Appeals of SBA Loan Review Decisions Under the Paycheck Protection Program, 52883-52890 [2020-17895]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 85, Number 167 (Thursday, August 27, 2020)]
[Rules and Regulations]
[Pages 52883-52890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17895]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 134

[Docket Number SBA-2020-0042]
RIN 3245-AH55


Appeals of SBA Loan Review Decisions Under the Paycheck 
Protection Program

AGENCY: U.S. Small Business Administration.

ACTION: Interim final rule.

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SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA) 
posted on its website an interim final rule relating to the 
implementation of sections 1102 and 1106 of the Coronavirus Aid, 
Relief, and Economic Security Act (CARES Act or the Act) (published in 
the Federal Register on April 15, 2020). Section 1102 of the Act 
temporarily adds a new product, titled the ``Paycheck Protection 
Program,'' to the U.S. Small Business Administration's (SBA's) 7(a) 
Loan Program. Subsequently, SBA issued a number of interim final rules 
implementing the Paycheck Protection Program (PPP). This interim final 
rule supplements the interim final rule on Loan Review Procedures and 
Related Borrower and Lender Responsibilities posted on SBA's website on 
May 22, 2020 (published on June 1, 2020, in the Federal Register), as 
revised by the interim final rule posted on SBA's website on June 22, 
2020, in order to inform PPP borrowers and lenders of the process for a 
PPP borrower to appeal certain SBA loan review decisions under the PPP 
to the SBA Office of Hearings and Appeals, and requests public comment.

DATES: 
    Effective date: This rule is effective August 25, 2020.
    Applicability date: This interim final rule applies to certain loan 
review decisions made by SBA under the Paycheck Protection Program.
    Comment date: Comments must be received on or before September 28, 
2020.

ADDRESSES: You may submit comments, identified by number SBA-2020-0042 
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-[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/localassistance/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 have been taken to minimize the public's exposure to the virus. 
These measures, some of which are government-mandated, have been 
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

[[Page 52884]]

(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'' (PPP). Section 1106 of the CARES Act provides for 
forgiveness of up to the full principal amount of qualifying loans 
guaranteed under the PPP.
    On April 2, 2020, SBA posted its first PPP interim final rule (85 
FR 20811) (the First Interim Final Rule). Subsequently, SBA issued a 
number of other interim final rules implementing the 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.
    On May 22, 2020, SBA and Treasury posted an interim final rule on 
Loan Review Procedures and Related Borrower and Lender Responsibilities 
(85 FR 33010) (Loan Review Interim Final Rule (IFR)). The rule stated 
that SBA would be issuing a separate interim final rule addressing the 
process for appealing certain SBA loan review decisions under the PPP. 
On June 5, 2020, the Paycheck Protection Program Flexibility Act of 
2020 (Pub. L. 116-142) (Flexibility Act) was signed into law, amending 
the CARES Act. On June 22, 2020, SBA and Treasury posted an interim 
final rule that in part revised the Loan Review IFR to incorporate the 
relevant Flexibility Act amendments, address revisions to the Loan 
Forgiveness Application (SBA Form 3508), and include a new alternative 
Loan Forgiveness Application (SBA Form 3508EZ). On July 4, 2020, Public 
Law 116-147 was enacted, extending the authority for SBA to guarantee 
PPP loans to August 8, 2020.
    As described below, this interim final rule informs PPP borrowers 
and lenders of the process for a PPP borrower to appeal certain SBA 
loan review decisions under the PPP to the SBA Office of Hearings and 
Appeals (OHA) by establishing a new subpart L for 13 CFR part 134, and 
requests public comment.

II. Comments and Immediate Effective Date

    The intent of the CARES 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 the OHA appeal 
process as rapidly as possible because SBA can review a PPP loan and 
make determinations as to a borrower's eligibility at any time. This 
interim final rule supplements the previous regulation on the discrete 
issues related to SBA's process for reviewing a borrower's eligibility 
for a PPP loan, the PPP loan amount received, the use of the PPP loan 
proceeds and/or the PPP loan forgiveness amount claimed by the 
borrower.
    This interim final rule is effective without advance notice and 
public comment because section 1114 of the CARES Act authorizes SBA to 
issue regulations to implement title I of the CARES 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 notice and public comment would delay 
the ability of PPP borrowers to understand with certainty the process 
for appealing certain SBA loan review decisions under the PPP. This 
rule is being issued to allow for immediate implementation of the OHA 
appeal feature of this program. Although this interim final rule is 
effective immediately, comments are solicited from interested members 
of the public on all aspects of this interim final rule, including 
section III below. These comments must be submitted on or before 
September 28, 2020. SBA will consider these comments and the need for 
making any revisions as a result of these comments.

