employed on a
full-time, part-time, or other basis.’’
Such programs generally provide parttime jobs for students with financial
need, and their services are incident to
and for the purpose of pursuing a course
of study. Work study students are
excluded from the definition of
employees in other areas of federal law.
For example, in the regulations
implementing the Affordable Care Act,
Treasury defined an employee’s ‘‘hours
of service’’ to exclude work study
hours.2 Explaining this exclusion, the
regulation’s preamble states that ‘‘[t]he
federal work study program, as a
federally subsidized financial aid
program, is distinct from traditional
employment in that its primary purpose
is to advance education.’’ 3 Similarly,
student work is generally exempt from
Federal Insurance Contribution Act
(FICA) and Federal Unemployment
taxes.4
For similar reasons, the
Administrator, in consultation with the
Secretary of the Treasury, has
determined that a limited exception for
work study is appropriate here. In
particular, the Administrator recognizes
that requiring institutions of higher
education to count work study students
towards employee headcount would
result in an anomalous outcome in two
respects. First, it would prevent some
small educational institutions from
(1) the Federal Work-Study Program, (2) the Job
Location and Development Program, and (3) Work
Colleges Program.
2 26 CFR 54.4980H–1(a)(24) (‘‘Hour of service
. . . (ii) Excluded hours . . . (B) Work-study
program. The term hour of service does not include
any hour for services to the extent those services
are performed as part of a Federal Work-Study
Program as defined under 34 CFR 675 or a
substantially similar program of a State or political
subdivision thereof.’’).
3 79 FR 8544, 8550 (Feb. 12, 2014).
4 Internal Revenue Code Section 3121(b)(10)
excepts from FICA tax ‘‘service performed in the
employ of—(A) a school, college, university . . . if
such service is performed by a student who is
enrolled and regularly attending classes at such
school, college, university.’’ Student workers, who
are not full time, are excepted where the services
are ‘‘incident to and for the purposes of pursuing
a course of study.’’ 26 CFR 31.3121(b)(10)–2(d)(3)(i).
VerDate Sep<11>2014
15:57 May 07, 2020
Jkt 250001
receiving PPP loans due solely to their
provision of financial aid to students in
the form of work study. Second, it
would result in the exclusion of small
educational institutions whose part-time
work study headcount dwarfs their fulltime faculty and staff headcounts.
Educational institutions that filed loan
applications prior to the issuance of the
regulation are not bound by this
interpretation but may rely on it.
Lenders may continue to rely on
borrower certifications as part of their
good faith review process.
3. Additional Information
SBA may provide further guidance, if
needed, through SBA notices that will
be posted on SBA’s website at
www.sba.gov. Questions on the
Paycheck Protection Program may be
directed to the Lender Relations
Specialist in the local SBA Field Office.
The local SBA Field Office may be
found at https://www.sba.gov/tools/
local-assistance/districtoffices.
Compliance With Executive Orders
12866, 12988, 13132, 13563, and 13771,
the Paperwork Reduction Act (44 U.S.C.
Ch. 35), and the Regulatory Flexibility
Act (5 U.S.C. 601–612).
Executive Orders 12866, 13563, and
13771
This interim final rule is
economically significant for the
purposes of Executive Orders 12866 and
13563, and is considered a major rule
under the Congressional Review Act.
SBA, however, is proceeding under the
emergency provision at Executive Order
12866 Section 6(a)(3)(D) based on the
need to move expeditiously to mitigate
the current economic conditions arising
from the COVID–19 emergency. This
rule’s designation under Executive
Order 13771 will be informed by public
comment.
Executive Order 12988
SBA has drafted this rule, to the
extent practicable, in accordance with
the standards set forth in section 3(a)
and 3(b)(2) of Executive Order 12988, to
minimize litigation, eliminate
ambiguity, and reduce burden. The rule
has no preemptive or retroactive effect.
