This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

5036 

Vol. 86, No. 11 

Tuesday, January 19, 2021 

SMALL BUSINESS ADMINISTRATION 

13 CFR Parts 109, 120, and 123 

[Docket Number SBA–2020–0057] 

RIN 3245–AH60 

Ensuring Equal Treatment for FaithBased Organizations in SBA’s Loan 

and Disaster Assistance Programs 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Proposed rule. 

SUMMARY: The U.S. Small Business 

Administration (‘‘SBA’’ or ‘‘Agency’’) is 

proposing to remove five regulatory 

provisions that run afoul of the Free 

Exercise Clause of the First 

Amendment. All five provisions make 

certain faith-based organizations 

ineligible to participate in certain SBA 

business loan and disaster assistance 

programs because of their religious 

status. Because the provisions exclude a 

class of potential participants based 

solely on their religious status, the 

provisions violate the Free Exercise 

Clause of the First Amendment. SBA 

now proposes to remove the provisions 

to ensure in its business loan and 

disaster assistance programs the equal 

treatment for faith-based organizations 

that the Constitution requires. 

DATES: Comments must be received on 

or before February 18, 2021. 

ADDRESSES: You may submit comments, 

identified by RIN 3245–AH60, by any of 

the following methods: 

• Federal eRulemaking Portal: 

https://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail or Hand Delivery/Courier: 

Valerie Mills, Executive Operations 

Officer, Office of General Counsel, U.S. 

Small Business Administration, 409 

Third Street SW, 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 Valerie Mills, Executive 

Operations Officer, Office of General 

Counsel, U.S. Small Business 

Administration, 409 Third Street SW, 

Washington, DC 20416, or send an email 

to Valerie.Mills@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. 

FOR FURTHER INFORMATION CONTACT: 

Valerie Mills, Executive Operations 

Officer, Office of General Counsel, (202) 

619–0539, Valerie.Mills@sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

Consistent with its April 3, 2020, 

letter to Congress pursuant to 28 U.S.C. 

530D (‘‘530D letter’’), SBA is proposing 

to remove from the Code of Federal 

Regulations (‘‘CFR’’) five provisions that 

run afoul of the Free Exercise Clause of 

the First Amendment. The provisions 

that SBA proposes to remove consist of 

the two provisions with which SBA’s 

530D letter was concerned and three 

other, substantially similar provisions. 

All five provisions make certain faithbased organizations ineligible to 

participate in certain SBA business loan 

and disaster assistance programs 

because of their religious status. 

Because the provisions exclude a class 

of potential participants solely based on 

their religious status, the provisions 

violate the Free Exercise Clause of the 

First Amendment, as construed in 

Trinity Lutheran Church of Columbia, 

Inc. v. Comer, 137 S. Ct. 2012 (2017), 

and Espinoza v. Montana Department of 

Revenue, 140 S. Ct. 2246 (2020). After 

consulting with the Department of 

Justice, in its 530D letter, SBA already 

has announced its decision not to 

enforce, apply, or administer two of the 

provisions, as well as its intention to 

propose amendments to conform those 

provisions to the Constitution. SBA now 

proposes such amendments, as well as 

amendments to three substantially 

similar provisions, to ensure in its 

business loan and disaster assistance 

programs the equal treatment for faithbased organizations that the 

Constitution requires. 

A. The Subject Programs 

Intermediary Lending Pilot Program 

(‘‘ILP’’). The Intermediary Lending Pilot 

(‘‘ILP’’) program was established as a 

pilot program authorized by the Small 

Business Jobs Act of 2010, Public Law 

111–240 (2010), to provide loans of up 

to $1,000,000 to nonprofit 

intermediaries for the purpose of 

providing loans to small businesses. The 

program authorized SBA to select up to 

20 nonprofit intermediaries each year to 

receive loans of up to $1,000,000, 

subject to the availability of funds. 

Selected ILP intermediaries, in turn, use 

the funds to make loans of up to 

$200,000 to eligible startup, newly 

established, or growing small 

businesses. ILP Intermediaries continue 

to relend a portion of the payments 

received on small business loans made 

under the program until they have fully 

repaid their loans to SBA. 

