79698 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

DEPARTMENT OF AGRICULTURE 

Rural Utilities Service 

7 CFR Part 5001 

[Docket No. RUS–19–Agency–0030] 

RIN 0572–AC63 

OneRD Guarantee Loan 

AGENCY: Rural Business-Cooperative 

Service, Rural Housing Service, Rural 

Utilities Service, USDA. 

ACTION: Final rule; request for 

comments. 

SUMMARY: Rural Development’s Rural 

Business-Cooperative Service, Rural 

Housing Service, and Rural Utilities 

Service, agencies of the United States 

Department of Agriculture (USDA), 

collectively referred to as the Agency in 

this document, are publishing this final 

rule for the OneRD Guarantee Loan 

Program (OneRD). The intent of this rule 

is to make necessary revisions to the 

policy and procedures which will 

strengthen oversight and management of 

the growing Community Facilities (CF), 

Water and Waste Disposal (WWD), 

Business and Industry (B&I), and Rural 

Energy for America (REAP) guarantee 

portfolios. This action is part of a 

continuing effort by the Agency to 

improve customer service for its lenders 

and create a more efficient work process 

for its staff. 

DATES: 

Effective date: This final rule is 

effective November 29, 2024. 

Comments due date: Comments must 

be submitted on or before October 30, 

2024. 

ADDRESSES: You may submit comments, 

identified by docket number RUS–19– 

Agency–0030 and Regulatory 

Information Number (RIN) number 

0572–AC63 through https://

www.regulations.gov. 

Instructions: All submissions received 

must include the Agency name and 

docket number or RIN for this 

rulemaking. All comments received will 

be posted without change to https://

www.regulations.gov, including any 

personal information provided. 

Docket: For access to the docket to 

read background documents or 

comments received, go to https://

www.regulations.gov. 

Additional information about Rural 

Development and its programs is 

available on the internet at https://

www.rd.usda.gov. 

FOR FURTHER INFORMATION CONTACT: 

Susan L. Woolard, Regulations 

Management Division, Rural 

Development Innovation Center, U.S. 

Department of Agriculture, 1400 

Independence Ave. SW, Stop 1522, 

Washington, DC 20250; telephone 202– 

720–9631; email susan.woolard@

usda.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Rural Housing Service (RHS), the 

Rural Business-Cooperative Service 

(RBCS), and the Rural Utilities Service 

(RUS), agencies of the USDA Rural 

Development mission area, hereinafter 

collectively referred to as the Agency, 

published a final rule with comment on 

July 14, 2020 (85 FR 42494) that created 

a unified guaranteed loan platform for 

enhanced delivery of four existing 

guaranteed loan programs: Community 

Facilities (CF) administered by RHS; 

Water and Waste Disposal (WWD) 

administered by RUS; and Business and 

Industry (B&I) and Rural Energy for 

America (REAP) administered by RBCS. 

The final rule was effective on October 

1, 2020, and Rural Development began 

operating under the new guaranteed 

loan platform on that date. 

Collectively, Rural Development’s 

guaranteed loan programs work to assist 

in building and maintaining sustainable 

rural communities. Through the public 

comment period and monthly office 

hours with lenders and staff, the Agency 

has solicited feedback on the 

requirements and policies contained in 

the rule implemented on October 1, 

2020. The Agency has identified areas 

for revision or clarification that are 

amended with this final rule with 

comment. This OneRD final rule with 

comment incorporates revisions 

intended to simplify, clarify, improve, 

expand, and enhance the delivery of the 

four guaranteed loan programs. 

II. Summary of Changes to Regulation 

1. § 5001.3 Definitions 

a. The definition of ‘‘affiliate’’ is 

updated to provide additional 

information on affiliation determination 

and include a reference to 13 CFR 

121.03. 

b. The definition of ‘‘agricultural 

producer’’ is updated to include 

additional information regarding what 

constitutes agricultural operations 

income for the calculation of the fiveyear average for eligibility 

determinations. Additional information 

on the location of an agricultural 

producer for eligibility determinations 

is also added. 

c. The definition of ‘‘collateral’’ is 

updated to include assignments of 

relevant agreements as acceptable 

collateral. 

d. The definition of ‘‘Debt Collection 

Improvement Act’’ is updated to correct 

the title of the act and provide 

additional information on the Debt 

Collection Improvement Act of 1996. 

e. The definition of ‘‘delinquency’’ is 

updated to provide additional 

information on how this term is used in 

the Part. 

f. The definition of ‘‘energy efficient 

equipment and systems’’ is updated to 

include clear demonstration of energy 

efficiency as an application 

requirement. 

g. The definition of ‘‘federal debt’’ is 

updated to include additional 

information on the Debt Collection 

Improvement Act of 1996. 

h. The definition of ‘‘guarantor’’ is 

updated to include responsibility for 

repayment as an undertaking of a 

guarantor. 

i. The definition of ‘‘hospital’’ is 

updated to include additional 

information on Certification Numbers. 

j. The definition of ‘‘hybrid’’ is 

updated to include additional 

information and an example on the 

eligibility of hybrid systems. 

k. The definition of ‘‘local owner’’ is 

updated to include information on what 

constitutes a normal commuting area. 

l. The definition of ‘‘matching funds’’ 

is updated to include the percentage of 

matching funds required to be eligible 

for a REAP guaranteed loan. 

m. The definition of ‘‘natural resource 

value-added product’’ is updated to 

provide non-definitive examples of 

eligible and ineligible projects. 

n. The definition of ‘‘professional 

service’’ is updated to include that a 

loan finder fee is not considered a 

professional service under the Part. 

o. The definition of ‘‘refurbished’’ is 

updated to provide an example of an 

acceptable refurbishment and also to 

provide information on what is 

considered as ineligible. 

p. The definition of ‘‘renewable 

energy system (RES)’’ is updated to 

include information on items that are 

not considered RES. 

q. The definition of ‘‘retrofitting’’ is 

updated to include examples of eligible 

projects. 

r. The definition of ‘‘rural and rural 

area’’ is updated to include additional 

information to identify ineligible areas, 

define rural-in-character determinations 

as project specific determinations, 

provide additional information on 

‘‘strings’’ or areas that are attached to 

the urbanized are by a contiguous area 

of urbanized blocks, and to specify that 

applications cannot be approved subject 

to meeting rural area requirements. 

s. The definition of ‘‘simple payback’’ 

is updated to include additional 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79699 

information on items to include in the 

calculation and calculating shared meter 

proration. 

t. The definition of ‘‘small business’’ 

is updated to include additional 

information on average net income, net 

worth thresholds and to update the size 

standard to meet the new Small 

Business Administration’s definition. 

u. The definition of ‘‘total project 

costs’’ is updated to include additional 

information on ineligible project costs 

and retrofitting for existing RES. 

v. The definition of ‘‘underserved 

communities’’ is updated to expand on 

populations that should be considered 

for awarding of priority points. 

2. Section 5001.9 Standards for 

Financial Information 

a. The Agency added language at 

§ 5001.9(a) to reinforce that the loan is 

the lender’s, and their standard 

operating procedures apply. 

b. ‘‘For those situations,’’ is added to 

§ 5001.9(b) to clarify the subject of the 

last sentence. 

c. At § 5001.9(c) additional language 

is added to provide information on the 

use of tax returns as financial statements 

and their suitability for eligibility 

determinations. 

3. Section 5001.101 Introduction 

a. § 5001.101(a) is amended to add 

‘‘. . . through 5001.119 . . .’’ to include 

all four program areas. 

b. § 5001.101(f) is added to identify 

the location in the regulation of eligible 

and ineligible uses of funds 

respectively. 

4. Section 5001.102 Project 

Eligibility—General 

a. To direct REAP applicants to 

refinancing information specific to the 

REAP program, language is added to 

§ 5001.102(d). 

b. § 5001.102(d)(1) is modified to 

provide further clarification on 

refinancing limits on debts owed to 

another creditor and (d)(2) provides an 

expanded description of ‘‘better rates or 

repayment terms’’. 

c. ‘‘Special conditions and limitations 

on loans’’ and ‘‘Loan Guarantees for 

Water, Wastewater, and Essential 

Community Facilities Loans’’ is added 

to paragraph 5001.102(d)(3) to further 

identify sections 333 and 306(a)(24)(C), 

respectively, of the Consolidated Farm 

and Rural Development Act. 

d. § 5001.102(d)(4)(iii) is modified to 

provide additional information for loans 

where debt refinancing is the majority 

purpose. 

e. § 5001.102(d)(5) is modified to 

specify program applicability, lender’s 

responsibility for providing the 

requested information and update 

information on total debt service 

coverage ration as the current language 

implies an acceptable ratio that is not 

intended. 

5. Section 5001.103 Eligible CF 

Projects and Requirements 

a. Assisted living facilities are added 

to § 5001.103(a)(1) to identify them, in 

certain situations, as health care 

facilities. 

b. § 5001.103(a)(3) is updated to 

include eligibility requirements for 

business incubators (when not 

inherently commercial), thrift stores, 

and fairgrounds, agricultural exposition 

centers, farmers markets, food 

distribution and food banks. 

c. § 5001.103(b)(1) is updated to 

include information on public use 

requirements of Veterans of Foreign 

Wars and American Legion post 

facilities. 

d. § 5001.103(d) is added to provide 

limitations on leased space in a CF 

project. 

e. § 5001.103(e) is added to provide 

the documentation necessary when the 

project is to otherwise improve an 

essential community facility through the 

purchase of an existing facility. 

6. Section 5001.104 Eligible WWD 

Projects and Requirements 

a. Introductory paragraph is updated 

to correct regulatory references and 

remove duplication. 

b. § 5001.104(a)is updated to better 

describes eligible WWD projects. 

c. § 5001.104(a)(1) is updated by 

removing ‘‘To construct, enlarge, 

extend, or otherwise improve the 

following types of facilities: . . .’’ as 

those actions are eligible uses of funds 

and not types of projects. 

d. Remove § 5001.104(a)(2) as these 

items are listed at § 5001.121(b)(10) 

‘‘Eligible use of loan funds’’. The 

duplication has caused confusion. 

7. Section 5001.105 Eligible B&I 

Projects and Requirements 

a. § 5001.105(b)(7) is updated to add 

examples of eligible agricultural 

production projects. 

b. § 5001.105(b)(14) is updated to 

include additional information on what 

constitutes a leasehold improvement for 

this part and to provide further security 

enhancements. 

c. § 5001.105(b)(15)(i)(D) is updated to 

include the timing of agreements with 

retail and institutional clients in regard 

to locally or regionally produced 

agricultural products. 

d. § 5001.105(b)(20) is updated to 

include information on independent 

living facilities’ eligibility for a 

guarantee. 

e. § 5001.105(b)(22) (vii) is updated to 

expand on the demonstration of 

technical merit for energy projects. 

f. § 5001.105(d) is updated to add 

information on balance sheets used to 

show that capital and equity 

requirements are met. 

g. § 5001.105(d)(1)(iii) is updated to 

reflect the correct owner-contributed 

capital calculation. 

h. § 5001.105(d)(6) is deleted and the 

content moved to § 5001.452(b)(8)(iii)(X) 

as this certification was not intended to 

be separate from the lender’s 

certification required as part of the 

documents submitted for issuance of the 

loan note guarantee. 

8. Section 5001.106 Eligible REAP— 

Renewable Energy System (RES) Projects 

and Requirements 

§ 5001.106(e)(2) is updated to include 

how a non-response in an area of a 

technical report will be scored. 

9. Section 5001.108 Eligible REAP— 

Energy Efficient Equipment and Systems 

(EEE) Projects and Requirements 

The introductory paragraph for 

§ 5001.108 is updated to include that 

EEE projects may be located in rural or 

non-rural areas as long as the energy 

efficient equipment of systems are used 

for agricultural production or processing 

in accordance with this part. 

10. § 5001.115 Ineligible Projects— 

General 

a. § 5001.115(l) is updated to provide 

additional information to clarify when 

telephone systems may be considered as 

an eligible project. 

b. § 5001.115(n) is updated to provide 

additional information to clarify when 

owner-occupied housing may be 

considered for funding. 

b. § 5001.115(r) is updated to provide 

additional information to religious 

organizations on items that may cause 

their project to be deemed ineligible. 

11. § 5001.116 Neligible CF Projects 

a. § 5001.116(b) is updated to add a 

reference to § 5001.103(d) for eligibility 

of commercial enterprises leasing space 

in an eligible CF project. 

b. § 5001.116(e) is updated to include 

characteristics of ineligible purchase 

transactions. 

12. § 5001.121 Eligible Uses of Loan 

Funds 

a. § 5001.121(a)(2) is updated to 

include the installed conduit is not 

essential to the operation of the eligible 

essential community facility or service 

to be financed and to add an example. 

b. § 5001.121(a)(3)(iv) is updated to 

clarify that guaranteed loan proceeds 


ddrumheller on DSK120RN23PROD with RULES2
79700 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

may be used to pay interim financing in 

full, if used, and that payment in full 

includes interest on that interim 

financing. 

c. § 5001.121(b) is revised in its 

entirety to classify eligible uses of funds 

as those that must be part of a 

construction project and those that are 

non-construction. Additionally, the 

purchase and installation of RES for use 

by an eligible facility, the use of up to 

10 percent of project funds to construct, 

improve, or acquire broadband 

infrastructure, and professional service 

fees, such as engineering or 

environmental services and preplanning 

evaluation procedures are added as 

eligible uses of funds. Additional 

information regarding the purchase of 

land and/or rights, including water 

rights is added as well as providing 

clarification on payment of interim 

financing, limiting initial operating 

expenses to newly constructed facilities 

and clarifying that purchase of 

equipment must include installation 

and is not for the purpose of increasing 

inventory is also included. 

d. § 5001.121(d)14)(vi) is added to 

provide additional information on what 

is considered refinancing under the 

REAP program. 

13. § 5001.121 Eligible Uses of Loan 

Funds 

a. § 5001.121(c)(6) is updated to 

provide additional flexibility to the 

programs. 

b. § 5001.121(d) is updated to clarify 

what the percentage includes. 

c. § 5001.121(d)(14) is updated to add 

information that paying interim 

financing is not considered refinancing. 

14.§ 5001.122 Ineligible Uses of Loan 

Funds 

a. § 5001.122(k) is updated to include 

as an additional ineligible use of loan 

funds any costs for RES and/or EEI 

projects that are used to improve a 

vehicle’s ability to propel itself. 

b. § 5001.122(l) is updated to clarify 

that a former owner may remain as an 

employee of the business during a 

reasonable transition period and to align 

the language with the definition of 

conflict of interest. 

c. § 5001.122(n) is added to include 

lease payments as ineligible uses of 

funds. 

15. § 5001.126 Borrower Eligibility 

a. § 5001.126 (a)and (a)(1) are updated 

to clarify that the borrower must own 

and retain control of the project at all 

times under all ownership structures. 

b. § 5001.126(c)(2) is updated to notify 

lenders that they are required to certify 

in writing that their borrower is unable 

to afford commercial credit at 

reasonable rates and terms without the 

guarantee. 

c. § 5001.126(d)(3)(iii) is updated to 

reference the definition of citizen and to 

clarify that applications will not be 

approved, nor will conditional 

commitments be issued subject to 

meeting the citizenship requirement. 

d. § 5001.126(d)(4) is updated to 

further ensure benefit to U.S. residents. 

e. § 5001.126(e)(1) is updated to 

provide more specificity on eligible 

borrower entity types. 

f. § 5001.126(e)(2) is updated to clarify 

the timing of when and how long a 

borrower must own or control a project 

and the site for the project to at the time 

of application or no later than 

guaranteed loan closing and for the term 

of the guaranteed loan. 

16. § 5001.127 Borrower Ineligibility 

Conditions 

a. § 5001.127(a) is updated to specify 

that the 20 percent ownership interest 

in the borrower does not apply to 

passive investors and expands on 

delinquent debt under a repayment 

plan. 

b. § 5001.127(a)(4) is updated to add 

that lenders must check SAM 

exclusions at https://sam.gov to ensure 

compliance with 2 CFR 180.300. 

c. § 5001.127(d) is updated to include 

a prohibition on projects receiving 

income from marijuana operations. 

d. § 5001.127(f) is updated to specify 

that lender’s directors, stockholders, or 

other owners that are officers, directors, 

stockholders, or other owners of the 

borrower without management control 

or ownership of less than 5% must 

recuse themselves from the decisionmaking process associated with the 

guaranteed loan. 

17. § 5001.130 Lender Eligibility 

Requirements 

a. § 5001.130(a)(3) is updated to 

reduce risk and meet the requirements 

of 31 U.S.C. 3354. 

b. § 5001.130(c)(2) is updated to 

include instructions on how nonregulated lending entities may apply for 

approved lender status. 

c. § 5001.130(c)(4) is updated to 

provide additional information on what 

an approved lender renewal review will 

include. 

d. § 5001.130(c)(4)(iv) is updated to 

provide additional information to 

lenders that have not been active in the 

Agency’s guaranteed loan program or 

whose loans have caused a loss to the 

Agency on approved lender status 

renewal. 

e. § 5001.130(c)(4)(v) is added to 

notify lenders that the renewal term are 

for a period of 5 years. 

f. § 5001.130(d)(2) is updated to 

provide non-regulated lending entities 

serving Tribal trust lands additional 

guidance on submittal of information 

needed for applications to be 

determined as approved lenders. 

g. § 5001.130(d)(4) is updated to 

provide non-regulated lending entities 

serving Tribal trust lands information 

on what will be considered during the 

approved lender renewal review. 

h. § 5001.130(d)(4)(v) is added to 

notify lenders that renewals are for a 

period of 5 years. 

18. § 5001.131 Lender’s Agreement 

Section 5001.131 is updated to 

include that approval as a lender under 

one program is approval for all 

programs covered under this part, that 

non-regulated lenders approval expires 

January 31st of the fifth year after the 

date of Agency approval and that only 

one lenders agreement will be issued for 

each lending entity based on their tax 

identification number. This paragraph is 

also updated to include the requirement 

that a lending entity continue to service 

their outstanding loan guarantees made 

under this part even if they fail to renew 

its lenders agreement and loses its 

approved lender status. 

19. § 5001.132 Maintenance of 

Approved Lender Status 

a. § 5001.132(a)(4) is updated to 

clarify that a non-regulated lending 

entity that fails to renew its approval 

status within 5 years from the execution 

of the lender’s agreement will lose its 

approved status. 

b. § 5001.132(b) is updated to include 

that revocation of approved lender 

status may apply to the entire entity, 

specific branches, or personnel as 

appropriate. This addition also requires 

the lender to revoke the level II 

eAuthentication privileges of all 

individuals included in the revocation 

notice. 

20. § 5001.140 Cooperative Stock/ 

Cooperative Equity 

a. § 5001.140(a)(4) is updated to 

include that in event of default if the 

stock is not sufficient to satisfy the debt, 

the borrower is fully liable for the entire 

debt regardless of the success or failure 

of the cooperative; the lender will 

maximize recovery; and, that DCIA may 

impose significant restrictions on 

delinquent Federal debtors. 

b. § 5001.140(b) is updated to include 

that in event of default if the stock is not 

sufficient to satisfy the debt, the 

borrower is fully liable for the entire 

debt regardless of the success or failure 

of the cooperative; the lender will 

maximize recovery; and, that DCIA may 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79701 

impose significant restrictions on 

delinquent Federal debtors. 

c. § 5001.140(d)(3) is updated to 

include that in event of default if the 

stock is not sufficient to satisfy the debt, 

the borrower is fully liable for the entire 

debt regardless of the success or failure 

of the cooperative; the lender will 

maximize recovery; and, that DCIA may 

impose significant restrictions on 

delinquent Federal debtors. 

21. § 5001.141 New Markets Tax 

Credit 

a. The title is updated to New Markets 

Tax Credit Program. The introductory 

paragraph is updated to reinforce that 

requests for loan guarantees that include 

NMTC are subject to all applicable 

program eligibility requirements, credit 

analysis and due diligence as required 

by 7 CFR part 5001. Additional 

information is provided on the 

treatment of tax benefit or loss of tax 

benefits in the servicing actions of a 

guaranteed loan. 

b. § 5001.141(b)(iii) is updated to 

clarify leveraged lender entity 

requirements. 

c. § 5001.141(b)(6) is updated to 

include guidance for QALICB’s and 

their owners regarding guarantees of the 

guaranteed loan as stipulated in 

§ 5001.204. 

d. § 5001.141(b)(14) is added to 

inform applicants that they NMTC 

structure must be approved by the 

Agency. 

22. § 5001.202 Lender’s Credit 

Evaluation 

a. The introductory paragraph is 

updated to provide additional 

information to lenders on timing of 

application submittal and completion of 

the lender’s internal credit evaluation 

process as part of a complete 

application package. The update also 

includes a requirement for the lender’s 

credit evaluation to include a written 

review and comment on the ‘‘Five Cs’’ 

of credit as outlined in § 5001.202(b)(1) 

through (5). 

b. § 5001.202(a) is updated to include 

reference to the lender’s responsibility 

to evaluate the relationships between all 

associated parties in the event of 

affiliated entities. 

c. § 5001.202(b)(6)(iii) is amended to 

add that any steps taken or proposed to 

address any financial or industry 

weakness must be reasonable and 

adequately addressed. 

d. § 5001.202(b)(6)(iv) is updated to 

include additional guidance on 

borrower projections and substantiation 

of increases of revenues, profit margins 

or profitability. 

e. § 5001.202(b)(6)(iv) is updated to 

include the source of the cash flow in 

the analysis of the operational cash flow 

when lenders are requesting the loan 

note guarantee prior to project 

completion. 

23. § 5001.203 Appraisals 

a. The introductory paragraph is 

updated to include, ‘‘. . . as determined 

by the approval official.’’ to indicate 

who determines appraisal acceptability. 

Additionally, information on the 

handling of value attributed to business 

valuation or as a going concern and 

discounting is added. For applications 

that include an existing facility, the 

Agency is including that it is expected 

that the appraiser will physically visit 

the property unless otherwise approved 

by the Agency approval official, as these 

‘‘desktop products’’ are not reliable and 

present the potential for additional 

valuation risk to the Agency. 

b. § 5001.203(b) is updated to provide 

additional assurances during the loan 

underwriting review process. 

c. § 5001.203(c) is updated to 

incorporate the language from 

§ 5001.203(c)(1)(i). 

d. § 5001.203(c)(1) is removed. The 

language from the current 

§ 5001.203(c)(1)(i) is incorporated into 

§ 5001.203(c). The current language in 

§ 5001.203(c)(1)(ii) is not necessary as 

the Agency’s expectations are 

adequately covered in previous 

language. 

e. § 5001.203(d) (1) is updated to 

allow for other than a State Certified 

General Appraiser when approved by 

the Agency as some project types are 

unique enough that a qualified appraiser 

may not be available. 

f. § 5001.203(f) is updated to require 

immediate notification to the Agency if 

potential contamination is observed or 

identified. 

g. § 5001.203(h) is updated to reiterate 

that appraisal fees are eligible project 

costs, and that the Agency does not pay 

for appraisals at the time of application 

but that servicing appraisals will be 

handled in accordance with 7 CFR 5001 

subpart F. 

24. § 5001.205 General Project 

Monitoring Requirements 

a. § 5001.205(a)(4) is added to include 

compliance with section 70914 of the 

Build America, Buy America Act within 

the Infrastructure Investment and Jobs 

Act (Pub. L. 117–58). 

b. § 5001.205(b)(1) is updated to 

include compliance with the Uniform 

Relocation Assistance and Real Property 

Acquisition Policies Act of 1970 to 

ensure that all property transactions are 

conducted accordingly. 

c. § 5001.205(e)(1)(i) is removed and 

the information combined with 

§ 5001.205(e)(1) as a separate (i) was not 

necessary. 

d. § 5001.205(e)(2)(iii) is updated to 

include the requirement that the lender 

must provide evidence of sufficient cash 

flow to complete the project 

construction, including contingencies 

for cost overruns, plus working capital 

during the business start-up period. 

e. § 5001.205(e)(2)(iv) is updated to 

include the requirement that, in all 

cases, borrower equity must be injected 

prior to any guaranteed loan funds. 

f. § 5001.205(e)(2)(vii) is updated so 

that the credit underwriting of the 

independent technology development 

firm is not limited only to renewable 

energy projects, but may include energy 

efficiency, renewable chemical, and 

biobased manufacturing projects. 

25. § 5001.206 Compliance With 

USDA Departmental Regulations, 

Policies, and Other Federal Laws 

Section 5001.206(b) is updated to 

include compliance with the Uniform 

Relocation Assistance and Real Property 

Acquisition Policies Act of 1970 as a 

requirement if the proposed project 

requires the acquisition of real property 

or will displace people from their 

homes, business, or farms, and Section 

70914 of the Build America, Buy 

America Act within the Infrastructure 

Investment and Jobs Act, and 31 U.S.C. 

3354 Do Not Pay Initiative. 

Subpart D 

26. § 5001.301 Beginning the 

Application Process 

Section 5001.301(a) is updated in its 

entirety to reflect current application 

submittal practices. 

