Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20817 

Compliance With Executive Orders 

12866, 12988, 13132, and 13771, the 

Paperwork Reduction Act (44 U.S.C. 

Ch. 35), and the Regulatory Flexibility 

Act (5 U.S.C. 601–612) 

E.O. 12866 and E.O. 13563 

This interim final rule is 

economically significant for the 

purposes of Executive Orders 12866 and 

13563. 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. 

This rule is necessary to implement 

Sections 1102 and 1106 of the CARES 

Act in order to provide economic relief 

to small businesses nationwide 

adversely impacted under the COVID– 

19 Emergency Declaration. We 

anticipate that this rule will result in 

substantial benefits to small businesses, 

their employees, and the communities 

they serve. However, we lack data to 

estimate the effects of this rule. 

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 impose recordkeeping or reporting 

requirements under the Paperwork 

Reduction Act (‘‘PRA’’). SBA has 

obtained emergency approval under 

OMB Control Number 3245–0407 for the 

information collection (IC) required to 

implement the program described 

above. This IC consists of Form 2483 

(Paycheck Protection Program 

Application Form), SBA Form 2484 

(Paycheck Protection Program Lender’s 

Application for 7(a) Loan Guaranty), 

and SBA Form 3506 (CARES Act 

Section 1102 Lender Agreement), and 

SBA Form 3507 (CARES Act Section 

1102 Lender Agreement—Non-Bank and 

Non-Insured Depository Institution 

Lender). The collection is approved for 

use until September 30, 2020. 

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 to the public 

interest. Small Business 

Administration’s Office of Advocacy 

guide: How to Comply with the 

Regulatory Flexibility Ac. Ch.1. p.9. 

Accordingly, SBA is not required to 

conduct a regulatory flexibility analysis. 

Authority: 15 U.S.C. 636(a)(36); 

Coronavirus Aid, Relief, and Economic 

Security Act, Public Law 116–136, 

Section 1114. 

Jovita Carranza, 

Administrator. 

[FR Doc. 2020–07672 Filed 4–10–20; 4:15 pm] 

BILLING CODE P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 121 

[Docket No. SBA–2020–0019] 

RIN 3245–AH35 

Business Loan Program Temporary 

Changes; Paycheck Protection 

Program 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Interim final rule. 

SUMMARY: Elsewhere in this issue of the 

Federal Register, the U.S. Small 

Business Administration (SBA) is 

publishing an interim final rule (the 

Initial Rule) announcing the 

implementation of sections 1102 and 

1106 of the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act or 

the Act). Section 1102 of the Act 

temporarily adds a new program, titled 

the ‘‘Paycheck Protection Program,’’ to 

the SBA’s 7(a) Loan Program. Section 

1106 of the Act provides for forgiveness 

of up to the full principal amount of 

qualifying loans guaranteed under the 

Paycheck Protection Program. The 

Paycheck Protection Program and loan 

forgiveness are intended to provide 

economic relief to small businesses 

nationwide adversely impacted by the 

Coronavirus Disease 2019 (COVID–19). 

This interim final rule supplements the 

Initial Rule with additional guidance 

regarding the application of certain 

affiliate rules applicable to SBA’s 

implementation of sections 1102 and 

1106 of the Act and requests public 

comment. 

DATES: 

Effective date: This interim final rule 

is effective April 15, 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. 


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20818 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 

1Section 7(a)(36)(D)(iv) of the Small Business Act 

(15 U.S.C. 636(a)(36)(D)(iv), as added by the Act, 

waives the affiliation rules contained in § 121.103 

for (1) any business concern with not more than 500 

employees that, as of the date on which the loan 

is disbursed, is assigned a North American Industry 

Classification System code beginning with 72; (2) 

any business concern operating as a franchise that 

is assigned a franchise identifier code by the 

Administration; and (3) any business concern that 

receives financial assistance from a company 

licensed under section 301 of the Small Business 

Investment Act of 1958 (15 U.S.C. 681). This 

interim final rule has no effect on these statutory 

waivers, which remain in full force and effect. As 

a result, the affiliation rules contained in section 

121.301 also do not apply to these types of entities. 