Business Loan Programs. SBA 

provides financial assistance to small 

businesses under three business loan 

programs: its general business loan 

program authorized by section 7(a) of 

the Small Business Act, 15 U.S.C. 636(a) 

(‘‘7(a) loans’’), its microloan program 

authorized by section 7(m) of the Small 

Business Act, 15 U.S.C. 636(m) 

(‘‘microloans’’), and its development 

company program authorized by title V 

of the Small Business Investment Act, 

15 U.S.C. 695–697f (‘‘504 loans’’). 7(a) 

loans provide financing to eligible small 

businesses for general business 

purposes and are guaranteed loans by 

which SBA guarantees a portion of a 

loan made by a lender. Through its 

microloans, SBA makes loans to nonprofit intermediaries that in turn make 

short-term loans with a maximum 

amount of $50,000 to eligible small 

businesses for general business 

purposes, including the purchase of 

furniture, fixtures, supplies, materials, 

equipment, and for working capital. 

SBA also makes technical assistance 

grants to intermediaries for use in 

providing management assistance and 

counseling to microloan borrowers and 

prospective microloan borrowers. 

Projects involving 504 loans require 

long-term, fixed-asset financing for 

small businesses. A 504 project has 

three main partners: A Third Party 

Lender provides 50 percent or more of 

the financing; a Certified Development 

Company (CDC) provides up to 40 

percent of the financing through a 504 


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Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5037 

debenture (guaranteed 100% by SBA); 

and an applicant (Borrower) injects at 

least 10 percent of the financing. 

Economic Injury Disaster Loan 

Program (‘‘EIDL’’). The Economic Injury 

Disaster Loan (‘‘EIDL’’) program 

provides economic relief to eligible 

small businesses and private nonprofit 

organizations that experience 

substantial economic injury as a direct 

result of a declared disaster. Substantial 

economic injury is such that a business 

concern is unable to meet its obligations 

as they mature or to pay its ordinary and 

necessary operating expenses. EIDL loan 

proceeds may be used only for working 

capital necessary to carry on the 

business concern until resumption of 

normal operations and for expenditures 

necessary to alleviate the specific 

economic injury, but not to exceed that 

which the business concern could have 

provided had the injury not occurred. 

Military Reservist Economic Injury 

Disaster Loan Program (‘‘MREIDL’’). The 

Military Reservist Economic Injury 

Disaster Loan (‘‘MREIDL’’) program 

provides loan funds to eligible small 

businesses to meet their ordinary and 

necessary operating expenses that they 

could have met, but are unable to meet, 

because an essential employee was 

called up to active service for a period 

of more than 30 consecutive days in his 

or her role as a military reservist. The 

loans provide the amount of working 

capital that eligible small businesses 

need to pay their necessary obligations 

as they mature until operations return to 

normal after the essential employee is 

released from active service. Loans can 

be provided for a maximum amount of 

$2,000,000 and a maximum term of 30 

years. 

Immediate Disaster Assistance 

Program (‘‘IDAP’’). The Immediate 

Disaster Assistance Program (‘‘IDAP’’) is 

a guaranteed disaster loan program for 

small businesses that have suffered 

physical damage or economic injury due 

to a declared disaster. An IDAP loan is 

an interim loan in an amount not to 

exceed $25,000 made by an IDAP lender 

to meet the immediate business needs of 

an IDAP borrower while approval of 

long-term financing from a disaster loan 

is pending with SBA. Currently, there is 

no funding available for IDAP loans. 

B. Religious-Status-Based Exclusions in 

the Subject Programs and Conflict With 

Recent Supreme Court Decisions 

Construing the Free Exercise Clause 

Current regulatory provisions 

governing the ILP, Business Loan 

programs, EIDL, MREIDL, and IDAP all 

render ineligible to participate 

businesses that are ‘‘[p]rincipally 

engaged in’’—or businesses whose 

‘‘principal activity’’ is—‘‘teaching, 

instructing, counseling or indoctrinating 

religion or religious beliefs, whether in 

a religious or secular setting.’’ 13 CFR 

109.400(b)(11), 120.110(k), 123.301(g), 

123.502(n), 123.702(b)(6). Notably, these 

exclusions of otherwise-eligible 

participants are based not on any 

religious use of business loan funds or 

disaster assistance, but rather are based 

on the religious activities in which they 

generally engage, precluding them from 

even secular uses of business loan funds 

and disaster assistance. In short, they 

categorically disqualify otherwiseeligible faith-based organizations from 

receiving business loan funds and 

disaster assistance solely on account of 

their religious status. 