27. § 5001.303 Applications for Loan 

Guarantee 

Section 5001.303(c)(15) is updated to 

include the entire title of SEC Form 10– 

K. 

28. § 5001.307 Specific Application 

Requirements for REAP Projects 

Section 5001.307(b) is updated to 

include clarification on application 

documentation requirements for rural 

small businesses and agriculture 

operations owned by Tribes. 

28. § 5001.315 Application Evaluation 

and Award Provisions 

a. § 5001.315(b) is updated to include 

the word ‘‘complete’’ to describe 

applications that the Agency will 

review. 

b. § 5001.315(c)(1) is updated to 

include the word ‘‘priority’’ to better 

describe scoring. 


ddrumheller on DSK120RN23PROD with RULES2
79702 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

c. § § 5001.315(e)(2) is updated to 

include notification in writing when 

their application is withdrawn from 

further funding consideration. 

29. § 5001.319 REAP Project Priority 

Point System 

a. The introductory paragraph is 

updated to add, ‘‘. . . and subject to the 

availability of funds . . .’’ to state when 

the Agency will compete each complete 

and eligible application for RES, EEI 

and EEE projects. 

b. § 5001.319(b)(1)(i) is updated to 

include when priority points will be 

awarded for retrofitting RES projects 

and how off-the-grid and direct-use 

projects will be awarded priority points. 

c. § 5001.319 (b)(2)(i) is updated to 

include information on calculating the 

percentage of energy being replaced, 

whether it is categorized a replacement 

or generation. This does not change the 

underlying calculation but provides 

clarification. 

d. § 5001.319 (b)(2)(i)(A) is updated to 

include a requirement for 

documentation to show that the 

borrower entity incurred the cost of the 

historical energy to be replaced and 

what may be considered in the 

calculation. This does not change the 

underlying calculation but provides 

clarification. 

e. § 5001.319(b)(2)(ii) is updated to 

add information on RES projects that are 

not projecting to increase the amount of 

renewable energy generated and that if 

documentation of prior energy usage is 

not provided the project will be scored 

as an energy generation project. 

f. § 5001.319(b)(2)(iii) is updated to 

add ‘‘vendor certification’’ as acceptable 

documentation of energy savings by the 

installation of the EEI project. 

g. § 5001.319(d) is updated to clarify 

the meaning of ‘‘received and 

accepted’’. 

h. § 5001.319(e) is updated to specify 

that an existing business must be in 

operation for at least one full year, not 

simply a year since legal business 

formation. 

i. § 5001.319(f)(1) is updated to add, 

for clarity, that RES include 

replacement, generation, and direct-use 

RES projects. 

j. § 5001.319(g)(6) is updated to clarify 

that the United States Census Bureau 

information to determine population 

living in poverty is for the last 30 years. 

Subpart E 

30. § 5001.401 Interest Rate Provisions 

Section 5001.401 is updated to 

include that in the event of an interest 

rate swap, the Agency’s guarantee can 

only cover principal and interest and 

does not cover any fees related to the 

swap. A requirement for the lender to 

provide the Agency with an overall 

effective interest rate charged to the 

borrower in the swap transaction is also 

added. 

31. § 5001.402 Term Length, Loan 

Schedule, and Repayment 

Section 5001.402(b)(2) is updated to 

provide additional information to 

lenders on Agency requirements 

regarding loan amortizations including 

requirements, that balloon payments are 

not acceptable except in some loan 

servicing cases and that payments must 

be amortized to maximize successful 

loan repayment and may vary by 

business type or company cash flow. 

32. § 5001.406 Guaranteed Loan 

Amounts 

Section 5001.406(c) is updated to 

place a limit on total guarantor loans. 

Section 5001.406(d) is updated to 

include that borrowers must 

demonstrate evidence of a financial 

contribution in the project of at least 25 

percent of total eligible project costs. 

Federal grant funds, if authorized by the 

grantor, may be used as the financial 

contribution. 

33. § 5001.408 Participation or 

Assignment of Guaranteed Loan 

Section 5001.408(a)(5) is updated to 

include a clarification of default and 

that lenders using the multi-note system 

may sell the guarantee on the secondary 

market for a specific note once that note 

is fully disbursed. 

34. § 5001.450 General 

a. § 5001.450(b)(1) is updated to add, 

‘‘. . . during the loan approval process’’ 

to provide information on when 

approval of a parity or junior lien 

position request must be approved by 

the Agency. A statement regarding 

where to find the requirements for 

guaranteed loans to purchase 

cooperative stock was also added. 

b. § 5001.450(c)(1) is updated to 

include language on requesting the 

payment of interest up to 180 days past 

the most recent delinquency effective 

date. 

c. § 5001.450(c)(1)(iii) is updated to 

provide lenders with information on 

requesting extensions of accrued 

interest and that approved collection 

efforts that extend beyond 180 days will 

be limited to 90 days of accrued interest 

payments from the Agency. 

d. § 5001.450(c)(2) is updated to add 

‘‘. . . and provide the Agency with a 

copy.’’ to provide information for the 

lender on Agency notification of holders 

in the event of interest termination. 

35. § 5001.452 Loan Closing and 

Conditions Precedent to Issuance of 

Loan Note Guarantee 

a. § 5001.452(a) is updated to add that 

if at a later date it is discovered that all 

conditions of the conditional 

commitment had not been met prior to 

loan closing that full enforceability of 

the guarantee may be compromised. 

b. § 5001.452(b)(8)(iii)(U) is updated 

to include that ‘‘. . . or will perform 

. . .’’ may be part of the lender’s 

certification of steady state operating 

level. 

c. § 5001.452(b)(8)(iii)(W) is added to 

include certification of compliance with 

American Iron and Steel and Build 

America, Buy America requirements for 

applicable WWD projects. 

d. § 5001.452(b)(8)(iii)(X) is added to 

include certification that, for B&I 

projects, the capital/equity requirements 

of the Conditional Commitment were 

met. 

e. § 5001.452(c) is updated to add that 

a permission to operate letter from the 

energy off-taker is required. 

36. § 5001.454 Guarantee Fee 

a. To ensure that the correct guarantee 

fee is applied, the opening paragraph to 

§ 5001.454 is updated to include that 

the guarantee fee rate applied will be 

the rate as established in the Federal 

Register for the fiscal year in which a 

guaranteed loan is obligated. 

b. § 5001.454(b) is updated to include 

that once the guarantee is obligated, the 

guarantee fee rate in effect at the time 

of obligation will remain in place even 

if the guarantee fee rate changes before 

the loan note guarantee is issued. 

c. § 5001.454(d)(5) is updated to 

provide additional information on what 

constitutes an additional market for 

existing local business. 

Subpart F—Servicing Provisions 

37. § 5001.505 Collateral Inspection 

and Release 

Section 5001.505(b)(3) is revised to 

add additional information to further 

specify requirements of an arm’s length 

transaction. 

38. § 5001.510 Subordination of Lien 

Position 

Section 5001.510(b)(3) is updated to 

include additional information on 

discounting of collateral when 

determining sufficient collateral 

coverage. 

39. § 5001.516 Protective Advances 

a. § 5001.516(c) is updated to inform 

lender that payment of real estate taxes 

is not considered a protective advance 

and does not require Agency approval. 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79703 

b. § 5001.516(d) is updated to inform 

lenders that it is their responsibility to 

ensure that protective advances will be 

secured by the collateral of the 

guaranteed loan. 

40. § 5001.517 Liquidation 

a. § 5001.517(c)(1) is updated to 

include items that may be used to 

establish the lender’s ownership of the 

guaranteed loan promissory note and 

related security instruments. 

b. § 5001.517(c)(2) is updated to 

include additional requirements of the 

liquidation plan including: transaction 

history for the loan; if the interest rate 

was a variable rate, the lender must 

include documentation of changes to 

the agreed upon base rate and when the 

changes in the loan rate became 

effective; and explanation of any special 

accommodations that were made. 

c. § 5001.517(c)(6)(i) is updated to 

include that a copy of the appraisal or 

valuation will be provided to the 

Agency with the liquidation plan or as 

soon as it is available. 

d. § 5001.517(c)(10) is updated to 

include a non-exhaustive list of 

examples of liquidation expenses that 

may be incurred. 

e. § 5001.517(c)(11) is updated to 

include: a non-exhaustive list of 

possible protective advances; that 

protective advances may be made to 

maintain services or address unique 

situations with proper justification; and 

non-Agency approved advances of 

funds will not be guaranteed. 

f. § 5001.517(e)(1)(i) is updated to add 

‘‘actively marketing the collateral.’’ 

Additionally, consideration of 

submitting a final loss claim is added as 

a possible next action if the lender is 

unable to sell the collateral. 

41. § 5001.521 Loss Calculations and 

Payment 

Section 5001.521(d)(2) is updated to 

include information to borrowers and 

lenders on project development issues 

that could reduce any loss claim 

payable. 

The Agency also plans to correct 

minor spelling, grammatical and 

capitalization errors. All changes to 

appendices C, D and E to Subpart D of 

Part 5001 correct spelling, grammatical 

or capitalization errors. 

III. Executive Orders and Acts 

Executive Orders 12866 and 13563 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches to maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. 

This final rule has been determined to 

be not significant for purposes of 

Executive Order (E.O.) 12866 and 

therefore has not been reviewed by the 

Office of Management and Budget 

(OMB). 

National Environmental Policy Act 

In accordance with the National 

Environmental Policy Act of 1969, 

Public Law 91–190, this final rule has 

been reviewed in accordance with 7 

CFR part 1970 (‘‘Environmental Policies 

and Procedures’’). The Agency has 

determined that i) this action meets the 

criteria established in 7 CFR 1970.53(f); 

ii) no extraordinary circumstances exist; 

and iii) the action is not ‘‘connected’’ to 

other actions with potentially 

significant impacts, is not considered a 

‘‘cumulative action’’ and is not 

precluded by 40 CFR 1506.1. Therefore, 

the Agency has determined that the 

action does not have a significant effect 

on the human environment, and 

therefore neither an Environmental 

Assessment nor an Environmental 

Impact Statement is required. 

Executive Order 12988, Civil Justice 

Reform 

This final rule has been reviewed 

under Executive Order 12988 (Civil 

Justice Reform). The Agency has 

determined that this rule meets the 

applicable standards provided in 

section 3 of the Executive Order. In 

addition, all State and local laws, and 

regulations that conflict with this rule 

will be preempted. No retroactive effect 

will be given to this rule. 

Executive Order 13132, Federalism 

The policies contained in this final 

rule do not have a substantial direct 

effect on 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. Nor does 

this rule impose substantial direct 

compliance costs on state and local 

governments. Therefore, consultation 

with the states is not required. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601–602) generally requires an 

agency to prepare a regulatory flexibility 

analysis of any rule subject to notice 

and comment rulemaking requirements 

under the Administrative Procedure Act 

(‘‘APA’’) or any other statute. The APA 

exempts from notice and comment 

requirements rules ‘‘relating to agency 

management or personnel or to public 

property, loans, grants, benefits, or 

contracts’’ (5 U.S.C. 553(a)(2)), so 

therefore an analysis has not been 

prepared for this rule. 

Executive Order 12372, 

Intergovernmental Consultation 

This final rule is excluded from the 

scope of Executive Order 12372 

(Intergovernmental Consultation), 

which may require a consultation with 

State and local officials. See the final 

rule related notice entitled, 

‘‘Department Programs and Activities 

Excluded from Executive Order 12372’’ 

(50 FR 47034). 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

This executive order imposes 

requirements on the Agency. The 

Agency has determined that the rule 

does not have a substantial direct effect 

on one or more Indian Tribe(s) or on 

either the relationship or the 

distribution of powers and 

responsibilities between the Federal 

Government and Indian Tribes. Thus, 

this rule is not subject to the 

requirements of Executive Order 13175. 

If Tribal leaders are interested in 

consulting with the Agency on this rule, 

they are encouraged to contact USDA’s 

Office of Tribal Relations or the 

Agency’s Native American Coordinator 

at: AIAN@usda.gov to request such a 

consultation. 

Assistance Listing Number 

The Assistance Listing (formerly 

known as the Catalog of Federal 

Domestic Assistance (CFDA)) numbers 

assigned to the 4 programs within this 

rule are: 10.766 for Community Facility 

Programs, 10.760 for Water and Waste 

Disposal Programs, 10.768 for Business 

and Industry Programs and 10.868 for 

Rural Energy for America Program. The 

complete catalog is available on the 

internet at https://sam.gov/content/ 

assistance-listings. 

Paperwork Reduction Act and 

Recordkeeping Requirements 

This rule contains no new reporting 

or recordkeeping burdens under OMB 

control number 0572–0166 that would 

require approval under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

Chapter 35). 


ddrumheller on DSK120RN23PROD with RULES2
79704 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

E-Government Act Compliance 

Rural Development is committed to 

complying with the E-Government Act 

of 2002, which requires Government 

agencies in general to provide the public 

the option of submitting information or 

transacting business electronically to 

the maximum extent possible. 

Civil Rights Impact Analysis 

RD has reviewed this Final rule in 

accordance with USDA Regulation 

4300–4, Civil Rights Impact Analysis,’’ 

to identify any major civil rights 

impacts the rule might have on program 

participants on the basis of age, race, 

color, national origin, sex, disability, 

gender identity (including gender 

expression), genetic information, 

political beliefs, sexual orientation, 

marital status, familial status, parental 

status, veteran status, religion, reprisal 

and/or resulting from all or a part of an 

individual’s income being derived from 

any public assistance program. This 

final rule is within a guarantee-based 

program. Guarantees are not covered 

under Title VI of the Civil Rights Act of 

1964, Section 504 of the Rehabilitation 

Act of 1973, and Title IX of the 

Education Amendments Act of 1972, as 

amended, when the Federal assistance 

does not include insurance or interest 

credit loans. Lenders must comply with 

other applicable Federal laws, including 

Equal Employment Opportunities, the 

Equal Credit Opportunity Act, the Fair 

Housing Act, and the Civil Rights Act of 

1964. Guaranteed loans that involve the 

construction of or addition to facilities 

that accommodate the public must 

comply with the Architectural Barriers 

Act Accessibility Standard. The 

borrower and lender are responsible for 

ensuring compliance with these 

requirements. 

USDA Non-Discrimination Statement 

In accordance with Federal civil 

rights laws and U.S. Department of 

Agriculture (USDA) civil rights 

regulations and policies, the USDA, its 

Mission Areas, agencies, staff offices, 

employees, and institutions 

participating in or administering USDA 

programs are prohibited from 

discriminating based on race, color, 

national origin, religion, sex, gender 

identity (including gender expression), 

sexual orientation, disability, age, 

marital status, family/parental status, 

income derived from a public assistance 

program, political beliefs, or reprisal or 

retaliation for prior civil rights activity, 

in any program or activity conducted or 

funded by USDA (not all bases apply to 

all programs). Remedies and complaint 

filing deadlines vary by program or 

incident. 

Program information may be made 

available in languages other than 

English. Persons with disabilities who 

require alternative means of 

communication to obtain program 

information (e.g., Braille, large print, 

audiotape, American Sign Language) 

should contact the responsible Mission 

Area, agency, or staff office; or the 711 

Relay Service. 

To file a program discrimination 

complaint, a complainant should 

complete a Form AD–3027, USDA 

Program Discrimination Complaint 

Form, which can be obtained online at 

https://www.usda.gov/sites/default/ 

files/documents/ad-3027.pdf from any 

USDA office, by calling (866) 632–9992, 

or by writing a letter addressed to 

USDA. The letter must contain the 

complainant’s name, address, telephone 

number, and a written description of the 

alleged discriminatory action in 

sufficient detail to inform the Assistant 

Secretary for Civil Rights (ASCR) about 

the nature and date of an alleged civil 

rights violation. The completed AD– 

3027 form or letter must be submitted to 

USDA by: 

(1) Mail: U.S. Department of 

Agriculture, Office of the Assistant 

Secretary for Civil Rights, 1400 

Independence Avenue SW, Washington, 

DC 20250–9410; or 

(2) Fax: (833) 256–1665 or (202) 690– 

7442; or 

(3) Email: program.intake@usda.gov. 

Severability 

It is USDA’s intention that the 

provisions of this rule shall operate 

independently of each other. In the 

event that this rule or any portion is 

ultimately declared invalid or stayed as 

to a particular provision, it is USDA’s 

intent that the rule nonetheless be 

severable and remain valid with respect 

to those provisions not affected by a 

declaration of invalidity or stayed. 

USDA concludes it would separately 

adopt all of the provisions contained in 

this final rule. 

USDA is an equal opportunity 

provider, employer, and lender. 

List of Subjects in 7 CFR Part 5001 

Business and industry, Community 

facility, Energy efficiency improvement, 

Loan programs, Renewable energy, 

Rural areas, Rural development, Water 

and waste disposal. 

For the reasons set forth in the 

preamble, under the authority at 5 

U.S.C. 301 and 7 U.S.C. 1989, 7 CFR 

part 5001 is amended as follows: 

PART 5001—Guaranteed Loans 

■ 1. The authority citation for part 5001 

continues to read as follows: 

Authority: 5 U.S.C. 301; 7 U.S.C. 1926(a); 

7 U.S.C. 1932(a); and 7 U.S.C. 8107. 

Subpart A—General Provisions 

■ 2. Amend § 5001.1 by revising (b) to 

read as follows: 

§ 5001.1 General. 

* * * * * 

(b) The applicability of the provision 

of this part for processing and approving 

applications and for servicing 

guaranteed loans depend on when a 

complete application is received. The 

Agency will process and approve 

applications, and service guaranteed 

loans according to the provisions of this 

part for all complete guaranteed loan 

applications that it receives on or after 

October 1, 2020, including guaranteed 

loan applications submitted under any 

of the programs whose authorization is 

identified in this section. All complete 

applications received before October 1, 

2020, will be processed, and awarded 

and guaranteed loans serviced in 

accordance with the existing regulations 

in effect at the complete application 

date for the program under which the 

application was submitted. 

■ 3. Amend § 5001.2 by revising 

paragraphs (b) and (d) to read as 

follows: 

§ 5001.2 Structure. 

* * * * * 

(b) Subpart B. This subpart contains 

provisions for determining project, 

borrower, and lender eligibility that are 

applicable to each guaranteed loan 

made under this part. It also contains a 

list of eligible and ineligible uses of loan 

funds, ineligible projects and conditions 

that would make an otherwise eligible 

borrower ineligible. The lender’s 

agreement is addressed as well as 

maintenance of approved lender status. 

* * * * * 

(d) Subpart D. This subpart contains 

provisions relating to applications for a 

loan guarantee under this part, 

including preliminary eligibility 

reviews, the application process, 

application evaluation, and the 

application award processes that are 

applicable to each guaranteed loan 

made under this part. 

* * * * * 

■ 4. Amend § 5001.3 by revising the 

definitions of ‘‘Affiliate’’, ‘‘Agricultural 

producer’’, ‘‘Collateral’’, ‘‘Commercially 

available, ‘‘Debt Collection 

Improvement Act’’, ‘‘Delinquency’’, 

‘‘Energy efficient equipment and 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79705 

systems’’, ‘‘Federal debt’’, ‘‘Guarantor’’, 

‘‘Hospital’’, ‘‘Hybrid’’, ‘‘Local owner’’, 

‘‘Matching funds’’, ‘‘Natural resource 

value-added product’’, ‘‘Professional 

service’’, ‘‘Refurbished’’, ‘‘Renewable 

energy system (RES)’’, ‘‘Retrofitting’’, 

‘‘Rural and rural area’’, ‘‘Simple 

payback’’, ‘‘Small business’’, ‘‘Total 

project costs’’, and ‘‘Underserved 

communities’’ to read as follows: 

§ 5001.3 Definitions. 

* * * * * 

Affiliate means a person that is 

connected with or controlled by another 

organization. Factors such as 

ownership, management, current and 

previous relationships with or ties to 

another person, and contractual 

relationships, will be considered in 

determining whether affiliation exists. 

Affiliation is determined using the 

principles outlined in 13 CFR 121.103. 

* * * * * 

Agricultural producer means a 

person, including non-profits, directly 

engaged in the production of 

agricultural products through labor 

management and operations, including 

the cultivating, growing, and harvesting 

plants and crops (including farming); 

breeding, raising, feeding, or housing of 

livestock (including ranching); forestry 

products; hydroponics; nursery stock; or 

aquaculture, whereby 50 percent or 

greater of their gross income is derived 

from the operations. All gross income of 

the applicant entity is included for 

agricultural producer eligibility. The 

percentage is calculated as the average 

of gross agricultural operations income 

of the concern divided by the gross nonfarm income of the concern for the five 

most recent years. If the concern has 

been in operation for less than 60 

months but for at least 12 months, 

average gross agricultural operations 

income, and gross non-farm income for 

as long as the concern has been in 

operation will be used. Agricultural 

operations income may include such 

items as production contracts, crop 

insurance, commodity payments, etc. 

Total income may include W–2 wages, 

schedule C income, and other income 

not related to the agricultural operation. 

Calculations will be using the 

applicant’s five most recent tax years. 

Each year’s gross agricultural operations 

income will be divided by the 

applicant’s gross total income, then the 

five years will be averaged to determine 

eligibility. An agricultural producer 

could be located in either a rural or a 

non-rural area. 

* * * * * 

Collateral means the asset(s), 

including assignments of relevant 

agreements, pledged by the borrower to 

the lender as security for the guaranteed 

loan. 

* * * * * 

Debt Collection Improvement Act 

(DCIA) means the Debt Collection 

Improvement Act of 1996, 31 U.S.C. 

3701 et seq., which requires that any 

nontax monies that are payable or may 

become payable from the United States 

under contracts and other written 

agreements to any person not an agency 

or subdivision of a state or local 

government may be subject to certain 

collection options, such as 

administrative offset, for a delinquent 

debt the person owes to the United 

States implemented under 7 CFR part 3. 

* * * * * 

Delinquency means a situation that 

exists when a scheduled loan payment 

on a guaranteed loan made under this 

part is more than 30 calendar days past 

due and cannot be cured within the next 

30 calendar days. For purposes of this 

part, delinquency provides guidance for 

completing borrower status reports and 

is not used to define monetary or nonmonetary default or undertaking-related 

servicing actions. 

* * * * * 

Energy efficient equipment and 

systems (EEE) means equipment or 

systems for agricultural production or 

processing that exceed any of the 

following standards. Applications for 

energy efficient equipment and systems 

must clearly demonstrate energy 

efficiency. 

* * * * * 

Essential community facility means a 

public improvement, operated on a nonprofit basis, needed for the orderly 

development of a rural community 

where the rural community is a city or 

town, or its equivalent county or multicounty area. The term ‘‘facility’’ refers to 

both the physical structure financed, 

and the resulting service provided to 

rural residents or rural businesses. 

Facilities may include, but are not 

limited to, courthouses, community 

centers, libraries, firehouses, health 

care, education, transportation, and 

industrial parks. An industrial park 

consists of land and the necessary 

access ways and utilities to the site, but 

not improvements erected on such site. 

* * * * * 

Federal debt means debt owed to the 

Federal Government that is subject to 

collection under the Debt Collection 

Improvement Act of 1996, 31 U.S.C. 

3701, et seq. 

* * * * * 

Guaranteed loan means a loan made 

and serviced by a lender for which the 

Agency and lender have entered into a 

lender’s agreement and for which the 

Agency has issued a loan note 

guarantee. Unless otherwise specified, 

guaranteed loan refers to a loan that the 

Agency has guaranteed under this part. 

* * * * * 

Guarantor means a person giving 

assurance to the Agency under an 

Agency-approved written agreement 

that the borrower’s obligations will be 

fulfilled and promising its undertaking 

of responsibility for repayment of a 

guaranteed loan if the borrower should 

default. 

* * * * * 

Hospital (1) For the purpose of 

refinancing rural hospital debt in 

accordance with § 5001.102(d)(5), 

hospital means the following types of 

facilities defined in the Social Security 

Act, Section 1861 (42 U.S.C. 1395x): 

(i) Hospital (section 1861(e)). 

(ii) Psychiatric hospital (section 

1861(f)). 

(iii) Long-term care hospital (section 

1861(ccc)); and shall also include the 

following other provider types defined 

in the Social Security Act, Section 1861 

(42 U.S.C. 1395X): 

(A) Critical access hospital (section 

1861(mm)(1)). 

(B) Religious nonmedical health care 

institution (section 1861(ss)(1)). 

(2) The Agency will use the applicant 

provider’s Centers for Medicare and 

Medicaid Services (CMS) Certification 

Number (CCN) to verify the applicant 

provider is listed as a ‘‘Hospital’’ for the 

‘‘Provider or Supplier Type’’ category 

on the CMS Quality Certification and 

Oversight Reports (QCOR) website 

qcor.cms.gov/index_new.jsp. 

* * * * * 

Hybrid means a combination of two or 

more renewable energy technologies 

that are incorporated into a unified 

system to support a single project. 

