[Federal Register Volume 66, Number 204 (Monday, October 22, 2001)]
[Rules and Regulations]
[Pages 53329-53332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26565]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 66, No. 204 / Monday, October 22, 2001 /
Rules and Regulations
[[Page 53329]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 123
RIN 3245-AE82
Disaster Loan Program
AGENCY: U.S. Small Business Administration (SBA).
ACTION: Interim final rule with request for comments.
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SUMMARY: In response to the President's major disaster declarations
with respect to the World Trade Center and the Pentagon and the
attendant economic repercussions from those disasters, the SBA is
revising its disaster loan regulations. This Interim Final Rule allows
SBA to make economic injury disaster loans to eligible small business
concerns outside the declared disaster areas that suffered substantial
economic injury as a direct result of the destruction of the World
Trade Center, New York, New York, or the damage to the Pentagon on
September 11, 2001, or as a direct result of any related Federal action
taken between September 11, 2001 and October 22, 2001. Because these
affected small business concerns need economic injury disaster
assistance quickly, SBA is issuing this regulation as an interim final
rule.
DATES: Effective Date: This rule is effective on October 22, 2001.
Comment Date: Comments must be received on or before November 21,
2001.
ADDRESSES: Address all comments concerning the interim rule to Herbert
Mitchell, Associate Administrator for Disaster Assistance, U.S. Small
Business Administration, 409 Third Street, SW., Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT: James Rivera, Deputy Associate
Administrator, Office of Disaster Assistance, 202-205-6734.
SUPPLEMENTARY INFORMATION:
I. General Description of New Program
The President made major disaster declarations for the terrorist
attacks on the World Trade Center, New York, New York and the Pentagon
that took place on September 11, 2001. Notices, 66 FR 48682-48638,
Sept. 21, 2001, amended 66 FR 49674, Sept. 28, 2001, and 66 FR 51435,
Oct. 9, 2001, (NY) and 66 FR 51535, Oct. 9, 2001 (VA). Pursuant to
SBA's current regulations, SBA has issued disaster declarations which
provide economic injury disaster loans (EIDL) to eligible small
business concerns in geographic areas contiguous to the declared
disaster areas. Notices, 66 FR 48154, Sept. 18, 2001 (NY), amended 66
FR 50702-50703, Oct. 4, 2001 (NY), and 66 FR 49736, Sept. 28, 2001
(VA), corrected 66 FR 50703, Oct. 4, 2001; and Military Reservist
Economic Injury Disaster Loan (EIDL) Notices, 66 FR 50241-50242, Oct.
2, 2001.
Under section 4(d) of the Small Business Act the SBA has a
statutory obligation to act in the public interest when determining
eligibility for assistance under the Small Business Act. 15 U.S.C.
633(d). In addition, the SBA is specifically authorized to provide
economic injury disaster assistance to small businesses suffering
substantial economic injury in areas affected by disasters. 15 U.S.C.
636(b)(2). Further, there is nothing in the Small Business Act that
precludes SBA from expanding EIDL assistance to businesses located
beyond the areas contiguous to the declared disaster areas.
Accordingly, SBA is adding a new subpart G, with respect to the
terrorist attacks on September 11, 2001, to authorize it to provide
EIDL assistance to eligible small businesses located beyond such
contiguous areas.
This action is being taken in recognition of the widespread
economic dislocation caused by the terrorist attacks and the related
Federal actions taken directly thereafter. Many small business concerns
have suffered economic injury directly attributable to the terrorist
attacks on September 11, 2001 or to certain necessary Federal actions
taken in response to those attacks. These economic injuries have ranged
from interruptions of normal business activities for brief periods of
time to significant changes to normal business practices and
procedures.
Under section 123.601 of the new subpart, SBA EIDL assistance will
be available to such businesses if they can show that they suffered
substantial economic injury as a direct result of the destruction of
the World Trade Center, New York, New York, or the damage to the
Pentagon on September 11, 2001, or any related Federal action occurring
between September 11, 2001 and the date of publication of this interim
final rule such that they are unable to meet their obligations as they
mature or are unable to pay their ordinary and necessary operating
expenses. The proceeds of an EIDL loan can be used by a business for
working capital necessary to carry the business until resumption of
normal operations and for expenditures necessary to alleviate the
economic injury attributable to the terrorist attacks. EIDL assistance
is not available for economic losses attributable to an economic
downturn, and it may not exceed the amount attributable to the
September 11, 2001 attacks or the specified Federal action. A loss of
anticipated profits or a drop in sales is not considered substantial
economic injury for this purpose.