In two recent decisions, the Supreme 

Court has made clear that such 

religious-status-based exclusions from a 

public benefit violate the Free Exercise 

Clause of the First Amendment. 

In Trinity Lutheran Church of 

Columbia, Inc. v. Comer, 137 S. Ct. 2012 

(2017), the Court examined a state’s 

‘‘policy of categorically disqualifying 

churches and other religious 

organizations from receiving grants 

under its playground resurfacing 

program.’’ Id. at 2017. The Court held 

that the policy violated the Free 

Exercise Clause. It explained that ‘‘[t]he 

Free Exercise Clause ‘protect[s] religious 

observers against unequal treatment’ 

and subjects to the strictest scrutiny 

laws that target the religious for ‘special 

disabilities’ based on their ‘religious 

status.’ ’’ Id. at 2019 (quoting Church of 

Lukumi Babulu Aye, Inc. v. Hialeah, 508 

U.S. 520, 533, 542 (1993)). The Court 

noted that it repeatedly had applied this 

‘‘basic principle’’ to ‘‘confirm[ ] that 

denying a generally available benefit 

solely on account of religious identity 

imposes a penalty on the free exercise 

of religion that can be justified only by 

a state interest ‘of the highest order.’ ’’ 

Id. (quoting McDaniel v. Paty, 435 U.S. 

618, 628 (1978) (plurality opinion)). The 

state policy failed this stringent test. 

The Court concluded that, ‘‘[i]n the face 

of the clear infringement on free 

exercise before us,’’ the State’s proffered 

interest—a ‘‘policy preference for 

skating as far as possible from religious 

establishment concerns,’’ even where 

the Establishment Clause did not 

prohibit the funding at issue—‘‘cannot 

qualify as compelling.’’ Id. at 2024. 

Three years later, in Espinoza v. 

Montana Department of Revenue, 140 S. 

Ct. 2246 (2020), the Court examined a 

state-court decision that had applied a 

state constitutional provision to 

invalidate a tax-credit scholarships 

program solely on the ground that some 

scholarship recipients had sought to use 

their scholarships at religious schools. 

The question presented was ‘‘whether 

the Free Exercise Clause precluded’’ the 

state court ‘‘from applying [the state 

constitutional] provision to bar religious 

schools from the scholarship program.’’ 

Id. at 2254. The Court answered that 

question in the affirmative. The Court 

began by reiterating the basic principle 

that ‘‘[t]he Free Exercise Clause . . . 

‘protects religious observers against 

unequal treatment’ and against ‘laws 

that impose special disabilities on the 

basis of religious status,’’’ id. (quoting 

Trinity Lutheran, 137 S. Ct. at 2019), 

and by noting Trinity Lutheran’s 

‘‘ ‘unremarkable’ conclusion that 

disqualifying otherwise eligible 

recipients from a public benefit ‘solely 

because of their religious character’ 

imposes ‘a penalty on the free exercise 

of religion that triggers the most 

exacting scrutiny,’ ’’ id. at 2255 (quoting 

Trinity Lutheran, 137 S. Ct. at 2021). 

The Court then observed that, as 

construed by the state court, the state 

constitutional provision ‘‘bars religious 

schools from public benefits solely 

because of the religious character of the 

schools’’ and ‘‘also bars parents who 

wish to send their children to a religious 

school from those same benefits, again 

solely because of the religious character 

of the school.’’ Id. at 2255. The Court 

was unpersuaded by the State’s 

assertion that the status-based exclusion 

aimed to prevent religious uses of funds. 

‘‘Status-based discrimination,’’ the 

Court concluded, ‘‘remains status based 

even if one of its goals or effects is 

preventing religious organizations from 

putting aid to religious uses.’’ Id. at 

2256. Accordingly, the Court held ‘‘that 

strict scrutiny applies under Trinity 

Lutheran because [the state 

constitutional] provision discriminates 

based on religious status,’’ id. at 2257, 

and that, like the state policy it 

examined in Trinity Lutheran, the state 

constitutional provision under review 

failed that test, id. at 2260–63. 