III. Subpart L--Rules of Practice for Appeals of Certain SBA Loan 
Review Decisions Under the Paycheck Protection Program

    This interim final rule establishes a new subpart L for 13 CFR part 
134, establishing rules of practice for appeals of certain SBA loan 
review decisions under the Paycheck Protection Program (PPP).
    Section 134.1201, Scope of rules in this subpart L, provides a 
process for appeal to OHA of certain SBA loan review decisions under 
the PPP and any other PPP matter referred to OHA by the Administrator. 
This subpart defines the term SBA loan review decision as an official 
written decision by SBA, after SBA completes a review of a PPP loan, 
that finds a borrower (1) was ineligible for a PPP loan; (2) was 
ineligible for the PPP loan amount received or used the PPP loan 
proceeds for unauthorized uses; (3) is ineligible for PPP loan 
forgiveness in the amount determined by the lender in its full or 
partial approval decision issued to SBA (except for the deduction of 
any Economic Injury Disaster Loan advance in accordance with section 
1110(e)(6) of the CARES Act); and/or (4) is ineligible for PPP loan 
forgiveness in any amount when the lender has issued a full denial 
decision to SBA.
    For a PPP loan of any size, SBA may undertake a loan review at any 
time in SBA's discretion, and this subpart L applies to loan review 
decisions made by SBA after SBA completes a review of a PPP loan as set 
forth in Part III.1 and Part III.2c. of the Loan Review IFR, as 
amended. Only final SBA loan review decisions (as defined in this rule) 
can be appealed to OHA; a PPP borrower cannot file an OHA appeal of any 
decision made by a lender concerning a PPP loan. A PPP borrower can 
request an SBA review of a lender decision to deny the borrower's loan 
forgiveness application in full, in accordance with Part III.2.b. of 
the Loan Review IFR, as amended, but that request is for a review by 
SBA, not an OHA appeal. A borrower may exercise any other rights it has 
under applicable law against a PPP lender regarding a lender decision.
    In addition, this section sets forth other types of decisions and 
determinations that are not covered by this subpart L, and makes clear 
that subpart C of this part, Rules of Practice for Appeals From Size 
Determinations and NAICS Code Designations, is not applicable to 
appeals from SBA loan review decisions. Lastly, this section sets forth 
the specific provisions from subpart B of this part, OHA's general 
Rules of Practice, that are applicable to this subpart L. Other 
provisions from subpart B of this part do not apply to this subpart L. 
Because a PPP borrower must begin making payments of principal and 
interest on the remaining balance of its PPP loan at the end of the 
loan payment deferral period or when SBA remits the loan forgiveness 
amount to the PPP lender (or notifies the lender that no loan 
forgiveness is allowed), an appeal by a PPP borrower of any SBA loan 
review decision does not extend the deferral period of the PPP loan. 
Additionally, if SBA remits to the lender the PPP loan forgiveness 
amount set forth in the decision issued by the lender to SBA (except 
for the deduction of any Economic Injury Disaster Loan advance), the 
borrower may not file an appeal with OHA, and the borrower

[[Page 52885]]