Executive Order 13132
SBA has determined that this rule
will not have substantial direct effects
on the States, on the relationship
between the National Government and
the States, or on the distribution of
power and responsibilities among the
various layers of government. Therefore,
SBA has determined that this rule has
no federalism implications warranting
preparation of a federalism assessment.
PO 00000
Frm 00003
Fmt 4700
Sfmt 4700
27289
Paperwork Reduction Act, 44 U.S.C.
Chapter 35
SBA has determined that this rule
will not impose new or modify existing
recordkeeping or reporting requirements
under the Paperwork Reduction Act.
Regulatory Flexibility Act (RFA)
The Regulatory Flexibility Act (RFA)
generally requires that when an agency
issues a proposed rule, or a final rule
pursuant to section 553(b) of the APA or
another law, the agency must prepare a
regulatory flexibility analysis that meets
the requirements of the RFA and
publish such analysis in the Federal
Register. 5 U.S.C. 603, 604. Specifically,
the RFA normally requires agencies to
describe the impact of a rulemaking on
small entities by providing a regulatory
impact analysis. Such analysis must
address the consideration of regulatory
options that would lessen the economic
effect of the rule on small entities. The
RFA defines a ‘‘small entity’’ as (1) a
proprietary firm meeting the size
standards of the Small Business
Administration (SBA); (2) a nonprofit
organization that is not dominant in its
field; or (3) a small government
jurisdiction with a population of less
than 50,000. 5 U.S.C. 601(3)–(6). Except
for such small government jurisdictions,
neither State nor local governments are
‘‘small entities.’’ Similarly, for purposes
of the RFA, individual persons are not
small entities. The requirement to
conduct a regulatory impact analysis
does not apply if the head of the agency
‘‘certifies that the rule will not, if
promulgated, have a significant
economic impact on a substantial
number of small entities.’’ 5 U.S.C.
605(b). The agency must, however,
publish the certification in the Federal
Register at the time of publication of the
rule, ‘‘along with a statement providing
the factual basis for such certification.’’
If the agency head has not waived the
requirements for a regulatory flexibility
analysis in accordance with the RFA’s
waiver provision, and no other RFA
exception applies, the agency must
prepare the regulatory flexibility
analysis and publish it in the Federal
Register at the time of promulgation or,
if the rule is promulgated in response to
an emergency that makes timely
compliance impracticable, within 180
days of publication of the final rule. 5
U.S.C. 604(a), 608(b). Rules that are
exempt from notice and comment are
also exempt from the RFA requirements,
including conducting a regulatory
flexibility analysis, when among other
things the agency for good cause finds
that notice and public procedure are
impracticable, unnecessary, or contrary
E:\FR\FM\08MYR1.SGM
08MYR1
27290
Federal Register / Vol. 85, No. 90 / Friday, May 8, 2020 / Rules and Regulations
to the public interest. SBA Office of
Advocacy guide: How to Comply with
the Regulatory Flexibility Act, Ch.1. p.9.
Accordingly, SBA is not required to
conduct a regulatory flexibility analysis.
Jovita Carranza,
Administrator.
[FR Doc. 2020–09963 Filed 5–7–20; 8:45 am]
BILLING CODE 8026–03–P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 124
RIN 3245–AH13
Regulatory Reform Initiative: Small
Disadvantaged Businesses
U.S. Small Business
Administration.
ACTION: Direct final rule.
AGENCY:
The U.S. Small Business
Administration (SBA) is removing from
the Code of Federal Regulations (CFR)
16 regulations that are no longer
necessary because they are either
redundant or obsolete. This action will
assist the public by simplifying SBA’s
regulations.
SUMMARY:
This rule is effective on August
6, 2020 without further action, unless
significant adverse comment is received
by July 7, 2020. If significant adverse
comment is received, SBA will publish
a timely withdrawal of the rule in the
Federal Register.
