[Federal Register Volume 63, Number 170 (Wednesday, September 2, 1998)]
[Rules and Regulations]
[Pages 46643-46644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23657]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 123


Disaster Loan Program

AGENCY: Small Business Administration.

ACTION: Final rule.

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SUMMARY: Under this final rule SBA amends its regulations to conform 
the eligibility criteria for disaster loans to those applicable in 
SBA's business loan program. Under the final rule, a business can not 
obtain a physical disaster loan if it is engaged in any illegal 
activity; if it is a government owned entity (other than one owned or 
controlled by a Native American tribe); or if it engages in products or 
services of a prurient sexual nature. Under the final rule, a business 
is not eligible for an economic injury disaster loan if more than one-
third of its revenues are from legal gambling operations or from 
packaging SBA loans; if it is principally engaged in teaching or 
indoctrinating religion; or is primarily engaged in political or 
lobbying activities.

DATES: This rule is effective September 2, 1998.

FOR FURTHER INFORMATION CONTACT: Bernard Kulik, 202-205-6734.

SUPPLEMENTARY INFORMATION: On April 23, 1998, SBA published a notice of 
proposed rulemaking (63 FR 20140) to amend section 123.201 of its 
regulations so that an applicant would not be eligible for a physical 
disaster business loan if it is engaged in any illegal activity; if it 
is a government owned entity (other than a business owned or controlled 
by a Native American tribe); or if the business (1) presents live 
performances of a prurient sexual nature, or (2) derives directly or 
indirectly more than de minimis gross revenue from activities of a 
prurient sexual nature. The proposed rule was intended to codify SBA's 
existing policy of using the same ineligibility criteria for SBA's 
disaster and business loan programs. Thus, a business that would not be 
eligible to receive an SBA guaranteed business loan because it met 
these criteria, would also not be eligible to obtain a physical 
disaster loan.
    SBA also proposed to amend section 123.301 of its regulations so 
that a business would not be eligible for an economic injury disaster 
loan if it: (1) derived more than one-third of its gross annual revenue 
from legal gambling activities; (2) earned more than one-third of its 
gross annual revenue from packaging SBA loans; (3) was principally 
engaged in teaching, instructing, counseling, or indoctrinating 
religion or religious beliefs, whether in a religious or secular 
setting; or (4) primarily engaged in political or lobbying activities. 
These proposed changes were intended to codify SBA's existing policy of 
using the same ineligibility criteria for its economic injury disaster 
and business loan program. Thus, if a business is not eligible, because 
of these criteria, for an SBA guaranteed loan under the business loan 
program, it would not be eligible for an economic injury disaster loan.
    SBA received one comment. The commenter was concerned that if the 
proposed economic injury amendments were finalized, SBA would not be 
able to assist non-profit entities which provide community services and 
derive more than one third of their revenue from legal gambling 
activities. Under SBA's rules, non-profit entities presently do not 
qualify for economic

[[Page 46644]]

injury loans, so the proposed amendment would not change their 
eligibility. Accordingly, the final rule is identical to the proposed 
rule.
    In this final rule, SBA also corrects a typographical error in 
section 123.202(a) by substituting ``lesser'' for ``greater'' in the 
first sentence which now reads: ``Disaster business loans, including 
both physical disaster and economic injury loans to the same borrower, 
together with its affiliates, cannot exceed the lesser of the 
uncompensated physical loss and economic injury or $1.5 million.'' This 
ensures that an applicant receives disaster assistance for an 
uncompensated loss or injury without obtaining excessive SBA assistance 
at lower than market rates.

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)

    SBA certifies that this final rule does not constitute a 
significant rule within the meaning of Executive Order 12866 and does 
not have significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 
et seq. It is not likely to have an 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. This final rule codifies current SBA practices and will not 
affect additional businesses or impose any costs.
    For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch 35, SBA 
certifies that this final rule contains no new reporting or record 
keeping requirements.
    For purposes of Executive Order 12612, SBA certifies that this 
final 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.

(Catalog of Federal Domestic Assistance Programs, No. 59.012 and 
59.008)

List of Subjects in 13 CFR Part 123

    Disaster assistance, Loan programs-business, 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 123, 
chapter I, title 13, Code of Federal Regulations, as follows:

PART 123--DISASTER LOAN ASSISTANCE

    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. Add new paragraphs (d), (e), and (f) to Sec. 123.201 to read as 
follows:


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

* * * * *
    (d) You are not eligible if your business is engaged in any illegal 
activity.
    (e) You are not eligible if you are a government owned entity 
(except for a business owned or controlled by a Native American tribe).
    (f) You are not eligible if your business presents live 
performances of a prurient sexual nature or derives directly or 
indirectly more than de minimis gross revenue through the sale of 
products or services, or the presentation of any depictions or 
displays, of a prurient sexual nature.


Sec. 123.202  [Amended]

    3. Amend Sec. 123.202(a) by removing the word ``greater'' and 
adding, in its place, the word ``lesser'' in the first sentence.
    4. Amend Sec. 123.301 as follows:
    a. Remove ``gambling'' and ``loan packaging'' in paragraph (a);
    b. Remove ``or'' at the end of paragraph (c);
    (c) Remove the period and insert ``; or'' at the end of paragraph 
(d); and
    (d) Add new paragraphs (e), (f), (g), and (h) to read as follows:


Sec. 123.301  When would my business not be eligible to apply for an 
economic injury disaster loan?

* * * * *
    (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.

    Dated: July 20, 1998.
Aida Alvarez,
Administrator.
[FR Doc. 98-23657 Filed 9-1-98; 8:45 am]
BILLING CODE 8025-01-P