Projects which propose two or more 

different renewable energy technologies 

that are not incorporated into a unified 

system and projects which propose 

different renewable energy technologies 

at two or more locations (a different 

technology at each site) are not eligible. 

For example, installing wind 

technologies at one location and solar 

technologies at another location is not 

considered hybrid but installing wind 

and solar technologies that are 

incorporated into a unified system to 

support a single project at both locations 

is considered hybrid. 

* * * * * 

Local owner means an individual who 

owns any portion of an entity that is the 

eligible borrower and whose primary 

residence is located within the normal 


ddrumheller on DSK120RN23PROD with RULES2
79706 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

commuting area, typically 100 miles or 

less, of the guaranteed loan project. 

* * * * * 

Matching funds means the 25 percent 

of total eligible project costs required by 

7 U.S.C. 8107 (REAP) to be eligible to 

receive a guaranteed loan. Funds 

provided by the borrower in excess of 

matching funds are not matching funds. 

* * * * * 

Natural resource value-added product 

means a product derived from any 

naturally occurring resource, including 

agricultural resources, that is further 

processed to add value or used to 

generate energy or renewable energy. 

For example, wind or the sun being 

used for energy generation, grapes that 

are processed into wine or jam, or straw 

that is processed into particle board. 

Feeding grain to livestock is not 

considered as part of this definition. 

* * * * * 

Professional service means services 

used by the borrower for planning and 

developing a project, including, but not 

limited to, appraisals, architectural 

services, surveys, environmental impact 

analyses, implementing mitigation 

measures, and establishing or acquiring 

property rights. Such services are 

generally rendered by persons licensed 

or certified by States or accreditation 

associations, such as architects, 

engineers, accountants, attorneys, or 

appraisers, and those rendered by loan 

packagers, but not including loan 

finders. A loan finder fee is not 

considered a professional service. 

* * * * * 

Refurbished means a piece of 

equipment or renewable energy system 

that has been brought into a commercial 

facility, thoroughly inspected, and worn 

parts replaced and has a warranty that 

is approved by the Agency or its 

designee An example of refurbished 

equipment is a diesel engine that has 

been rebuilt to factory specifications. 

The purchase of used equipment which 

has not been refurbished is not eligible. 

* * * * * 

Renewable energy system (RES) 

means a system that produces usable 

energy from a renewable energy source. 

Co-firing with fossil fuels, natural gas or 

petroleum-based products or materials 

such as coal and other fuels, oils, 

chemicals, tires, or plastic are not 

eligible; and may include: 

(1) Distribution components necessary 

to move energy produced by such 

system to the initial point of sale; and 

(2) Other components and ancillary 

infrastructure of such system, such as a 

storage system; however, such system 

may not include a mechanism for 

dispensing energy at retail e.g., a 

flexible fuel pump. 

* * * * * 

Retrofitting means a modification to 

an existing building or installed 

equipment that incorporates a function 

or feature(s) not included in the original 

design when built or for the 

replacement of existing components 

with components that improve the 

original design and does not affect 

original warranty if the warranty is still 

in existence. Examples of retrofitting 

include: 

(1) Installing newly designed blades 

to an existing wind turbine to enhance 

energy production. 

(2) Adding equipment or processes to 

or altering or enhancing an existing RES 

to improve production, efficiency, or 

financial viability, such as a feedstock 

retreater on an existing biodiesel 

production plant; 

(3) Adding a battery system to an 

existing RES; 

(4) Installing a steam turbine at an 

ethanol plant, or; 

(5) Installing a combined heat and 

power system for a pellet production 

facility. 

* * * * * 

Rural and rural area means any area 

of a State not in a city or town that has 

a population of more than 50,000 

inhabitants, and which excludes certain 

populations pursuant to 7 U.S.C. 

1991(a)(13)(H), according to the latest 

decennial census of the United States 

and not in the urbanized area 

contiguous and adjacent to a city or 

town that has a population of more than 

50,000 inhabitants. In making this 

determination, the Agency will use the 

latest decennial census of the United 

States. Applications cannot be approved 

subject to meeting rural area 

requirements. Locations that are 

contiguous and adjacent to an urbanized 

area will be delineated as a non-eligible 

area in the Rural Development Property 

Eligibility Map found at: https://

eligibility.sc.egov.usda.gov/eligibility/ 

welcomeAction.do. This map is 

maintained independently by another 

government agency and is oriented 

through census tract data. The following 

exclusions apply: 

(1) Any area in the urbanized area 

contiguous and adjacent to a city or 

town that has a population of more than 

50,000 inhabitants that has been 

determined to be ‘‘rural in character’’ as 

follows: 

(i) The determination that an area is 

‘‘rural in character’’ will be made by the 

Under Secretary of Rural Development. 

Rural in character requests and 

determinations are project specific; e.g., 

if approved, the determination does not 

apply to any future request made within 

the same area. The process to request a 

determination under this provision is 

outlined in paragraph (1)(ii) of this 

definition. The determination that an 

area is ‘‘rural in character’’ under this 

definition will apply to areas that are 

within: 

(A) An urbanized area that has two 

points on its boundary that are at least 

40 miles apart, which is not contiguous 

or adjacent to a city or town that has a 

population of greater than 150,000 

inhabitants or the urbanized area of 

such a city or town; or 

(B) An urbanized area contiguous and 

adjacent to a city or town of greater than 

50,000 inhabitants that is within 1⁄4 mile 

of a rural area. 

(ii) Units of local government may 

petition the Under Secretary of Rural 

Development for a ‘‘rural in character’’ 

designation by submitting a petition to 

the appropriate Rural Development 

State Director for recommendation to 

the Administrator on behalf of the 

Under Secretary. The petition shall 

document how the area meets the 

requirements of paragraph (1)(i)(A) or 

(B) of this definition and discuss why 

the petitioner believes the area is ‘‘rural 

in character,’’ including, but not limited 

to, the area’s population density, 

demographics, and topography and how 

the local economy is tied to a rural 

economic base. Upon receiving a 

petition, the Under Secretary will 

consult with the applicable governor or 

leader in a similar position and request 

comments to be submitted within 5 

business days, unless such comments 

were submitted with the petition. The 

Under Secretary will release to the 

public a notice of a petition filed by a 

unit of local government not later than 

30 days after receipt of the petition by 

way of publication in a local newspaper 

and posting on the Agency’s website at 

rd.usda.gov/onerdguarantee, and the 

Under Secretary will make a 

determination not less than 15 days, but 

no more than 60 days, after the release 

of the notice. Upon a negative 

determination, the Under Secretary will 

provide to the petitioner an opportunity 

to appeal a determination to the Under 

Secretary, and the petitioner will have 

10 business days to appeal the 

determination and provide further 

information for consideration. The 

Under Secretary will make a 

determination of the appeal in not less 

than 15 days, but no more than 30 days. 

(iii) Rural Development State 

Directors may also initiate a request to 

the Under Secretary to determine if an 

area is ‘‘rural in character.’’ A written 

recommendation must document how 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79707 

the area meets the statutory 

requirements of paragraph (1)(i)(B) of 

this definition and discusses why the 

State Director believes the area is ‘‘rural 

in character,’’ including, but not limited 

to, the area’s population density, 

demographics, topography, and how the 

local economy is tied to a rural 

economic base. Upon receipt of such a 

request, the Administrator will review 

the request for compliance with the 

‘‘rural in character’’ provisions and 

make a recommendation to the Under 

Secretary. Provided a favorable 

determination is made, the Under 

Secretary will consult with the 

applicable Governor and request 

comments within 10 business days, 

unless gubernatorial comments were 

submitted with the request. A public 

notice will be published by the State 

Office in accordance with paragraph 

(1)(ii) of this definition. There is no 

appeal process for requests made on the 

initiative of the State Director. 

(2) An area that is attached to the 

urbanized area of a city or town with 

more than 50,000 inhabitants by a 

contiguous area of urbanized census 

blocks that is not more than two census 

blocks wide. Applicants from such an 

area should work with their Rural 

Development State Office to request a 

determination of whether their project is 

located in a rural area under this 

provision. This applies to areas that 

would not be considered a rural area 

because they are attached to the 

urbanized area of a city or town of 

greater than 50,000 inhabitants by a 

‘‘string’’ area that is two census blocks 

wide or less (which are typically 

interstates or major highways). As long 

as the ‘‘string’’ area is two census blocks 

wide or less, the area outside of the 

urbanized area, beginning with the 

‘‘string’’ area, may be considered rural. 

Once an area is approved as a string 

exception, any project within that area 

is eligible. 

(3) For the Commonwealth of Puerto 

Rico, the island is considered Rural and 

eligible except for the San Juan Census 

Designated Place (CDP) and any other 

CDP with greater than 50,000 

inhabitants. Areas within CDPs with 

greater than 50,000 inhabitants, other 

than the San Juan CDP, may be 

determined to be Rural if they are ‘‘not 

urban in character.’’ 

(4) For the State of Hawaii, all areas 

within the State are considered rural 

and eligible except for the Honolulu 

CDP within the County of Honolulu and 

any other CDP with greater than 50,000 

inhabitants. Areas within CDPs with 

greater than 50,000 inhabitants, other 

than the Honolulu CDP, may be 

determined to be rural if they are ‘‘not 

urban in character.’’ 

(5) For the purpose of defining a rural 

area in the Republic of Palau, the 

Federated States of Micronesia, and the 

Republic of the Marshall Islands, the 

Agency shall determine what 

constitutes rural and rural Area based 

on available population data. 

* * * * * 

Simple payback means the estimated 

simple payback of a project funded 

under this part as calculated using 

paragraph (1), (2), or (3) of this 

definition, as applicable. 

(1) Energy efficiency improvement 

projects simple payback = (Total Project 

Costs) ÷ (Dollar value of energy saved). 

(i) Energy saved will be determined 

by subtracting the projected energy 

(determined by the method in paragraph 

(1)(i)(B) of this definition) to be 

consumed from the historical energy 

consumed (determined by the method 

in paragraph (1)(i)(A) of this definition), 

and converting the result to a monetary 

value using a constant value or price of 

energy (determined by the method in 

paragraph (1)(i)(C) of this definition). 

(A) Actual energy used in the original 

building and/or equipment, as 

applicable, prior to the EEI project, must 

be based on the actual average annual 

total energy used in British thermal 

units (BTU) over the most recent 12, 24, 

36, 48, or 60 consecutive months of 

operation. 

(B) Projected energy use if the 

proposed EEI project had been in place 

for the original building and/or 

equipment, as applicable, for the same 

time period used to determine that 

actual energy use under paragraph 

(1)(i)(A) of this definition. 

(C) Value or price of energy must be 

the actual average price paid over the 

same time period used to calculate the 

actual energy used under paragraph 

(1)(i)(A) of this definition. 

(ii) Energy efficiency improvement 

projects simple payback does not allow 

EEI to monetize benefits other than the 

dollar amount of the energy savings the 

agricultural producer or rural small 

business realizes as a result of the 

improvement. 

(iii) Proposed additional energy 

consumption by a business which 

would result in greater savings if 

implemented is not considered in the 

payback calculation. 

(2) Renewable energy systems projects 

simple payback = (total project costs) ÷ 

(dollar value of energy units replaced, 

credited, sold, or used and fair market 

value of byproducts as applicable in a 

typical year). 

(i) Value of energy replaced will be 

calculated based on the borrower 

entity’s historical energy consumption 

with actual average price paid for the 

energy replaced, following the 

methodology outlined in paragraph 

(1)(i) of this definition RES replacement 

projects which generate more energy 

than the applicant’s historical records 

document, may add to the replacement 

value, the value obtained by taking the 

excess energy generated times a 

documented market price in order to 

derive at total dollar value of energy 

units replaced, credited, sold, or used. 

(ii) Value of energy credited or sold 

will be calculated based on the amount 

of energy units to be sold at the 

proposed rate per unit, as documented 

in utility net metering or crediting 

policies and/or a purchase agreement. 

(iii) If proposed energy will be used 

in a new facility (includes any directuse project), value of energy used will 

be calculated based on the amount of 

energy units to be used at the 

documented price per unit of 

conventional fuel alternative. 

(iv) Value of byproducts produced by 

and used in the project or related 

enterprises should be documented at the 

fair market value to be received for the 

byproducts in a typical year. 

(v) Renewable energy systems projects 

simple payback does not include any 

one-time benefits such as but not 

limited to construction and investmentrelated benefits, nor credits which do 

not provide annual income to the 

project, such as tax credits. These 

benefits may be considered when 

appropriate for calculating repayment 

ability of guaranteed loans. 

(vi) For RES projects that involve a 

shared meter with a residence where the 

cost of the system has been prorated, 

only the eligible prorated amount of 

energy attributed to the rural business or 

agricultural producer will be used in the 

payback calculation. For projects that 

involve in-eligible expenses other than 

residential, the full amount of energy 

production will be used in the payback 

calculation. 

(3) Energy efficiency equipment and 

systems projects simple payback = (total 

project costs) ÷ (dollar value of 

efficiency savings). Efficiency savings 

will be determined by subtracting the 

annual value of energy to be consumed 

by the proposed energy efficient 

equipment from the annual value of 

energy that a conventional equipment 

alternative would have consumed. 

Adequate documentation must be 

provided for all consumption estimates 

and values utilized in the calculation. 

* * * * * 

Small business means an entity that 

meets the requirements of paragraphs 

(1) and (2) of this definition: 


ddrumheller on DSK120RN23PROD with RULES2
79708 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

(1) An entity or utility, as applicable, 

as further defined in paragraphs (1)(i) 

through (iv) of this definition and 

meeting the requirements in paragraph 

(2) of this definition. With the exception 

of the entities identified in this 

paragraph, all other non-profit entities 

are not small businesses for the 

purposes of REAP program eligibility: 

(i) A private for-profit entity, 

including a sole proprietorship, 

partnership, or corporation. The 

application must sufficiently describe 

the operations of the applicant’s 

business entity; 

(ii) A cooperative (including a 

cooperative qualified under section 

501(c)(12) of the Internal Revenue 

Code); 

(iii) An electric utility (including a 

Tribal or governmental electric utility) 

that provides service to rural consumers 

and operates independent of direct 

government control; or 

(iv) A Tribal corporation or other 

Tribal business entities that are 

chartered under Section 17 of the Indian 

Reorganization Act (25 U.S.C. 5124) or 

have similar structures and 

relationships with their Tribal 

governments and are acceptable to the 

Agency. The Agency will determine the 

small business status of such Tribal 

entity without regard to the resources of 

the Tribal government. This means that 

only the applicant entity must meet the 

definition of a small business; and 

(2) An entity that meets the 

requirements of (i) or (ii) below: 

(i) The Small Business Administration 

size standards in accordance with 13 

CFR 121.301(a), and any successor 

regulation. The size of the applicant 

alone (without affiliates) must not 

exceed the size standard designated for 

the industry in which the applicant is 

primarily engaged. Also, the size of the 

applicant combined with its affiliates 

must not exceed the size standard 

designated for either the primary 

industry of the applicant alone or the 

primary industry of the applicant and 

its affiliates, whichever is higher. Size 

standards to be utilized are found in 13 

CFR 121.201, and any successor 

regulation. The size standards 

themselves are expressed either in 

number of employees or annual receipts 

in millions of dollars, unless otherwise 

specified. The number of employees or 

annual receipts indicates the maximum 

allowed for an entity and its affiliates 

and are calculated using the following 

criteria: 

(A) The number of employees is 

calculated using the guidance found in 

13 CFR 121.106, and any successor 

regulation. The average number of 

employees is used based upon number 

of employees for each of the pay periods 

for the preceding 24 months. Part-time 

and temporary employees are counted 

as full-time employees. If the entity has 

not been in business for 24 months, the 

average number of employees is used for 

each of the pay periods during which it 

has been in business; or 

(B) Annual receipts are calculated 

using the guidance found in 13 CFR 

121.104, and any successor regulation. 

Federal income tax returns and any 

amendments filed with the IRS on or 

before the date of application must be 

used. If an entity has not filed a Federal 

income tax return, the Agency will 

calculate the entities annual receipts 

using any other available information 

such as regular books of account, or 

audited financial statements; or 

(ii) The size standard outlined in 13 

CFR 121.301(b)(2), and any successor 

regulation. Including its affiliates, the 

entity must not have a tangible net 

worth in excess of $20 million, and 

average net income after Federal income 

taxes (excluding carry over losses) for 

the preceding two completed fiscal year 

not in excess of $6.5 million. 

* * * * * 

Total project costs means the sum of 

all costs associated with a completed 

project. All costs associated with a 

completed project, including ineligible 

project costs, must be included. Total 

project costs for retrofitting an existing 

RES includes the costs associated with 

the modifications or replacement of the 

existing components. 

* * * * * 

Underserved communities mean 

communities (including urban or rural 

communities and Indian tribal 

communities) that have limited access 

to affordable, healthy foods, including 

fresh fruits and vegetables, in grocery 

retail stores or farmer-to-consumer 

direct markets and that have either a 

high rate of hunger or food insecurity or 

a high poverty rate as reflected in the 

most recent decennial census or other 

Agency-approved census. For purposes 

of awarding priority points, when 

applicable, this definition shall also 

include unserved or underserved 

populations, including minorities or 

protected groups, persistent poverty 

areas, or areas where Rural 

Development projects have not been 

awarded in the past five years. High 

poverty rate is based on current census 

data and is not the same as persistent 

poverty which uses data for the last 30 

years. 

* * * * * 

■ 5. Amend § 5001.6 by revising 

paragraph (b) to read as follows: 

§ 5001.6 General lender responsibilities. 

* * * * * 

(b) Lenders can contract for services, 

but such contracting does not relieve a 

lender from its responsibilities as 

identified in this part or, where 

applicable, in the applicable guaranteed 

loan program identified in § 5001.1. 

* * * * * 

■ 6. Revise § 5001.7 to read as follows: 

§ 5001.7 Agency’s special initiatives. 

Applicants submitting applications 

that support the implementation of 

strategic or special initiatives are 

encouraged to review the Agency’s 

annual notice to determine if their 

projects are eligible for receiving 

priority for projects. These projects may 

also support the implementation of 

strategic economic development and 

community development plans on a 

multi-jurisdictional and multi-sectoral 

basis in accordance with section 6401 of 

the Agriculture Improvement Act of 

2018 (Pub. L. 115–334). 

■ 7. Amend § 5001.8 by revising 

paragraphs (e) introductory text and 

(e)(1) to read as follows: 

§ 5001.8 Approvals, regulations, and 

forms. 

* * * * * 

(e) 7 CFR part 5001 does not prohibit 

or consent to electronic signatures. 

Rural Development will accept 

electronic signatures from lenders for 

origination, loan closing, and servicing 

documents in accordance with the ESign Act unless otherwise prohibited by 

law or program. Lenders may use 

electronic signatures for electronic 

promissory notes (eNotes), deeds of 

trust and other documents relevant to 

the loan transaction, providing that the 

lender perfects and maintains a first lien 

position, an enforceable promissory 

note, and meets all other agency 

requirements including the following: 

(1) Lenders may submit forms to Rural 

Development electronically using 

USDA’s Service Center Agencies Online 

Services website. Registration is limited 

to individuals and each individual 

authorized by the lender must register 

and upon registration may electronically 

sign and submit certain forms on behalf 

of the lender. 

* * * * * 

■ 8. Revise and republish § 5001.9 to 

read as follows: 

§ 5001.9 Standards for financial 

information. 

(a) All financial information (e.g., 

financial statements, balance sheets, 

financial projections, and income 

statements) must be prepared and 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79709 

submitted in accordance with 

accounting practices acceptable to the 

Agency. Such practices can include, but 

are not limited to, Generally Accepted 

Accounting Principles (GAAP) and the 

industry’s standard accounting practice. 

Unless the applicant or borrower meets 

the threshold for an audit in accordance 

with 2 CFR part 200 subpart F, the type 

of financial statement, e.g., borrower 

prepared, compiled, reviewed, or 

audited, required is typically the 

decision of the lender. 

(b) For sole proprietorships and other 

situations where business assets are 

held personally, financial statements 

must be prepared using only the assets 

and liabilities directly attributable to the 

applicant’s project. For these situations, 

assets, plus any improvements, must be 

valued at the lower of cost or market 

value. 

(c) A tax return is not an acceptable 

financial statement when underwriting 

a loan guaranteed under this part; 

however, tax return information may be 

used to prepare financial statements and 

to determine REAP eligibility. 

■ 9. Amend § 5001.101 by: 

■ a. Revising paragraphs (a) and (b); and 

■ b. Adding paragraph (f) 

The revisions and addition read as 

follows: 

§ 5001.101 Introduction. 

* * * * * 

(a) Project eligibility. Sections 

5001.102 through 5001.108 identify 

requirements for projects to be eligible 

to receive a loan guarantee under this 

part. Sections 5001.115 through 

5001.119 identify types of projects that 

are not eligible for a loan guarantee 

under this part. The Agency will not 

issue a loan guarantee under this part 

for any project that does not meet the 

applicable eligibility criteria as 

specified. 

(b) Borrower eligibility. Section 

5001.126 identifies the types of 

borrowers that are eligible to receive a 

loan guarantee for their projects under 

this part. The types of borrowers eligible 

to receive loan guarantees for their 

projects vary based on the guaranteed 

loan program they are applying under 

and that guaranteed loan program’s 

authorizing statute as set forth in 

§ 5001.1. Section 5001.127 identifies 

conditions that would make an 

otherwise eligible borrower ineligible 

for receiving a loan guarantee for its 

project under this part. 

* * * * * 

(f) Use of funds. Section 5001.121 

identifies eligible uses of guaranteed 

loan funds and § 5001.122 identifies 

ineligible uses of guaranteed loan funds. 

* * * * * 

■ 10. Amend § 5001.102 by revising and 

republishing paragraph (d) to read as 

follows: 

§ 5001.102 Project eligibility—general. 

* * * * * 

(d) Debt refinancing. The Agency can 

guarantee loans for debt refinancing, as 

described in paragraphs (d)(1) through 

(5) of this section when the guaranteed 

loan extinguishes the debt being 

refinanced. These paragraphs do not 

apply to REAP loans, see 

§ 5001.121(d)(14) for REAP refinancing 

provisions. Longer-term financing to 

pay off a lender’s interim construction 

loan after project completion will not be 

treated as debt refinancing as long as it 

meets the requirements for takeout of 

interim financing in § 5001.121(c)(6). 

An eligible debt refinancing project is: 

(1) Refinancing of debt on one or more 

loans owed to another creditor. There is 

no limit on percent of total use of funds 

if a new lender is refinancing debt owed 

to another creditor; 

(2) Refinancing of debt owed to the 

applicant lender or any part thereof 

provided that the applicant lender debt 

being refinanced does not exceed 50 

percent of the total use of funds in the 

new aggregated federally-guaranteed 

debt, the applicant lender debt being 

refinanced is in a current status for the 

past six months and the new guaranteed 

loan is providing better rates or 

repayment terms. Better rates or 

repayment terms can be shown in a 

variety of ways including the lender 

providing a fixed rate over a lower 

variable rate provided the change is 

advantageous to the borrower’s longterm repayment ability. The current 

status cannot be achieved by the lender 

forgiving the borrower’s debt or by 

servicing actions that impact the 

borrower’s repayment schedule; or 

(3) Refinancing of debt owed directly 

to the Federal Government or that is 

federally-guaranteed, including any 

guaranteed debt owed to the applicant 

lender, when a refinance of this debt is 

consistent with sections 333, ‘‘Special 

Conditions and Limitations on Loans’’ 

and 306(a)(24)(C), ‘‘Loan Guarantees for 

Water, Wastewater, and Essential 

Community Facilities Loans’’ of the 

Consolidated Farm and Rural 

Development Act (as amended by the 

Agriculture Improvement Act of 2018, 

Pub. L. 115–334). Such guaranteed debt 

shall not be included in the amount of 

applicant lender debt when calculating 

the maximum percentage of the total use 

of funds in the new guaranteed loan as 

stated in paragraph (d)(2) of this section; 

and, 

(4) When the refinancing is in 

accordance with paragraphs (d)(1) 

through (3) of this section, the following 

requirements must be met: 

(i) The Agency has determined that 

the project is viable, and debt 

refinancing is necessary to improve cash 

flow; 

(ii) The debt is reflected on the 

borrower’s balance sheet and the 

original loan funds were used for 

project-eligible purposes. Refinancing of 

existing of lines of credit is considered 

an eligible purpose for debt refinancing 

in the B&I program; 

(iii) For loans to existing businesses 

where debt refinancing is a majority 

purpose of the guaranteed loan, the 

borrower must demonstrate historical 

debt service coverage ratios using 

proposed debt service requirements of 

not less than 1.1 times, or the borrower’s 

current financial performance 

demonstrates it has corrected or 

recovered from impacts or issues 

adversely affecting its past financial 

performance. The debt service coverage 

ratio computed based on the current 

income statement must be at least 1:1 to 

demonstrate correction or recovery. 