2 In order to help potential borrowers identify 

other businesses with which they may be deemed 

to be affiliated under the common management 

standard, the Borrower Application Form, SBA 

Form 2483, released on April 2, 2020, requires 

applicants to list other businesses with which they 

have common management. The information 

supplied by the applicant in response to that 

information request should be used by applicants 

as they assess whether they have affiliates that 

should be included in their number of employees 

reported on SBA Form 2483. 

Comment Date: Comments must be 

received on or before May 15, 2020. 

ADDRESSES: You may submit comments, 

identified by number SBA–2020–0019 

through the Federal eRulemaking Portal: 

http://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: 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 

or the 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 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 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 Act provides for 

forgiveness of up to the full principal 

amount of qualifying loans guaranteed 

under the Paycheck Protection Program. 

On April 2, 2020, SBA issued an interim 

final rule (the Initial Rule) announcing 

the implementation of sections 1102 

and 1106 of the Act. A more detailed 

discussion of sections 1102 and 1106 of 

the Act is found in section III of the 

Initial Rule. 

This interim final rule supplements 

the Initial Rule with additional 

guidance regarding the application of 

certain affiliate rules applicable to 

SBA’s implementation of sections 1102 

and 1106 of the Act and requests public 

comment. 

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 (5 

U.S.C. 553(b)(3)(B)). Specifically, small 

businesses need to be informed on how 

to apply for a loan and the terms of the 

loan under section 1102 of the Act as 

soon as possible because the last day to 

apply for and receive a loan is June 30, 

2020. The immediate effective date of 

this interim final rule will benefit small 

businesses so that they can immediately 

apply for the loan with a better 

understanding of loan terms and 

conditions. 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 1 of the 

Act without regard to notice 

requirements. 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. These comments 

must be submitted on or before May 15, 

2020. The SBA will consider these 

comments and the need for making any 

revisions as a result of these comments. 

III. Affiliate Rules for Paycheck 

Protection Program 

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 Paycheck Protection Program 

(PPP). Loans under the PPP will be 100 

percent guaranteed by SBA, and the full 

principal amount of the loans may 

qualify for loan forgiveness. Additional 

information about the PPP is available 

in the Initial Rule. 

1. Affiliation Rules Generally 

Are affiliates considered together for 

purposes of determining eligibility? 

In most cases, a borrower will be 

considered together with its affiliates for 

purposes of determining eligibility for 

the PPP.1 Under SBA rules, entities may 

be considered affiliates based on factors 

including stock ownership, overlapping 

management,2 and identity of interest. 

13 CFR 121.301. 

How do SBA’s affiliation rules affect my 

eligibility and apply to me under the 

PPP? 

An entity generally is eligible for the 

PPP if it, combined with its affiliates, is 

a small business as defined in section 3 

of the Small Business Act (15 U.S.C. 

632), or (1) has 500 or fewer employees 

whose principal place of residence is in 

the United States or is a business that 

operates in a certain industry and meets 

applicable SBA employee-based size 

standards for that industry, and (2) is a 


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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20819 

tax-exempt nonprofit organization 

described in section 501(c)(3) of the 

Internal Revenue Code (IRC), a taxexempt veterans organization described 

in section 501(c)(19) of the IRC, a Tribal 

business concern described in section 

31(b)(2)(C) of the Small Business Act, or 

any other business concern. Prior to the 

Act, the nonprofit organizations listed 

above were not eligible for SBA 

Business Loan Programs under section 

7(a) of the Small Business Act; only forprofit small business concerns were 

eligible. The Act made such nonprofit 

organizations not only eligible for the 

PPP, but also subjected them to SBA’s 

affiliation rules. Specifically, section 

1102 of the Act provides that the 

provisions applicable to affiliations 

under 13 CFR 121.103 apply with 

respect to nonprofit organizations and 

veterans organizations in the same 

manner as with respect to small 

business concerns. However, the 

detailed affiliation standards contained 

in § 121.103 currently do not apply to 

PPP borrowers, because § 121.103(a)(8) 

provides that applicants in SBA’s 

Business Loan Programs (which include 

the PPP) are subject to the affiliation 

rule contained in 13 CFR 121.301. 