must begin repayment of any remaining balance of its PPP loan.
    Section 134.1202, The appeal petition, provides that an appeal 
petition must include the following information: (1) The basis for 
OHA's jurisdiction, including, but not limited to, evidence that the 
appeal is timely filed in accordance with Sec.  134.1204; (2) A copy of 
the SBA loan review decision that is being appealed, or a description 
of that decision if a copy is unavailable; (3) A full and specific 
statement as to why the SBA loan review decision is alleged to be 
erroneous, together with all factual information and legal arguments 
supporting the allegations; (4) The relief being sought; (5) Signed 
copies of payroll tax filings actually reported to the Internal Revenue 
Service (IRS), and State quarterly business and individual employee 
wage reporting and unemployment insurance tax filings actually reported 
to the relevant state, for the relevant periods of time, if not 
provided with the PPP Loan Forgiveness Application (SBA Form 3508, SBA 
Form 3508EZ, or lender's equivalent), or an explanation as to why they 
are not relevant or not available; (6) Signed copies of applicable 
federal tax returns actually filed with the IRS with appropriate 
schedules (e.g., IRS Form 1040 with Schedule C/F) documenting income 
for self-employed individuals or partners in a partnership, if not 
provided with the PPP Borrower Application Form (SBA Form 2483 or 
lender's equivalent), or an explanation as to why they are not relevant 
or not available; and (7) The name, address, telephone number, email 
address and signature of the appellant or its attorney. This provision 
is consistent with OHA's general rules of practice in subpart B, with 
the addition of the requirement for submission of certain financial 
information. SBA has determined that submission by the appellant of 
financial information, or an explanation as to why they are not 
relevant or not available, is appropriate to support SBA's efforts to 
assess compliance with the PPP requirements set forth in the statute, 
rules, and guidance. The appellant must serve a copy of the appeal 
petition with attachments on the Associate General Counsel for 
Litigation, U.S. Small Business Administration, 409 Third Street SW, 
Washington, DC 20416, [email protected]. The appellant must attach to 
the appeal petition a signed certificate of service meeting the 
requirements of Sec.  134.204(d). This section further provides that an 
appeal petition which does not include the above may be dismissed by 
the Judge and permits SBA to move for a motion for more definite 
statement or otherwise comply with the requirements of this section.
    Section 134.1203, Standing, provides that only the borrower on a 
loan for which SBA has issued a final SBA loan review decision has 
standing to appeal the SBA loan review decision to OHA. Individual 
owners of a borrower and lenders do not have standing to appeal an SBA 
loan review decision.
    Section 134.1204, Deadline for filing appeal petition, prescribes 
that an appeal petition must be filed within 30 calendar days after (i) 
the appellant's receipt of the final SBA loan review decision, or (ii) 
notification by the lender of the final SBA loan review decision, 
whichever is earlier.
    Section 134.1205, Dismissal, provides that the Judge must dismiss 
the appeal if: (1) The appeal is beyond OHA's jurisdiction as set forth 
under Sec.  134.1201; (2) the appellant lacks standing to appeal under 
Sec.  134.1203; or (3) the appeal is untimely under Sec.  134.1204, or 
is premature because SBA has not yet made a final SBA loan review 
decision. This section also provides that the Judge may dismiss the 
appeal if, among other things, the appeal does not, on its face, allege 
specific facts that if proven to be true, warrant reversal or remand of 
the SBA loan review decision.
    Section 134.1206, Notice and order, provides that upon receipt of 
an appeal challenging a final SBA loan review decision, OHA will assign 
the matter to either an Administrative Law Judge or an Administrative 
Judge in accordance with Sec.  134.218. Unless the appeal will be 
dismissed under Sec.  134.1205, the Judge will issue a notice and order 
establishing a deadline for production of the administrative record and 
specifying a date for the close of record. Typically, the 
administrative record will be due 20 calendar days after issuance of 
the notice and order unless additional time is requested and granted, 
and the record will close 45 calendar days from the date of OHA's 
receipt of the appeal unless additional time is requested and granted. 
With this timeframe, SBA seeks to provide a timely and judicious 
processing of the appeal petition, while also affording additional time 
if, for example, the volume of appeals or other matters require 
additional time for compilation of the administrative record and the 
close of record.
    Section 134.1207, The administrative record, requires that the 
administrative record shall include relevant documents that SBA 
considered in making its final decision or that were before SBA at the 
time of the final decision. The administrative record need not, 
however, contain all documents pertaining to the appellant. In 
addition, SBA may claim privilege as to certain materials. The 
administrative record must be certified and authenticated that it is, 
to the best of the signatory's knowledge, complete and correct. SBA 
will file the administrative record with OHA and serve it on appellant. 
This section permits the appellant to object to the absence of any 
document from the administrative record that the appellant believes 
should have been included in the administrative record. An appellant 
also may object to any claim that documents in the administrative 
record are privileged. Such objections must be filed with OHA and 
served on SBA no later than 10 calendar days after appellant's receipt 
of the administrative record. The Judge will rule upon such objections 
and may direct or permit that the administrative record be 
supplemented.
    Section 134.1208, Response to an appeal petition, prescribes that 
only SBA may respond to an appeal and the response should set forth the 
relevant facts and legal arguments to the issues presented on appeal. 
Except for good cause shown, a response filed after the close of record 
established by the Judge will not be considered. SBA must file its 
response with OHA, and serve a copy of the response upon the appellant 
and upon each of the persons identified in the certificate of service 
attached to the appellant's appeal petition. No reply to a response 
will be permitted unless the Judge directs otherwise.
    Section 134.1209, Evidence beyond the record, discovery and oral 
hearings, provides that, generally, the Judge may not admit evidence 
beyond the written administrative record or permit any form of 
discovery. Discovery will be permitted in OHA's appellate proceedings 
only if the Judge determines that SBA, upon written submission, has 
made a showing of good cause for discovery. An oral hearing will not be 
held on an appeal of an SBA loan review decision, unless, following the 
motion of a party, or at the Judge's own initiative, the Judge orders 
an oral hearing upon concluding that there is a genuine dispute of 
material fact that cannot be resolved except by the taking of testimony 
and the confrontation of witnesses. SBA has determined that allowing an 
oral hearing under limited circumstances, and allowing discovery by 
SBA, only upon a showing of good cause, balances SBA's potential need 
for discovery since it may not have all relevant documents from 
appellant with the efficient use of limited resources available. If an 
oral hearing is ordered, the proceeding shall