(5) For CF guaranteed loan requests 

only, refinancing of debt, not including 

new construction, incurred by a rural 

hospital to preserve access to a health 

service when the refinancing will 

meaningfully improve the financial 

position of the hospital. The debt can be 

existing Agency direct loan debt, 

Agency guaranteed debt, or another 

lender’s debt (including other nonAgency Federal guaranteed debt). Loan 

requests to refinance rural hospital debt 

must demonstrate that the new amount 

of annual debt repayment on the debt 

being refinanced will be less than the 

existing amount of annual debt 

repayment and provide a total debt 

service coverage ratio of at least 1.1 

based on historical cash flow. To 

calculate the ratio, the new debt service 

amount will include annual capital 

expense reserve and annual debt 

repayment reserve requirements. This 

information will be provided by the 

lender on an Agency approved 

application for loan guarantee and its 

associated supporting documentation. 

■ 11. Amend § 5001.103 by: 

■ a. Revising paragraphs (a)(1), (a)(3) 

and (b)(1); and 

■ b. Adding paragraphs (d) and (e). 

The revisions and additions read as 

follows: 

§ 5001.103 Eligible CF projects and 

requirements. 

* * * * * 

(a) * * * 

(1) Health care facilities and services, 

including but not limited to hospitals 

and assisted living facilities providing 


ddrumheller on DSK120RN23PROD with RULES2
79710 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

daily living and health care assistance 

in compliance with Federal, Tribal and/ 

or State licensure or certification 

requirements; 

* * * * * 

(3) Community, public, social, 

educational, or cultural facilities or 

services, including but not limited to: 

(i) Business incubators when not an 

inherently commercial enterprise, and 

the applicant demonstrates the 

following: 

(A) Applicant is a mission-driven 

organization such as a local or regional 

economic development organization; 

(B) The facility will be used to 

provide technical assistance, training, 

workforce development, administrative 

support services and vocational training 

to address workforce shortages in the 

community or region; and 

(C) Capacity building and support 

services that include at a minimum the 

following with the borrower 

demonstrating expertise in one or more 

of these services or presents a 

sustainable economically feasible 

program to outsource such activities: 

(1) Business plan development; 

(2) Administrative support services; 

(3) Training and technical assistance; 

(4) Mentoring, coaching, and 

leadership; 

(5) Finance and accounting 

workshops; 

(6) Programs to access capital; and 

(7) High-speed internet access; 

(ii) Thrift stores that operate as 

charitable organizations to enrich the 

quality of life for residents of the rural 

community they serve demonstrated by 

the following activities: 

(A) Collect and resell used or donated 

merchandise to community residents 

and may also provide other services 

such as job training or food pantries; 

(B) Receive donations, gifts, or 

bequests of money to help fund the 

organization and its purpose with a 

significant portion obtained from the 

rural community it serves. 

(C) Profits are reinvested in the 

facility or in charitable activities in the 

rural community served to ensure the 

goals of the organization are met. 

(iii) Fairgrounds, agricultural 

exposition centers, farmers markets, 

food distribution and food banks; 

* * * * * 

(b) * * * 

(1) To demonstrate availability for 

public use, the borrower may not 

restrict use of or membership to its 

facility or service based on race, color, 

religion, sex, national origin, age, 

disability, sexual orientation, or marital 

or familial status Veterans of Foreign 

Wars and American Legion post 

facilities must be open and available for 

use by appointment or lease to 

community residents or groups. 

* * * * * 

(d) Leased space. Eligible projects 

may include leased space to ineligible 

organizations or leased space used for 

ineligible commercial activities 

provided the floor space leased to 

ineligible organizations or used for 

ineligible commercial activity is less 

than 25 percent of the facility’s floor 

space. The ineligible organization and 

the ineligible commercial activity must 

be related to and enhance the primary 

purpose of the eligible project. 

Examples include a hair salon in an 

assisted living facility, or a pharmacy in 

a medical facility. 

(e) Purchase of existing facility. When 

the project is to otherwise improve an 

essential community facility through the 

purchase of an existing facility as 

defined in § 5001.3 the following are 

required: 

(1) An appraisal which demonstrates 

the purchase price is fair and reasonable 

and represents the market value of the 

facility through an arm’s length 

transaction; and 

(2) If the transaction is necessary to 

improve the facility, documentation of 

the improvements that will be required 

and the plan, including source of 

funding, to complete those 

improvements within a reasonable 

timeframe; or 

(3) If the transaction is necessary to 

prevent a loss of service, documentation 

in the form of a financial analysis that 

demonstrates the seller will not have the 

financial means to continue to operate 

the facility and provide the needed 

services. 

■ 12. Amend § 5001.104 by revising the 

introductory text and paragraphs (a) and 

(d)(1) to read as follows: 

§ 5001.104 Eligible WWD projects and 

requirements. 

For a WWD project to be eligible for 

a loan guarantee under this part, it must 

meet the criteria specified in § 5001.102 

and this section and be for a borrower 

eligible to submit an application for the 

project in accordance with § 5001.126. 

(a) Type of project. The project must 

be for one or more of the following 

facilities: 

(1) Drinking water facilities, including 

but not limited to water source, 

treatment and distribution; 

(2) Sanitary sewage facilities, 

including but not limited to collection 

and treatment; 

(3) Solid waste facilities; or, 

(4) Stormwater facilities. 

* * * * * 

(d) * * * 

(1) The project must be installed to 

serve any user within the service area 

who desires service and can be feasibly 

and legally served. 

* * * * * 

■ 13. Amend § 5001.105 by revising 

paragraphs (b)(7), (b)(10), (b)(14), 

(b)(15)(i)(D), (b)(18)(i), (b)(18)(ii) 

introductory text, (b)(20), (b)(22)(vii), (d) 

introductory text, and (d)(1)(iii) to read 

as follows: 

§ 5001.105 Eligible B&I projects and 

requirements. 

* * * * * 

(b) * * * 

(7) Agricultural production, when not 

eligible for Farm Service Agency (FSA) 

farm loan programs assistance and when 

it is part of an integrated business also 

involved in the processing of 

agricultural products. Any agricultural 

production considered for guaranteed 

loan financing must be owned, 

operated, and maintained by the 

business receiving the guaranteed loan. 

Examples of potentially eligible 

agricultural production include but are 

not limited to an apple orchard in 

conjunction with a food processing 

plant; poultry buildings linked to a meat 

processing operation; or sugar beet 

production coupled with storage and 

processing. 

* * * * * 

(10) Development and construction of 

broadband and telecommunication 

systems, including modification of 

existing systems, that are not otherwise 

eligible for funding in the RUS program 

or if funding is unavailable in the RUS 

program, subject to the public notice 

filing requirements of 7 CFR 1738.106(a) 

and the additional reporting 

requirements of 7 CFR 1738.107. 

* * * * * 

(14) Leasehold improvements when 

the lease contains no reverter clauses or 

restrictive clauses that would impair the 

use or value of the property as security 

for the loan. The term of the lease must 

be equal to or greater than the term of 

the loan. Leasehold improvements are 

physical enhancements made to 

property by or on behalf of the 

property’s lessee. When improvements 

are made to real property and those 

improvements are permanently affixed 

to the property, the title to those 

improvements automatically transfers to 

the owner of the property upon 

termination of the lease. 

(15) * * * 

(i) * * * 

(D) Includes an appropriate agreement 

with retail and institutional clients to 

inform consumers that they are 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79711 

purchasing or consuming locally or 

regionally produced agricultural food 

products. The agreement(s) must be in 

place prior to issuance of the loan note 

guarantee and stated as part of the 

lender’s certification at loan closing. 

* * * * * 

(18) * * * 

(i) Guaranteed loans to eligible 

cooperatives may be made in principal 

amounts up to $40 million if the project 

is located in a rural area, the cooperative 

facility being financed provides for the 

value-added processing of agricultural 

commodities, and the total amount of 

guaranteed loans exceeding $25 million 

does not exceed 10 percent of the funds 

available for the fiscal year. Guaranteed 

loans in excess of $25 million in 

accordance with this provision may 

only be approved by the Secretary, 

whose authority may not be redelegated. 

(ii) Guaranteed loans to eligible 

cooperatives may also be made in nonrural areas provided: 

* * * * * 

(20) Nursing homes and assisted 

living facilities where constant medical 

care is provided and available onsite to 

the residents. Independent living 

facilities are not eligible in accordance 

with § 5001.118(a). Independent living 

facilities are considered residential 

property as they have many similarities 

to a multi-family housing complex, 

whereas nursing home and assisted 

living facility tenants rely on those 

entities to provide needed personal or 

medical care. Properties consisting of 

both assisted care facilities and 

independent senior living may be 

eligible if the availability of the on-site 

medical services is an optional service 

to the independent living residents, or 

if the predominant residents of the 

facility require assisted living care. 

* * * * * 

(22) * * * 

(vii) Operations and maintenance. 

The demonstration of technical merit is 

the completion of two operating cycles 

at its designed production level. 

‘‘Operating cycle’’ is the average time 

between the acquisition of materials or 

the providing of services and the final 

cash realization of that acquisition or 

provision of services. 

* * * * * 

(d) Capital and equity. Borrowers are 

required to have sufficient capital or 

equity to mitigate the ongoing financial 

and operational risks of the business. 

The capital/equity requirement must be 

met in the form of either cash or earning 

assets contributed to the business and 

reflected on the borrower’s balance 

sheet. Transfers of assets at fair market 

value between related parties, which are 

not arm’s length transactions, must be in 

accordance with GAAP and require 

evidence that the transaction was 

entered into at market terms. Equity 

cannot include appraisal surplus or 

bargain purchase gains. Subordinated 

debt may be included when the 

subordinated debt is in exchange for 

cash injected into the business that 

remains in the business for the life of 

the guaranteed loan. The note or other 

form of evidence must be submitted to 

the Agency in order for subordinated 

debt to count towards meeting the 

balance sheet equity requirement. 

Balance sheet equity will be determined 

based upon current and projected 

borrower financial statements. A 

balance sheet as of loan closing is 

required and should reflect the new 

debt and use of proceeds. If there are 

multiple borrowers, consolidated 

financial statements should be 

presented. The following capital and 

equity requirements must be met at the 

time of lender’s closing of the 

guaranteed loan. 

(1) * * * 

(iii) Owner contributed capital, as 

reflected in the equity section of the 

balance sheet, that is equal to or greater 

than 10 percent of net total fixed assets 

plus depreciation. 

* * * * * 

■ 14. Amend § 5001.106 by revising the 

introductory text, paragraphs (d)(2), 

(e)(2) and (e)(3) introductory text to read 

as follows: 

§ 5001.106 Eligible REAP–Renewable 

Energy System (RES) projects and 

requirements. 

For a REAP RES project to be eligible 

for a loan guarantee under this part, it 

must meet the criteria specified in 

§ 5001.102(a) through (c) and in 

paragraphs (a) through (e) of this section 

and be for a borrower eligible to submit 

an application for the project in 

accordance with § 5001.126.* * * 

* * * * * 

(d) * * * 

(2) The borrower may install or elect 

to conditionalize funding upon the 

installation of a device (such as a 

second meter) that results in 100 

percent of the energy generated by the 

RES project to be used only by the 

agricultural operation or rural small 

business. 

* * * * * 

(e) * * * 

(2) Pass/pass with conditions/fail 

assignments. The Agency will assign 

each area of the technical report, as 

specified in paragraph (e)(1) of this 

section, a ‘‘pass,’’ ‘‘pass with 

conditions,’’ or ‘‘fail.’’ An area will 

receive a ‘‘pass’’ if the information 

provided for the area has no weaknesses 

and meets or exceeds any requirements 

specified for the area. An area will 

receive a ‘‘pass with conditions’’ if the 

information provided for the area has 

minor weaknesses which could be 

conditioned and reasonably resolved by 

the borrower. Otherwise, if the 

information provided for the area is 

conclusively deemed to be a major 

weakness, or if the area has not been 

addressed by the applicant, the area will 

receive a fail. 

(3) Determination. The Agency will 

compile the results for each area of the 

technical report to determine if the 

project has technical merit. 

* * * * * 

■ 15. Amend § 5001.107 by revising and 

republishing paragraph (a) to read as 

follows: 

§ 5001.107 Eligible REAP—Energy 

Efficiency Improvement (EEI) projects and 

requirements. 

* * * * * 

(a) The EEI project must use less 

energy on an annual basis than the 

original building and/or equipment that 

it will improve or replace as 

demonstrated in an energy assessment 

or energy audit as applicable. 

(1) If the project’s total project cost is 

greater than $80,000, the energy 

assessment must be conducted by an 

energy auditor, an energy assessor, or an 

individual supervised by either an 

energy assessor or energy auditor. The 

final energy assessment must be 

validated and signed by the energy 

assessor, the energy auditor who 

conducted the energy assessment, or by 

the supervising energy assessor or 

energy auditor of the individual who 

conducted the assessment, as 

applicable. 

(2) If the project’s total project cost is 

$80,000 or less, the energy assessment 

may be conducted in accordance with 

paragraph (a)(1) of this section or by a 

person that has at least 3 years of 

experience and completed at least five 

energy assessments or energy audits on 

similar type projects. Eligible EEI 

include, but are not limited to: 

(i) Efficiency improvements to 

existing RES; and 

(ii) Construction of a new building 

only when the new building is used for 

the same purpose as the existing 

building and if, based on an energy 

assessment or energy audit, as 

applicable, it is more cost effective to 

construct a new building that will use 

less energy on annual basis than to 

improve the energy efficiency of the 

existing building. 

* * * * * 


ddrumheller on DSK120RN23PROD with RULES2
79712 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

■ 16. Amend § 5001.108 by revising the 

introductory text to read as follows: 

§ 5001.108 Eligible REAP—Energy 

Efficient Equipment and Systems (EEE) 

projects and requirements. 

For a REAP EEE project to be eligible 

for a loan guarantee under this part, it 

must meet the criteria specified in 

§ 5001.102(a) through (c) and in 

paragraphs (a) through (d) of this section 

and be for a borrower that is an 

agricultural producer eligible to submit 

an application for the project in 

accordance with § 5001.126. The EEE 

project can be located in a rural or nonrural area as long as the energy efficient 

equipment or systems are used for 

agricultural production or processing in 

accordance with paragraph (a) of this 

section. If the borrower plans to use 

taxable bonds as debt instruments the 

provision § 5001.105(b)(19) must be 

met. 

* * * * * 

■ 17. Amend § 5001.115 by revising 

paragraphs (l), (n) and (r) to read as 

follows: 

§ 5001.115 Ineligible projects—general. 

* * * * * 

(l) Telephone systems. In certain 

circumstances, when not eligible for 

assistance through the Agency’s 

telecommunications program these 

projects may be eligible for assistance 

under this part. 

* * * * * 

(n) Except as provided in 

§ 5001.105(b)(8), owner-occupied 

housing. Owner-occupied housing, such 

as bed and breakfasts, and hotels and 

motels, are only eligible when the prorata value of the owner’s living quarters, 

based on square footage, is deducted 

from the loan proceeds. 

* * * * * 

(r) Loans supporting inherently 

religious activities, such as worship, 

religious instruction, proselytization, or 

to pay costs associated with acquisition, 

construction, or rehabilitation of 

structures for inherently religious 

activities, including the financing of 

multi-purpose facilities where religious 

activities will be among the activities 

conducted. However, religious 

organizations may participate in 

projects eligible for funding under 

section 306(a)(24) of the Consolidated 

Farm and Rural Development Act, 7 

U.S.C. 1926(a)(24), provided they do not 

use Agency assistance for inherently 

religious activities in accordance with 7 

CFR part 16, ‘‘Equal Opportunity for 

Religious Organizations.’’ If an 

organization conducts religious 

activities, they must be offered 

separately, in time, or location from 

programs or services supported with the 

guaranteed loan. Participation in the 

religious activities must be voluntary, 

and not mandatory, for the beneficiaries 

of the program or services. Religious 

organizations may not discriminate 

against a beneficiary or prospective 

beneficiary, on the basis of religion or 

religious beliefs. Sanctuaries, chapels, 

or other rooms that are used as a 

principal place of worship are ineligible 

for guaranteed financing under this part. 

* * * * * 

■ 18. Amend § 5001.116 by revising 

paragraphs (b) and (e) to read as follows: 

§ 5001.116 Ineligible CF projects. 

* * * * * 

(b) Inherently commercial enterprises: 

This type of project is typically operated 

by a private enterprise with an essential 

characteristic to produce profits. This 

term does not include projects operated 

by private enterprises on a not-for-profit 

basis that provide education, childcare, 

geriatric care, or health care to rural 

communities. Inherently commercial 

enterprises include but are not limited 

to: grocery stores; television and radio 

services or facilities; that portion of a 

water and/or waste disposal facility 

normally provided by a business or 

industrial user; and telecommunication 

facilities or services, including 

broadband or fiber network services that 

do not meet the requirements of 

§ 5001.103(a)(6). See § 5001.103(d) for 

the eligibility of a commercial enterprise 

leasing space in an eligible project; 

* * * * * 

(e) Projects involving the purchase of 

existing facilities in which the 

transaction’s purpose is to primarily 

retire the debt of the seller in order for 

the seller to continue to use the facility 

at a lower cost. Characteristics of 

ineligible purchase transactions may 

include the following: 

(1) An entity, which may or may not 

be an eligible CF borrower, forms a new 

eligible entity or uses an existing 

eligible related entity to purchase all or 

part of its assets; 

(2) The new entity uses CF guaranteed 

loan funds to purchase the assets at the 

agreed upon price and leases the assets 

back to the seller, generally at a rate 

which equates to the new debt 

payments; and 

(3) The seller uses the proceeds of the 

sale to retire its high-cost debt and 

continues to use the facilities at a lower 

cost. 

■ 19. Amend § 5001.121 by revising the 

introductory text, paragraphs (a)(2), 

(a)(3)(iv), (b), (c)(6), (d) introductory 

text, and (d)(14) introductory text to 

read as follows: 

§ 5001.121 Eligible uses of loan funds. 

Guaranteed loan funds can only be 

used for the items specified in this 

section and any other items the Agency 

identifies in the Federal Register. In 

addition, RD may allow a recipient of a 

loan guarantee under this part to use up 

to 10 percent of project funds to 

construct, improve, or acquire 

broadband infrastructure subject to the 

requirements of 7 CFR part 1980, 

subpart M. 

* * * * * 

(a) * * * 

(2) To pay the cost of conduit, such 

as pipe, tube, or tile for protecting 

electric wires or cables, and its 

installation in conjunction with 

financing facilities authorized in 

§ 5001.103, when the cost of the conduit 

is less than 25 percent of the total 

project cost and the conduit is not 

essential to the operation of the eligible 

essential facility or service to be 

financed. The borrower must be the 

owner of the conduit. The conduit must 

be installed at the time of project 

construction and must be for public use. 

A project example is construction of a 

road. While work is being completed in 

preparation for the eligible road project, 

the borrower takes advantage of the 

construction to install underground 

conduit in anticipation of installing 

fiber optic cables in the near future. 

(3) * * * 

(iv) Interest on guaranteed loans until 

the facility is self-supporting, but not for 

more than three years; interest on 

guaranteed loans secured by general 

obligation bonds until tax revenues are 

available for payment, but not for more 

than two years; and when the borrower 

obtains interim financing for the eligible 

project, the guaranteed loan proceeds 

may be used to pay off the interim 

financing as well as the interest on 

interim financing; 

* * * * * 

(b) WWD projects. Guaranteed loan 

funds for a WWD project receiving a 

loan guarantee may be used to pay the 

following: 

(1) Constructing, extending, or 

otherwise improving an eligible facility 

outlined in § 5001.104(a), and may 

include the cost of materials and labor 

in addition to the following: 

(i) Cost of acquiring interests in land, 

rights (e.g., water rights, leases, permits, 

rights-of-way), and other evidence of 

land or water control or protection 

necessary for development of the 

project. 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79713 

(ii) Purchasing or renting equipment 

necessary to construct, or extend the 

facility services, for owner construction. 

(iii) Cost of additional borrower labor 

and other expenses necessary to install, 

extend, or protect the facility. 

(iv) Interest incurred during 

construction in conjunction with 

interim financing, and the payoff of the 

interim loan with the permanent 

financing. 

(v) Initial operating expenses, 

including interest, for a period 

ordinarily not exceeding one year when 

the borrower is unable to pay such 

expenses, for construction of a new 

facility. The lender must provide 

justification and the Agency must 

document the reason for granting the 

longer time. 

(vi) Professional service fees and 

charges provided the Agency approves 

the amounts as reasonable and 

customary in the area. 

(vii) Water reuse, renewable energy, 

and other construction projects to 

improve the sustainability or resilience 

of an eligible facility. 

(2) Stand-alone projects not involving 

construction may also be made for the 

following purposes: 

(i) Costs of acquiring interests in land, 

rights (e.g., water rights, leases, permits, 

rights-of-way), and other evidence of 

land or water control or protection 

necessary for the maintenance or 

operation of the facility. 

(ii) Purchase of equipment to operate, 

maintain, or protect facilities, such as 

computers, generators, vehicles, 

backhoes, meters, pipe, and pumps, etc. 

The purchase of equipment must 

include installation and not be for the 

sole purpose of increasing inventory. 

Owner construction or installation is an 

option. 

(iii) The purchase or acquisition of 

existing facilities when it is necessary 

either to improve service or prevent the 

loss of service. 

(iv) The purchase and installation of 

RESs for use by an eligible facility (even 

if it does not include construction). 

(v) Planning, studies, and designs for 

incorporating renewable energy or water 

reuse, or to improve the sustainability or 

resilience of an eligible facility. 

(vi) The Agency may allow a recipient 

of a loan guarantee under this part to 

use up to 10 percent of project funds to 

construct, improve, or acquire 

broadband infrastructure subject to the 

requirements of 7 CFR part 1980, 

subpart M. 

(vii) Professional service fees for 

engineering and environmental services 

that provide services for preplanning 

evaluation procedures, such as leak 

detection, or inflow and infiltration 

analysis, as reasonable and customary in 

the area to evaluate an existing facility’s 

need for improvements or repairs. Such 

services will be in accordance with 

professional service agreements with 

copies of analysis to be provided in the 

application package for such reports as 

preliminary engineering report, final 

design with plans and specifications, 

bidding documents, or the completed 

environmental review analysis. 

(viii) Refinancing in accordance with 

§ 5001.102(d). 

(3) Other expenses related to any 

project under (b)(1) and (2), including: 

(i) Guarantee fees, as determined 

under § 5001.454. 

(ii) Lender fees, as provided in 

§ 5001.403. 

(iii) Payoff of interim financing 

including principal and interest. 

(c) * * * 

(6) Takeout of interim financing: 

Guaranteeing a loan that provides for 

permanent, long-term financing after 

project completion to pay off a lender’s 

interim loan will not be treated as debt 

refinancing provided that the lender 

submits a complete request for 

preliminary eligibility review or 

complete application that proposes such 

interim financing prior to closing the 

interim loan. The borrower must take no 

action until the conclusion of the 

environmental review process prior to 

any action that would have an adverse 

effect on the environment or limit the 

choices of any reasonable alternatives to 

be considered by the Agency. Interim 

financing is typically used to pay costs 

associated with a planned project, such 

as construction or installation of 

equipment, however, the Agency will 

consider, on a case-by-case basis, other 

reasons to use interim financing. The 

term for interim financing loans should 

be for the construction period plus a 

reasonable time for the business to begin 

generation of working capital to 

amortize the loan. Guaranteed 

promissory notes that do not convert the 

interim financing payment schedule to 

an amortizing permanent schedule in 

the same note are not allowed. In certain 

cases, the applicant lender may use 

interim financing to pay-off a borrower’s 

maturing loan with another lender if it 

is in the best interests of the borrower. 

The takeout of interim financing is only 

eligible when the permanent loan on 

which the guarantee will be placed 

takes out the interim financing that 

financed the planned project and when 

the lender submits a complete 

preliminary eligibility review or 

application to the Agency that proposes 

the interim financing prior to closing 

the interim loan. If the interim financing 

does not meet these requirements, it is 

considered debt refinancing and must 

comply with § 5001.102(d). If the 

guarantee is issued prior to 

construction, the promissory note must 

contain and convert the terms of the 

interim financing to permanent 

financing. The Agency will not 

guarantee takeout of interim financing 

loans that prevent a meaningful 

environmental assessment prior to 

Agency loan approval. Even for projects 

with interim financing, the Agency 

cannot approve the loan nor issue a 

conditional commitment until the 

environmental process is complete. The 

Agency assumes no responsibility or 

obligation for interim loans. 

* * * * * 

(d) REAP projects. Guaranteed loan 

funds for a project receiving a loan 

guarantee under REAP may be used to 

pay the expenses associated with the 

items identified in paragraphs (d)(1) 

through (14) of this section, provided 

such items are directly related to and 

their use and purpose are limited to the 

RES, EEI, or EEE project. The expenses 

associated with the items specified in 

paragraphs (d)(8) through (11) of this 

section cannot exceed more than ten 

percent of the loan amount. Ten percent 

is an aggregate amount, not ten percent 

for each item. 

