[Federal Register Volume 62, Number 126 (Tuesday, July 1, 1997)]
[Rules and Regulations]
[Pages 35337-35338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17204]



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 Rules and Regulations
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  Federal Register / Vol. 62, No. 126 / Tuesday, July 1, 1997 / Rules 
and Regulations  

[[Page 35337]]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 123


Disaster Loan Program

AGENCY: Small Business Administration.

ACTION: Interim final rule.

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SUMMARY: The Small Business Administration (SBA) is amending its 
disaster loan rules to ensure that when a legal business entity is 
engaged in both agricultural enterprises and non-agricultural business 
ventures, SBA can provide physical disaster business loans to the non-
agricultural portion which has been damaged by floods and other 
catastrophes. SBA is making these changes effective immediately in 
order to make such assistance available to businesses which have been 
adversely affected by recent major floods.

DATES: This rule is effective July 1, 1997. Comments must be submitted 
on or before July 31, 1997.

ADDRESSES: Please mail comments to Bernard Kulik, Associate 
Administrator for Disaster Assistance, 409 3rd Street, SW, Washington, 
DC 20416.

FOR FURTHER INFORMATION CONTACT: Bernard Kulik, Associate Administrator 
for Disaster Assistance, (202) 205-6734.

SUPPLEMENTARY INFORMATION: Section 2(e) of the Small Business Act (15 
USC Sec. 631(e)) (``Act'') states that the policy of the Congress is 
that the Government aid and assist ``victims'' of floods and other 
catastrophes. Section 2(g) of the Act provides that in its 
administration of the disaster loan program pursuant to section 7(b) of 
the Act, SBA shall provide, ``to the maximum extent possible'', 
assistance and counseling to disaster ``victims''. In administering the 
disaster loan program, SBA is precluded, by section 7(b) of the Act, 
from assisting agricultural enterprises. As defined in section 18(b)(1) 
of the Act, an ``agricultural enterprise'' is a business engaged in the 
production of food and fiber, ranching, and raising of livestock, 
aquaculture, and all other farming and agricultural related industries.
    SBA previously provided physical disaster business loan assistance 
only to business entities which were adversely affected by floods and 
other catastrophes when the primary activity of the business entity was 
non-agricultural. Thus if a person or a single business entity operated 
both agricultural and non-agricultural enterprises, SBA would not 
assist any part of the business entity that suffered damage if the 
primary activity of the total entity was agricultural.
    SBA has reconsidered the statutory language above and has re-
evaluated its position with respect to the ``primary activity rule'' 
which it administratively applied. The Act requires SBA to assist 
``victims'' of floods and other catastrophes, without regard to the 
primary activity of a total business entity. If the victim of a flood 
or other catastrophe is a non-agricultural business venture, SBA should 
assist that victim regardless of whether such business is a part of a 
larger business entity whose primary activity is agricultural. Thus, if 
the total business operation is comprised of a retail store and a 
ranch, and the retail store is destroyed by a flood, SBA should offer 
physical disaster assistance to the retail store even if the ranching 
operation generated more revenue.
    Accordingly, SBA is promulgating this interim final rule to permit 
SBA to provide physical disaster business loan assistance to a non-
agricultural business venture within the total business entity if the 
non-agricultural business has been damaged by a flood or other 
catastrophe, regardless of the primary activity of the total business 
entity. The rule also makes clear that the business entity can be a 
sole proprietorship, corporation, limited liability company, or 
partnership.

Compliance With Executive Orders 12612, 12778, and 12866, the 
Regulatory Flexibility Act (15 U.S.C. Sec. 601, et seq.), and the 
Paperwork Reduction Act (44 U.S.C. Ch. 35)

    SBA certifies that this final rule is not a significant rule within 
the meaning of Executive Order 12866; it is not likely to have annual 
economic effect of $100 million or more, result in a major increase in 
costs or prices, or have a significant adverse effect on competition or 
the United States economy. SBA also certifies that this rule will not 
have a significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 
Sec. 601 et seq. This rule makes eligible for physical disaster loans 
only those nonagricultural businesses that are part of a business 
entity that is primarily agricultural and, therefore, does not meet the 
substantial number of small businesses criterion anticipated by the 
Regulatory Flexibility Act.
    For purposes of the Paperwork Reduction Act. 44 U.S.C. Ch 35, SBA 
certifies that this final rule contains no new reporting or 
recordkeeping requirements.
    For purposes of Executive Order 12612, SBA certifies that this rule 
has no federalism implications warranting the preparation of a 
Federalism Assessment.
    For purposes of Executive Order 12778, SBA certifies that this rule 
is drafted, to the extent practicable, in accordance with the standards 
set forth in Section 2 of that Order.
    SBA is issuing this as an interim final rule and not as a proposed 
rule, because the businesses covered by this rule need physical 
disaster loans immediately and notice and public comment procedures are 
impracticable and contrary to the public interest.

List of Subjects in 13 CFR Part 123

    Disaster assistance, loan programs-business, small businesses.

    For the reasons set forth above, SBA amends part 123 of title 13, 
Code of Federal Regulations, 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; and Pub. L. 103-75, 107 Stat. 739.

    2. Section 123.201 is amended by revising paragraph (b) to read as 
follows:


Sec. 123.201  When am I not eligible to apply for a physical disaster 
business loan?

    (a) * * *
    (b) Sometimes a damaged business entity (whether in the form of a 
corporation, limited liability company,

[[Page 35338]]

partnership, or sole proprietorship) is engaged in both agricultural 
enterprise and a non-agricultural business venture. If the agricultural 
enterprise part of your business entity has suffered a physical 
disaster, that enterprise is not eligible for SBA physical disaster 
assistance. If the non-agricultural business venture of your entity has 
suffered physical disaster damage, that part of your business operation 
would be eligible for SBA physical disaster assistance. If both the 
agricultural enterprise part and the non-agricultural business venture 
have incurred physical disaster damage, only the non-agricultural 
business venture of your business entity would be eligible for SBA 
physical disaster assistance.
* * * * *
    Dated: June 25, 1997.
Aida Alvarez,
Administrator.
[FR Doc. 97-17204 Filed 6-30-97; 8:45 am]
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