2. Faith-Based Organizations 

This rule exempts otherwise qualified 

faith-based organizations from the 

SBA’s affiliation rules, including those 

set forth in 13 CFR part 121, where the 

application of the affiliation rules would 

substantially burden those 

organizations’ religious exercise. This 

exemption is required, or at a minimum 

authorized, by the Religious Freedom 

Restoration Act (RFRA) (Pub. L. 103– 

141), which provides that the 

‘‘[g]overnment shall not substantially 

burden a person’s exercise of religion’’ 

unless the government can 

‘‘demonstrate[] that application of the 

burden’’ to the person is both ‘‘in 

furtherance of a compelling 

governmental interest’’ and ‘‘the least 

restrictive means of furthering that 

compelling governmental interest.’’ 42 

U.S.C. 2000bb–1. 

A substantial burden under RFRA 

includes both government action that 

compels a person to violate his sincere 

religious beliefs or suffer a penalty, see, 

e.g., Burwell v. Hobby Lobby Stores, Inc., 

573 U.S. 682, 726 (2014), and the 

imposition of a substantial burden 

through ‘‘indirect’’ measures. Thomas v. 

Review Bd. of Ind. Emp. Sec. Div., 450 

U.S. 707, 717–18 (1981). Notably, the 

government imposes a substantial 

burden on religious exercise when it 

‘‘conditions receipt of an important 

benefit upon conduct proscribed by a 

religious faith, or where it denies such 

a benefit because of conduct mandated 

by religious belief.’’ Id. at 718. For 

example, in Sherbert v. Verner, 374 U.S. 

398 (1963), a State denied the plaintiff 

unemployment benefits because she 

would not work on Saturday, the 

Sabbath of her faith. Id. at 400–01. Even 

though no ‘‘sanctions directly 

compel[led]’’ her to work on Saturday, 

the Supreme Court held that the State’s 

denial of benefits ‘‘puts the same kind 

of burden upon the free exercise of 

religion as would a fine imposed against 

[her] for her Saturday worship.’’ Id. at 

404. As the Court observed, the State’s 

framework ‘‘forces her to choose 

between following the precepts of her 

religion and forfeiting benefits, on the 

one hand, and abandoning one of the 

precepts of her religion in order to 

accept work, on the other hand.’’ Id. 

Consistent with these precedents, RFRA 

explicitly contemplates that ‘‘the denial 

of government funding, benefits, or 

exemptions’’ may violate its protections. 

42 U.S.C. 2000bb–4. 

SBA is aware of the existence of faithbased organizations that would qualify 

for relief under the CARES Act but for 

their affiliation with other entities as an 

aspect of their religious practice. 

Supreme Court precedent has long 

recognized that the organizational 

structure of faith-based entities may 

itself be a matter of significant religious 

concern and that faith-based 

organizations are therefore guaranteed 

the ‘‘power to decide for themselves, 

free from state interference, matters of 

church government as well as those of 

faith and doctrine.’’ Kedroff v. St. 

Nicholas Cathedral of Russian Orthodox 

Church in N. Am., 344 U.S. 94, 116 

(1952). Moreover, an assessment of the 

extent to which questions concerning 

religious polity rest upon theological or 

other religious foundations presents 

particular difficulties, for the First 

Amendment ‘‘forbids civil courts’’ from 

‘‘the interpretation of particular church 

doctrines and the importance of those 

doctrines to the religion.’’ Presbyterian 

Church v. Mary Elizabeth Blue Hull 

Mem’l Presbyterian Church, 393 U.S. 