* * * * * 

(14) Refinancing outstanding longterm debt. It is not considered 

refinancing if loans were structured as 

construction or bridge loans for shortterm financing needs (interim financing) 

in preparation for a long-term loan. 

Refinancing will be considered when— 

* * * * * 

■ 20. Amend § 5001.122 by revising the 

introductory text and paragraphs (a), (k) 

and (l), and adding paragraph (n) to read 

as follows: 

§ 5001.122 Ineligible uses of loan funds. 

Projects that receive a loan guarantee 

under this part cannot use the 

guaranteed loan funds for those 

expenses or purposes identified in 

paragraphs (a) through (n) of this section 

and for any other item the Agency 

identifies in accordance with § 5001.10. 

(a) Payment in excess of actual costs 

(e.g., profit, overhead, indirect costs, 

and wages to owners) incurred by the 

contractor or other service provider on 

a contract or agreement that has been 

entered into at less than an arm’s length 

transaction or has a potential for a 

conflict of interest. In situations where 

there is common ownership or an 

otherwise closely related company is 

being paid to do construction or 

installation work for a borrower, only 

documented costs associated with the 


ddrumheller on DSK120RN23PROD with RULES2
79714 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

construction or installation can be paid 

with guaranteed loan funds and cannot 

include any profit or wages to such 

related person. 

* * * * * 

(k) Agricultural tillage equipment, 

used equipment, and vehicles are 

ineligible for loans as specified under 

REAP. Costs include costs for RES and/ 

or EEI projects that are used to improve 

a vehicle’s ability to propel itself are 

ineligible uses for loan funds. For 

example, modifying an existing 

vehicle’s engine to run on renewable 

fuels or replacing an older vehicle with 

a new more efficient vehicle are 

ineligible uses of loan funds. Projects 

similar to purchasing and installing 

solar panels to power a refrigerator or 

the replacement of a refrigerator for a 

more efficient one on a food truck may 

be considered eligible uses of loan funds 

if all other borrower and project 

eligibility requirements are met. 

(l) Distribution or payment to an 

individual or entity that will retain an 

ownership interest in the borrower or 

distribution or payment to a beneficiary 

of the borrower. Distribution or payment 

to a member of the immediate family of 

an owner, partner, or stockholder will 

not be permitted, except for change in 

ownership interest and the Agency 

determines the price paid to be 

reasonable based upon an appraisal. 

This prohibition does not apply to 

transfers of ownership for ESOPs or 

worker cooperatives, to cooperatives 

where the cooperative pays the member 

for product or services, or where 

member stock is transferred among 

members of the cooperative in 

accordance with § 5001.140 of this part. 

This paragraph does not preclude the 

former owner from remaining an 

employee of the business during a 

reasonable transition period. The 

payment of personal debt is considered 

a distribution or payment to an owner, 

except for the refinancing of debt for an 

asset that is used in the business when 

the owner is a co-borrower on the loan. 

* * * * * 

(n) Lease payments, including lease to 

own or capitalized leases. This does not 

preclude a REAP applicant from leasing 

out REAP financed and installed 

equipment to a third party (lessee) such 

as a non-profit, school district, or 

municipal government. The third party 

(lessee) must directly utilize the 

equipment to fulfill the statutory 

purposes of REAP, to generate 

renewable energy or provide energy 

savings. The borrower must maintain 

ownership and control of the project for 

the entire useful life of the project, 

including site, income and expenses via 

the lease agreement. Additionally, all 

other REAP requirements, must be 

reviewed in this scenario to ensure 

complete eligibility is obtained with a 

lease in place. This includes, but is not 

limited to, project eligibility, including 

prohibitions on residential use and 

other prescribed eligible project costs. A 

REAP applicant may lease out a 

commercial building, improved with 

REAP funds, to various tenants. This 

may include an office complex in which 

a Federal Government Agency is a 

tenant. This is allowable as long as 

conflict of interest requirements are 

complied with. 

■ 21. Amend § 5001.126 by revising the 

introductory text, paragraphs (a) 

introductory text, (a)(1), (b)(2)(i), (c)(2), 

(d)(3) introductory text, (d)(3)(iii), (d)(4), 

(e)(1) and (2) to read as follows: 

§ 5001.126 Borrower eligibility. 

To be eligible for a loan guarantee 

under this part, a borrower must meet 

the requirements specified in this 

section at the time of each guaranteed 

loan’s approval and through issuance of 

the loan note guarantee. A borrower 

must meet the eligibility requirements 

specified in paragraph (a) of this section 

and in paragraphs (b) through (e), as 

applicable, of this section. 

(a) Legal authority and responsibility. 

The borrower must have, or obtain 

before issuance of the loan note 

guarantee, the legal authority necessary 

to construct, operate, and maintain the 

proposed facility and services and to 

obtain, give security for, and repay the 

proposed loan. 

(1) Operate and maintain the facility. 

The borrower is responsible for 

operating, maintaining, and managing 

the facility and providing for its 

continued availability and use. The 

borrower will retain this responsibility 

even though the facility may be 

operated, maintained, or managed by a 

third party under contract, management 

agreement, or written lease. Leases may 

be used for certain projects when they 

are the only feasible way to provide the 

service or facility, are the customary 

practice to provide such service or 

facility within the industry or in the 

State and provide for the borrower’s 

management control of the project. 

Contracts, management agreements, or 

written leases must not contain options 

or other provisions for transfer of 

ownership unless approved by the 

Agency. The borrower must own and 

retain control of the facility at all times; 

however, various types of ownership 

structures are permitted to bring in 

passive investor equity. These include 

but are not limited to partnership flips 

and inverted leases, which are common 

in the renewable energy industry. The 

anticipated release of passive tax credit 

investor entities resulting in a change in 

ownership control that does not impact 

the financial performance of the loan, as 

outlined at time of loan closing, does 

not constitute a transfer or assumption, 

nor require concurrence from the 

Agency. 

* * * * * 

(b) * * * 

(2) * * * 

(i) Association with or control by a 

public body or bodies typically 

evidenced in the organizational 

documents of the borrower; or 

* * * * * 

(c) * * * 

(2) Credit elsewhere. In accordance 

with 7 U.S.C. 1983, certify in writing, 

subject to Agency verification, that the 

borrower is unable to finance the 

proposed project from their own 

resources or through commercial credit 

without a guarantee, at reasonable rates 

and terms. A loan guarantee will not be 

provided to borrowers who are able to 

obtain sufficient credit elsewhere to 

finance project costs at reasonable rates 

and terms, taking into consideration 

prevailing private and cooperative rates 

and terms in the community in or near 

where the borrower resides, for loans for 

similar purposes and periods of time, or 

to borrowers who are able to finance 

project costs from their own resources. 

All lenders are required to provide 

written certification that their borrowers 

are unable to afford commercial credit at 

reasonable rates and terms without the 

guarantee. 

* * * * * 

(d) * * * 

(3) A borrower who is an individual 

must meet the requirements of (i) 

through (iii) below. Applications will 

neither be approved, nor a conditional 

commitment issued subject to meeting 

the citizenship requirement. 

* * * * * 

(iii) Be a citizen or resident of the 

Republic of Palau, the Federated States 

of Micronesia, American Samoa, Guam, 

the Commonwealth of the Northern 

Mariana Islands, or the Republic of the 

Marshall Islands. 

(4) A borrower must demonstrate, to 

the Agency’s satisfaction, that 

guaranteed loan funds will remain in 

the United States and the project being 

financed will primarily create new or 

save existing jobs for rural U.S. 

residents. To ensure that loan funds 

remain in the United States, loans must 

be collateralized with fixed assets that 

remain in the United States. 

(e) * * * 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79715 

(1) Type of borrower. The borrower 

must be either an agricultural producer 

or a rural small business if applying for 

RES or EEI funding. The borrower must 

be an agricultural producer if applying 

for EEE funding. For-profit rural small 

businesses that provide long-term care 

services that benefit residents, such as 

nursing homes and assisted living 

facilities, are eligible. For-profit rural 

small businesses that provide short-term 

housing, such as hotels, are also eligible. 

Newly formed special purpose entities 

or equivalents that are clearly created 

solely for the circumvention of 

provisions prohibited by REAP statute 

are not eligible. 

(2) Ownership. The borrower at the 

time of application or no later than 

guaranteed loan closing and for the term 

of the guaranteed loan must: 

(i) Own the project; and 

(ii) Own or control the site for the 

project at the time of application and for 

the term of the guaranteed loan. 

* * * * * 

■ 22. Amend § 5001.127 by revising 

paragraphs (a) introductory text, (a)(3), 

(a)(4), (d), and (f) to read as follows: 

§ 5001.127 Borrower ineligibility 

conditions. 

* * * * * 

(a) An entity is ineligible if any of the 

conditions identified in paragraphs 

(a)(1) through (4) of this section applies 

to the borrower, any owner with more 

than 20 percent ownership interest in 

the borrower (does not include passive 

investors), or any owner with control of 

the borrower. Entities with delinquent 

debt, as identified in paragraphs (a)(1) 

through (a)(4), under a repayment plan 

are not eligible until the debt is paid in 

full. 

* * * * * 

(3) Delinquency on Federal debt. 

(4) Debarment or suspension from 

receiving Federal assistance. The lender 

is responsible for verification of the 

borrower’s status. Verification can be 

done at sam.gov. 

* * * * * 

(d) An entity is ineligible if it derives 

income from illegal drugs, drug 

paraphernalia, or any other illegal 

product or activity as defined under 

Federal statute. A borrower that intends 

to lease space or enter into a power 

purchase agreement with a marijuana 

dispensary is not eligible given our 

borrower would be receiving income 

from the marijuana operation which is 

a violation of Federal laws as marijuana 

is a controlled substance under Federal 

law and subject to Federal prosecution 

under the Controlled Substances Act (21 

U.S.C. 812). 

* * * * * 

(f) An entity is ineligible if its lender 

or any of the lender’s officers has an 

ownership interest in the borrower or is 

an officer or director of the borrower 

with management control or where the 

borrower or any of its officers, directors, 

stockholders, or other owners have more 

than a five percent ownership interest in 

the lender. Any of the lender’s directors, 

stockholders, or other owners that are 

officers, directors, stockholders, or other 

owners of the borrower without 

management control or ownership less 

than 5 percent must be recused from 

any decision-making process associated 

with the guaranteed loan. 

* * * * * 

■ 23. Amend § 5001.130 by: 

■ a. Redesignating (a)(3) through (a)(6) 

as (a)(4) through (a)(7) and adding new 

paragraph (a)(3); 

■ b. Revising paragraphs (c)(1)(iii), (c)(2) 

introductory text, (c)(2)(viii)(H), (c)(4) 

introductory text, (c)(4)(iv); 

■ c. Adding paragraph (c)(4)(v); 

■ d. Revising paragraphs (d)(2) 

introductory text, (d)(4) introductory 

text, and (d)(4)(iv) ; and, 

■ e. Adding paragraph (d)(4)(v). 

The additions and revisions read as 

follows: 

§ 5001.130 Lender eligibility requirements. 

* * * * * 

(a) * * * 

(3) Be free from default and 

delinquency on any debt owed to the 

Federal Government; 

* * * * * 

(c) * * * 

(1) * * * 

(iii) Have and agree to maintain 

balance sheet equity in accordance with 

§ 5001.105(d) of this part of at least 10 

percent of assets and sufficient funds 

available to disburse the guaranteed 

loans it proposes to approve within the 

first six months of being approved as a 

lender; 

* * * * * 

(2) Written request. A non-regulated 

lending entity that seeks to become a 

lender must submit a written request to 

the Agency via OneRDlenderapproval@

usda.gov, and must include the 

following information: 

* * * * * 

(viii) * * * 

(H) Proposed interest rate structure 

and loan fees, including any loan 

origination, loan preparation, and 

servicing fees. 

* * * * * 

(4) Renewals. To maintain its status as 

an approved lender, the non-regulated 

lending entity must submit a written 

request to the Agency for renewal of its 

approved lender status at least 60, but 

not more than 120, calendar days prior 

to the expiration of the existing lender’s 

agreement to be assured of a timely 

renewal. A review of the lender’s 

performance will be completed to 

determine whether the lender has 

continually met the eligibility criteria 

described in paragraphs (c) and (d) of 

this section. The lender’s activity in the 

program and its delinquency/default 

rate will also be considered when 

making a determination regarding 

renewal. Any action by the lender since 

it was designated an eligible lender that 

could be cause for revoking its status, in 

accordance with § 5001.132, will be 

considered cause for denying the 

renewal of eligible status. The lender 

will be notified in writing whether the 

request is approved, reasons for denial, 

or any conditions the lender must meet 

for approval. The lender’s written 

request must provide the information 

specified in paragraphs (c)(2)(i) and (iii) 

through (v) of this section; and 

* * * * * 

(iv) The Agency may require lenders 

with limited guaranteed loan activity 

over the previous five years, or a lender 

that has originated guaranteed loans 

with servicing issues or a loss to the 

Agency, to resubmit all the information 

required by paragraph (c)(2) of this 

section. A lender who is not active in 

the Agency guaranteed loan programs 

should provide evidence that they 

remain active in other commercial 

lending activity with acceptable 

underwriting and servicing 

performance. Lenders with loans that 

cause a loss to the Agency are a concern 

and those projects will be reviewed to 

determine the cause of the loss, 

including whether the lender’s analysis 

or servicing processes were insufficient. 

(v) The renewal will be for a term of 

5 years. 

(d) * * * 

(2) Written request. A non-regulated 

lending entity serving Tribal trust lands 

that seeks to become a lender must 

submit a written request to the Agency 

via OneRDlenderapproval@usda.gov 

that includes the following information: 

* * * * * 

(4) Renewals. To maintain its status as 

an approved lender, the non-regulated 

lending entity serving Tribal trust land 

must submit a written request to the 

Agency for renewal of its approved 

lender status at least 60 and not more 

than 120 calendar days prior to the 

expiration of the existing lender’s 

agreement to be assured of a timely 

renewal. A review of the lender’s 


ddrumheller on DSK120RN23PROD with RULES2
79716 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

performance will be completed to 

determine whether the lender has 

continually met the eligibility criteria 

described in paragraphs (c) and (d) of 

this section. The lender’s activity in the 

program and its delinquency/default 

rate will also be considered when 

making a determination regarding 

renewal. Any action by the lender since 

it was designated an eligible lender that 

could be cause for revoking its status, in 

accordance with § 5001.132, will be 

considered cause for denying the 

renewal of eligible status. The lender 

will be notified in writing whether the 

request is approved, reasons for denial, 

or any conditions the lender must meet 

for approval. The lender’s written 

request must provide the information 

specified in paragraphs (c)(2)(i) and (iii) 

through (v) of this section; and 

* * * * * 

(iv) The Agency may require lender 

with limited guaranteed loan activity 

over the previous five years, or a lender 

that has originated guaranteed loans 

with servicing issues or a loss to the 

Agency, to submit updated information 

required by paragraph (c)(2) of this 

section. 

(v) The renewal will be for a term of 

5 years. 

* * * * * 

■ 24. Revise § 5001.131 to read as 

follows: 

§ 5001.131 Lender’s agreement. 

When approved to participate as a 

lender under this part, the lender must 

execute a lender’s agreement before the 

Agency will issue a loan note guarantee. 

A new lender’s agreement must be 

executed with any existing lender 

making new loans on or after October 1, 

2020. Approval under one program is 

approval for all programs. The eligibility 

expiration date for non-regulated 

lenders will be five years from the date 

of the original execution of a lender’s 

agreement as specified in § 5001.130(c) 

and (d). There will be only one lender’s 

agreement issued for each lending entity 

based on their tax identification 

number. Lender’s agreements will not 

be issued for individual branches. 

Subsequent loans do not require a new 

lender’s agreement. A lender who fails 

to renew its lender’s agreement and 

loses its approved lender status must 

continue to service any outstanding 

guaranteed loans in conformance with 

the lender’s agreement last in effect and 

the applicable regulation under which 

the lender became an approved lender. 

Such lenders cannot submit requests for 

new loan guarantees. 

* * * * * 

■ 25. Amend § 5001.132 by revising 

paragraphs (a)(3) and (4), (b) 

introductory text, (b)(14), and (c) to read 

as follows: 

§ 5001.132 Maintenance of approved 

lender status. 

* * * * * 

(a) * * * 

(3) Is a regulated lending entity and 

fails to remain in good standing with its 

regulator; 

(4) Is a non-regulated lending entity 

and fails to renew its approval status 

within 5 years of the expiration date of 

the lender’s agreement. 

(b) Revocation of approved status and 

debarment of lender. The Agency can 

revoke a lender’s status as an approved 

lender at any time for cause as specified 

in the lender’s agreement. A decision to 

revoke a lender’s approved status will 

be made by the Agency and the lender 

will be notified in writing. The 

revocation may apply to all branches of 

the lender, specific branches, or 

personnel, as appropriate. The lender 

must revoke the level II eAuthentication 

privileges of all individuals included in 

the revocation notice. Cause for 

revoking lender status includes, but is 

not necessarily limited to, the 

circumstances identified in paragraphs 

(b)(1) through (14) of this section. 

* * * * * 

(14) Violation of applicable 

nondiscrimination laws, including, but 

not limited to, statutes, regulations, 

USDA Departmental Regulations, the 

USDA Non-Discrimination Statement, 

and the Equal Credit Opportunity Act. 

USDA’s Non-Discrimination Statement 

is located on the Agency’s website, see 

usda.gov/non-discrimination-statement. 

In addition to revoking the lender’s 

status, the Agency may debar the lender 

in compliance with 2 CFR part 180. 

(c) Servicing of outstanding loans. 

Any lender who loses its status as an 

approved lender under any of the 

conditions identified in paragraph (a) or 

(b) of this section must reapply under 

the provisions of § 5001.130 to be 

reinstated as an approved lender. A 

lender who loses its approved lender 

status must continue to service any 

outstanding guaranteed loans in 

conformance with the lender’s 

agreement last in effect and the 

applicable regulation under which the 

lender became an approved lender. In 

addition, such lenders cannot submit 

requests for new loan guarantees. 

■ 26. Amend § 5001.140 by revising 

paragraphs (a)(4), (b) introductory text 

and (d)(3) to read as follows: 

§ 5001.140 Cooperative stock/cooperative 

equity. 

* * * * * 

(a) * * * 

(4) The lender will, at a minimum, 

obtain a valid lien on the stock, an 

assignment of any patronage refund, and 

the ability to transfer the stock to 

another party, or any other right or 

ability necessary to liquidate and 

dispose of the collateral in the event of 

a default by the borrower. The lender 

and borrower understand that the 

borrower is fully liable for the entire 

debt, regardless of the success or failure 

of the cooperative. The lender is 

expected to maximize recovery on the 

loan, including collection of personal, 

partnership and corporate guarantees. In 

addition, provisions of the DCIA may 

impose significant restrictions on 

delinquent Federal debtors, including 

eligibility for other Federal programs. 

* * * * * 

(b) Purchase of transferable stock 

shares. The Agency may also guarantee 

loans for the purchase of transferable 

stock shares of any type of existing 

cooperative, which would primarily 

involve new or incoming members. 

Such stock may provide delivery or 

some form of participation rights and 

may only be traded among cooperative 

members. The lender and borrower 

understand that the borrower is fully 

liable for the entire debt, regardless of 

the success or failure of the ESOP. The 

lender is expected to maximize recovery 

on the loan, including collection of 

personal, partnership and corporate 

guarantees. In addition, provisions of 

the DCIA may impose significant 

restrictions on delinquent Federal 

debtors, including eligibility for other 

Federal programs. 

* * * * * 

(d) * * * 

(3) The lender must, at a minimum, 

obtain a valid lien on the stock, an 

assignment of any patronage refund, and 

the ability to transfer the stock to 

another party, or otherwise liquidate 

and dispose of the collateral in the event 

of a default by a borrower. The lender 

and borrower understand that the 

borrower is fully liable for the entire 

debt, regardless of the success or failure 

of the cooperative or ESOP. The lender 

is expected to maximize recovery on the 

loan, including collection of personal, 

partnership and corporate guarantees. In 

addition, provisions of the DCIA may 

impose significant restrictions on 

delinquent Federal debtors, including 

eligibility for other Federal programs. 

* * * * * 

■ 27. Amend § 5001.141 by: 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79717 

■ a. Revising the section heading, the 

introductory text, and paragraphs 

(b)(1)(iii), (b)(4), (6) and (8); and 

■ b. Adding (b)(14). 

The revisions and addition read as 

follows: 

§ 5001.141 New Markets Tax Credits 

Program. 

The New Markets Tax Credits (NMTC) 

Program is administered by the U.S. 

Department of the Treasury’s (Treasury) 

Community Development Financial 

Institutions (CDFI) Fund with NMTC 

credits allocated to Treasury-certified 

Community Development Entities (CDE) 

across the United States to make 

Qualified Equity Investments (QEI) in 

low-income communities. NMTC 

related definitions and terms in this 

section are governed by section 45(D) of 

the Internal Revenue Code (26 U.S.C. 

45D), and applicable Treasury 

regulations (26 CFR 1.45D–1). A CDE 

will generally establish a new 

subsidiary of a CDE (sub-CDE) for 

individual NMTC projects. Lenders and 

their borrowers with guaranteed loan 

projects that include NMTC investments 

must comply with the provisions in this 

section. To be a lender for a guaranteed 

loan project that involves financing 

under the NMTC provisions, the lending 

entity must meet the applicable 

eligibility criteria in § 5001.130. The 

Agency will not waive its servicing 

rights to a guaranteed loan or be a party 

to any forbearance agreement in 

conjunction with a NMTC project. 

Requests for loan guarantees that 

include NMTC are subject to all 

applicable program eligibility 

requirements, credit analysis, and due 

diligence required by part 5001. In all 

cases the Agency will undertake efforts 

to protect the best financial interests of 

the Federal government and collection 

of its guaranteed loan. The Agency will 

not consider any tax benefit or loss of 

tax benefits to the CDE, sub-CDE or 

NMTC investor in the servicing actions 

of a guaranteed loan. 

* * * * * 

(b) * * * 

(1) * * * 

(iii) When the borrower is a leveraged 

lender entity it must relend one 

hundred percent of the guaranteed loan 

funds to an investor fund entity. In all 

cases one hundred percent of the 

guaranteed loan funds are or will be 

invested by the investment fund entity 

in one or more sub-CDEs that will then 

be loaned directly to a QALICB, as 

defined by applicable regulations of the 

Internal Revenue Service, through a 

direct tracing method, and such 

guaranteed loan funds are, or will be 

used by the QALICB in accordance with 

the eligibility requirements in subpart B 

of this part. The QALICB’s project must 

be the ultimate use of one hundred 

percent of the guaranteed loan funds. 

* * * * * 

(4) The loan terms found in 

§ 5001.402 of this part apply to both the 

borrower and the QALICB. The maturity 

and related payment schedule of the 

lender’s guaranteed loan to the borrower 

must be no longer than the maturity and 

related payment schedule of the subCDE’s loan to the QALICB. An Agency 

approved unequal or escalating 

schedule of principal and interest 

payments can be used for a NMTC loan. 

The lender may require additional 

principal repayment by a co-borrower, 

such as an owner or principal 

participant of the QALICB. The 

provisions of § 5001.402(b)(3) 

notwithstanding, the Agency may 

consider the payment of interest-only 

payments by a borrower pursuant to an 

interest-only term not to exceed seven 

years on a loan made under an NMTC 

structure if the lender requires: 

(i) A debt repayment reserve fund or 

sinking fund in an amount at least equal 

to the guaranteed loan’s principal 

amortization that would have otherwise 

applied to the loan if equally amortized 

payments were collected during the 

seven-year term; and 

(ii) Such reserve funds or sinking 

funds are applied to the guaranteed loan 

as an additional payment of principal at 

the end of such interest-only term. The 

debt repayment reserve fund or sinking 

fund may be accumulated during the 

loan terms, or the full amount may be 

funded at loan closing. 

* * * * * 

(6) The personal, partnership and 

corporate guarantee provisions of 

§ 5001.204 of this part apply when the 

guaranteed loan borrower is a leveraged 

lender entity in a NMTC project. 

Guaranteed loans made directly to an 

investor fund entity as the borrower do 

not require a personal, partnership, or 

corporate guarantee from the investor 

fund entity’s owner, who is the NMTC 

tax credit investor and considered a 

passive investor. The Agency shall 

obtain the personal, partnership or 

corporate guarantee from the QALICB 

ownership for a guaranteed loan to an 

investor fund entity in compliance with 

§ 5001.204, subject to the eligibility 

requirements of the NMTC program. 

The Agency may require additional 

personal, partnership or corporate 

guarantees if warranted by an Agency 

evaluation of potential financial risk. 

The QALICB is the ultimate user of the 

guaranteed loan funds, and their owners 

should provide a guarantee of the 

guaranteed loan as stipulated in 

§ 5001.204. 

* * * * * 

(8) The financial report provisions of 

§ 5001.504 of this part apply to both the 

borrower and the QALICB. 

* * * * * 

(14) Agency concurrence of the NMTC 

structure is required on all projects 

leveraging the NMTC program. 