[[Page 52886]]

be conducted in accordance with Sec. Sec.  134.214 and 134.222 in 
subpart B of this part as the Judge deems appropriate. All appeals 
under this subpart L will be decided solely on a review of the written 
administrative record, the appeal petition, response(s) filed thereto, 
any admitted evidence, and an oral hearing, if held.
    Section 134.1210, Interlocutory appeals, provides that either party 
may file an interlocutory appeal of a Judge's ruling which decides an 
issue of privilege. Interlocutory appeals will be decided by the 
Administrator or a designee. An interlocutory appeal must be filed and 
served no later than 20 calendar days after issuance of the ruling to 
which the interlocutory appeal applies. A response to the interlocutory 
appeal must be filed 10 calendar days after the interlocutory appeal is 
served. The Judge may stay the proceedings before OHA, in whole or in 
part, as he or she deems appropriate pending resolution of the 
interlocutory appeal.
    Section 134.1211, Alternative dispute resolution, provides that at 
any time during the pendency of an appeal, the parties may submit a 
joint motion requesting that the Judge permit the use of alternative 
dispute resolution to assist in resolving the matter. If the motion is 
granted, the Judge will also stay the proceedings before OHA, in whole 
or in part, as he or she deems appropriate, pending the outcome of the 
alternative dispute resolution. In addition, the Assistant 
Administrator for Hearings and Appeals (AA/OHA) or a Judge may 
designate another Judge or attorney assigned to OHA to serve as a 
neutral in alternative dispute resolution procedures. If OHA provides 
the neutral and the mediation fails to resolve all issues in the case, 
the OHA-provided neutral will not be involved in the adjudication.
    Section 134.1212, Standard of review, provides that the standard of 
review is whether the SBA loan review decision was based on clear error 
of fact or law. The appellant has the burden of proof, by a 
preponderance of the evidence.
    Section 134.1213, Decision on appeal, provides that the Judge will 
issue his or her decision within 45 calendar days after the close of 
record, as practicable. The decision will contain findings of fact and 
conclusions of law, the reasons for such findings and conclusions, and 
any relief ordered. The decision will be served on each party. The 
Judge's decision on the appeal is an initial decision. However, unless 
a request for review is filed pursuant to Sec.  134.228(a), or a 
request for reconsideration is filed pursuant to paragraph (c) of Sec.  
134.1213, an initial decision shall become the final decision of SBA 30 
calendar days after its service. This section allows for a request for 
reconsideration pursuant to paragraph (c) of Sec.  134.1213 by either 
party or by the Judge on his or her own initiative. This section also 
provides for the right to request review by the Administrator pursuant 
to Sec.  134.228(a), in which case the provisions in Sec.  134.228 will 
apply. If a request for review pursuant to Sec.  134.228(a) is filed, 
the decision of the Administrator is a final decision of SBA appealable 
to federal district court. In order for a borrower to exhaust its 
administrative remedies and preserve its right to seek judicial review 
of an SBA final decision in a federal district court, a borrower that 
disputes the initial decision or reconsidered initial decision must 
file and serve a request for review of an initial decision or 
reconsidered initial decision by the Administrator pursuant to Sec.  
134.228(a). If the borrower does not request review by the 
Administrator pursuant to Sec.  134.228(a), the borrower's right to 
seek review in federal court is waived due to the borrower's failure to 
exhaust administrative remedies. This section also provides that the 
final OHA decision creates precedent only for appeals involving the 
PPP. Any OHA decision pursuant to this subpart L applies only to the 
PPP and does not apply to SBA's 7(a) Loan Program generally or to any 
interpretation or application of the regulations in part 120 or part 
121 of this title. SBA has determined that this is appropriate because 
the PPP is governed by the CARES Act, which adds a new temporary 
program to SBA's 7(a) Loan Program, but does not apply to SBA's 7(a) 
Loan Program generally. Lastly, this section provides that, consistent 
with the general OHA rules of practice in subpart B of part 134, OHA 
decisions are normally published without redactions on OHA's website. A 
decision may contain confidential business and financial information or 
personally identifiable information where that information is either 
decisionally-significant or otherwise necessary for a comprehensible 
decision. Where no protective order is in place, a party may request a 
redacted public decision by contacting OHA. Where a protective order is 
in place, the Judge will usually issue the unredacted decision under 
the protective order and a redacted version for public release.
    Section 134.1214, Effects of the decision, provides that OHA may 
affirm, reverse, or remand an SBA loan review decision. If remanded, 
OHA no longer has jurisdiction over the matter unless a new appeal is 
filed as a result of a new SBA loan review decision.
    Section 134.1215, Equal Access to Justice Act (EAJA), provides that 
a prevailing appellant is not entitled to recover attorney's fees. 
Appeals to OHA from SBA loan review decisions under the PPP are not 
proceedings that are required to be conducted by an Administrative Law 
Judge under Sec.  134.603.
    Section 134.1216, Exhaustion of administrative remedies, provides 
that an appeal to OHA and request for review by the Administrator of a 
disputed initial decision or reconsidered initial decision are 
administrative remedies that must be exhausted before judicial review 
of an SBA loan review decision may be sought in a federal district 
court.
    Section 134.1217, Confidential information and protective order, 
provides that if a filing or other submission made pursuant to an 
appeal in this subpart L contains confidential business and financial 
information; personally identifiable information; source selection 
sensitive information; income tax returns; documents and information 
covered under Sec.  120.1060 of this title; or any other exempt 
information, that information is not available to the public pursuant 
to the Freedom of Information Act (FOIA), 5 U.S.C. 552. This provision 
is consistent with the general rule of practice in subpart B of this 
part. In addition, this section permits SBA or appellant to seek a 
protective order over any document or information filed pursuant to an 
appeal in this subpart L, including any document or information 
exchanged in discovery if permitted in accordance with Sec.  134.1209.