Under section 123.601 of the new subpart, in order to obtain SBA
EIDL assistance the business must show that it was a small business, as
defined in part 121 of SBA's regulations (13 CFR part 121), on
September 11, 2001. It must also demonstrate that the principal owners
of the business have used all reasonably available funds, and that the
business is unable to obtain credit elsewhere.
Under section 123.602 of the new subpart, not all small businesses
are legally eligible for EIDL assistance. For example, SBA cannot
provide EIDL assistance to a nonprofit or charitable entity or a
business that derives more than one-third of its gross annual revenue
from legal gambling activities. It is also unable to provide EIDL
assistance to a business principally engaged in teaching, instructing,
counseling, or indoctrinating religion or religious beliefs, whether in
a religious or secular setting. Further, EIDL assistance cannot be used
to refinance indebtedness that the business incurred prior to the
terrorist attacks on September 11, 2001. Nor can such assistance be
used to pay dividends or other disbursements to owners, partners,
officers or stockholders, except
[[Page 53330]]
for reasonable remuneration directly related to their performance of
services for the business.
The window to apply for assistance under this subpart will expire
ninety days from the date of publication of this rule. Therefore, all
applications must be postmarked on or before that date. The SBA may
extend this deadline in its discretion for good cause. Any request for
an increase in EIDL assistance must be made not later than one year
after the date SBA approves the initial loan request.
Eligible small business concerns may apply for assistance under
this subpart using existing SBA Forms for the existing EIDL Program.
The forms needed are SBA Form #5 ``Disaster Business Loan Application
(OMB #3245-0017), SBA Form #1368 ``Additional Filing Requirements
EIDL'' (OMB #3245-0017), SBA Form #413 ``Personal Financial Statement''
(OMB #3245-0188), and IRS Form #8821 ``Tax Information Authorization''
(OMB #1545-1165). Applications can be filed at the SBA disaster office
servicing the applicant's state. Such offices are located in Niagara
Falls, NY; Atlanta, GA; Ft. Worth, TX; and Sacramento, CA. Small
business concerns may obtain additional information by contacting the
Disaster Area Office responsible for their state: Niagara Falls
Disaster Office (Area 1), Telephone: (800) 659-2955; Facsimile: (716)
282-1472; (Connecticut, Delaware, Maryland, Maine, Massachusetts, New
Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia,
Vermont, West Virginia, District of Columbia, Commonwealth of Puerto
Rico, Virgin Islands); Atlanta Disaster Office (Area 2), Telephone:
(800) 359-2227; Facsimile: (404) 347-4183; (Alabama, Florida, Georgia,
Illinois, Indiana, Kentucky, Michigan, Minnesota, Mississippi, North
Carolina, Ohio, South Carolina, Tennessee, Wisconsin); Dallas/Ft. Worth
Disaster Office (Area 3); Telephone: (800) 366-6303; Facsimile: (817)
885-7616; (Arkansas, Colorado, Iowa, Kansas, Louisiana, Missouri,
Montana, North Dakota, Nebraska, New Mexico, South Dakota, Oklahoma,
Texas, Utah, Wyoming); or Sacramento Disaster Office (Area 4);
Telephone: (800) 488-5323; Facsimile: (916) 566-7280; (Alaska, Arizona,
California, Hawaii, Idaho, Nevada, Oregon, Washington; The Islands of
American Samoa, Marshall Islands, Micronesia, and Guam).
II. Justification for Publication as Interim Final Status Rule
In general, SBA publishes a rule for public comment before issuing
a final rule, in accordance with the Administrative Procedure Act and
SBA regulations. 5 U.S.C. 553 and 13 CFR 101.108. The Administrative
Procedure Act provides an exception to this standard rulemaking
process, however, where an agency finds good cause to adopt a rule
without prior public participation. 5 U.S.C. 553(b)(3)(B). The good
cause requirement is satisfied when prior public participation is
impracticable, unnecessary, or contrary to the public interest. Under
such circumstances, an agency may publish an interim final rule without
soliciting public comment.