440, 450 (1969). A number of faithbased organizations understand their 

affiliation with other religious entities 

as a part of their exercise of religion, as 

a mandate given the ‘‘hierarchical or 

connectional’’ structure of their church, 

Jones v. Wolf, 443 U.S. 595, 597 (1979), 

or as an expression of their sincere 

religious belief. Cf. 1 W. Cole Durham 

& Robert Smith, Religious Organizations 

and the Law section 8.19 (Westlaw rev. 

ed. 2017) (‘‘Religious organizations, 

such as parishes or mission centers, 

normally tend to choose the civilproperty-holding structures that most 

closely mirror their own ecclesiology or 

polity.’’). Either affiliation decision falls 

within the definition of ‘‘religious 

exercise’’ that applies to RFRA, which 

‘‘includes any exercise of religion, 

whether or not compelled by, or central 

to, a system of religious belief.’’ See 42 

U.S.C. 2000cc–5(7)(A); 2000bb–2(4) 

(‘‘the term ‘exercise of religion’ means 

religious exercise, as defined in section 

2000cc–5 of this title’’). 

As applied to these faith-based 

organizations, the affiliation rules 

would impose a substantial burden. The 

affiliation rules would deny an 

important benefit (participation in a 

program for which they would 

otherwise be eligible under the CARES 

Act) because of the exercise of sincere 

religious belief (affiliation with other 

religious entities). 

The Administrator has also concluded 

that she does not have a compelling 

interest in denying emergency 

assistance to faith-based organizations 

that are facing the same economic 

hardship to which the CARES Act 

responded and who would be eligible 

for PPP but for their faith-based 

organizational and associational 

decisions. This conclusion is reinforced 

by the fact that the affiliation rules 

already contain numerous exemptions, 

see generally 13 CFR 121.103(b), ranging 

from ‘‘[b]usiness concerns owned and 

controlled by Indian Tribes, Alaska 

Native Corporations, [and] Native 

Hawaiian Organizations,’’ id. 

§ 121.103(b)(2)(i) to ‘‘member 

shareholders of a small agricultural 

cooperative.’’ Id. § 121.103(b)(7). In light 

of these exemptions, it is difficult to 

maintain that denying relief to these 

faith-based organizations is necessary to 

further a compelling government 

interest, let alone the least restrictive 

means of doing so. See Church of the 

Lukumi Babalu Aye, Inc. v. City of 

Hialeah, 508 U.S. 520, 547 (1993) (‘‘[A] 

law cannot be regarded as protecting an 

interest of the highest order when it 

leaves appreciable damage to that 

supposedly vital interest 

unprohibited.’’) (cleaned up); Gonzales 

v. O Centro Espirita Beneficiente Uniao 

do Vegetal, 546 U.S. 418, 433 (2006) 

(applying same principle under RFRA). 

SBA accordingly must exempt faithbased organizations that would 

otherwise be disqualified from the PPP 

based on features of those organizations’ 

affiliations that are a matter of sincere 

religious exercise as defined in 42 

U.S.C. 2000bb–2. 

This action is also supported by 15 

U.S.C. 634(b)(6), which authorizes the 

Administrator to ‘‘make such rules and 

regulations as he deems necessary to 


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20820 Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 

carry out the authority vested in him by 

or pursuant to this chapter.’’ As relevant 

here, the CARES Act expanded 

eligibility for the covered loans during 

the covered period for nonprofit 

organizations that employ not more than 

500 employees or, if applicable, the size 

standard in number of employees 

established by the Administrator for the 

industry in which the nonprofit 

organization operates. 15 U.S.C. 

636(a)(36)(D)(i). That expansion posed 

unique concerns for the Administrator, 

who is tasked with applying the 

‘‘provisions applicable to affiliations 

under section 121.103 of title 13, Code 

of Federal Regulations, or any successor 

thereto, . . . with respect to a nonprofit 

organization and a veterans 

organizations in the same manner as 

with respect to a small business 

concern.’’ Id. 636(a)(36)(D)(vi). 

Although these rules may easily be 

applied to faith-based organizations in 

many cases, their application to certain 

faith-based organizations presents 

significant challenges, in particular 

because of the large number of faithbased organizations who would now be 

eligible for the PPP but for their 

religious exercise. 