ADDRESSES: You may submit comments,
identified by RIN 3245–AH13 by any of
the following methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail or Hand Delivery/Courier:
Brenda Fernandez, U.S. Small Business
Administration, Office of Policy,
Planning and Liaison, 409 Third Street
SW, 8th Floor, Washington, DC 20416.
SBA will post all comments on https://
www.regulations.gov. If you wish to
submit confidential business
information (CBI), as defined in the User
Notice at https://www.regulations.gov,
please submit the information to Brenda
Fernandez, U.S. Small Business
Administration, Office of Policy,
Planning and Liaison, 409 Third Street
SW, 8th Floor, Washington, DC 20416,
or send an email to brenda.fernandez@
sba.gov. Highlight the information that
you consider to be CBI and explain why
you believe SBA should hold this
information as confidential. SBA will
review the information and make the
final determination on whether it will
publish the information.
DATES:
VerDate Sep<11>2014
15:57 May 07, 2020
Jkt 250001
FOR FURTHER INFORMATION CONTACT:
Brenda Fernandez, U.S. Small Business
Administration, Office of Policy,
Planning and Liaison, 409 Third Street
SW, Washington, DC 20416; (202) 205–
7337; brenda.fernandez@sba.gov.
SUPPLEMENTARY INFORMATION:
Small Disadvantaged Business Program
The government promotes contracting
and subcontracting with small
disadvantaged businesses (SDBs) by
setting government-wide and agencyspecific goals for the percentage of
Federal contract and subcontract dollars
awarded to SDBs each fiscal year. The
government-wide goal is that not less
than 5 percent of the total value of all
prime contract and subcontract awards
be made to SDBs. At one time, SDBs had
to be certified by the SBA, or by a
private certifying entity acting in
compliance with SBA regulations, to
qualify for certain Federal programs as
prime contractors. However, all Federal
programs for SDB prime contractors
have been discontinued, with only the
government-wide and agency-specific
goals for the percentage of Federal
contract and/or subcontract dollars
awarded to SDBs each year remaining.
Pursuant to the SDB subcontracting
program, Federal agencies must
negotiate subcontracting plans with the
apparent successful bidder or offeror on
qualifying prime contracts prior to
awarding the contract. Subcontracting
plans set goals for the percentage of
subcontract dollars to be awarded to
SDBs, among others, and describe
efforts that will be made to ensure that
SDBs have an equitable opportunity to
compete for subcontracts. Federal
agencies may also consider the extent of
subcontracting with SDBs in
determining to whom to award a
contract or whether to give contractors
monetary incentives to subcontract with
SDBs.
Firms do not need to be certified
SDBs to qualify for Federal programs for
subcontractors. Rather, a firm may
represent that it qualifies as an SDB for
any Federal subcontracting program if it
believes in good faith that it is owned
and controlled by one or more socially
and economically disadvantaged
individuals. In addition, 8(a)
Participants are deemed to be SBDs for
Federal contracting purposes. As of
August 8, 2019, the SBA’s Dynamic
Small Business Search database
included 125,616 self-certified SDBs.
Background Information
On February 24, 2017, President
Trump issued Executive Order 13777,
Enforcing the Regulatory Reform
Agenda, which further emphasized the
PO 00000
Frm 00004
Fmt 4700
Sfmt 4700
goal of the Administration to alleviate
the regulatory burdens placed on the
public. Under Executive Order 13777,
agencies must evaluate their existing
regulations to determine which ones
should be repealed, replaced, or
modified. In doing so, agencies should
focus on identifying regulations that,
among other things: Eliminate jobs or
inhibit job creation; are outdated,
unnecessary or ineffective; impose costs
that exceed benefits; create a serious
inconsistency or otherwise interfere
with regulatory reform initiatives and
policies; or are associated with
Executive Orders or other Presidential
directives that have been rescinded or
substantially modified.
