[Federal Register Volume 60, Number 102 (Friday, May 26, 1995)]
[Rules and Regulations]
[Pages 27870-27871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12647]



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SMALL BUSINESS ADMINISTRATION

13 CFR Part 116


Policies of General Application

AGENCY: Small Business Administration (SBA).

ACTION: Interim final rule with request for comments.

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SUMMARY: On October 22, 1994, the President signed Public Law 103-403, 
The Small Business Administration Reauthorization and Amendments Act of 
1994. Section 612 of that Act requires SBA to promulgate regulations by 
April 22, 1995 which require certification by any recipient of 
financial assistance under the Small Business Act that such recipient 
is not delinquent on a court order or other formal agreement requiring 
payment of child support. This interim final rule, published in 
accordance with Public Law 103-403, implements this requirement.

DATES: This rule becomes effective May 26, 1995. Comments by June 26, 
1995.

ADDRESSES: Comments should be sent to John R. Cox, Associate 
Administrator for Financial Assistance, Small Business Administration, 
409 Third Street, SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT:
John R. Cox, (202) 205-6490.

SUPPLEMENTARY INFORMATION: Public Law 103-403 required SBA, among other 
things, to promulgate regulations which require certification by any 
recipient of Agency financial assistance under the Small Business Act 
that the recipient is not delinquent on a court order or other formal 
agreement requiring payment of child support. In that regard, Section 
612 of Pub. L. 103-403, October 22, 1994, states:

    (f) Certification of Compliance with Child Support 
Obligations.--
    (1) In General. For financial assistance approved after the 
promulgation of final regulations to implement this section, each 
recipient of financial assistance under this Act, including a 
recipient of a direct loan or a loan guarantee, shall certify that 
the recipient is not more than 60 days delinquent under the terms of 
any--
    (A) administrative order;
    (B) court order; or
    (C) repayment agreement entered into between the recipient and 
the custodial parent or State agency providing child support 
enforcement services, that requires the recipient to pay child 
support, as such is defined in section 462(b) of the Social Security 
Act.
    (2) Enforcement. Not later than 6 months after the date of 
enactment of this subsection, the Administration shall promulgate 
such regulations as may be necessary to enforce compliance with the 
requirements of this subsection.

[Emphasis added.]

    The Conference Report language on this section is useful in 
providing guidance for implementing this requirement. (See Report 103-
824 to accompany S. 2060.) It provides:

    Sec. 612. Certification of compliance with child support 
obligations.
    Both bills contained provisions requiring SBA borrowers to 
certify that they are not in violation of any court order or 
agreement requiring the payment of child support. The conference 
report contains the same provision with a clarification with court 
orders, administrative orders, or agreements, specifically 60 days 
or more in arrears.
    While intending to strengthen federal policy in support of 
family support obligations, the conferees recognize that economic 
circumstances may from time to time cause a parent to be late in 
such payments. It is not the intent of the conferees to subject 
minor lapses to the criminal and civil penalties contained in both 
the Small Business Act and the False Statements Act for false 
representations made to the agency in the course of a loan 
application or other application for assistance. Hence, the 
conference agreement provides for a certification that the applicant 
is not more than 60 days late in making any child support payment 
required by court order or agreement. Loan applicants should be 
advised of this provision at the outset of the 
[[Page 27871]] application process, but certification pursuant to 
this section may be made as part of the loan closing.

    Thus, certification at the time of application does not appear to 
be required, although it may be used as a means for ``weeding out'' 
delinquents. In the alternative, certification at the time of closing 
is consistent with the intent of Congress, and these regulations 
require such certification.
    SBA has also determined that the intent of the legislation is to 
require individuals who are subject to agreements requiring the payment 
of child support to make the required certifications. Many of the 
applicants for SBA financial assistance are corporations, partnerships 
and sole proprietorships. For purposes of these regulations, SBA will 
require any owner or partner holding 50% or more of the voting 
interests of an applicant (a principal) to certify.
    Finally, SBA takes the position that the statute intends coverage 
only for its business loan and disaster loan program; i.e. financial 
assistance made available under the Small Business Act. Therefore, only 
applicants for assistance under those programs will be required to make 
the required certifications.
    In practice, after the effective date of these regulations, SBA or 
its participating lender will notify the principals of all applicants 
for assistance under the business and disaster loan programs at the 
time of application that they must certify to compliance with 
outstanding court orders or agreements requiring the payment of child 
support. The required certification will be made a condition of the 
loan authorization which if not satisfied will be a ground for not 
closing the loan.
Compliance With Executive Orders 12612, 12778, and 12866, the 
Regulatory Flexibility Act, 5 U.S.C. 601 et seq., and the Paperwork 
Reduction Act, 44 U.S.C. Ch. 35

    For purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., SBA certifies that this final rule does not have a significant 
economic impact on a substantial number of small entities.
    BAS certifies that this final rule does not constitute a 
significant regulatory action for the purposes of Executive Order 
12866, since the change is not likely to result in an annual effect on 
the economy of $100 million or more.
    SBA certifies that this final rule does not impose additional 
reporting or recordkeeping requirements which would be subject to the 
Paperwork Reduction Act, 44 U.S.C. Chapter 35.
    This final rule does not have federalism implications warranting 
the preparation of a Federalism Assessment in accordance with Executive 
Order 12612.
    For purposes of Executive Order 12778, SBA certifies that this 
final rule is drafted, to the extent practicable, in accordance with 
the standards set forth in section 2 of that Order.
    Because this final rule reflects a reporting requirement imposed by 
Pub. L. 103-403, and is required to be effective by April 22, 1995, SBA 
is publishing this final rule without opportunity for prior public 
comment pursuant to 5 U.S.C. 553(b)(A). However, SBA solicits and will 
consider any comments it receives with respect to this final rule in 
making future adjustments.

(Catalog of Federal Domestic Assistance Program Nos. 59.001, 59.002, 
59.008, 59.012, 59.021)

List of Subjects in 13 CFR Part 116

    Small businesses.

    Accordingly, pursuant to the authority contained in section 5(b)(6) 
of the Small Business Act, 15 U.S.C. 634(b)(6), SBA amends part 116, 
chapter I, title 13, Code of Federal Regulations, as follows:
    1. Subpart F is added to read as follows:

Subpart F--Compliance With Child Support Obligations.

116.42  Policy.
116.43  Certification.
116.44  Recipient.

    Authority: Sec. 612 of Pub. L. 103-403, 108 Stat. 4175.

Subpart F--Compliance With Child Support Obligations


Sec. 116.42  Policy.

    It is the policy of SBA that each recipient of financial assistance 
under the Small Business Act shall certify that the recipient is not 
more than 60 days delinquent under any administrative order, court 
order, or repayment agreement between the recipient and the custodial 
parent or a State agency providing child support enforcement services 
that requires the recipient to pay child support as that term is 
defined in section 462(b) of the Social Security Act.


Sec. 116.43  Certification.

    The certification required to comply with the statement of policy 
expressed in Sec. 116.41 shall be a condition of all financial 
assistance granted under sections 7 (a) and (b) of the Small Business 
Act.


Sec. 116.44  Recipient.

    For purposes of this subpart the term recipient shall mean an owner 
of 50% or more of the ownership interest of an applicant for assistance 
under section 7 (a) or (b) of the Small Business Act.

    Dated: April 26, 1995.
Cassandra M. Pulley,
Deputy Administrator.
[FR Doc. 95-12647 Filed 5-25-95; 8:45 am]
BILLING CODE 8025-01-M