* * * * * 

■ 28. Amend 5001.202 by revising the 

introductory text, paragraphs (a), (b)(5) 

introductory text, and (b)(6)(iii), (iv) and 

(vi) to read as follows: 

§ 5001.202 Lender’s credit evaluation. 

For each application, the lender must 

prepare a credit evaluation that is 

consistent with Agency standards found 

in this part. Lenders are required to only 

submit complete loan applications that 

have been approved by their institution 

after completion of their internal credit 

evaluation. The components of a 

lender’s credit evaluation will include a 

written review and comment on the 

‘‘Five Cs’’ of credit that are outlined in 

§ 5001.202(b)(1) through (5). The 

Agency should be able to obtain 

sufficient details on the project, the 

borrower, and the borrower’s ability to 

repay the loan from the lender’s credit 

evaluation. 

(a) Lender’s evaluation guidelines. 

The lender must conduct a credit 

evaluation using credit documentation 

procedures and underwriting processes 

that are consistent with generally 

accepted prudent lending practices for 

commercial, public and project 

financing, and also consistent with the 

lender’s own policies, procedures, and 

lending practices. The underwriting 

process must include a review of each 

loan for which a loan guarantee is being 

sought under this part. Applications 

involving affiliated entities must 

include a global credit evaluation and if 

applicable a global historical and 

projected debt service coverage analysis. 

The lender should evaluate the 

relationships between all associated 

parties to determine potential risks 

which may affect our borrower and its 

ability to repay the loan. Entities which 

may have an impact on the borrower or 

significantly contribute to the 

repayment ability of the loan should 

provide financials for global analysis. 

Applications involving guarantor(s) 

must also include a global debt service 

coverage analysis of the guarantor(s) 

including the cash flow of the 

guarantor(s). In addition, the lender 

must review all applicable contracts, 

management agreements, and leases to 

determine they will not adversely affect 


ddrumheller on DSK120RN23PROD with RULES2
79718 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

either the borrower’s repayment ability 

or the value of the collateral securing 

the guaranteed loan. The lender’s 

evaluation must address any financial or 

other credit weaknesses of the borrower 

and project and discuss risk mitigation 

requirements imposed by the lender. 

(b) * * * 

(5) Conditions. This paragraph (b)(5) 

refers to the general business 

environment, including the regulatory 

environment affecting the business or 

industry, and status of the borrower’s 

industry. Consideration will be given to 

items listed in paragraphs (b)(5)(i) 

through (ix) of this section and when 

applicable the lender should submit 

supporting documentation (e.g., 

feasibility study, market study, 

preliminary architectural or engineering 

reports, etc.) in accordance with 

§§ 5001.304 through 5001.307: 

* * * * * 

(6) * * * 

(iii) Spreadsheets and analysis of the 

financial statements provided in 

accordance with § 5001.303, with 

appropriate ratios and comparisons with 

industry standards (such as Dun & 

Bradstreet or the Risk Management 

Association). The spreadsheets should 

enable a reviewer to easily scan the 

data, spot trends, and make 

comparisons. Steps taken or proposed to 

address any financial or industry 

weakness must be reasonable and 

adequately addressed. 

(iv) Financial projections deviating 

from historical financial performance 

must be substantiated and documented. 

The borrower’s projections should be 

consistent with their past performance. 

Increases to revenues, profit margins or 

profitability should be reasonable and 

substantiated in the analysis. 

* * * * * 

(vi) Operational cash flow analysis on 

a quarterly basis from the current 

financial statements through start-up or 

occupancy for projects involving 

construction when lenders are 

requesting the loan note guarantee prior 

to completion of construction The 

lender and borrower are required to 

provide a construction schedule with 

their application for a loan guarantee 

prior to construction completion. The 

projected cash flow needs should mirror 

the quarterly construction costs as the 

project is being completed. The cash 

flow analysis must indicate whether this 

cash flow is being provided by the 

guaranteed loan, borrower equity, or 

other sources. 

■ 29. Amend § 5001.203 by revising the 

introductory text, paragraphs (b), (c), 

(d)(1), (f) and (h) to read as follows: 

§ 5001.203 Appraisals. 

Appraisals of collateral are required 

as set forth in this section. The lender 

is responsible for ensuring that 

appraisal values adequately reflect the 

actual value of the collateral based on 

an arm’s length transaction. Completed 

appraisals should be submitted when 

the application is filed. If the appraisal 

has not been completed when the 

application is filed, the lender must 

submit an estimated appraised value. 

Prior to the issuance of the loan note 

guarantee, the estimated value must be 

supported with an appraisal acceptable 

to the approval official. If an appraisal 

is received containing any value 

attributed to business valuation or as a 

going concern, the business valuation or 

going concern value must be deducted 

from the reconciled market value prior 

to discounting. The Agency expects 

that, for appraisals of existing facilities, 

the appraiser will physically visit the 

property unless prior permission from 

the Agency is obtained. Appraisals are 

not typically required when security 

consists of either a revenue or general 

obligation bond or liens on real estate 

for WWD projects which rely on 

revenues of the facilities for loan 

repayment. 

* * * * * 

(b) Existing chattel. The lender must 

obtain appraisal(s) for existing chattel 

collateral when its value exceeds 

$250,000 and will be used to meet loan 

to value requirements. 

(c) Real estate. The lender must 

obtain appraisals for real estate 

collateral when the value of the 

collateral exceeds $250,000 or the 

current limitation established under the 

Financial Institutions Reform, Recovery, 

and Enforcement Act (FIRREA) Public 

Law 101–73, 103 Stat. 183 (1989). Real 

estate and chattels with a value below 

these thresholds must be evaluated in 

accordance with the lender’s primary 

regulator’s policies relating to appraisals 

and evaluations or, if the lender is not 

regulated, in accordance with normal 

banking practices and generally 

accepted methods of determining value. 

For construction projects, the lender 

must obtain the ‘‘As is’’ market value 

and the ‘‘prospective’’ market value as 

of the date of construction completion 

to determine the value of the real estate 

property. 

(d) * * * 

(1) Each real estate appraisal must be 

conducted by an independent qualified 

appraiser in accordance with the 

USPAP or similar Agency approved 

standard. The appraiser must have the 

specific qualification, experience, and 

competency to appraise the type of 

facility being financed. All real estate 

appraisals must meet the requirements 

contained in the FIRREA, and the 

appropriate guidelines contained in 

Standards 1 and 2 of the USPAP or 

similar Agency approved standard, and, 

unless approved by the Agency 

approval official, be performed by a 

State Certified General Appraiser 

licensed in the State in which the real 

estate is located. 

* * * * * 

(f) Environmental considerations. 

When the Agency will take a lien on 

real property, the real estate appraisals 

must include consideration of the 

potential effects from a release of 

hazardous substances or petroleum 

products or other environmental 

hazards on the market value of the 

collateral, as determined in accordance 

with the appropriate ASTM 

International Real Estate Assessment 

and Management environmental 

standards. Potential contamination that 

has been observed on the property or 

identified through research or 

interviews with individuals 

knowledgeable about the property 

should be immediately reported to the 

Agency. 

* * * * * 

(h) Appraisal fees. Unless otherwise 

stated in this part, appraisal fees or any 

other associated costs will not be paid 

by the Agency. Appraisal fees are 

eligible loan purposes. The Agency does 

not pay for appraisals required at the 

time of loan application. Appraisals for 

servicing actions are handled in 

accordance with section 5001 subpart F. 

■ 30. Amend § 5001.204 by revising 

paragraphs (b)(2) and (3) to read as 

follows: 

§ 5001.204 Personal, partnership, and 

corporate guarantees. 

* * * * * 

(b) * * * 

(2) Guarantees from any person or 

entity owning less than a 20-percent 

interest or membership in the borrower; 

and 

(3) Guarantees from persons whose 

ownership interest in the borrower is 

held indirectly through intermediate or 

affiliated entities. 

* * * * * 

■ 31. Amend § 5001.205 by revising and 

republishing paragraph (a), and revising 

paragraphs (b)(1), (e)(1), (e)(2)(iii), (iv), 

(vii) and (f)(1)(i) to read as follows: 

§ 5001.205 General project monitoring 

requirements. 

* * * * * 

(a) Design requirements. The lender 

must ensure that all facilities 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79719 

constructed with guaranteed loan funds 

are: 

(1) Designed using accepted 

architectural, engineering, and design 

practices, taking into consideration any 

Agency comments when the facility is 

being designed; 

(2) Designed in conformance to 

applicable Federal, Tribal, State, and 

local codes and requirements; 

(3) Constructed to support operations 

at the level and quality contemplated by 

the borrower using accepted 

architectural and engineering practices; 

and 

(4) Compliant with applicable 

domestic procurement preference 

requirements including section 70914 of 

the Build America, Buy America Act 

(BABAA) within the Infrastructure 

Investment and Jobs Act (Pub. L. 117– 

58). 

(b) * * * 

(1) Obtained valid, continuous, and 

adequate rights-of-way and easements, 

in compliance with Uniform Relocation 

Assistance and Real Property 

Acquisition Policies Act of 1970 (URA) 

if applicable, needed for the 

construction, operation, and 

maintenance of a project; and 

* * * * * 

(e) * * * 

(1) Construction inspections. The 

lender must notify the Agency of any 

scheduled field inspections during 

construction. The Agency may attend 

any field inspections the lender may 

conduct. Any Agency inspection, 

including those with the lender, are for 

the benefit of the Agency only (and not 

for the benefit of other parties in 

interest) and do not relieve any parties 

of interest of their responsibilities to 

conduct necessary inspections. On a 

case-by-case basis in the event that the 

Agency determines that there is 

additional risk to the government, the 

Agency may require the use of a 

qualified, independent inspector to 

inspect construction to ensure the 

project is being adequately built to meet 

the borrower’s requirements of the 

borrower’s approved project and comply 

with all applicable codes and legal 

requirements. 

(2) * * * 

(iii) The borrower and lender have 

agreed to a detailed timetable for the 

project with a corresponding budget of 

costs setting forth the parties 

responsible for payment. The timetable 

and budget will be confirmed as 

adequate for the planned development 

by a qualified independent consultant 

(e.g., the project architect or engineer) 

with demonstrated experience relating 

to the project’s industry. The lender 

must provide evidence that there is 

sufficient cash flow to complete the 

project construction, including 

contingencies for cost overruns, plus 

working capital during the business 

start-up period; 

(iv) The borrower has entered into a 

firm, fixed-price construction contract 

with an independent general contractor 

with costs outlined in detail and terms 

specifying change order approvals, the 

agreed retainage percentage, and the 

disbursement schedule. In all cases, 

borrower equity must be injected prior 

to any guaranteed loan funds; 

* * * * * 

(vii) When applicable, the borrower 

has entered into a contract with an 

independent technology development 

firm guaranteeing completion of the 

project with the necessary technology to 

successfully run the project and system 

performance for projects that utilize 

integrated processing equipment and 

systems, such as biorefineries, RESs, 

and chemical manufacturing plants. The 

credit underwriting of the independent 

technology development firm must be 

satisfactory to and approved by the 

Agency. This is not limited only to 

renewable energy projects, but may 

include energy efficiency, renewable 

chemical, and biobased manufacturing 

projects. The intent of the provision is 

to ensure that all technology proposed 

for the project can be successfully 

integrated together to ensure successful 

installation and performance of the 

system. The respective technology 

providers usually guarantee their 

specific technology with quality 

parameters of input such that the endproduct is what is proposed in both 

quality and yield. An engineering, 

procurement, construction (EPC) 

provider is responsible for the 

construction and assembly of the plant 

or facility. They adopt the quality limits 

and guarantee that the integrated facility 

that is built will perform according to 

specifications such that the input and 

operational bounds are met. The 

provision is likely applicable to the 

following types of projects: 

(A) Anaerobic digester. An anaerobic 

digester project which uses a biological 

process that requires specific conditions 

and environment to be able to produce 

the product of biogas that can be refined 

to renewable natural gas (RNG). In some 

simpler cases the gas will be used for 

heat or electricity, but in other more 

involved cases, it will be cleaned and 

refined to make RNG that is marketable, 

and quality assessed to enter an 

interconnect pipeline. These types of 

projects should be approved and 

verified by an independent technology 

firm, for integrated performance 

integrity and operability as well as yield 

integrity. 

(B) Landfill biogas. Like anaerobic 

digesters projects, a landfill biogas 

project will have multiple steps and 

processes such as collection, clean-up, 

flaring and refinement to a fuel or the 

gas can be used to produce electricity. 

These types of projects should be 

approved and verified by an 

independent technology firm for 

integrated performance integrity and 

operability, as well as yield integrity. 

(C) Biofuel, biomass, ethanol, 

biodiesel. A biofuel, ethanol, biomass, 

or biodiesel system will have multiple 

steps in which it must operate in line 

with the design proposed that has been 

from demonstration campaigns. It is 

paramount that an independent 

technology firm verify and guarantee the 

operation and performance of these 

integrated systems as they will have 

multiple processes which need to work 

in concert for the project to be 

successful. These types of projects 

should be approved and verified by an 

independent technology firm for 

integrated performance integrity and 

yield. 

(D) Solar thermal. Solar thermal 

systems must have multiple processes 

in order to provide the end product of 

power, hot water, or heat. Due to their 

potential complexity, these systems 

should be approved and verified by an 

independent technology firm for 

performance integrity and operability. 

(E) Hydrogen. These types of projects 

should be approved and verified by an 

independent technology firm for 

integrated performance integrity. 

(F) Geothermal. Depending on system 

complexity and if it has multiple 

processes, the project should be fortified 

with a guarantee that the system will 

operate definitively. 

(G) Renewable chemical. A project 

utilizing a series of chemical processes 

and reactions to produce a polymer that 

can be sold to make biodegradable 

plastics. An example of a BBP project 

utilizing gasification technology to 

produce a biochar or soil amendment as 

an end-user product. 

* * * * * 

(f) * * * 

(1) * * * 

(i) Certification by the independent 

engineer or qualified consultant to the 

lender that the work referred to in the 

draw has been successfully completed; 

and; 

* * * * * 

■ 32. Amend § 5001.206 by revising 

paragraph (b) to read as follows: 


ddrumheller on DSK120RN23PROD with RULES2
79720 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

§ 5001.206 Compliance with USDA 

Departmental Regulations, Policies, and 

other Federal laws. 

* * * * * 

(b) Other Federal laws. Lenders and 

borrowers must comply with other 

applicable Federal laws including, but 

not limited to the following: 

(1) Equal Employment Opportunity. 

(2) Americans with Disabilities Act. 

(3) Equal Credit Opportunity Act. 

(4) Fair Housing Act. 

(5) Uniform Relocation Assistance 

and Real Property Acquisition Policies 

Act of 1970 (URA). 

(6) Section 70914 of the Build 

America, Buy America Act (BABAA) 

within the Infrastructure Investment 

and Jobs Act (Pub. L. 117–58). 

(7) 31 U.S.C. 3354 Do Not Pay 

Initiative. 

■ 33. Amend § 5001.207 by revising 

paragraphs (a)(1), and (b)(2) to read as 

follows: 

§ 5001.207 Environmental responsibilities. 

* * * * * 

(a) * * * 

(1) The lender is responsible for 

becoming familiar and ensuring 

compliance with Federal environmental 

requirements. The lender must alert the 

Agency to any environmental issues 

related to a project or items that may 

require extensive environmental review. 

Proposals that minimize the potential of 

any project to adversely impact the 

environment must be developed and 

provided upon request by the Agency. 

* * * * * 

(b) * * * 

(2) The lender must assist in the 

collection of additional data when the 

Agency needs such data to complete its 

environmental review of the project and 

mitigation of environmental issues. 

■ 34. Revise § 5001.301 to read as 

follows: 

§ 5001.301 Beginning the application 

process. 

(a) The lender must file applications 

and related documents through their 

Agency contact. 

(b) The lender may complete either a 

request for preliminary eligibility 

review in accordance with § 5001.302 or 

a full application in accordance with 

§§ 5001.303 through 5001.307, as 

applicable, to begin the process for 

obtaining a guaranteed loan. The 

Agency encourages, but does not 

require, lenders to file requests for 

preliminary eligibility reviews in order 

to obtain Agency comments before 

submitting a full application. 

■ 35. Amend § 5001.303 by revising 

paragraph (c)(15) and (d) to read as 

follows: 

§ 5001.303 Applications for loan 

guarantee. 

* * * * * 

(c) * * * 

(15) Securities and Exchange 

Commission (SEC) Form 10–K, ‘‘Annual 

Report Pursuant to Section 13 or 15(d) 

of the Securities Exchange Act of 1934,’’ 

as noted in § 5001.306(a)(4). 

* * * * * 

(d) Application modification. Once a 

complete application is accepted by the 

Agency and prior to Agency award of a 

loan note guarantee, any modification to 

the application will be treated as a new 

application and the Agency will process 

the information accordingly. The 

submission date of record for a modified 

application is the date the Agency 

receives the modified application 

information. 

■ 36. Amend § 5001.304 by revising the 

introductory text and (a)(4) introductory 

text to read as follows: 

§ 5001.304 Specific application 

requirements for CF projects. 

In addition to the requirements 

specified in § 5001.303 as applicable, a 

lender seeking a loan guarantee for a CF 

project must submit a financial 

feasibility report prepared by a qualified 

firm or individual acceptable to the 

Agency. All projects financed under this 

section must meet the financial 

feasibility requirements of this section 

and must be based on projected taxes, 

assessments, revenues, fees, or other 

sources of revenues in an amount 

sufficient to provide for project 

operation and maintenance, debt 

payments, and compliance with lender 

reserve requirements, when applicable. 

Other sources of revenue or existence of 

payment guarantors are particularly 

important in considering the feasibility 

of eligible recreation projects. The 

financial feasibility report must take 

into consideration any interest rate 

adjustment that may be instituted under 

the terms of the promissory note. 

Financial projections for projects that 

are assisted living facilities, skilled 

nursing facilities, or similar types of 

eligible residential facilities must be 

based on no more than 90 percent 

occupancy. Utility projects dependent 

on user fees for debt repayment shall 

base their income and expense forecast 

on user estimates supported by either a 

State statute or local ordinance 

requiring mandatory hookup or signed 

and enforceable user agreements. If the 

primary use of the essential community 

facility is by a business and the success 

or failure of the facility is dependent on 

that business, then the economic 

viability of that business must also be 

assessed. For projects that include the 

purchase and installation of RES that 

meet the eligibility requirements of 

§ 5001.103(a)(8), a technical report on 

the RES as outlined in § 5001.307(e)(1) 

and (2), as applicable, will be included 

with the applicable financial feasibility 

report. The type of financial feasibility 

report required will depend upon the 

size of the guaranteed loan, the 

collateral securing the guaranteed loan, 

and the financial history of the 

borrower. The two types of financial 

feasibility report and when they are 

required are described in paragraphs (a) 

and (b) of this section. 

(a) * * * 

(4) The Agency may require a 

feasibility study when the lender’s 

analysis, borrower’s business plan, or 

project information is not sufficient to 

determine the technical feasibility, 

market feasibility, or economic viability 

of the project. 

* * * * * 

■ 37. Amend § 5001.305 by revising 

paragraph (a)(2) and adding paragraph 

(d) to read as follows: 

§ 5001.305 Specific application 

requirements for WWD projects. 

* * * * * 

(a) * * * 

(2) The lender must ensure that the 

project is designed utilizing accepted 

architectural and engineering practices 

and conforms to applicable Federal 

requirements (e.g., the seismic 

requirements of Executive Order 12699 

(55 FR 835, 3 CFR, 1990 Comp., p. 269), 

the debarment requirements of 2 CFR 

part 180 as supplemented by 2 CFR part 

417, American Iron and Steel (Section 

746 of Title VII of the Consolidated 

Appropriations Act of 2017), and the 

Copeland Anti-Kickback Act (18 U.S.C. 

874)); State, local and Tribal codes and 

requirements; and facility plans or plans 

and specifications reviewed and 

approved by the applicable State, local 

and/or Tribal regulatory agency. The 

lender must also ensure that the 

planned project will be completed 

within the available funds and once 

completed, will be suitable for the 

borrower’s needs. Upon completion of 

the project, the lender must certify that 

all applicable Federal requirements 

were met. 

* * * * * 

(d) Domestic procurement preference. 

(1) American Iron and Steel (AIS). 

Guaranteed loans must comply with AIS 

requirements. Lenders and borrowers 

are responsible for meeting the AIS 

requirements of Section 746 of Title VII 

of the Consolidated Appropriations Act 

of 2017 and the continuing resolutions 

adopted thereafter. 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79721 

(2) Build America, Buy America Act 

(BABAA). BABAA was enacted as part 

of the Infrastructure and Jobs Act (Pub. 

L. 117–58) on November 15, 2021 and 

became effective on May 14, 2022. 

Under Section 70914(a) of BABAA, 

‘‘none of the funds made available for a 

Federal financial assistance program for 

infrastructure may be obligated for a 

project unless all of the iron, steel, 

manufactured products, and 

construction materials used in the 

project are produced in the United 

States.’’ Additional information may be 

found on the Agency’s Build America, 

Buy America website at https://

www.rd.usda.gov/build-america-buyamerica. 

(3) Compliance. Owners are 

ultimately responsible for compliance 

with the domestic procurement 

preference requirements and should 

consult with the Agency early in project 

development. Compliance must be 

certified to prior to the issuance of the 

loan note guarantee. The lender must 

include any domestic preference 

language, provided by the Agency, in 

the loan agreement and other 

appropriate loan documents. 

* * * * * 

■ 38. Amend § 5001.306 by revising 

paragraphs (a)(3) introductory text and 

(b) introductory text to read as follows: 

§ 5001.306 Specific application 

requirements for B&I projects. 

* * * * * 

(a) * * * 

(3) The Agency may require a 

feasibility study when the lender’s 

analysis, borrower’s business plan, or 

project information is not sufficient to 

determine the technical feasibility, 

market feasibility, or economic viability 

of the project. 

* * * * * 

(b) Applications requesting a 

guaranteed loan in an amount of 

$600,000 or less. Guaranteed loan 

applications may be processed under 

this paragraph (b) if the amount of the 

guaranteed loan does not exceed 

$600,000, provided the Agency 

determines that the lender’s analysis, 

borrower’s business plan, or other 

project or borrower information 

submitted by the lender is sufficient to 

determine the technical feasibility, 

market feasibility, and economic 

viability of the project. If any of the 

items in paragraphs (a)(1) through (4) of 

this section apply, the lender must 

collect the information and maintain it 

in their file. A lender may need to 

resubmit or modify an application if the 

application does not contain sufficient 

information for the Agency to make an 

informed loan approval decision. 

* * * * * 

■ 39. Amend § 5001.307 by revising 

paragraphs (a)(1) and (2), (b) 

introductory text, (e) introductory text, 

(e)(1)(ii), (e)(1)(v) introductory text, 

(e)(1)(v)(A)(2) and (3), (e)(1)(v)(C)(2) and 

(3) to read as follows: 

§ 5001.307 Specific application 

requirements for REAP projects. 

* * * * * 

(a) * * * 

(1) Eligible borrowers must meet the 

definition of agricultural producer or 

rural small business as defined in 

§ 5001.3. Agricultural producers seeking 

funding for a RES or EEI project may 

apply as either a rural small business or 

as an agricultural producer, provided 

they meet the applicable eligibility 

requirements. Agricultural producers 

seeking funding for an EEE project must 

be eligible and apply as an agricultural 

producer. 

(2) The borrower must provide the 

primary NAICS code applicable to the 

borrower’s business concern and certify 

on the Agency approved application 

form or system that it meets the 

definition of agricultural producer or 

rural small business. The Agency 

reserves the right to request supporting 

documentation to verify borrower 

eligibility. 

(b) Borrower description. Describe the 

ownership of the borrower, including 

the information specified in paragraphs 

(b)(1) through (3) of this section, as 

applicable. Include a description of the 

borrower’s existing farm, ranch, or 

business operation, including how long 

the borrower has been in operation. 

Rural small businesses and agriculture 

operations owned by Tribes should 

provide documentation to adequately 

show the separation of the applicant 

and the Tribal government. 

* * * * * 

(e) Technical report. All eligible 

projects must have technical merit and 

provide information as identified in 

§ 5001.106(e), § 5001.107, or § 5001.108 

and (e)(1) through (3) of this section. 

(1) * * * 

(ii) For RES projects, sufficient 

information to enable the calculation of 

the percentage of historical use of 

energy compared to the amount of 

renewable energy that will be generated 

once the project is operating at its 

steady state operating level. If the 

project is closely associated with a 

residence, satisfactory demonstration 

must be made that 50 percent or more 

of the projected renewable energy will 

benefit the agricultural operation or 

rural small business; and 

* * * * * 

(v) For total project costs in the 

amount of $80,000 or less, a technical 

report, as identified in § 5001.303(c)(16), 

prepared in accordance with the 

following paragraphs, as applicable: 

(A) * * * 

(2) Vendor/installer certification that 

the EEI project uses commercially 

available technology; 

(3) Vendor/installer certified 

projections on the quantity of energy to 

be saved; 

* * * * * 

(C) * * * 

(2) Vendor/installer certification that 

the EEE project uses commercially 

available technology; 

(3) Vendor/installer certification of 

the proposed energy consumption 

quantity and price per unit of the energy 

efficiency equipment to be installed; 

* * * * * 

■ 40. Amend § 5001.315 by revising 

paragraphs (a) introductory text, (b) 

introductory text, (c)(1) and (2), (d)(4) 

and (e)(2) to read as follows: 

§ 5001.315 Application evaluation and 

award provisions. 