Like the state policy that the Court 

declared unconstitutional in Trinity 

Lutheran and the state constitutional 

provision that the Court declared 

unconstitutional in Espinoza, the five 

subject provisions deny a public benefit 

solely on account of religious status. 

Each categorically renders ineligible to 

participate in an SBA business loan or 

disaster assistance program all 

businesses that are ‘‘[p]rincipally 

engaged in’’—or businesses whose 

‘‘principal activity’’ is—‘‘teaching, 

instructing, counseling or indoctrinating 

religion or religious beliefs, whether in 

a religious or secular setting.’’ 13 CFR 

109.400(b)(11), 120.110(k), 123.301(g), 


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5038 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

123.502(n), 123.702(b)(6). Notably, none 

of these exclusions concerns religious 

uses of business loan or disaster 

assistance funds. Instead, each prohibits 

an otherwise-eligible applicant from 

receiving such funds solely on account 

of its religious activities, even if it uses 

the funds for secular purposes. And any 

interest in prohibiting religious uses of 

funds cannot justify such a sweeping, 

status-based exclusion. As the Court 

held in Espinoza, ‘‘[s]tatus-based 

discrimination remains status based 

even if one of its goals or effects is 

preventing religious organizations from 

putting aid to religious uses.’’ 140 S. Ct. 

at 2256. Moreover, SBA cannot identify 

any other possible interest underlying 

the subject provisions, much less one 

that would pass muster under the 

‘‘ ‘strictest scrutiny,’ ’’ id. at 2257 

(quoting Trinity Lutheran, 137 S. Ct. at 

2019), that the Court applies to such 

religious-status-based exclusions. 

In addition, the five subject regulatory 

provisions cannot be justified under 

Locke v. Davey, 540 U.S. 712 (2004), 

because they are not restrictions on 

religious uses of business loans or 

disaster assistance. Rather, they exclude 

certain recipients from even secular 

uses of business loans and disaster 

assistance based solely on their religious 

status. 

Therefore, the five subject 

provisions—13 CFR 109.400(b)(11), 

120.110(k), 123.301(g), 123.502(n), and 

123.702(b)(6)—are inconsistent with the 

Free Exercise Clause of the First 

Amendment, as construed by the 

Supreme Court in Trinity Lutheran and 

Espinoza. 

C. SBA’s 530D Letter and Subsequent 

Review of SBA Regulations 

In light of the Supreme Court’s 

decision in Trinity Lutheran, and after 

consultation with the U.S. Department 

of Justice, SBA determined that the 

religious-status-based exclusions in its 

Business Loan and EIDL programs—13 

CFR 120.110(k) and 123.301(g)—are 

unconstitutional. In a letter submitted 

on April 3, 2020, pursuant to 28 U.S.C. 

530D, SBA informed Congress of its 

determination. SBA explained that the 

provisions ‘‘impermissibly exclude a 

class of potential recipients based solely 

on their religious identity, just like the 

State policy that was struck down in 

Trinity Lutheran’’; that they 

‘‘categorically exclude religious 

organizations simply because they are 

religious’’; and that ‘‘[t]hese status-based 

prohibitions also cannot be justified 

under Locke v. Davey, 540 U.S. 712 

(2004)’’ because they ‘‘are not limited to 

religious uses of business loans or 

economic disaster assistance, but rather 

exclude certain recipients from even 

secular uses based on their religious 

character.’’ SBA notified Congress that it 

would ‘‘refrain from enforcing, 

applying, or administering’’ the subject 

provisions, and that it intended to 

‘‘propose amendments to 13 CFR 

120.110 and 123.301 that will conform 

these provisions to the Constitution.’’ 

Since submitting its 530D letter, SBA 

has reviewed its other regulations and 

identified three other substantially 

similar provisions—13 CFR 

109.400(b)(11), 123.502(n), and 

123.702(b)(6)—that suffer from the same 

constitutional defect identified in the 

530D letter. Accordingly, SBA now 

proposes to remove all five of the 

invalid provisions to conform its 

regulations to the requirements of the 

Free Exercise Clause. 