In response to the President’s
directive, SBA initiated a review of its
regulations to determine which might be
revised or eliminated. Based on this
analysis, SBA has identified
unnecessary provisions that can be
removed from the CFR. First, this rule
removes 13 CFR 124.516—which states
that the procuring activity decides all
contract disputes arising between an
8(a) Participant and a procuring activity
contracting officer after the award of an
8(a) contract—because this provision is
redundant. 13 CFR 124.512 already
delegates 8(a) contract administration
functions to procuring agencies and
contract dispute resolution is an
element of contract administration.
Second, this rule removes 13 CFR
124.1002 through 124.1016. As
discussed below, these provisions
pertain to the Small Disadvantaged
Business Program, which is no longer a
viable program. Section 1207 of the
1987 Defense Authorization Act (Pub. L.
99–661, codified in 10 U.S.C. 2323)
established a statutory 5 percent goal for
all Department of Defense (DOD)
contracts to be awarded to small
disadvantaged businesses (SDBs). To
this end, the statute authorized the
award of contracts to SDBs using less
than full and open competitive
procedures. Specifically, DOD
implemented regulations requiring a
contracting officer to set-aside a
procurement for exclusive competition
among SDBs whenever market research
identified two or more SDBs that could
perform the contract at a fair and
reasonable price. In addition, SDBs
would receive a 10 percent price
evaluation adjustment for offers
submitted in an unrestricted or full and
open competition. DOD’s SDB program
was initially a self-certification program.
SBA established eligibility criteria, but
firms self-certified their SDB status for
particular procurements. However, SBA
was responsible for processing SDB
E:\FR\FM\08MYR1.SGM
08MYR1
Agencies
[Federal Register Volume 85, Number 90 (Friday, May 8, 2020)]
[Rules and Regulations]
[Pages 27287-27290]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09963]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 85, No. 90 / Friday, May 8, 2020 / Rules and
Regulations
[[Page 27287]]
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 113 and 120
[Docket Number SBA-2020-0024]
RIN 3245-AH40
Business Loan Program Temporary Changes; Paycheck Protection
Program--Nondiscrimination and Additional Eligibility Criteria
AGENCY: U.S. Small Business Administration.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA)
posted an interim final rule announcing the implementation of the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The
CARES Act temporarily adds a new program, titled the ``Paycheck
Protection Program,'' to the SBA's 7(a) Loan Program. The CARES Act
also provides for forgiveness of up to the full principal amount of
qualifying loans guaranteed under the Paycheck Protection Program
(PPP). The PPP is intended to provide economic relief to small
businesses nationwide adversely impacted by the Coronavirus Disease
2019 (COVID-19). SBA posted additional interim final rules on April 3,
2020, April 14, 2020, April 24, 2020, April 28, 2020, and April 30,
2020 and the Department of the Treasury posted an additional interim
final rule on April 28, 2020. This interim final rule supplements the
previously posted interim final rules by providing guidance on
nondiscrimination obligations and additional eligibility requirements,
and requests public comment.
DATES:
Effective date: This rule is effective May 8, 2020.
Applicability date: This interim final rule applies to applications
submitted under the Paycheck Protection Program through June 30, 2020,
or until funds made available for this purpose are exhausted.
Comment date: Comments must be received on or before June 8, 2020.
ADDRESSES: You may submit comments, identified by number SBA-2020-0024
through the Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. SBA will post all
comments on www.regulations.gov. If you wish to submit confidential
business information (CBI) as defined in the User Notice at
www.regulations.gov, please send an email to [email protected]. Highlight
the information that you consider to be CBI and explain why you believe
SBA should hold this information as confidential. SBA will review the
information and make the final determination whether it will publish
the information.
FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833-
572-0502, or the local SBA Field Office; the list of offices can be
found at https://www.sba.gov/tools/local-assistance/districtoffices.
SUPPLEMENTARY INFORMATION:
I. Background Information
On March 13, 2020, President Trump declared the ongoing Coronavirus
Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude
to warrant an emergency declaration for all States, territories, and
the District of Columbia. With the COVID-19 emergency, many small
businesses nationwide are experiencing economic hardship as a direct
result of the Federal, State, tribal, and local public health measures
that are being taken to minimize the public's exposure to the virus.