(a) General. The Agency will evaluate 

all applications according to the 

provisions of this part and may require 

the lender to obtain additional 

assistance in those areas where the 

lender does not have the necessary 

expertise to originate or service the 

guaranteed loan. For the purposes of 

this paragraph (a), ‘‘those areas’’ mean: 

* * * * * 

(b) Evaluation and eligibility 

determinations. The Agency will review 

each complete application to make a 

formal determination as to: the 

eligibility of the borrower, lender, 

project, and guaranteed loan purpose 

and proposed use of funds; if there is a 

reasonable assurance of repayment 

ability; if sufficient collateral and equity 

exists; if the proposed guaranteed loan 

complies with all applicable statutes 

and regulations; and if the 

environmental review is complete. The 

Agency will only guarantee loans that 

are sound and that have a reasonable 

assurance of repayment. 

* * * * * 

(c) * * * 

(1) Lenders must provide necessary 

information related to determining the 

priority score, if requested by the 

Agency. To the extent possible, lenders 

should consider the established 

priorities of the Agency when 

submitting projects for a loan guarantee. 


ddrumheller on DSK120RN23PROD with RULES2
79722 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

Higher scoring applications will receive 

first consideration for funding. 

(2) The Agency may establish a 

minimum priority score for each 

guarantee program. The Agency will, if 

established, publish the minimum score 

in a document in the Federal Register. 

Applications that do not meet the 

applicable minimum score will compete 

with all other guaranteed loan 

applications for each specific program 

in a competition on the first business 

day of September of the Federal fiscal 

year in which the application is ready 

for funding. 

* * * * * 

(d) * * * 

(4) If a lender agrees to the lower loan 

guarantee amount offered by the Agency 

under either paragraph (d)(1) or (2) of 

this section, the lender must certify that 

the purpose(s) of the project can still be 

met at the lower funding level and must 

provide documentation that the 

borrower has obtained the remaining 

funds needed to complete the project as 

originally proposed. 

(e) * * * 

(2) If an unfunded application has a 

priority score less than any applicable 

minimum score and remains unfunded 

after the competition held on the first 

business day of September of the fiscal 

year in which the application is ready 

for funding, the Agency will notify the 

applicant in writing and withdraw the 

application from further funding 

consideration. 

* * * * * 

■ 41. Amend § 5001.316 by adding a 

paragraph heading to paragraph (e) and 

paragraph and revising paragraph (e)(2) 

to read as follows: 

§ 5001.316 CF project priority point system 

and reservation of funds. 

* * * * * 

(e) Rural priority. * * * 

* * * * * 

(2) On July 1 of each year, the Agency 

will evaluate the dollar amount of 

complete applications on hand for 

projects in rural areas with a population 

of not more than 20,000 inhabitants. 

The dollar amount of the complete 

applications will be subtracted from the 

reserved allocation identified in this 

paragraph (e) and the remaining amount 

will be made available through the end 

of the Federal fiscal year for projects in 

rural areas with a population of not 

more than 50,000 inhabitants. 

■ 42. Amend § 5001.318 by revising 

paragraph (b) introductory text to read 

as follows: 

§ 5001.318 B&I project priority point 

system. 

* * * * * 

(b) Location priority. An application is 

eligible to receive points under each of 

the categories identified in paragraphs 

(b)(1) through (3) of this section if the 

project is located within: 

* * * * * 

■ 43. Amend § 5001.319 by revising the 

introductory text, paragraphs (a) 

introductory text, (b)(1)(i) introductory 

text, (b)(2)(i) introductory text, 

(b)(2)(i)(A), (b)(2)(ii), (b)(2)(iii) 

introductory text, (d) introductory text, 

(e), (f) introductory text, (f)(1) 

introductory text and (g)(6) introductory 

text to read as follows: 

§ 5001.319 REAP project priority point 

system. 

This section applies to REAP projects 

seeking a loan guarantee. On a periodic 

basis, and subject to the availability of 

funds, the Agency will compete each 

complete and eligible RES, EEI, and EEE 

application that is ready to be funded 

and whose priority score, as determined 

in this section, meets, or exceeds the 

minimum priority score. Applications 

that do not meet the applicable 

minimum score will be considered as 

provided in § 5001.315(c)(2). A 

maximum score of 90 points is possible. 

(a) Environmental benefits. The 

Agency will award up to 5 points under 

this criterion based on documentation 

or the applicant’s indication in the 

application that the project will have a 

positive effect on resource conservation, 

public health, and the environment. If 

the project will have a positive impact 

on: 

* * * * * 

(b) * * * 

(1) * * * 

(i) Renewable energy systems. The 

quantity of energy generated or replaced 

per guaranteed loan dollar requested 

will be determined by dividing the 

projected total annual energy generated 

or replaced by the RES or RES retrofit 

(minus energy for residential use), 

which will be converted to BTUs, by the 

guaranteed loan dollars requested. 

Applications for retrofitting of a RES 

that are not projecting to increase the 

amount of renewable energy that the 

RES is generating, while still eligible for 

REAP, will not be awarded points under 

this criteria. Off-the-grid projects and 

direct-use projects which are not 

replacements, will be awarded points 

based on proposed energy generation. 

Points will be awarded under this subcriterion based on the annual amount of 

energy generated or replaced (minus 

energy for residential use) per dollar of 

guaranteed loan amount requested for 

the RES project. The Agency will award 

up to 10 points as determined under 

paragraph (b)(1)(i)(A) and (B) of this 

section below. If the annual amount of 

energy generated per dollar of 

guaranteed loan amount requested 

calculated under paragraph (b)(1)(ii) of 

this section is: 

* * * * * 

(2) * * * 

(i) Energy replacement. The Agency 

will award points under this subcriterion for an RES project based on the 

amount of energy replaced by the 

project compared to the amount of 

energy used by the applicable 

process(es) over a 12-month period. If 

the estimated energy produced is more 

than 150 percent of the energy used by 

the applicable process(es), the project 

will be scored as an energy generation 

project under paragraph (b)(2)(ii) of this 

section. When calculating the 

percentage of energy being replaced and 

whether it is categorized as a 

replacement or generation, the entire 

amount of energy produced by the new 

system will be used in the calculation, 

regardless of whether the project is 

being prorated because it shares a meter 

with a residence or if it has ineligible 

project costs. 

(A) Documentation for energy 

replacement. For a RES project to 

qualify as energy replacement, the 

borrower must provide documentation 

in its application on prior energy use 

incurred by the borrower. 

Documentation must be shown that the 

borrower entity incurred the cost of the 

historical energy to be replaced, in order 

for the project to qualify as energy 

replacement. Replacement of existing 

direct use renewable energy can be 

considered in the replacement 

calculation as long as the borrower 

entity owns the existing RES system. 

For a project involving a recent 

acquisition, historical energy costs of 

the previous owner can be used to 

document prior energy use. Applicant 

entities cannot utilize historical energy 

costs of affiliate businesses to document 

prior energy use. Proposed energy use, 

such as that attributed to an expansion, 

is not considered in the replacement 

calculation. For a RES project involving 

new construction and being installed to 

serve the new facility, the project can be 

classified as energy replacement only if 

the borrower can document prior energy 

use from a facility that is within plus or 

minus 10 percent of the size of the 

facility it is replacing. The estimated 

quantities of energy must be converted 

to either BTUs, watts, or similar energy 

equivalents to facilitate scoring. 

* * * * * 

(ii) Energy generation. If the RES 

project is intended for production of 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79723 

energy or is a proposed retrofitting of an 

existing RES which increases the 

amount of energy generated, the Agency 

will award 10 points. Applications for 

retrofitting of an RES that are not 

projecting to increase the amount of 

renewable energy that the RES is 

generating, while still eligible for REAP, 

will not be awarded points under this 

criteria. If the borrower cannot 

document prior energy use, the project 

will be scored as an energy generation 

project, regardless of whether or not 

there is an agreement in place to sell the 

power. 

(iii) Energy saved. The Agency will 

award up to 15 points under this subcriterion for an EEI project based on the 

percentage of estimated energy saved by 

the installation of the project as 

determined by the projections in the 

applicable vendor certification, energy 

assessment or energy audit. If the 

estimated energy expected to be saved 

over the same period used in the energy 

assessment or energy audit, as 

applicable, will be— 

* * * * * 

(d) Previous grantees or borrowers. 

The Agency will award up to 15 points 

under this criterion based on whether 

the borrower has received and accepted 

a REAP grant award under 7 CFR part 

4280 or a guaranteed loan commitment 

under either this part or 7 CFR part 

4280. Received and accepted means 

REAP grant funds were disbursed and/ 

or a REAP loan note guarantee was 

issued by the Agency. The 

determination is based on the fiscal year 

in which the obligation was made. 

* * * * * 

(e) Existing businesses. A maximum 

of 5 points will be awarded for an 

existing agricultural producer business 

or rural small business that meets the 

definition of existing business in 

§ 5001.3. The business must be in 

operation for at least one full year, not 

simply a year since legal business 

formation. 

(f) Simple payback. A maximum of 15 

points will be awarded for this criterion 

based on the simple payback of the 

project as defined in § 5001.3. Points 

will be awarded for either RES, EEI, or 

EEE; points will not be awarded for 

more than one category. See definition 

of simple payback for calculations. 

Simple payback calculations will be 

calculated based only on the 

documented information provided with 

the application. 

(1) Renewable energy systems. RESs 

includes replacement, generation, and 

direct-use RES projects. If the simple 

payback of the project is: 

* * * * * 

(g) * * * 

(6) The project is located in an area 

where 20 percent or more of its 

population is living in poverty, as 

defined by the United States Census 

Bureau, for the last 30 years; an 

underserved community; or an area 

which has experienced long-term 

population decline, or loss of 

employment. 

* * * * * 

■ 44. Revise and republish appendix C 

to subpart D of part 5001 to read as 

follows: 

Appendix C to Subpart D of Part 5001— 

Technical Reports for Energy Efficiency 

Improvement (EEI) Projects With Total 

Project Costs of More Than $80,000 

For all EEI projects with total project costs 

of more than $80,000, provide the 

information specified in Sections A and D 

and in Section B or Section C, as applicable. 

If the application is for an EEI project with 

total project costs of $80,000 or less, please 

see § 5001.307(e) for the technical report 

information to be submitted with your 

application. 

If the application is for an EEI project with 

total project costs of $200,000 and greater, 

you must conduct an energy audit (EA). 

However, if the application is for an EEI 

project with total project costs of less than 

$200,000, you may conduct either an energy 

assessment or an energy audit. Energy audits 

that meet the American Society of Heating, 

Refrigeration and Air-Conditioning Engineers 

(ASHREA) Level II Energy Survey; Analysis 

and American National Standards Institute 

(ANSI); or American Society of Agricultural 

and Biological Engineers (ASABE) S162 

Standard for performing on farm energy 

audits will be considered by the Agency to 

be acceptable audits. 

Section A. Project Information 

Describe how all the improvements to or 

replacement of an existing building and/or 

equipment meet the requirements of being 

commercially available. Describe how the 

design, engineering, testing, and monitoring 

are sufficient to demonstrate that the 

proposed project will meet its intended 

purpose, ensure public safety, and comply 

with applicable laws, regulations, 

agreements, permits, codes, and standards. 

Describe how all equipment required for the 

EEI(s) is available and able to be procured 

and delivered within the proposed project 

development schedule. In addition, present 

information regarding component warranties 

and the availability of spare parts. 

Section B. Energy Audit 

If conducting an EA, provide the following 

information. 

(1) Situation Report. Provide a narrative 

description of the existing building and/or 

equipment, its energy system(s) and usage, 

and activity profile. Also include average 

price per unit of energy (electricity, natural 

gas, propane, fuel oil, renewable energy, etc.) 

paid by the customer for the most recent 12 

months, or an average of 2, 3, 4, or 5 years, 

for the building and equipment being 

audited. Any energy conversion should be 

based on use rather than source. 

(2) Potential Improvement Description. 

Provide a narrative summary of the potential 

improvement and its ability to reduce energy 

consumption or improve energy efficiency, 

including a discussion of reliability and 

durability of the improvements. 

(i) Provide preliminary specifications for 

critical components. 

(ii) Provide preliminary drawings of project 

layout, including any related structural 

changes. 

(iii) Identify significant changes in future 

related operations and maintenance costs. 

(iv) Describe explicitly how outcomes will 

be measured. 

(3) Technical Analysis. Give consideration 

to the interactions among the potential 

improvements and the current energy 

system(s). 

(i) For the most recent 12 months, or an 

average of 2, 3, 4, or 5 years, prior to the date 

the application is submitted, provide both 

the total amount and the total cost of energy 

used for the original building and/or 

equipment, as applicable, for each 

improvement identified in the potential 

project. In addition, provide for each 

improvement identified in the potential 

project an estimate of the total amount of 

energy that would have been used and the 

total cost that would have been incurred if 

the proposed project were in operation for 

this same time period. 

(ii) Calculate all direct and attendant 

indirect costs of each improvement; 

(iii) Rank potential improvements 

measures by cost-effectiveness; and 

(iv) Provide an estimate of simple payback, 

including all calculations, documentation, 

and any assumptions. 

(4) Qualifications of the auditor. Provide 

the qualifications of the individual or entity 

which completed the energy audit. 

Section C. Energy Assessment 

If conducting an energy assessment, 

provide the following information. 

(1) Situation Report. Provide a narrative 

description of the existing building and/or 

equipment, its energy system(s) and usage, 

and activity profile. Also include average 

price per unit of energy (electricity, natural 

gas, propane, fuel oil, renewable energy, etc.) 

paid by the customer for the most recent 12 

months, or an average of 2, 3, 4, or 5 years, 

for the building and equipment being 

evaluated. Any energy conversion shall be 

based on use rather than source. 

(2) Potential Improvement Description. 

Provide a narrative summary of the potential 

improvement and its ability to reduce energy 

consumption or improve energy efficiency. 

(3) Technical Analysis. Giving 

consideration to the interactions among the 

potential improvements and the current 

energy system(s), provide the information 

specified in paragraphs (3)(i) through (iii) of 

this appendix. 

(i) For the most recent 12 months, or an 

average of 2, 3, 4, or 5 years, prior to the date 

the application is submitted, provide both 

the total amount and the total cost of energy 

used for the original building and/or 


ddrumheller on DSK120RN23PROD with RULES2
79724 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

equipment, as applicable, for each 

improvement identified in the potential 

project. In addition, provide for each 

improvement identified in the potential 

project an estimate of the total amount of 

energy that would have been used and the 

total cost that would have been incurred if 

the proposed project were in operation for 

this same time period. 

(ii) Document baseline data compared to 

projected consumption, together with any 

explanatory notes on source of the projected 

consumption data. When appropriate, show 

before-and-after data in terms of 

consumption per unit of production, time, or 

area. 

(iii) Provide an estimate of simple payback, 

including all calculations, documentation, 

and any assumptions. 

(4) Qualifications of the Assessor. Provide 

the qualifications of the individual or entity 

that completed the assessment. If the energy 

assessment for a project with total project 

costs of $80,000 or less is not conducted by 

energy auditor or energy assessor, then the 

individual or entity must have at least 3 years 

of experience and completed at least five 

energy assessments or energy audits on 

similar type projects. 

Section D. Qualifications 

Provide a resume or other evidence of the 

contractor or installer’s qualifications and 

experience with the proposed EEI 

technology. Any contractor or installer with 

less than 2 years of experience may be 

required to provide additional information in 

order for the Agency to determine if they are 

qualified installer/contractor. 

■ 45. Revise and republish appendix D 

to subpart D of part 5001 to read as 

follows: 

Appendix D to Subpart D of Part 5001— 

Technical Reports for Renewable 

Energy System (RES) Projects With 

Total Project Costs of Less Than 

$200,000 but More Than $80,000 

Provide the information specified in 

Sections A through D for each technical 

report prepared under this appendix. 

A renewable energy site assessment may be 

used in lieu of Sections A through C if the 

renewable energy site assessment contains 

the information requested in Sections A 

through C. In such instances, the technical 

report would consist of Section D and the 

renewable energy site assessment. 

Note: If the total project cost for the RES 

project is $80,000 or less, this appendix does 

not apply. Instead, for such projects, please 

provide the information specified in 

§ 5001.307(e). 

Section A. Project Description 

Provide a description of the project, 

including its intended purpose and a 

summary of how the project will be 

constructed and installed. Describe how the 

system meets the definition of commercially 

available. Identify the project’s location and 

describe the project site. 

Section B. Resource Assessment 

Describe the quality and availability of the 

renewable resource to the project. Identify 

the amount of renewable energy generated 

that will be generated once the proposed 

project is operating at its steady state 

operating level. If applicable, also identify 

the percentage of energy being replaced by 

the system. 

If the application is for a bioenergy project, 

provide documentation that demonstrates 

that any and all woody biomass feedstock 

from National Forest System land or public 

lands cannot be used as a higher value woodbased product. 

Section C. Project Economic Assessment 

Describe the projected financial 

performance of the proposed project. The 

description must address total project costs, 

energy savings, and revenues, including 

applicable investment and other production 

incentives accruing from government 

entities. Revenues to be considered shall 

accrue from the sale of energy, offset or 

savings in energy costs, byproducts, and 

green tags. Provide an estimate of simple 

payback, including all calculations, 

documentation, and any assumptions. 

Section D. Project Construction and 

Equipment Information 

Describe how the design, engineering, 

testing, and monitoring are sufficient to 

demonstrate that the proposed project will 

meet its intended purpose, ensure public 

safety, and comply with applicable laws, 

regulations, agreements, permits, codes, and 

standards. Describe how all equipment 

required for the RES is available and able to 

be procured and delivered within the 

proposed project development schedule. In 

addition, present information regarding 

component warranties and the availability of 

spare parts. 

Section E. Qualifications of Key Service 

Providers 

Describe the key service providers, 

including the number of similar systems 

installed and/or manufactured, professional 

credentials, licenses, and relevant 

experience. When specific numbers are not 

available for similar systems, estimations will 

be acceptable. 

■ 46. Revise and republish appendix E 

to subpart D of part 5001 to read as 

follows: 

Appendix E to Subpart D of Part 5001— 

Technical Reports for Renewable 

Energy System (RES) Projects With 

Total Project Costs of $200,000 and 

Greater 

Provide the information specified in 

Sections A through G for each technical 

report prepared under this appendix. 

Provide the resource assessment under 

Section C that is applicable to the project. For 

hybrid projects, technical reports must be 

prepared for each technology that comprises 

the hybrid project. 

Section A. Qualifications of the Project Team 

Describe the project team, their 

professional credentials, and relevant 

experience. The description shall support 

that the project team key service providers 

have the necessary professional credentials, 

licenses, certifications, and relevant 

experience to develop the proposed project. 

Section B. Agreements and Permits 

Describe the necessary agreements and 

permits (including any for local zoning 

requirements) required for the project and the 

anticipated schedule for securing those 

agreements and permits. For example, 

interconnection agreements and power 

purchase agreements are necessary for all 

renewable energy projects electrically 

interconnected to the utility grid. 

Section C. Resource Assessment 

Describe the quality and availability of the 

renewable resource and the amount of 

renewable energy generated through the 

deployment of the proposed system. For all 

bioenergy projects, except anaerobic digesters 

projects, complete Section C.3 of this 

appendix. For anaerobic digester projects, 

complete Section C.6 of this appendix. 

(1) Wind. Provide adequate and 

appropriate data to demonstrate the amount 

of renewable resource available. Indicate the 

source of the wind data and the conditions 

of the wind monitoring when collected at the 

site or assumptions made when applying 

nearby wind data to the site. 

(2) Solar. Provide adequate and 

appropriate data to demonstrate the amount 

of renewable resource available. Indicate the 

source of the solar data and assumptions. 

(3) Bioenergy/Biomass Project. Provide 

adequate and appropriate data to 

demonstrate the amount of renewable 

resource available. Indicate the type, 

quantity, quality, and seasonality of the 

renewable biomass resource, including 

harvest and storage, where applicable. Where 

applicable, also indicate shipping or 

receiving method and required infrastructure 

for shipping. For proposed projects with an 

established resource, provide a summary of 

the resource. Document that any and all 

woody biomass feedstock from National 

Forest System land or public lands cannot be 

used as a higher value wood-based product. 

(4) Geothermal Electric Generation. 

Provide adequate and appropriate data to 

demonstrate the amount of renewable 

resource available. Indicate the quality of the 

geothermal resource, including temperature, 

flow, and sustainability and what conversion 

system is to be installed. Describe any special 

handling of cooled geothermal waters that 

may be necessary. Describe the process for 

determining the geothermal resource, 

including measurement setup for the 

collection of the geothermal resource data. 

For proposed projects with an established 

resource, provide a summary of the resource 

and the specifications of the measurement 

setup. 

(5) Geothermal Direct Generation. Provide 

adequate and appropriate data to 

demonstrate the amount of renewable 

resource available. Indicate the quality of the 

geothermal resource, including temperature, 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79725 

flow, and sustainability and what direct use 

system is to be installed. Describe any special 

handling of cooled geothermal waters that 

may be necessary. Describe the process for 

determining the geothermal resource, 

including measurement setup for the 

collection of the geothermal resource data. 

For proposed projects with an established 

resource, provide a summary of the resource 

and the specifications of the measurement 

setup. 

(6) Anaerobic Digester Project/Biogas. 

Provide adequate and appropriate data to 

demonstrate the amount of renewable 

resource available. Indicate the substrates 

used as digester inputs, including animal 

wastes or other renewable biomass in terms 

of type, quantity, seasonality, and frequency 

of collection. Describe any special handling 

of feedstock that may be necessary. Describe 

the process for determining the feedstock 

resource. Provide either tabular values or 

laboratory analysis of representative samples 

that include biodegradability studies to 

produce gas production estimates for the 

project on daily, monthly, and seasonal basis. 

If an anerobic digester project, identify the 

type of operation (e.g., dairy, swine, layer, 

etc.), along with breed, herd population size 

and demographics, and the type of waste 

collection method and frequency information 

available. For the biogas produced, identify 

the type of digester (e.g., mixed, plug-flow, 

attached film, covered lagoon, etc.), if 

applicable, or the method of capture (landfill, 

sewage waste treatment, etc.) and treatment. 

Identify the system designer and determine 

the digester design assumptions such as the 

number and type of animals, the bedding 

type and estimated annual quantity used, the 

manure and wastewater volumes, and the 

treatment of digester effluent (e.g., none, 

solids separation by screening, etc. with 

details including use or method of disposal). 

(7) Hydrogen Project. Provide adequate and 

appropriate data to demonstrate the amount 

of renewable resource available. Indicate the 

type, quantity, quality, and seasonality of the 

renewable biomass resource. For solar, wind, 

or geothermal sources of energy used to 

generate hydrogen, indicate the renewable 

resource where the hydrogen system is to be 

installed. Local resource maps may be used 

as an acceptable preliminary source of 

renewable resource data. For proposed 

projects with an established renewable 

resource, provide a summary of the resource. 

(8) Hydroelectric/Ocean Energy Projects. 

Provide adequate and appropriate data to 

demonstrate the amount of renewable 

resource available. Indicate the quality of the 

resource, including temperature (if 

applicable), flow, and sustainability of the 

resource, including a summary of the 

resource evaluation process and the 

specifications of the measurement setup and 

the date and duration of the evaluation 

process and proximity to the proposed site. 

If less than 1 year of data is used, a qualified 

consultant must provide a detailed analysis 

of the correlation between the site data and 

a nearby, long-term measurement site. 

(9) Renewable Energy Systems with Storage 

Components. Provide adequate and 

appropriate data to demonstrate the amount 

of renewable resource available. Indicate the 

type, quantity, quality, and seasonality of the 

renewable energy resource, where applicable. 

Indicate the storage system specifications and 

the integrity of the system in conjunction 

with the RES it is integrated with, including 

application, size, lifetime, response time, 

capital and maintenance costs associated 

with the operation as well as the distribution 

of the stored resource(s). 

Section D. Design and Engineering 

Describe the intended purpose of the 

project and the design, engineering, testing, 

and monitoring needed for the proposed 

project. The description shall support that 

the system will be designed, engineered, 

tested, and monitored to meet its intended 

purpose, ensure public safety, and comply 

with applicable laws, regulations, 

agreements, permits, codes, and standards. In 

addition, identify that all major equipment is 

commercially available, including 

proprietary equipment, and justify how this 

unique equipment is needed to meet the 

requirements of the proposed design. In 

addition, information regarding component 

warranties and the availability of spare parts 

must be presented. 