D. President Trump’s Executive Order 

13798 and the Attorney General’s 

Memorandum on Religious Liberty 

SBA’s proposal not only follows from 

recent Supreme Court precedent and 

will ensure compliance with the 

Constitution, but also accords with 

Executive Branch policy. On May 4, 

2017, President Trump issued Executive 

Order 13798, Presidential Executive 

Order Promoting Free Speech and 

Religious Liberty, 82 FR 21675 (May 9, 

2017). Executive Order 13798 states that 

‘‘Federal law protects the freedom of 

Americans and their organizations to 

exercise religion and participate fully in 

civic life without undue interference by 

the Federal Government’’ and further 

provides that the executive branch will 

honor and enforce those protections. It 

also directed the Attorney General to 

‘‘issue guidance interpreting religious 

liberty protections in Federal law.’’ 82 

FR at 21675. Pursuant to this 

instruction, the Attorney General, on 

October 6, 2017, issued the 

Memorandum for All Executive 

Departments and Agencies, ‘‘Federal 

Law Protections for Religious Liberty,’’ 

82 FR 49668 (Oct. 26, 2017) (the 

‘‘Attorney General’s Memorandum on 

Religious Liberty’’). 

Consistent with Trinity Lutheran, the 

Attorney General’s Memorandum on 

Religious Liberty emphasized that 

individuals and organizations do not 

forfeit religious-liberty protections by 

receiving government grants or 

otherwise interacting with Federal, 

state, or local governments, and that 

‘‘government may not exclude religious 

organizations as such from secular aid 

programs . . . when the aid is not being 

used for explicitly religious activities 

such as worship or proselytization.’’ 82 

FR at 49669. 

II. Section by Section Analysis 

A. Section 109.400—Eligible Small 

Business Concerns 

SBA is proposing to amend 13 CFR 

109.400 to remove paragraphs (b)(11) 

and (b)(12) and redesignate the 

following paragraphs accordingly. 13 

CFR 109.400(b) currently enumerates a 

list of ‘‘types of businesses’’ that ‘‘are 

not eligible to receive a loan from an ILP 

Intermediary under’’ the ILP. Included 

in this list is 13 CFR 109.400(b)(11), 

‘‘[b]usinesses principally engaged in 

teaching, instructing, counseling or 

indoctrinating religion or religious 

beliefs, whether in a religious or secular 

setting[.]’’ This exclusion based on 

religious status violates the Free 

Exercise Clause of the First Amendment 

to the Constitution. Therefore, SBA 

proposes to remove it but leave intact 

the other exclusions listed in 13 CFR 

109.400(b). 

B. Section 120.110—What businesses 

are ineligible for SBA business loans? 

SBA is proposing to amend 13 CFR 

120.110 to remove paragraphs (k) and (l) 

and redesignate the following 

paragraphs accordingly. 13 CFR 120.110 

currently enumerates a list of ‘‘types of 

businesses’’ that ‘‘are ineligible for SBA 

business loans.’’ Included in this list is 

13 CFR 120.110(k), ‘‘[b]usinesses 

principally engaged in teaching, 

instructing, counseling or indoctrinating 

religion or religious beliefs, whether in 

a religious or secular setting[.]’’ This 

exclusion based on religious status 

violates the Free Exercise Clause of the 

First Amendment to the Constitution. 

Therefore, SBA proposes to remove it 

but leave intact the other exclusions 

listed in 13 CFR 120.110. 

C. Section 123.301—When would my 

business not be eligible to apply for an 

Economic Injury Disaster Loan? 

SBA is proposing to amend 13 CFR 

123.301 to remove paragraph (g) and 

redesignate the following paragraph 

accordingly. 13 CFR 123.301 currently 

enumerates a list of types of businesses 

that ‘‘are not eligible for an economic 

[injury] disaster loan.’’ Included in this 

list is 13 CFR 123.301(g), businesses that 

are ‘‘[p]rincipally engaged in teaching, 

instructing, counseling or indoctrinating 

religion or religious beliefs, whether in 

a religious or secular setting[.]’’ This 

exclusion based on religious status 

violates the Free Exercise Clause of the 

First Amendment to the Constitution. 

Therefore, SBA proposes to remove it 

but leave intact the other exclusions 

listed in 13 CFR 123.301. 


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1See Religious Restrictions on Capital Financing 

for Historically Black Colleges and Universities, 43 

Op. O.L.C.—**7–15 (Aug. 15, 2019) (slip op.) 