These measures, some of which are government-mandated, are being
implemented nationwide and include the closures of restaurants, bars,
and gyms. In addition, based on the advice of public health officials,
other measures, such as keeping a safe distance from others or even
stay-at-home orders, are being implemented, resulting in a dramatic
decrease in economic activity as the public avoids malls, retail
stores, and other businesses.
On March 27, 2020, the President signed the Coronavirus Aid,
Relief, and Economic Security Act (the CARES Act) (Pub. L. 116-136) to
provide emergency assistance and health care response for individuals,
families, and businesses affected by the coronavirus pandemic. The
Small Business Administration (SBA) received funding and authority
through the CARES Act to modify existing loan programs and establish a
new loan program to assist small businesses nationwide adversely
impacted by the COVID-19 emergency. Section 1102 of the CARES Act
temporarily permits SBA to guarantee 100 percent of 7(a) loans under a
new program titled the ``Paycheck Protection Program.'' Section 1106 of
the CARES Act provides for forgiveness of up to the full principal
amount of qualifying loans guaranteed under the Paycheck Protection
Program (PPP). On April 24, 2020, the President signed the Paycheck
Protection Program and Health Care Enhancement Act (Pub. L. 116-139),
which provided additional funding and authority for the PPP.
Prior to the CARES Act, nonprofit organizations were not eligible
to participate in SBA's 7(a) Loan Program (15 U.S.C. 636(a)). Section
1102 of the CARES Act expanded eligibility, limited to PPP, to include
certain nonprofit organizations, among other organizations.
SBA regulations at 13 CFR part 113 impose regulatory requirements
``to reflect to the fullest extent possible the nondiscrimination
policies of the Federal Government as expressed in the several
statutes, Executive Orders, and messages of the President dealing with
civil rights and equality of opportunity.'' 13 CFR 113.1(a). But
because SBA's loan programs previously served business entities, these
regulations did not restate certain limitations and exemptions under
federal law primarily pertinent to certain faith-based or nonprofit
organizations. In particular, Title IX of the Education Amendments of
1972 permits single-sex admissions practices by preschools, non-
vocational elementary or secondary schools, and private undergraduate
higher education institutions. See 20 U.S.C. 1681(a)(1). Additionally,
the Fair Housing Act of 1968 allows religious organizations to reserve
housing for coreligionists, see 42 U.S.C. 3607, and allows for single-
sex emergency shelters that provide refuge to abused women (or abused
men), see 24 CFR 5.106; see also Johnson v. Dixon, 786 F. Supp. 1, 4
(D.D.C. 1991) (``It is . . . doubtful [that] `emergency
[[Page 27288]]
overnight shelter,' . . . can be characterized as a `dwelling' within
the meaning of the [Fair Housing] Act.''). Finally, the Indian Child
Welfare Act of 1978 requires certain placement preferences in the
foster care and adoptions of Indian children. See 25 U.S.C. 1915. The
broadly worded SBA regulations do not articulate these limitations on
the application of the relevant nondiscrimination provisions.
In addition, there is a technical discrepancy between SBA's
religious employer exemption at 13 CFR 113.3-1(h) and Title VII of the
Civil Rights Act, which allows religious employers to make hiring
decisions according to their religious beliefs with respect to all
``activities,'' not just ``religious activities.'' See An Act to
further promote equal employment opportunities for American workers,
Public Law 92-261, 86 Stat. 103, 104 (1972), codified at 42 U.S.C.
2000e-1(a).