As discussed above, carrying the 

affiliation rules over to all faith-based 

organizations without modification 

would raise concerns under RFRA. 

Moreover, application of the affiliation 

rules, which, for example, provide for 

assessment of whether one faith-based 

organization ‘‘controls or has the power 

to control’’ another organization, 13 CFR 

121.103(a)(1), could involve SBA in 

questions of church governance 

concerning ‘‘the allocation of power 

within a (hierarchical) church so as to 

decide . . . religious law (governing 

church polity),’’ in violation of the First 

Amendment. Serbian E. Orthodox 

Diocese for the U.S.A. & Canada v. 

Milivojevich, 426 U.S. 696, 709 (1979) 

(internal quotation marks omitted)). 

Finally, affiliation rules developed in 

the context of for-profit enterprises 

present significant administrative 

difficulties where faith-based 

organizations are concerned. For 

example, ‘‘the notion of corporate 

subsidiarity or affiliation in civil law is 

entirely foreign to the polity of religious 

organizations,’’ and there is a significant 

risk that civil authorities will 

‘‘mischaracterize or misinterpret the 

polity of a religious body.’’ 1 W. Cole 

Durham & Robert Smith, Religious 

Organizations and the Law sections 

8.19, 8.21 (discussing examples of 

judicial mischaracterizations). 

Consistent with these concerns, it is also 

notable that other areas of federal law 

approach issues analogous to affiliation 

differently for religious organizations. 

See, e.g., 26 U.S.C. 512 (b)(12). 

For these reasons, in addition to the 

RFRA mandate, the Administrator has 

determined that it is appropriate to 

exercise the authority granted under 15 

U.S.C. 634(b)(6) to exempt from 

application of SBA’s affiliation rules 

faith-based organizations that would 

otherwise be disqualified from 

participation in PPP because of 

affiliations that are a part of their 

religious exercise. 

Accordingly, the SBA’s affiliation 

rules, including those set forth in 13 

CFR part 121, do not apply to the 

relationship of any church, convention 

or association of churches, or other 

faith-based organization or entity to any 

other person, group, organization, or 

entity that is based on a sincere 

religious teaching or belief or otherwise 

constitutes a part of the exercise of 

religion. This includes any relationship 

to a parent or subsidiary and other 

applicable aspects of organizational 

structure or form. A faith-based 

organization seeking loans under this 

program may rely on a reasonable, good 

faith interpretation in determining 

whether its relationship to any other 

person, group, organization, or entity is 

exempt from the affiliation rules under 

this provision, and SBA will not assess, 

and will not require participating 

lenders to assess, the reasonableness of 

the faith-based organization’s 

determination. 

3. Additional Information 

SBA may provide further guidance, if 

needed, through SBA notices and a 

program guide which will be posted on 

SBA’s website at www.sba.gov. 

Questions on the Paycheck Protection 

Program 7(a) Loans 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, 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 impose recordkeeping or reporting 

requirements under the Paperwork 

Reduction Act (‘‘PRA’’). SBA has 

obtained emergency approval under 

OMB Control Number 3245–0407 for the 

information collection (IC) required to 

implement the program described 

above. This IC consists of Form 2483 

(Paycheck Protection Program 

Application Form) and SBA Form 2484 

(Paycheck Protection Program Lender’s 

Application for 7(a) Loan Guaranty) 

SBA Form 3506 (CARES Act Section 

1102 Lender Agreement), and SBA Form 

3507 (CARES Act Section 1102 Lender 

Agreement—Non-Bank and Non-Insured 

Depository Institution Lender). The 

collection is approved for use until 

October 31, 2020. 

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 


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Federal Register / Vol. 85, No. 73 / Wednesday, April 15, 2020 / Rules and Regulations 20821 

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 Ac. Ch.1. p.9. Accordingly, 

SBA is not required to conduct a 

regulatory flexibility analysis. 