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.

[[Page 52887]]

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 interim final rule does not impose 
additional reporting or recordkeeping requirements under the Paperwork 
Reduction Act.

Regulatory Flexibility Act (RFA)

    The Regulatory Flexibility Act generally requires that when an 
agency issues a proposed rule, or a final rule pursuant to section 
553(b) of the APA or another law, the agency must prepare a regulatory 
flexibility analysis that meets the requirements of the RFA and publish 
such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to describe the impact of a 
rulemaking on small entities by providing a regulatory impact analysis. 
Such analysis must address the consideration of regulatory options that 
would lessen the economic effect of the rule on small entities. The RFA 
defines a ``small entity'' as (1) a proprietary firm meeting the size 
standards of the Small Business Administration (SBA); (2) a nonprofit 
organization that is not dominant in its field; or (3) a small 
government jurisdiction with a population of less than 50,000. 5 U.S.C. 
601(3)-(6). Except for such small government jurisdictions, neither 
State nor local governments are ``small entities.'' Similarly, for 
purposes of the RFA, individual persons are not small entities. The 
requirement to conduct a regulatory impact analysis does not apply if 
the head of the agency ``certifies that the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities.'' 5 U.S.C. 605(b). The agency must, however, publish 
the certification in the Federal Register at the time of publication of 
the rule, ``along with a statement providing the factual basis for such 
certification.'' If the agency head has not waived the requirements for 
a regulatory flexibility analysis in accordance with the RFA's waiver 
provision, and no other RFA exception applies, the agency must prepare 
the regulatory flexibility analysis and publish it in the Federal 
Register at the time of promulgation or, if the rule is promulgated in 
response to an emergency that makes timely compliance impracticable, 
within 180 days of publication of the final rule. 5 U.S.C. 604(a), 
608(b). Rules that are exempt from notice and comment are also exempt 
from the RFA requirements, including conducting a regulatory 
flexibility analysis, when among other things the agency for good cause 
finds that notice and public procedure are impracticable, unnecessary, 
or contrary to the public interest. 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.

List of Subjects in 13 CFR Part 134

    Administrative practice and procedure, Claims, Equal access to 
justice, Lawyers, Organization and function (Government agencies).

    For the reasons stated in the preamble, the Small Business 
Administration amends 13 CFR part 134 as set forth below:

PART 134--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF 
HEARINGS AND APPEALS

0
1. The authority citation for part 134 is revised to read as follows:

    Authority:  5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 634(i), 
637(a), 648(l), 656(i), 657t and 687(c); 38 U.S.C. 8127(f); E.O. 
12549, 51 FR 6370, 3 CFR, 1986 Comp., p. 189.

    Subpart J issued under 38 U.S.C. 8127(f)(8)(B).
    Subpart K issued under 38 U.S.C. 8127(f)(8)(A).
    Subpart L issued under 15 U.S.C. 636(a)(36); Pub. L. 116-136; 
Pub. L. 116-139; 116-142; 116-147.


0
2. Amend Sec.  134.102 by:
0
a. Removing the word ``and'' at the end of paragraph (u);
0
b. Removing the period at the end of paragraph (v) and adding ``; and'' 
in its place; and
0
c. Adding paragraph (w) to read as follows:


Sec.  134.102  Jurisdiction of OHA.

* * * * *
    (w) Appeals of certain SBA loan review decisions as defined in 13 
CFR 134.1201.

0
3. Add subpart L to read as follows:

Subpart L--Rules of Practice for Appeals of Certain SBA Loan Review 
Decisions Under the Paycheck Protection Program

Sec.
134.1201 Scope of rules in this subpart L.
134.1202 The appeal petition.
134.1203 Standing.
134.1204 Deadline for filing appeal petition.
134.1205 Dismissal.
134.1206 Notice and order.
134.1207 The administrative record.
134.1208 Response to an appeal petition.
134.1209 Evidence beyond the record, discovery and oral hearings.
134.1210 Interlocutory appeals.
134.1211 Alternative dispute resolution procedures.
134.1212 Standard of review.
134.1213 Decision on appeal.
134.1214 Effects of the decision.
134.1215 Equal Access to Justice Act (EAJA).
134.1216 Exhaustion of administrative remedies.
134.1217 Confidential information and protective order.

    Authority: 15 U.S.C. 636(a)(36); Pub. L. 116-136; Pub. L. 116-
139; Pub. L. 116-142; Pub. L. 116-147


Sec.  134.1201  Scope of the rules in this subpart L.