In enacting the good cause exception to standard rulemaking
procedures, Congress recognized that emergency situations arise where
an agency must issue a rule without public participation. The President
declared a national emergency as a result of the events of September
11, 2001. The events of that day have affected U.S. businesses both in
the declared disaster areas and across the nation. Many of the affected
businesses would qualify for SBA and other Federal assistance but for
their location outside the contiguous counties.
Accordingly, SBA finds that good cause exists to publish this rule
as an interim final rule in light of the urgent need to make economic
injury disaster loans available to businesses that have suffered
economic injury, but that do not qualify under SBA's existing
geographic restrictions. Advance solicitation of comments for this
rulemaking would be impracticable and contrary to the public interest,
as it would delay the delivery of critical assistance to these
businesses by a minimum of three to six months. Any such delay would be
extremely prejudicial to the affected businesses. It is likely that
some would be forced to cease operations before a rule could be
promulgated under standard notice and comment rulemaking procedures.
Furthermore, SBA has a statutory obligation to act in the public
interest in determining eligibility for Federal assistance under the
Small Business Act. 15 U.S.C. 633(d). In addition, SBA also has the
specific statutory authority to provide economic injury assistance to
small businesses in areas affected by disasters. 15 U.S.C. 636(b)(2).
SBA also notes the failure to adopt this rule immediately would work to
the detriment of many small businesses.
Although this rule is being published as an interim final rule,
comments are hereby solicited from interested members of the public.
These comments must be received on or before November 21, 2001. SBA may
then consider these comments in making any necessary revisions to these
regulations.
III. Justification for Immediate Effective Date of Interim Final
Rule
The APA requires that ``publication or service of a substantive
rule shall be made not less than 30 days before its effective date,
except * * * as otherwise provided by the agency for good cause found
and published with the rule.'' 5 U.S.C. 553(d)(3). SBA finds that good
cause exists to make this final rule effective the same day it is
published in the Federal Register.
The purpose of the APA provision is to provide interested and
affected members of the public sufficient time to adjust their behavior
before the rule takes effect. For the reasons set forth above in II,
Justification of Publication of Interim Final Status Rule, SBA finds
that good cause exists for making this interim final rule effective
immediately, instead of observing the 30-day period between publication
and effective date.
SBA also believes, based on its contacts with interested members of
the public, that there is strong interest in immediate implementation
of this rule. SBA is aware of many entities that will be assisted by
the immediate adoption of this rule.
Compliance With Executive Orders 12866, 12988, and 13132, the
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
For purposes of Executive Order 12988, SBA has determined that this
rule is drafted, to the extent practicable, in accordance with the
standards set forth in section 3 of that Order.
This regulation will not have substantial direct effects on the
States, on the relationship between the national government and the
States, or on the distribution of power and responsibility among the
various levels of government. Therefore, under Executive Order 13132,
SBA determines that this rule does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment.
This rule does not impose any new information collection
requirements from SBA which require the approval of OMB under the
Paperwork Reduction Act of 1980, 44 U.S.C. 3501-3520. The new rule
increases access to SBA programs that assist small businesses, but uses
existing SBA Forms with current OMB control numbers. Eligible small
business concerns may apply for assistance under this subpart using
existing SBA Forms for the existing EIDL Program. The forms needed are
SBA Form #5 ``Disaster Business Loan
[[Page 53331]]
Application (OMB #3245-0017), SBA Form #1368 ``Additional Filing
Requirements EIDL'' (OMB #3245-0017), SBA Form #413 ``Personal
Financial Statement'(OMB #3245-0188), and IRS Form 8821 ``Tax
Information Authorization'' (OMB #1545-1165). Applications can be filed
at the SBA disaster office servicing the state where the business is
located. Such offices are located in Niagara Falls, NY; Atlanta, GA;
Ft. Worth, TX; and Sacramento, CA. Small business concerns may obtain
additional information by contacting the Disaster Area Office
responsible for their state: Niagara Falls Disaster Office (Area 1),
Telephone: (800) 659-2955; Facsimile: (716) 282-1472; Atlanta Disaster
Office (Area 2), Telephone: (800) 359-2227; Facsimile: (404) 347-4183;
Dallas/Ft. Worth Disaster Office (Area 3); Telephone: (800) 366-6303;
Facsimile: (817) 885-7616; or Sacramento Disaster Office (Area 4);
Telephone: (800) 488-5323; Facsimile: (916) 566-7280.