(analyzing a loan program substantially similar to 

SBA’s business loan programs and concluding that 

the Establishment Clause did not require any useof-funds restrictions); Authority of FEMA to Provide 

Disaster Assistance to Seattle Hebrew Academy, 26 

Op. O.L.C. 114, 122–32 (2002) (analyzing a disaster 

assistance program substantially similar to SBA’s 

disaster assistance programs and concluding that 

the Establishment Clause permitted the provision of 

disaster assistance to a religious school). 

2See 13 CFR 109.430, 120.120, 120.130, 120.131, 

123.303, 123.508, 123.509, and 123.704. 

D. Section 123.502—Under what 

circumstances is your business 

ineligible to be considered for a Military 

Reservist Economic Injury Disaster loan? 

SBA is proposing to amend 13 CFR 

123.502 to remove paragraph (n) and 

redesignate the following paragraph 

accordingly. 13 CFR 123.502 currently 

enumerates a list of types of businesses 

that are ‘‘ineligible for a Military 

Reservist EIDL.’’ Included in this list is 

13 CFR 123.502(n), listing businesses 

whose ‘‘[p]rincipal activity is teaching, 

instructing, counseling or indoctrinating 

religion or religious beliefs, whether in 

a religious or secular setting[.]’’ This 

exclusion based on religious status 

violates the Free Exercise Clause of the 

First Amendment to the Constitution. 

Therefore, SBA proposes to remove it 

but leave intact the other exclusions 

listed in 13 CFR 123.502. 

E. Section 123.702—What are the 

eligibility requirements for an IDAP 

loan? 

SBA is proposing to amend 13 CFR 

123.702 to remove paragraph (b)(6) and 

redesignate the following paragraphs 

accordingly. 13 CFR 123.702(b) 

currently enumerates a list of types of 

businesses that are ‘‘not eligible for an 

IDAP loan.’’ Included in this list is 13 

CFR 123.702(b)(6), businesses that are 

‘‘[p]rincipally engaged in teaching, 

instructing, counseling or indoctrinating 

religion or religious beliefs, whether in 

a religious or secular setting[.]’’ This 

exclusion based on religious status 

violates the Free Exercise Clause of the 

First Amendment to the Constitution. 

Therefore, SBA proposes to remove it 

but leave intact the other exclusions 

listed in 13 CFR 123.702(b). 

III. Compliance With Executive Orders 

12866, 13771, 12988, and 13132, the 

Paperwork Reduction Act (44 U.S.C., 

Ch. 35), and the Regulatory Flexibility 

Act (5 U.S.C. 601–612) 

A. Executive Order 12866 

Under Executive Order 12866, the 

Office of Information and Regulatory 

Affairs (OIRA) must determine whether 

this regulatory action is ‘‘significant’’ 

and, therefore, subject to the 

requirements of the executive order and 

subject to review by the Office of 

Management and Budget (OMB). 

Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ 

as an action likely to result in a 

regulation that may (1) have an annual 

effect on the economy of $100 million 

or more or adversely affect in a material 

way the economy, a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local, or tribal 

governments or communities (also 

referred to as an ‘‘economically 

significant’’ regulation); (2) create a 

serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

materially alter the budgetary impacts of 

entitlements, grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles stated in Executive Order 

12866. 

OIRA has determined that this 

proposed rule is a significant, but not 

economically significant, regulatory 

action subject to review by OMB under 

section 3(f) of Executive Order 12866. 

The proposed rule removes 

paragraphs that excluded from SBA’s 

loan and disaster assistance programs 

types of businesses that were 

‘‘principally engaged in teaching, 

instructing, counseling or indoctrinating 

religion or religious beliefs . . . .’’ 

Executive Order 12866 requires 

assessment of available alternatives. An 

alternative to the proposed rule’s 

elimination of invalid provisions is to 

take no action regarding the invalid 

exclusions. This alternative is untenable 

as it would leave in place provisions 

that are invalid under the Free Exercise 

Clause. The other alternative to the 

proposed rule’s elimination of the 

invalid provisions is to create new 

restrictions barring religious uses of 

business loans and disaster assistance. 

This alternative is unnecessary under 

the First Amendment; 1 would create 

unnecessary regulation as current 

regulations already specify—in secular 

terms—the permissible uses of funds; 2

and would thus be inconsistent with the 

Administration’s deregulatory agenda, 

see Executive Order 13771, Presidential 

Executive Order on Reducing 

Regulation and Controlling Regulatory 

Costs, 82 FR 9,339 (Feb. 3, 2017). 