    (a) The rules of practice in this subpart L apply to appeals to OHA 
from certain SBA loan review decisions under the Paycheck Protection 
Program (PPP) as described in paragraph (b) of this section, and to any 
other PPP matter referred to OHA by the Administrator of SBA. The PPP 
was established as a temporary program under section 1102 of the 
Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. 
116-136).
    (b) A final SBA loan review decision that is appealable under this 
subpart L is an official written decision by SBA, after SBA completes a 
review of a PPP loan, that finds a borrower:
    (1) Was ineligible for a PPP loan;
    (2) Was ineligible for the PPP loan amount received or used the PPP 
loan proceeds for unauthorized uses;
    (3) Is ineligible for PPP loan forgiveness in the amount determined 
by the lender in its full approval or partial approval decision issued 
to SBA (except for the deduction of any Economic Injury Disaster Loan 
advance in accordance with section 1110(e)(6) of the CARES Act); and/or
    (4) Is ineligible for PPP loan forgiveness in any amount when the 
lender has issued a full denial decision to SBA.
    (c) A borrower cannot file an OHA appeal of any decision made by a 
lender concerning a PPP loan.

[[Page 52888]]

    (d) Any determination by SBA's Office of Inspector General 
concerning a PPP loan is not appealable to OHA.
    (e) This subpart L does not create any right to appeal any SBA 
decision on any 7(a) loans other than PPP loans.
    (f) The Rules of Practice for Appeals From Size Determinations and 
NAICS Code Designations in subpart C of this part do not apply to 
appeals of SBA loan review decisions or to the PPP.
    (g) In addition to the subpart B of this part provisions 
specifically referenced in this subpart L, the following regulations 
from subpart B of this part also apply to this subpart L: 13 CFR 
134.207 through 134.209, 134.211, 134.212, and 134.217 through 134.221.


Sec.  134.1202  The appeal petition.

    (a) Contents. The appeal petition must include the following 
information:
    (1) The basis for OHA's jurisdiction, including, but not limited 
to, evidence that the appeal is timely filed in accordance with Sec.  
134.1204;
    (2) A copy of the SBA loan review decision that is being appealed, 
or a description of that decision if a copy is unavailable;
    (3) A full and specific statement as to why the SBA loan review 
decision is alleged to be erroneous, together with all factual 
information and legal arguments supporting the allegations;
    (4) The relief being sought;
    (5) Signed copies of payroll tax filings actually filed with the 
Internal Revenue Service (IRS), and State quarterly business and 
individual employee wage reporting and unemployment insurance tax 
filings actually reported to the relevant state, for the relevant 
periods of time, if not provided with the PPP Loan Forgiveness 
Application (SBA Form 3508, SBA Form 3508EZ, or lender's equivalent), 
or an explanation as to why they are not relevant or not available;
    (6) Signed copies of applicable federal tax returns actually filed 
with the IRS with appropriate schedules (e.g., IRS Form 1040 with 
Schedule C/F) documenting income for self-employed individuals or 
partners in a partnership, if not provided with the PPP Borrower 
Application Form (SBA Form 2483 or lender's equivalent), or an 
explanation as to why they are not relevant or not available; and
    (7) The name, address, telephone number, email address and 
signature of the appellant or its attorney.
    (b) Format. The maximum length of an appeal petition (not including 
attachments) is 20 pages, unless leave is sought by the appellant and 
granted by the Judge. A table of authorities is required only for 
petitions citing more than twenty cases, regulations, or statutes.
    (c) Service of the appeal petition. In addition to filing an appeal 
with OHA in accordance with Sec.  134.204(b), the appellant must serve 
a copy of the appeal petition with attachments on the Associate General 
Counsel for Litigation, U.S. Small Business Administration, 409 Third 
Street SW, Washington, DC 20416, [email protected].
    (d) Certificate of service. The appellant must attach to the appeal 
petition a signed certificate of service meeting the requirements of 
Sec.  134.204(d).
    (e) Dismissal. An appeal petition which does not contain all of the 
information required by paragraphs (a) through (d) of this section may 
be dismissed, with or without prejudice, at the Judge's own initiative, 
or upon motion of SBA.
    (f) Motion for more definite statement. SBA may, not later than 
five days after receiving an appeal petition, move for an order to the 
appellant to provide a more definite appeal petition or otherwise 
comply with this section. A Judge may order a more definite appeal 
petition on his or her own initiative.
    (1) A motion for a more definite appeal petition stays SBA's time 
for filing a response. The Judge will establish the time for filing and 
serving a response and will extend the close of the record as 
appropriate.
    (2) If the appellant does not comply with the Judge's order to 
provide a more definite appeal petition or otherwise fails to comply 
with applicable regulations, the Judge may dismiss the petition with 
prejudice.
    (g) Calculation of a deadline when the time period is given in 
days. Do not count the day the time period begins, but do count the 
last day of the time period. If the last day is Saturday, Sunday, or a 
Federal holiday, the time period ends on the next business day.


Sec.  134.1203  Standing.