Given these various discrepancies, organizations have accordingly
faced uncertainty about whether their participation in the PPP program
would require them to substantially change their operations for a short
period of months. These types of changes are impossible for some
organizations, and impractical for many. This uncertainty risks
frustrating the purpose of the CARES Act, which was to afford swift
stopgap relief to Americans who might otherwise lose their jobs or
businesses because of the economic hardships wrought by the response to
the COVID-19 public health emergency. To provide certainty to
applicants and recipients of loans and loan forgiveness under the PPP,
and to address the large-scale burdens that SBA regulations may impose
on recipients participating only on a short-term basis, this interim
final rule provides guidance that for purposes of the PPP, nonprofits
must meet their nondiscrimination obligations under existing Federal
laws and Executive Orders. This interim final rule also provides
guidance with respect to the religious employer exemption to ensure
harmony with Section 702 of Title VII.
In addition, as described below, to enable certain eligible small
educational institutions to participate in PPP, this interim final rule
provides that institutions of higher education shall exclude work study
students when determining the number of employees for purposes of PPP
loan eligibility.
II. Comments and Immediate Effective Date
The intent of the Act is that SBA provide relief to America's small
businesses expeditiously. This intent, along with the dramatic decrease
in economic activity nationwide, provides good cause for SBA to
dispense with the 30-day delayed effective date provided in the
Administrative Procedure Act. Specifically, it is critical to meet
lenders' and borrowers' need for clarity concerning program
requirements as rapidly as possible because the last day eligible
borrowers can apply for and receive a loan is June 30, 2020.
This interim final rule supplements previous regulations and
guidance on certain important, discrete issues. The immediate effective
date of this interim final rule will benefit lenders so that they can
swiftly close and disburse loans to small businesses. This interim
final rule is effective without advance notice and public comment
because section 1114 of the Act authorizes SBA to issue regulations to
implement Title I of the Act without regard to notice requirements. In
addition, SBA has determined that there is good cause for dispensing
with advance public notice and comment on the ground that it would be
contrary to the public interest. Specifically, SBA has determined that
advance public notice and comment would delay the ability of certain
organizations to implement their nondiscrimination obligations in a
manner consistent with the limitations contained in existing Federal
laws, and potentially force such organizations to change their
operations until SBA adopted a final or interim final rule. Rather than
change their operations, the affected organizations could elect not to
apply for PPP loans and lay off employees, which would defeat the
paycheck protection purposes of the PPP. This rule is being issued to
allow for immediate implementation of this program. Although this
interim final rule is effective immediately, comments are solicited
from interested members of the public on all aspects of the interim
final rule, including section III below. These comments must be
submitted on or before June 8, 2020. SBA will consider these comments
and the need for making any revisions as a result of these comments.
III. Paycheck Protection Program Nondiscrimination and Additional
Eligibility Criteria
Overview
The CARES Act was enacted to provide immediate assistance to
individuals, families, and organizations affected by the COVID-19
emergency. Among the provisions contained in the CARES Act are
provisions authorizing SBA to temporarily guarantee loans under the
PPP. Loans under the PPP will be 100 percent guaranteed by SBA, and the
full principal amount of the loans and any accrued interest may qualify
for loan forgiveness. Additional information about the PPP is available
in interim final rules published by SBA and the Department of the
Treasury in the Federal Register (85 FR 20811, 85 FR 20817, 85 FR
21747, 85 FR 23450, 85 FR 23917, 85 FR 26321 and 85 FR 26324)
(collectively, the PPP Interim Final Rules).
1. Non-Discrimination
Are recipients of PPP loans entitled to exemptions on the grounds
provided in Federal nondiscrimination laws for sex-specific admissions
practices, sex-specific domestic violence shelters, coreligionist
housing, or Indian tribal preferences in connection with adoption or
foster care practices?
Yes. With respect to any loan or loan forgiveness under the PPP,
the nondiscrimination provisions in the applicable SBA regulations
incorporate the limitations and exemptions provided in corresponding
Federal statutory or regulatory nondiscrimination provisions for sex-
specific admissions practices at preschools, non-vocational elementary
or secondary schools, and private undergraduate higher education
institutions under Title IX of the Education Amendments of 1972 (20
U.S.C. 1681 et seq.), for sex-specific emergency shelters and
coreligionist housing under the Fair Housing Act of 1968 (42 U.S.C.