Section E. Project Development 

Describe the overall project development 

method, including the key project 

development activities and the proposed 

schedule, including proposed dates for each 

activity. The description shall identify each 

significant historical and projected activity, 

its beginning and end, and its relationship to 

the time needed to initiate and carry the 

activity through to successful project 

completion. The description shall address 

applicant project development cash flow 

requirements. Details for equipment 

procurement and installation shall be 

addressed in Section F of this Appendix. 

Applications should include a concise 

development schedule with timelines for 

activities. 

Section F. Equipment Procurement and 

Installation 

Describe the availability of the equipment 

required by the system. The description shall 

support that the required equipment is 

available and can be procured and delivered 

within the proposed project development 

schedule. 

Describe the plan for site development and 

system installation, including any special 

equipment requirements. In all cases, the 

system or improvement shall be installed in 

conformance with manufacturer’s 

specifications and design requirements, and 

comply with applicable laws, regulations, 

agreements, permits, codes, and standards. 

Section G. Operations and Maintenance 

Describe the operations and maintenance 

requirements of the system, including major 

rebuilds and component replacements 

necessary for the system to operate as 

designed over its useful life. The warranty 

must cover and provide protection against 

both breakdown and a degradation of 

performance. The performance of the RES or 

EEI shall be monitored and recorded as 

appropriate to the specific technology. 

■ 47. Amend § 5001.401 by revising the 

introductory text and paragraph (c) to 

read as follows: 

§ 5001.401 Interest rate provisions. 

Interest rates, interest rate caps, and 

incremental interest rate adjustment 

limitations on a guaranteed loan are 

negotiated between the lender and the 

borrower. The interest rate for a 

guaranteed loan can be either fixed or 

variable, or a combination thereof, as 

long as it is a legal rate. Interest rates 

cannot be more than those rates the 

lender customarily charges its borrowers 

for non-guaranteed loans in similar 

circumstances in the ordinary course of 

business. The Agency encourages each 

lender to use the secondary market and 

pass interest-rate savings on to the 

borrower. If an interest rate swap is 

utilized, the guarantee will only cover 

principal and interest. The lender must 

provide the Agency with the overall 

effective interest rate charged to the 

borrower in the swap transaction. The 

Agency guarantee does not cover any 

fees related to the swap. 

* * * * * 

(c) Multi-rates. When multi-rates are 

used, the lender must provide the 

Agency with the overall effective 

interest rate for the entire loan. 

* * * * * 

■ 48. Amend § 5001.402 by revising 

paragraph (b)(2) to read as follows: 

§ 5001.402 Term length, loan schedule, 

and repayment. 

* * * * * 

(b) * * * 

(2) Guaranteed loans must require a 

periodic payment schedule that will 

retire the debt over the term of the loan 

without a balloon payment. Balloon 

maturities are not allowed, unless 

required as a loan servicing action. 

Payments must be amortized to 

maximize successful loan repayment 

and may vary by type of business or 

cash flow. 

* * * * * 

■ 49. Amend § 5001.403 by revising 

paragraph (b) to read as follows: 

§ 5001.403 Lender fees. 

* * * * * 

(b) Default charges, penalty interest, 

late payment fees, and additional 

interest expenses are not covered by the 

loan note guarantee and cannot be 

added to the principal or interest due 

under any loan note guarantee in the 

event of a loss claim as prescribed in 

§ 5001.521 or a repurchase as prescribed 

in § 5001.511. 


ddrumheller on DSK120RN23PROD with RULES2
79726 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

■ 50. Amend § 5001.406 by revising 

paragraphs (c) and (d) introductory text 

to read as follows: 

§ 5001.406 Guaranteed loan amounts. 

* * * * * 

(c) B&I projects. The maximum total 

amount of B&I guaranteed loans 

(including the guaranteed and 

unguaranteed portions of any B&I 

guaranteed loans, the outstanding 

principal and interest balance of any 

existing B&I guaranteed loans, and any 

new B&I guaranteed loan that is the 

subject of an application) that may be 

made to a borrower is limited to a 

maximum amount of $25 million. The 

Secretary, whose authority may not be 

redelegated, may approve, at the 

Secretary’s discretion, guaranteed loans 

in excess of $25 million and up to $40 

million for rural cooperatives that 

process value-added agricultural 

commodities in accordance with 

§ 5001.105(b)(18)(i). In addition to the 

borrower loan limit, there is a guarantor 

loan limit of $100 million. 

(d) REAP projects. The amount of a 

guaranteed loan that will be made 

available to an eligible project and 

borrower under this part will be at least 

$5,000, not to exceed 75 percent of 

eligible project costs. Borrowers must 

demonstrate evidence of a financial 

contribution in the project of not less 

than 25 percent of total eligible project 

costs. 

* * * * * 

■ 51. Amend § 5001.408 by revising 

paragraphs (a)(5) and (e)(1) to read as 

follows: 

§ 5001.408 Participation or assignment of 

guaranteed loans. 

* * * * * 

(a) * * * 

(5) Secondary market. The lender 

must properly close their loan and fully 

disburse loan funds of a promissory 

note for the purposes intended prior to 

assignment of the guaranteed portion of 

the promissory note(s) on the secondary 

market. The lender can assign all or part 

of the guaranteed portion of the loan 

only if the loan is not in default. Default 

includes a borrower default in payments 

or a lender default by unpaid periodic 

guarantee retention fees. A lender using 

the multi-note system may sell the 

guarantee on the secondary market for a 

specific note once that note is fully 

disbursed, even if other guaranteed 

notes for the project have not been fully 

disbursed. 

* * * * * 

(e) * * * 

(1) A guarantee and right to require 

purchase in accordance with § 5001.511 

will be directly enforceable by a holder 

notwithstanding any fraud or 

misrepresentation by the lender or any 

unenforceability of the loan guarantee 

by the lender, except for fraud or 

misrepresentation of which the holder 

had actual knowledge at the time it 

became the holder or in which the 

holder participates or condones. 

* * * * * 

■ 52. Amend § 5001.450 by revising 

paragraphs (b)(1), (c)(1) introductory 

text, (c)(1)(iii) and (c)(2) to read as 

follows: 

§ 5001.450 General. 

* * * * * 

(b) * * * 

(1) The entire loan must be secured by 

the same collateral with equal lien 

priority for the guaranteed and 

unguaranteed portions of the loan. The 

unguaranteed portion of the guaranteed 

loan will neither be paid first nor given 

any preference or priority over the 

guaranteed portion. A parity or junior 

lien position in the guaranteed loan 

collateral may be considered on a caseby-case basis and must be approved by 

the Agency during the loan approval 

process. Requirements for guaranteed 

loans to purchase cooperative stock are 

found in § 5001.140. 

* * * * * 

(c) * * * 

(1) If the lender owns all or a portion 

of the guaranteed portion of the 

guaranteed loan or makes a protective 

advance, the Agency, in its sole 

discretion, may cover interest on the 

guaranteed portion for the 90 days from 

the most recent delinquency effective 

date. Per paragraph (c)(2) of this section, 

if applicable, the lender should issue an 

interest termination letter to any 

holder(s) and provide the Agency with 

a copy. The Agency will entertain the 

payment of interest up to 180 days past 

the most recent delinquency effective 

date only if: 

* * * * * 

(iii) Concurrence for inclusion of the 

extended period of interest to the lender 

is received from the Agency. The lender 

must request an extension of accrued 

interest in writing and document their 

collection efforts and timeframe for full 

resolution, which must be within 180 

days from the most recent delinquency. 

Approved collection efforts that will 

extend longer than 180 days from the 

most recent delinquency date will be 

limited to 90 days of accrued interest 

payment from the Agency. 

(2) If the guaranteed loan has one or 

more holders, the lender will issue an 

interest termination letter to each holder 

establishing the termination date for 

interest accrual and provide the Agency 

with a copy. The loan note guarantee 

will not cover interest to any holder 

accruing after 90 days from the date of 

the interest termination letter. The 

Agency at its sole discretion may notify 

each holder of the interest termination 

provisions if it is determined that lender 

correspondence to holders is 

inadequate. 

■ 53. Amend § 5001.452 by: 

■ a. Revising paragraphs (a) and 

(b)(8)(iii)(U); 

■ b. Adding paragraphs (b)(8)(iii)(W) 

and (X); and 

■ c. Revising paragraph (c). 

The revisions and additions to read as 

follows: 

§ 5001.452 Loan closing and conditions 

precedent to issuance of loan note 

guarantee. 

(a) The lender must not close the 

guaranteed loan until all conditions of 

the conditional commitment are met. If, 

at a later date, it is discovered that all 

conditions were not met, the lender will 

be advised in writing that full 

enforceability of the guarantee by the 

lender may be compromised if the 

deficiencies are not corrected. 

(b) * * * 

(8) * * * 

(iii) * * * 

(U) For all RES and EEI projects, the 

lender must provide certification that 

the project has been performing or will 

perform at a steady state operating level 

in accordance with the technical 

requirements, plans, and specifications. 

Any modification to the 30-day steady 

state operating level requirement will be 

based on the Agency’s review of the 

technical report or vendor certification 

and will be incorporated into the 

conditional commitment. 

* * * * * 

(W) For WWD projects, if applicable, 

the lender must certify that the project 

complied with American Iron and Steel 

requirements. 

(X) For B&I, the capital/equity 

requirement set forth in the Conditional 

Commitment was met, as evidenced by 

a balance sheet as of the date the 

guaranteed loan was closed, giving 

effect to the entirety of the loan in the 

calculation whether or not the loan 

itself is fully advanced. A copy of the 

borrower’s loan closing balance sheet 

must be included with the lender’s 

certification. 

(c) For RES projects where applicable, 

the lender must provide to the Agency 

a copy of the executed power purchase 

agreement and/or a permission to 

operate letter from the energy off-taker. 

* * * * * 

■ 54. Amend § 5001.454 by revising the 

introductory text, paragraphs (b) 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79727 

introductory text, (d)(4) and (5) to read 

as follows: 

§ 5001.454 Guarantee Fee. 

The guarantee fee is a one-time, nonrefundable fee paid by the lender to the 

Agency at or before loan closing and is 

required to be paid before the Agency 

will issue the loan note guarantee. The 

guarantee fee rate applied will be the 

rate as established in the Federal 

Register for the fiscal year in which a 

guaranteed loan is obligated. The lender 

may pass the guarantee fee on to the 

borrower. 

* * * * * 

(b) Guarantee fee rates. The guarantee 

fee rate is established by the Agency in 

an annual document published in the 

Federal Register. While the fee rate may 

vary annually, they will not exceed the 

limits in table 1. Once the guarantee is 

obligated, the guarantee fee rate in effect 

at the time of obligation will remain in 

place even if the guarantee fee rate 

changes before the loan note guarantee 

is issued. 

* * * * * 

(d) * * * 

(4) Is part of a strategic economic 

development and community 

development plan on a multijurisdictional and multi-sectoral basis in 

accordance with Section 6401 of the 

Agriculture Improvement Act of 2018 

(Pub. L. 115–334); or 

(5) Provides an additional market for 

existing local businesses by purchasing 

substantial amounts of products or 

services from, selling product to, or 

providing services to existing local and 

regional businesses. The additional 

market for existing local businesses 

means that the borrower uses industry 

clusters in the same community as a 

substantial part of their product 

manufacturing or service delivery, or 

the borrower is part of a product chain 

where they are a substantial part of 

another local business’ product 

manufacturing or service delivery. The 

use of local janitorial or maintenance 

firms, for example, does not meet this 

criteria. 

■ 55. Amend § 5005.457 by revising 

paragraph (b)(1)(ii) to read as follows: 

§ 5001.457 Changes prior to loan closing. 

* * * * * 

(b) * * * 

(1) * * * 

(ii) Borrower’s written plan, scope of 

work, or the purpose or intent of the 

project. 

* * * * * 

■ 56. Amend § 5005.459 by revising 

paragraph (b)(1) to read as follows: 

§ 5001.459 Replacement of loan note 

guarantee, and assignment guarantee 

agreement. 

* * * * * 

(b) * * * 

(1) Be issued by a qualified surety 

company holding a certificate of 

authority from the Secretary of the 

Treasury and listed in Treasury 

Department Circular 570, except when 

the outstanding principal balance and 

accrued interest due the present holder, 

in accordance with § 5001.450(c), is less 

than $1 million as verified by the lender 

via a written letter of certification of 

balance due; 

* * * * * 

■ 57. Amend § 5005.502 by revising 

paragraph (d) to read as follows: 

§ 5001.502 Oversight and monitoring. 

* * * * * 

(d) Access to the project. Until the 

loan note guarantee is terminated, the 

borrower must allow the lender and 

therefore the Agency access to the 

project and its performance information 

and permit periodic inspections of the 

project by an authorized representative 

of the lender or the Agency. 

■ 58. Amend § 5005.505 by revising 

paragraphs (a), (b)(3) introductory text, 

(b)(3)(iii) to read as follows: 

§ 5001.505 Collateral inspection and 

release. 

* * * * * 

(a) Inspection of collateral. The lender 

must inspect the collateral as often as 

necessary to properly service the 

guaranteed loan. 

(b) * * * 

(3) Sale or release transaction. The 

sale or release of collateral must be 

based on an arm’s length transaction, 

unless otherwise approved, in writing, 

by the Agency when the sale or release 

of collateral results in paying the 

guaranteed loan in full and termination 

of the loan note guarantee. There must 

be adequate consideration at market 

value for the release of collateral. Such 

consideration may include, but is not 

limited to: 

* * * * * 

(iii) Application of the net proceeds 

from the sale of collateral to the 

borrower’s guaranteed loan or to its 

business operation in such a manner 

that a significant improvement to the 

borrower’s debt service ability will be 

clearly demonstrated. The lender’s 

written request must detail how the 

borrower’s debt service ability will be 

improved; and 

* * * * * 

■ 59. Amend § 5001.506 by revising 

paragraphs (e) and (k) to read as follows: 

§ 5001.506 Loan transfers and 

assumptions 

* * * * * 

(e) Loan agreement. A new loan 

agreement or an assumption agreement, 

acceptable to the Agency must be 

executed to establish the terms and 

conditions of the loan being assumed. 

* * * * * 

(k) Appraisals. If the proposed 

transfer and assumption is for less than 

the full amount of the guaranteed loan, 

an appraisal is required on all the 

collateral being transferred, and the 

amount of the assumption must not be 

less than this appraised value. The 

lender is responsible for obtaining the 

appraisal, which must conform to the 

requirements of § 5001.203 of this part. 

However, if the original appraisal is 

more than one year old, but less than 

two years old, the lender may provide 

an appraisal with a new effective date 

of evaluation in lieu of a completely 

new appraisal. 

* * * * * 

■ 60. Amend § 5001.507 by revising 

paragraphs (a)(3) and (d) to read as 

follows: 

§ 5001.507 Lender transfer. 

* * * * * 

(a) * * * 

(3) Agrees in writing to acquire title 

to the unguaranteed portion of the loan 

held by the original lender and assumes 

all original loan requirements, including 

liabilities and servicing responsibilities; 

and 

* * * * * 

(d) In cases when there is a transfer 

to a new lender or when a lender has 

been merged with or acquired by 

another lender, the Agency and the new 

lender must execute a new lender’s 

agreement, unless the new lender 

already has a valid lender’s agreement 

with the Agency. 

* * * * * 

■ 61. Amend § 5001.510 by revising 

paragraph (b)(3) to read as follows: 

§ 5001.510 Subordination of lien position. 

* * * * * 

(b) * * * 

(3) Remaining collateral is sufficient 

to provide for adequate collateral 

coverage of the guaranteed loan after 

taking into account the lender’s 

discount of collateral consistent with 

the lender’s sound loan-to-discounted 

value practices and satisfactory 

justification of the discount used. The 

Agency may require a current 

independent appraisal in accordance 

with § 5001.203. However, if the 

original appraisal is more than one year 

old, but less than two years old, the 


ddrumheller on DSK120RN23PROD with RULES2
79728 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

lender may provide an appraisal with a 

new effective date of evaluation in lieu 

of a completely new appraisal; 

* * * * * 

■ 62. Amend § 5001.511 by revising 

paragraphs (b) introductory text, (c)(9) 

and (10) to read as follows: 

§ 5001.511 Repurchase from holders. 

* * * * * 

(b) Repurchase by lender for loan 

servicing purposes. If the lender, 

borrower, and holder are unable to agree 

to restructuring of loan repayment, 

interest rate, or loan terms to resolve 

any loan problem or resolve any default 

and repurchase of the guaranteed 

portion of the loan is necessary to 

adequately service the loan, the holder 

must reassign the guaranteed portion of 

the loan to the lender. The reassignment 

must be for an amount not less than the 

holder’s unpaid principal and accrued 

interest, in accordance with 

§ 5001.450(c) of this part, on such 

portion less the lender’s servicing fee. 

* * * * * 

(c) * * * 

(9) Accelerated loan. When the lender 

has accelerated the loan and the lender 

holds all or a portion of the guaranteed 

loan, an estimated loss claim must be 

filed by the lender with the Agency 

within 60 calendar days from the date 

the loan was accelerated. Accrued 

interest paid to the lender in accordance 

with § 5001.450(c)(1). 

(10) Interest termination during 

bankruptcy. When a borrower files a 

Chapter 7 liquidation plan, the lender 

shall immediately notify the Agency 

and submit a liquidation plan. The 

Agency will establish an interest 

termination date based on the date 

interest was last paid to the lender. 

When a borrower files either a Chapter 

9 or Chapter 11 bankruptcy 

restructuring plan, the Agency and 

lender shall meet to discuss the 

bankruptcy procedure, the ability of the 

borrower to meet their restructuring 

plan, the lender’s treatment of accruing 

interest, and potentially establish an 

interest termination date for the 

guaranteed loan. If the restructuring 

bankruptcy Chapter 9 or Chapter 11 is 

converted to a liquidation bankruptcy 

Chapter 7 by court order, the interest 

termination date will be the date of such 

conversion. 

■ 63. Amend § 5001.516 by revising 

paragraphs (c) and (d) to read as follows: 

§ 5001.516 Protective advances. 

* * * * * 

(c) A lender must obtain written 

Agency approval for any protective 

advance that will cumulatively amount 

to more than $200,000, or 10 percent of 

the aggregate outstanding balance of 

principal and interest, whichever is less, 

to the same borrower. Payment of real 

estate taxes by the lender is not 

considered a protective advance and 

does not require Agency approval. 

(d) Protective advances constitute an 

indebtedness of the borrower to the 

lender and must be secured by collateral 

to the same extent as the original 

guaranteed loan. It is the lender’s 

responsibility to ensure that any 

protective advances are secured by the 

collateral of the guaranteed loan. 

* * * * * 

■ 64. Amend § 5001.517 by revising 

paragraphs (c)(1), (c)(2), (c)(6)(i), (c)(10), 

(c)(11), (d), (e)(1)(i), and (f)(2) to read as 

follows: 

§ 5001.517 Liquidation. 

* * * * * 

(c) * * * 

(1) Such proof as the Agency requires 

to establish the lender’s ownership of 

the guaranteed loan promissory note 

and related security instruments. Such 

proof may include copies of executed 

notes; and copies of mortgages or deeds 

of trust recorded in the appropriate 

jurisdiction; 

(2) A copy of the payment ledger, if 

available, or other documentation that 

reflects the current outstanding loan 

balance, accrued interest to date, and 

the method of computing the accrued 

interest. If the interest rate was a 

variable rate, the lender must include 

documentation of changes in the agreed 

upon base rate and when the changes in 

the loan rate became effective. 

* * * * * 

(6) * * * 

(i) These values or estimates of the 

collateral must be obtained by the 

lender through an independent 

appraisal. If the outstanding balance of 

principal and interest is less than 

$250,000, the lender may, instead of an 

appraisal, obtain these values or 

estimates by using their primary 

regulator’s policies relating to appraisals 

and evaluations or, if the lender is not 

regulated, normal banking practices and 

generally accepted methods of 

determining value. A copy of the 

appraisal or valuation will be provided 

to the Agency with the liquidation plan 

or as soon as it is available. 

* * * * * 

(10) An itemized list of estimated 

liquidation expenses expected to be 

incurred along with justification for 

each expense. These may include 

attorney, auctioneer, and other 

professional fees for services the lender 

will need to contract to maximize 

recovery on the loan. Cost could also 

include legal representation to protect 

Agency/lender joint interest in 

bankruptcy or receivership; 

(11) Estimated protective advance 

amounts with justification. Protective 

advances include, but are not limited to, 

advances made for taxes, annual 

assessments, ground rent, hazard and 

flood insurance premiums affecting the 

collateral, and other expenses necessary 

to protect the collateral. Protective 

advances may include advances 

necessary to maintain services or 

address unique situations with proper 

justification. If the lender has advanced 

funds without agency approval during 

the life of the loan, such expenditures 

or loans will not be guaranteed; 

* * * * * 

(d) Partial liquidation plan. If actions 

are necessary to immediately preserve 

and protect the collateral, the lender 

may submit a partial liquidation plan 

and, when approved by the Agency, 

submit a complete liquidation plan 

prepared by the lender in accordance 

with paragraph (c) of this section. 

(e) * * * 

(1) * * * 

(i) Proceed expeditiously with 

liquidation. The lender must actively 

market the collateral for a reasonable 

period of time. If after this period of 

time the lender is unable to sell the 

collateral, then consideration should be 

given to submission of a final loss claim 

based on the fair market value of the 

collateral prior to its ultimate 

disposition; 

* * * * * 

(f) * * * 

(2) The lender must provide the 

Agency a copy of the acceleration 

notice, or other acceleration document 

sent to the borrower. 

* * * * * 

■ 65. Amend § 5001.519 by revising 

paragraph (d)(2)(i) to read as follows: 

§ 5001.519 Bankruptcy. 

* * * * * 

(d) * * * 

(2) * * * 

(i) The lender must request a 

bankruptcy loss payment of the 

guaranteed portion of the accrued 

interest and principal discharged by the 

court for all bankruptcies when all or a 

portion of the debt has been discharged. 

Unless a final court decree approves a 

subsequent change to the bankruptcy 

plan that is adverse to the lender, only 

one bankruptcy loss payment is allowed 

during the bankruptcy. Once a final 

court decree has discharged all or part 

of the guaranteed loan and any appeal 

period has run, the lender must submit 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79729 

the documentation necessary for the 

Agency to review and adjust the 

bankruptcy loss claim to reflect any 

actual discharge of principal and 

interest. 

* * * * * 

■ 66. Amend § 5001.521 by revising 

paragraphs (d)(2), (e)(3), (e)(4), and 

(e)(8)(iii) to read as follows: 

§ 5001.521 Loss calculations and payment. 

* * * * * 

(d) * * * 

(2) Non-compliance with the 

requirements of § 5001.205(a) or 

§ 5001.305(a) will result in a reduction 

of loss claims payable. The Agency’s 

review of the non-compliance could 

result in a total reduction of the loss 

claim payable. The Agency’s review of 

the non-compliance could result in a 

total reduction of the loss claim payable. 

The lender must ensure during loan 

making and project development that 

the project is designed utilizing 

accepted architectural and engineering 

practices and conforms to applicable 

Federal requirements including the 

seismic requirements of Executive Order 

12699 (55 FR 835, January 5, 1990), 

State and local codes and requirements, 

and facility plans or plans and 

specifications reviewed and approved 

by the applicable State regulatory 

agency. The lender must also ensure 

that the planned project will be 

completed within the available funds 

and once completed, will be suitable for 

the borrower’s needs. 

* * * * * 

(e) * * * 

(3) Audit. Upon receipt of the final 

accounting and report of loss, the 

Agency may audit all applicable 

documentation to determine the final 

loss. The lender must make its records 

available to and otherwise assist the 

Agency in making any investigation or 

audit of the report of loss. The 

documentation accompanying the report 

of loss must support the amounts 

reported. The Agency must be satisfied 

that the lender has maximized the 

collections in conducting the 

liquidation. 

(4) Guarantees. The lender must 

determine the collectability of 

unsecured personal and corporate 

guarantees required in accordance with 

§ 5001.204 of this part. The lender must 

promptly collect or otherwise dispose of 

such guarantees prior to completion of 

the final loss report. However, if 

collection from the guarantors appears 

unlikely or will require a prolonged 

period of time, the lender must file the 

report of loss when all other collateral 

has been liquidated. Unsecured 

personal or corporate guarantees 

outstanding at the time of the 

submission of the final report of loss 

will be treated as a future recovery with 

the net proceeds to be shared on a pro 

rata basis by the lender and the Agency. 

* * * * * 

(8) * * * 

(iii) If a restructuring of a guaranteed 

loan includes the capitalization of 

interest, the guarantee will not cover the 

interest accrued on the capitalized 

interest. 

* * * * * 

Basil I. Gooden, 

Under Secretary, Rural Development. 

[FR Doc. 2024–21920 Filed 9–27–24; 8:45 am] 

BILLING CODE 3410–15–P 


ddrumheller on DSK120RN23PROD with RULES2