    Only the borrower on a loan for which SBA has issued a final SBA 
loan review decision has standing to appeal the SBA loan review 
decision to OHA.


Sec.  134.1204  Deadline for filing appeal petition.

    An appeal petition must be filed with OHA within 30 calendar days 
after the appellant's receipt of the final SBA loan review decision, or 
notification by the lender of the final SBA loan review decision, 
whichever is earlier.


Sec.  134.1205  Dismissal.

    (a) The Judge must dismiss the appeal if:
    (1) The appeal is beyond OHA's jurisdiction as set forth under 
Sec.  134.1201;
    (2) The appellant lacks standing to appeal under Sec.  134.1203; or
    (3) The appeal is untimely under Sec.  134.1204, or is premature 
because SBA has not yet made a final SBA loan review decision.
    (b) The Judge may dismiss the appeal in accordance with Sec.  
134.1202(e) or (f)(2), or if the appeal does not, on its face, allege 
specific facts that if proven to be true, warrant reversal or remand of 
the SBA loan review decision.


Sec.  134.1206  Notice and order.

    Upon receipt of an appeal challenging a final SBA loan review 
decision, OHA will assign the matter to either an Administrative Law 
Judge or an Administrative Judge in accordance with Sec.  134.218. 
Unless the appeal is dismissed under Sec.  134.1205, the Judge will 
issue a notice and order establishing a deadline for production of the 
administrative record and specifying a date for the close of record. 
The notice and order will be served upon all known parties (or their 
attorneys). Typically, the administrative record will be due 20 
calendar days after issuance of the notice and order unless additional 
time is requested and granted, and the record will close 45 calendar 
days from the date of OHA's receipt of the appeal unless additional 
time is requested and granted.


Sec.  134.1207  The administrative record.

    (a) Contents. The administrative record shall include relevant 
documents that SBA considered in making its final decision or that were 
before SBA at the time of the final decision. The administrative record 
need not, however, contain all documents pertaining to the appellant. 
In addition, SBA may claim privilege as to certain materials. The 
administrative record must be certified and authenticated that it is, 
to the best of the signatory's knowledge, complete and correct.
    (b) Filing. SBA will file the administrative record with OHA and 
serve it on appellant.
    (c) Objection. The appellant may object to the absence of any 
document from the administrative record that the appellant believes 
should have been included in the administrative record. An appellant 
also may object to any claim that documents in the administrative 
record are privileged. Such objections must be filed with OHA and 
served on SBA no later than 10 calendar days after the appellant's 
receipt of the administrative record. The Judge will rule upon such 
objections

[[Page 52889]]

and may direct or permit that the administrative record be 
supplemented.


Sec.  134.1208  Response to an appeal petition.

    (a) Who may respond. Only SBA may respond to an appeal. The 
response should set forth the relevant facts and legal arguments to the 
issues presented on appeal.
    (b) Time limit. Except for good cause shown, a response filed after 
the close of record established by the Judge will not be considered.
    (c) Service. The SBA must file its response with OHA, and serve a 
copy of the response upon the appellant and upon each of the persons 
identified in the certificate of service attached to the appeal 
petition pursuant to Sec.  134.1202(d).
    (d) Reply to a response. No reply to a response will be permitted 
unless the Judge directs otherwise.


Sec.  134.1209  Evidence beyond the record, discovery and oral 
hearings.

    (a) General Rule. Generally, the Judge may not admit evidence 
beyond the written administrative record or permit any form of 
discovery.
    (b) Discovery. Discovery will be permitted only if the Judge 
determines that SBA, upon written submission, has made a showing of 
good cause for discovery.
    (c) Oral hearings. Oral hearings will not be held on an appeal of 
an SBA loan review decision, unless, following the motion of a party, 
or at the Judge's own initiative, the Judge orders an oral hearing upon 
concluding that there is a genuine dispute of material fact that cannot 
be resolved except by the taking of testimony and the confrontation of 
witnesses. If an oral hearing is ordered, the proceeding shall be 
conducted in accordance with Sec. Sec.  134.214 and 134.222 in subpart 
B of this part as the Judge deems appropriate.
    (d) The record. All appeals under this subpart L will be decided 
solely on a review of the written administrative record, the appeal 
petition, and response(s) filed thereto, any admitted evidence, and an 
oral hearing, if held.


Sec.  134.1210  Interlocutory appeals.

    (a) General. Either party may file an interlocutory appeal of a 
Judge's ruling which decides an issue of privilege. Interlocutory 
appeals will be decided by the Administrator of SBA or a designee.
    (b) Procedures. An interlocutory appeal must be filed and served no 
later than 20 calendar days after issuance of the ruling to which the 
interlocutory appeal applies. A response to the interlocutory appeal 
must be filed 10 calendar days after the interlocutory appeal is 
served. The Judge may stay the proceedings before OHA, in whole or in 
part, as he or she deems appropriate pending resolution of the 
interlocutory appeal.