3601 et seq.), and for adoption or foster care practices giving child
placement preferences to Indian tribes under the Indian Child Welfare
Act of 1978 (25 U.S.C. 1901 et seq.).
In addition, for purposes of the PPP, SBA regulations do not bar a
religious nonprofit entity from making decisions with respect to the
membership or the employment of individuals of a particular religion to
perform work connected with the carrying on by such nonprofit of its
activities.
2. Student Workers and PPP Loan Eligibility
Do student workers count when determining the number of employees
for PPP loan eligibility?
Yes, student workers generally count as employees, unless (a) the
applicant is an institution of higher education, as defined in the
Department of Education's Federal Work-Study regulations, 34 675.2, and
(b) the student worker's services are performed as part of a Federal
Work-Study Program (as defined in those regulations \1\) or a
[[Page 27289]]
substantially similar program of a State or political subdivision
thereof. Institutions of higher education must exclude work study
students when determining the number of employees for PPP loan
eligibility, and must also exclude payroll costs for work study
students from the calculation of payroll costs used to determine their
PPP loan amount.
---------------------------------------------------------------------------
\1\ The Department of Education's Federal Work-Study Programs
described at 34 CFR part 675 are (1) the Federal Work-Study Program,
(2) the Job Location and Development Program, and (3) Work Colleges
Program.
---------------------------------------------------------------------------
The Administrator, in consultation with the Secretary, has
determined that this is a reasonable interpretation of section 1102(a)
of the CARES Act's reference to ``individuals employed on a full-time,
part-time, or other basis.'' Such programs generally provide part-time
jobs for students with financial need, and their services are incident
to and for the purpose of pursuing a course of study. Work study
students are excluded from the definition of employees in other areas
of federal law. For example, in the regulations implementing the
Affordable Care Act, Treasury defined an employee's ``hours of
service'' to exclude work study hours.\2\ Explaining this exclusion,
the regulation's preamble states that ``[t]he federal work study
program, as a federally subsidized financial aid program, is distinct
from traditional employment in that its primary purpose is to advance
education.'' \3\ Similarly, student work is generally exempt from
Federal Insurance Contribution Act (FICA) and Federal Unemployment
taxes.\4\
---------------------------------------------------------------------------
\2\ 26 CFR 54.4980H-1(a)(24) (``Hour of service . . . (ii)
Excluded hours . . . (B) Work-study program. The term hour of
service does not include any hour for services to the extent those
services are performed as part of a Federal Work-Study Program as
defined under 34 CFR 675 or a substantially similar program of a
State or political subdivision thereof.'').
\3\ 79 FR 8544, 8550 (Feb. 12, 2014).
\4\ Internal Revenue Code Section 3121(b)(10) excepts from FICA
tax ``service performed in the employ of--(A) a school, college,
university . . . if such service is performed by a student who is
enrolled and regularly attending classes at such school, college,
university.'' Student workers, who are not full time, are excepted
where the services are ``incident to and for the purposes of
pursuing a course of study.'' 26 CFR 31.3121(b)(10)-2(d)(3)(i).
---------------------------------------------------------------------------
For similar reasons, the Administrator, in consultation with the
Secretary of the Treasury, has determined that a limited exception for
work study is appropriate here. In particular, the Administrator
recognizes that requiring institutions of higher education to count
work study students towards employee headcount would result in an
anomalous outcome in two respects. First, it would prevent some small
educational institutions from receiving PPP loans due solely to their
provision of financial aid to students in the form of work study.
Second, it would result in the exclusion of small educational
institutions whose part-time work study headcount dwarfs their full-
time faculty and staff headcounts. Educational institutions that filed
loan applications prior to the issuance of the regulation are not bound
by this interpretation but may rely on it. Lenders may continue to rely
on borrower certifications as part of their good faith review process.