In accordance with Executive Order 

12866, SBA has assessed the potential 

costs and benefits of this regulatory 

action. SBA estimates that no 

quantifiable effects exist from this 

proposed rule relative to a baseline that 

represents the state of SBA’s programs 

in the absence of this action. Because 

these exclusions are not enforceable 

(and, indeed, SBA has informed 

Congress of its determination not to 

enforce 13 CFR 120.110(k) and 

123.301(g)), SBA expects the removal of 

these exclusions to impose no 

additional costs or significant benefits. 

In terms of benefits, SBA recognizes a 

nonquantifiable benefit to religious 

liberty that comes from removing 

exclusions of faith-based organizations, 

in conflict with the Free Exercise 

Clause. SBA also recognizes a 

nonquantifiable benefit to participants 

in SBA’s loan and disaster assistance 

programs that comes from increased 

clarity in the regulatory requirements 

that apply to faith-based organizations 

operating in these programs. Benefits 

may also accrue from the increased 

capacity of faith-based social-service 

providers to provide services, both 

because these providers will be able to 

allocate resources with less uncertainty 

and because more faith-based 

organizations may participate. The SBA 

does not expect the proposed rule to 

materially alter the budgetary impact of 

its loan programs or the rights and 

obligations of recipients. 

B. Executive Order 13771 

This proposed rule is not expected to 

be an Executive Order 13771 regulatory 

action. 

C. Executive Order 12988 

This action meets applicable 

standards set forth in sections 3(a) and 

3(b)(2) of Executive Order 12988, Civil 

Justice Reform, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. The action does not have 

retroactive or preemptive effect. 

D. Executive Order 13132 

This proposed rule does not have 

federalism implications as defined in 

Executive Order 13132. It would 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 

levels of government, as specified in the 

Executive Order. As such it does not 

warrant the preparation of a Federalism 

Assessment. 

E. Paperwork Reduction Act, 44 U.S.C., 

Ch. 35 

For the purpose of the Paperwork 

Reduction Act, 44 U.S.C. Ch. 35, SBA 

has determined that this rule will not 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5040 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

3According to the SUSB, 183,411 establishments 

were under NAICS Code 813110 in 2012, the last 

year for which this data set is available. Of the total 

number of establishments, 181,298 have annual 

receipts under $7.5 million. SBA uses a revenue 

standard for determining small businesses in 

NAICS 813110. In the 2019 SBA Table of Size 

Standards, that revenue standard was $8 million 

and below. SUSB information is arranged in dollar 

ranges of receipt size, with the next category 

ranging from above $7.5 million to $9,999,999, 

which is in excess of SBA’s small business 

standard. 660 establishments were in that category. 

impose any new reporting or record 

keeping requirements. 

F. Regulatory Flexibility Act, 5 U.S.C. 

601–612 

When an agency issues a rulemaking 

proposal, the Regulatory Flexibility Act 

(‘‘RFA’’) generally requires the agency to 

‘‘prepare and make available for public 

comment an initial regulatory flexibility 

analysis’’ that will ‘‘describe the impact 

of the proposed rule on small entities.’’ 

5 U.S.C. 603(a). But the RFA allows the 

head of an agency to certify a rule, in 

lieu of preparing an analysis, if the 

proposed rulemaking is not expected to 

have a significant economic impact on 

a substantial number of small entities. 5 

U.S.C. 605(b). 

The RFA defines ‘‘small entity’’ to 

include small businesses, small 

organizations, and small governmental 

jurisdictions. 5 U.S.C. 601(6). This 

proposed rule concerns participation in 

SBA’s business loan and disaster 

assistance programs by certain faithbased organizations. As such, the rule 

relates to small organizations. 

Small organizations that are the 

subject of this proposed rule include 

entities in NAICS Code 813110— 

Religious Organizations. According to 

the Census Bureau’s Statistics of U.S. 

Businesses (SUSB), in 2012, 

approximately 182,000 organizations in 

this NAICS code met the definition for 

SBA’s Small Business Size Standards, as 

updated in 2019.3 The number of those 

organizations that meet the general 

requirements for eligibility to 

participate in SBA’s business loan and 

disaster assistance programs is likely 

much smaller. 