Sec.  134.1211  Alternative dispute resolution.

    (a) Joint Motion. At any time during the pendency of an appeal, the 
parties may submit a joint motion requesting that the Judge permit the 
use of alternative dispute resolution to assist in resolving the 
matter.
    (b) Procedures. If the motion is granted, the Judge will also stay 
the proceedings before OHA, in whole or in part, as he or she deems 
appropriate, pending the outcome of the alternative dispute resolution. 
In addition, the AA/OHA or a Judge may designate another Judge or 
attorney assigned to OHA to serve as a neutral in alternative dispute 
resolution procedures. If OHA provides the neutral and the mediation 
fails to resolve all issues in the case, the OHA-provided neutral will 
not be involved in the adjudication.


Sec.  134.1212  Standard of review.

    The standard of review is whether the SBA loan review decision was 
based on clear error of fact or law. The appellant has the burden of 
proof, by a preponderance of the evidence.


Sec.  134.1213  Decision on appeal.

    (a) Time limits and contents. The Judge will issue his or her 
decision within 45 calendar days after the close of record, as 
practicable. The decision will contain findings of fact and conclusions 
of law, the reasons for such findings and conclusions, and any relief 
ordered. The decision will be served on each party.
    (b) Initial decision. The Judge's decision on the appeal is an 
initial decision. However, unless a request for review is filed 
pursuant to Sec.  134.228(a), or a request for reconsideration is filed 
pursuant to paragraph (c) of this section, an initial decision shall 
become the final decision of SBA 30 calendar days after its service. 
The final OHA decision creates precedent only for appeals involving the 
PPP. Any OHA decision pursuant to this subpart L applies only to the 
PPP and does not apply to SBA's 7(a) Loan Program generally or to any 
interpretation or application of the regulations in part 120 or part 
121 of this title.
    (c) Reconsideration. An initial decision of the Judge may be 
reconsidered. Either SBA or the appellant may request reconsideration 
by filing with the Judge and serving a petition for reconsideration 
within 10 calendar days after service of the written decision. The 
request for reconsideration must clearly show an error of fact or law 
material to the decision. The Judge may also reconsider a decision on 
his or her own initiative within 20 calendar days after service of the 
written decision.
    (d) Request for review. Within 30 calendar days after the service 
of an initial decision or a reconsidered initial decision of a Judge, 
any party, or SBA's Office of General Counsel, may file and serve a 
request for review by the Administrator pursuant to Sec.  134.228(a). 
In order for a borrower to exhaust its administrative remedies and 
preserve its right to seek judicial review of an SBA final decision in 
a federal district court, a borrower that disputes an initial decision 
or reconsidered initial decision must file and serve a request for 
review of the initial decision or reconsidered initial decision by the 
Administrator pursuant to Sec.  134.228(a). If a request for review is 
filed pursuant to Sec.  134.228(a), the provisions in Sec.  134.228 
will apply.
    (e) Publication. OHA decisions are normally published without 
redactions on OHA's website. A decision may contain confidential 
business and financial information or personally identifiable 
information where that information is either decisionally-significant 
or otherwise necessary for a comprehensible decision. Where no 
protective order is in place, a party may request a redacted public 
decision by contacting OHA. Where a protective order is in place, the 
Judge will usually issue the unredacted decision under the protective 
order and a redacted version for public release.


Sec.  134.1214  Effects of the decision.

    OHA may affirm, reverse, or remand an SBA loan review decision. If 
remanded, OHA no longer has jurisdiction over the matter unless a new 
appeal is filed as a result of a new SBA loan review decision.


Sec.  134.1215  Equal Access to Justice Act (EAJA), 5 U.S.C. 504.

    A prevailing appellant is not entitled to recover attorney's fees. 
Appeals to OHA from SBA loan review decisions under the PPP are not 
proceedings that are required to be conducted by an Administrative Law 
Judge under Sec.  134.603.


Sec.  134.1216  Exhaustion of administrative remedies.

    An appeal to OHA and request for review by the Administrator of a 
disputed initial decision or reconsidered initial decision are 
administrative remedies that must be exhausted before judicial review 
of an

[[Page 52890]]

SBA loan review decision may be sought in a federal district court.


Sec.  134.1217  Confidential Information and Protective Order.

    (a) If a filing or other submission made pursuant to an appeal in 
this subpart L contains confidential business and financial 
information; personally identifiable information; source selection 
sensitive information; income tax returns; documents and information 
covered under Sec.  120.1060 of this title; or any other exempt 
information, that information is not available to the public pursuant 
to the Freedom of Information Act (FOIA), 5 U.S.C. 552.
    (b) SBA or appellant may seek a protective order over any document 
or information exchanged in discovery if permitted in accordance with 
Sec.  134.1209 and any document or information filed pursuant to an 
appeal in this subpart L.

Jovita Carranza,
Administrator.
[FR Doc. 2020-17895 Filed 8-25-20; 11:15 am]
BILLING CODE P