3. Additional Information
SBA may provide further guidance, if needed, through SBA notices
that will be posted on SBA's website at www.sba.gov. Questions on the
Paycheck Protection Program may be directed to the Lender Relations
Specialist in the local SBA Field Office. The local SBA Field Office
may be found at https://www.sba.gov/tools/local-assistance/districtoffices.
Compliance With Executive Orders 12866, 12988, 13132, 13563, and 13771,
the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601-612).
Executive Orders 12866, 13563, and 13771
This interim final rule is economically significant for the
purposes of Executive Orders 12866 and 13563, and is considered a major
rule under the Congressional Review Act. SBA, however, is proceeding
under the emergency provision at Executive Order 12866 Section
6(a)(3)(D) based on the need to move expeditiously to mitigate the
current economic conditions arising from the COVID-19 emergency. This
rule's designation under Executive Order 13771 will be informed by
public comment.
Executive Order 12988
SBA has drafted this rule, to the extent practicable, in accordance
with the standards set forth in section 3(a) and 3(b)(2) of Executive
Order 12988, to minimize litigation, eliminate ambiguity, and reduce
burden. The rule has no preemptive or retroactive effect.
Executive Order 13132
SBA has determined that this rule will not have substantial direct
effects on the States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various layers of government. Therefore, SBA
has determined that this rule has no federalism implications warranting
preparation of a federalism assessment.
Paperwork Reduction Act, 44 U.S.C. Chapter 35
SBA has determined that this rule will not impose new or modify
existing recordkeeping or reporting requirements under the Paperwork
Reduction Act.
Regulatory Flexibility Act (RFA)
The Regulatory Flexibility Act (RFA) generally requires that when
an agency issues a proposed rule, or a final rule pursuant to section
553(b) of the APA or another law, the agency must prepare a regulatory
flexibility analysis that meets the requirements of the RFA and publish
such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically,
the RFA normally requires agencies to describe the impact of a
rulemaking on small entities by providing a regulatory impact analysis.
Such analysis must address the consideration of regulatory options that
would lessen the economic effect of the rule on small entities. The RFA
defines a ``small entity'' as (1) a proprietary firm meeting the size
standards of the Small Business Administration (SBA); (2) a nonprofit
organization that is not dominant in its field; or (3) a small
government jurisdiction with a population of less than 50,000. 5 U.S.C.
601(3)-(6). Except for such small government jurisdictions, neither
State nor local governments are ``small entities.'' Similarly, for
purposes of the RFA, individual persons are not small entities. The
requirement to conduct a regulatory impact analysis does not apply if
the head of the agency ``certifies that the rule will not, if
promulgated, have a significant economic impact on a substantial number
of small entities.'' 5 U.S.C. 605(b). The agency must, however, publish
the certification in the Federal Register at the time of publication of
the rule, ``along with a statement providing the factual basis for such
certification.'' If the agency head has not waived the requirements for
a regulatory flexibility analysis in accordance with the RFA's waiver
provision, and no other RFA exception applies, the agency must prepare
the regulatory flexibility analysis and publish it in the Federal
Register at the time of promulgation or, if the rule is promulgated in
response to an emergency that makes timely compliance impracticable,
within 180 days of publication of the final rule. 5 U.S.C. 604(a),
608(b). Rules that are exempt from notice and comment are also exempt
from the RFA requirements, including conducting a regulatory
flexibility analysis, when among other things the agency for good cause
finds that notice and public procedure are impracticable, unnecessary,
or contrary
[[Page 27290]]
to the public interest. SBA Office of Advocacy guide: How to Comply
with the Regulatory Flexibility Act, Ch.1. p.9. Accordingly, SBA is not
required to conduct a regulatory flexibility analysis.
Jovita Carranza,
Administrator.
[FR Doc. 2020-09963 Filed 5-7-20; 8:45 am]
BILLING CODE 8026-03-P