Considering that the proposed rule 

imposes no costs while ensuring that 

SBA’s regulations conform with 

requirements of the Free Exercise 

Clause, SBA estimates that the proposed 

rulemaking will not have a significant 

economic impact on a substantial 

number of small entities. SBA does not 

believe that the impact will be 

significant within any size groupings 

because this proposed rule eliminates 

invalid provisions in its business loan 

and disaster assistance programs. 

Accordingly, the Administrator of the 

SBA hereby certifies that this rule will 

not, if promulgated, have a significant 

economic impact on a substantial 

number of small entities. SBA invites 

comment from members of the public 

who believe there will be a significant 

impact on any small entities, including 

small businesses. 

List of Subjects 

13 CFR Part 109 

Loan programs—business, Reporting 

and recordkeeping requirements, Small 

businesses. 

13 CFR Part 120 

Loan programs—business, Reporting 

and recordkeeping requirements, Small 

businesses. 

13 CFR Part 123 

Disaster assistance, Loan programs— 

business, Reporting and recordkeeping 

requirements, Small businesses. 

Accordingly, for the reasons stated in 

the preamble, SBA proposes to amend 

13 CFR parts 109, 120, and 123 as 

follows: 

PART 109—INTERMEDIATE LENDING 

PILOT PROGRAM 

■ 1. The authority citation for 13 CFR 

part 109 continues to read as follows: 

Authority: 15 U.S.C. 634(b)(6), (b)(7), and 

636(l). 

§ 109.400 [Amended] 

■ 2. Amend § 109.400 by removing 

paragraph (b)(11) and redesignating 

paragraphs (b)(13) through (23) as 

paragraphs (b)(11) through (21), 

respectively. 

PART 120—BUSINESS LOANS 

■ 3. The authority citation for 13 CFR 

part 120 continues to read as follows: 

Authority: 15 U.S.C. 634(b) (6), (b) (7), (b) 

(14), (h), and note, 636(a), (h) and (m), and 

note, 650, 657t, and note, 657u, and note, 

687(f), 696(3) and (7), and note, and 697(a) 

and (e), and note. 

§ 120.110 [Amended] 

■ 4. Amend § 120.110 by removing 

paragraph (k) and redesignating 

paragraphs (m) through (s) as 

paragraphs (k) through (q), respectively. 

PART 123—DISASTER LOAN 

PROGRAM 

■ 5. The authority citation for 13 CFR 

part 123 continues to read as follows: 

Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 

636(d), and 657n. 

§ 123.301 [Amended] 

■ 6. Amend § 123.301 by: 

■ a. Adding the word ‘‘or’’ to the end of 

paragraph (f); and 

■ b. Removing paragraph (g) and 

redesignating paragraph (h) as 

paragraph (g). 

§ 123.502 [Amended] 

■ 7. Amend § 123.502 by: 

■ a. Adding the word ‘‘or’’ to the end of 

paragraph (m); and 

■ b. Removing paragraph (n) and 

redesignating paragraph (o) as paragraph 

(n). 

§ 123.702 [Amended] 

■ 8. Amend § 123.702 by removing 

paragraph (b)(6) and redesignating 

paragraphs (b)(7) through (25) as 

paragraphs (b)(6) through (24), 

respectively. 

Signed in Washington, DC. 

Jovita Carranza, 

Administrator. 

[FR Doc. 2021–00446 Filed 1–14–21; 11:15 am] 

BILLING CODE P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2020–1173; Project 

Identifier MCAI–2020–00299–R] 

RIN 2120–AA64 

Airworthiness Directives; Airbus 

Helicopters Deutschland GmbH 

Helicopters 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to adopt a 

new airworthiness directive (AD) for 

Airbus Helicopters Deutschland GmbH 

Model EC135P1, EC135P2, EC135P2+, 

EC135P3, EC135T1, EC135T2, 

EC135T2+, and EC135T3 helicopters. 

This proposed AD was prompted by a 

reassessment of the flight control 

system. This proposed AD would 

require modification of the cyclic stick, 

as specified in a European Aviation 

Safety Agency (EASA) AD, which is 

proposed for incorporation by reference 

(IBR). The FAA is proposing this AD to 

address the unsafe condition on these 

products. 

DATES: The FAA must receive comments 

on this proposed AD by March 5, 2021. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 


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