Due to its publication as an interim final rule, SBA has determined
that the provisions of the Regulatory Flexibility Act, 5 U.S.C. 601-
612, do not apply.
The Office of Management and Budget (OMB) reviewed this rule as a
``significant regulatory action'' under section 3(f) under Executive
Order 12866. SBA estimates that the final rule will have a significant
economic impact of more than $100 million.
Under section 4(d) of the Small Business Act, the SBA has a
statutory responsibility to act in the public interest in determining
eligibility for Federal assistance under the Small Business Act. 15
U.S.C. 633(d). In addition, the SBA is specifically authorized to
provide disaster assistance to small business concerns suffering
substantial economic injury in areas affected by disasters. 15 U.S.C.
636(b)(2). SBA believes this regulation is necessary to reduce the
adverse economic impact of the terrorist attacks and provide assistance
to small business concerns affected.
Description of Potential Benefits of the Rule
The most significant benefit to small businesses as a result of
this rule is their eligibility for economic injury disaster assistance
programs. As stated above, SBA estimates that approximately $852
million will be loaned to small businesses as a result of this change.
These small businesses will, as a result, be able to meet basic
operational costs and payroll obligations. SBA believes that, while the
subsidy cost of this lending will be approximately $250,000,000, the
economic benefit of keeping these small businesses operating will be
significant. The events of September 11, 2001 deepened the economic
slowdown the country was experiencing, and in many instances it also
raised unforeseen economic consequences for certain small businesses.
In addition, many small businesses find themselves directly affected by
certain necessary Federal regulatory action made necessary by the need
for heightened security. As such, many small businesses that would have
otherwise successfully weathered an ordinary economic downturn find
themselves faced with extraordinary situations. The survival of these
businesses presents a potential net increase to the economy.
Furthermore, it will ameliorate the negative effects of the downturn
and reduce or prevent additional costs to the government (through
increased payments in entitlement programs, and reduced revenues) and
the economy as a whole (through increased business failures and loss of
capacity).
List of Subjects in 13 CFR Part 123
Disaster assistance, Loan programs-business, Reporting and
recordkeeping requirements, Small businesses.
For the reasons stated in the preamble, SBA amends 13 CFR part 123
as follows:
PART 123--DISASTER LOAN PROGRAM
1. The authority citation for part 123 continues to read as
follows:
Authority: 15 U.S.C. 634(b)(6), 636(b), 636(c) and 636(f); Pub.
L. 102-395, 106 Stat. 1828, 1864; Pub. L. 103-75, 107 Stat. 739; and
Pub. L. 106-50, 113 Stat. 245.
2. In part 123, add new subpart G to read as follows:
Subpart G--Economic Injury Disaster Loans as a Result of the September
11, 2001 Terrorist Attacks
Sec.
123.600 Are economic injury disaster loans under this subpart
limited to the geographic areas contiguous to the declared disaster
areas?
123.601 Is my business eligible to apply for an economic injury
disaster loan under this subpart?
123.602 When would my business not be eligible to apply for an
economic injury disaster loan under this subpart?
123.603 What is the interest rate on an economic injury disaster
loan under this subpart?
123.604 How can my business spend my economic injury disaster loan
under this subpart?
123.605 How long do I have to apply for a loan under this subpart?
123.606 May I request an increase in the amount of an economic
injury disaster loan under this subpart?
Subpart G--Economic Injury Disaster Loans as a Result of the
September 11, 2001 Terrorist Attacks
Sec. 123.600 Are economic injury disaster loans under this subpart
limited to the geographic areas contiguous to the declared disaster
areas?