List of Subjects in 13 CFR Part 121 

Administrative practice and 

procedure, Authority delegations 

(Government agencies), 

Intergovernmental relations, 

Investigations, Reporting and 

recordkeeping requirements. 

For the reasons stated in the 

preamble, the Small Business 

Administration amends 13 CFR part 121 

as set forth below: 

PART 121—SMALL BUSINESS SIZE 

REGULATIONS 

■ 1. The authority citation for part 121 

is revised to read as follows: 

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

636(a)(36), 662, and 694a(9); Pub. L. 116–136, 

Section 1114. 

■ 2. Amend § 121.103 by adding 

paragraph (b)(10) to read as follows: 

§ 121.103 How does SBA determine 

affiliation? 

* * * * * 

(b) * * * 

(10)(i) The relationship of a faithbased organization to another 

organization is not considered an 

affiliation with the other organization 

under this subpart if the relationship is 

based on a religious teaching or belief or 

otherwise constitutes a part of the 

exercise of religion. In addition, the 

eligibility criteria set forth in 15 U.S.C. 

636(a)(36)(D) are satisfied for any faithbased organization having not more 

than 500 employees (including 

individuals employed on a full-time, 

part-time, or other basis) that pays 

Federal payroll taxes using its own 

Internal Revenue Service Employer 

Identification Number (EIN) or that 

would support a deduction under the 

second sentence of 26 U.S.C. 512(b)(12) 

if the organization generated unrelated 

business taxable income. For purposes 

of this paragraph (b)(10), the term 

‘‘faith-based organization’’ includes, but 

is not limited to, any organization 

associated with a church or convention 

or association of churches within the 

meaning of 26 U.S.C. 414(e)(3)(D). The 

term ‘‘organization’’ has the meaning 

given in 26 U.S.C. 414(m)(6)(A). The 

terms ‘‘church’’ and ‘‘convention or 

association of churches’’ have the same 

meaning that they have in 26 U.S.C. 

414. 

(ii) No specific process or filing is 

necessary to claim the benefit of the 

exemption in paragraph (b)(10)(i) of this 

section. In applying for a loan under the 

Paycheck Protection Program (PPP), a 

faith-based organization may make all 

necessary certifications with respect to 

common ownership or management or 

other eligibility criteria based upon 

affiliation, if the organization would be 

an eligible borrower but for application 

of SBA affiliation rules and if the 

organization falls within the terms of 

the exemption described in paragraph 

(b)(10)(i) of this section. If a faith-based 

organization indicates any relationship 

that may pertain to affiliation, such as 

ownership of, ownership by, or common 

management with any other 

organization, on or in connection with 

a loan application, and if the faith-based 

organization applying for a loan falls 

within the terms of the exemption 

described in paragraph (b)(10)(i) of this 

section with respect to that relationship, 

the faith-based organization may 

indicate on a separate sheet that it is 

entitled to the exemption. That sheet 

may be identified as addendum A, and 

no further listing of the other 

organization or description of the 

relationship to that organization is 

required. See appendix A to this part for 

a sample ‘‘Addendum A’’, but the 

format need not be used as long as the 

substance is the same. 

* * * * * 

■ 3. Add appendix A to part 121 to read 

as follows: 

Appendix A to Part 121—Paycheck 

Protection Program Sample Addendum 

A 

[Sample] 

ADDENDUM A 

✓ The Applicant claims an 

exemption from all SBA affiliation rules 

applicable to Paycheck Protection 

Program loan eligibility because the 

Applicant has made a reasonable, good 

faith determination that the Applicant 

qualifies for a religious exemption 

under 13 CFR 121.103(b)(10), which 

says that ‘‘[t]he relationship of a faithbased organization to another 

organization is not considered an 

affiliation with the other organization 

. . . if the relationship is based on a 

religious teaching or belief or otherwise 

constitutes a part of the exercise of 

religion.’’ 

Jovita Carranza, 

Administrator. 

[FR Doc. 2020–07673 Filed 4–10–20; 4:15 pm] 

BILLING CODE P 


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