No. Notwithstanding Sec. 123.4, SBA may make economic injury
disaster loans outside the declared disaster areas and the contiguous
geographic areas to small business concerns that have suffered
substantial economic injury as a direct result of the destruction of
the World Trade Center or the damage to the Pentagon on September 11,
2001, or as a direct result of any related federal action taken between
September 11, 2001 and October 22, 2001.
Sec. 123.601 Is my business eligible to apply for an economic injury
disaster loan under this subpart?
(a) If your business has suffered substantial economic injury as a
direct result of the destruction of the World Trade Center or the
damage to the Pentagon on September 11, 2001, or as a direct result of
any related federal action taken between September 11, 2001 and October
22, 2001, you are eligible to apply for an economic injury disaster
loan under this subpart.
(1) Substantial economic injury is such that a business concern is
unable to meet its obligations as they mature or to pay its ordinary
and necessary operating expenses.
(2) Loss of anticipated profits or a drop in sales is not
considered substantial economic injury for this purpose.
(b) Economic injury disaster loans are available under this subpart
only if you were a small business (as defined in part 121 of this
chapter) on September 11, 2001, you and your affiliates and principal
owners (20% or more ownership interest) have used all reasonably
available funds, and you are unable to obtain credit elsewhere (see
Sec. 123.104).
(c) Eligible businesses do not include agricultural enterprises,
but do include small agricultural cooperatives and producer
cooperatives.
Sec. 123.602 When would my business not be eligible to apply for an
economic injury disaster loan under this subpart?
Your business is not eligible for an economic injury disaster loan
under this subpart if you (or any principal of the business) fit into
any of the categories in Secs. 123.101 and 123.201, or if your business
is:
[[Page 53332]]
(a) Engaged in lending, multi-level sales distribution,
speculation, or investment (except for real estate investment with
property held for rental on September 11, 2001);
(b) A non-profit or charitable concern;
(c) A consumer or marketing cooperative;
(d) Not a small business concern; or
(e) Deriving more than one-third of gross annual revenue from legal
gambling activities;
(f) A loan packager which earns more than one-third of its gross
annual revenue from packaging SBA loans;
(g) Principally engaged in teaching, instructing, counseling, or
indoctrinating religion or religious beliefs, whether in a religious or
secular setting; or
(h) Primarily engaged in political or lobbying activities.
Sec. 123.603 What is the interest rate on an economic injury disaster
loan under this subpart?
Your economic injury disaster loan under this subpart will have an
interest rate of 4 percent per annum or less.
Sec. 123.604 How can my business spend my economic injury disaster
loan under this subpart?
(a) You can only use the loan proceeds for working capital
necessary to carry your concern until resumption of normal operations
and for expenditures necessary to alleviate the specific economic
injury, but not to exceed that which the business could have provided
had the injury not occurred.
(b) Loan proceeds may not be used to:
(1) Refinance indebtedness which you incurred prior to September
11, 2001;
(2) Make payments on loans owned by another federal agency
(including SBA) or a Small Business Investment Company licensed under
the Small Business Investment Act;
(3) Pay, directly or indirectly, any obligations resulting from a
federal, state or local tax penalty as a result of negligence or fraud,
or any non-tax criminal fine, civil fine, or penalty for non-compliance
with a law, regulation, or order of a federal, state, regional, or
local agency or similar matter;
(4) Repair physical damage; or
(5) Pay dividends or other disbursements to owners, partners,
officers, or stockholders, except for reasonable remuneration directly
related to their performance of services for the business.
Sec. 123.605 How long do I have to apply for a loan under this
subpart?
You have until January 22, 2002 to apply for a loan under this
subpart. Your application must be postmarked no later than this date.
SBA has the discretion, for good cause, to extend the application
deadline by publication of a notice in the Federal Register.
Sec. 123.606 May I request an increase in the amount of an economic
injury disaster loan under this subpart?
Yes. Notwithstanding Sec. 123.20, you may request an increase in
the amount of an economic injury disaster loan under this subpart not
later than one year after the date SBA approves your initial request.
Dated: October 16, 2001.
Hector V. Barreto,
Administrator.
[FR Doc. 01-26565 Filed 10-19-01; 8:45 am]
BILLING CODE 8025-01-P