[Federal Register Volume 67, Number 203 (Monday, October 21, 2002)]
[Rules and Regulations]
[Pages 64517-64519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26403]



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  Federal Register / Vol. 67, No. 203 / Monday, October 21, 2002 / 
Rules and Regulations  

[[Page 64517]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 123

RIN 3245-AE97


Disaster Loan Program--Disaster Mitigation Act of 2000

AGENCY: Small Business Administration (SBA).

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: Under the Disaster Mitigation Act of 2000, enacted on October 
30, 2000, (``Act'') the Individual and Family Grant Assistance Program 
is replaced by the Assistance to Individuals and Household Program 
(``IHP''). Under this interim final rule, SBA will implement its 
disaster loan program when the President declares a major disaster, or 
declares an emergency, and activates the IHP in an emergency disaster 
declaration. Under the Act, if the President declares a major disaster 
that includes, or is limited to, public assistance, a private nonprofit 
facility which provides non-critical services must first apply for 
disaster loan assistance from SBA before it could seek grant assistance 
for permanent repairs and/or replacements from the Federal Emergency 
Management Agency (``FEMA''). SBA is also implementing this legislative 
change, and is making certain technical changes.

DATES: Effective Date: This rule is effective on October 15, 2002.
    Applicability Date: This rule is applicable for major disasters 
declared on or after October 15, 2002.
    Comment Date: Comments must be received on or before December 20, 
2002.

ADDRESSES: Address all comments concerning the interim rule to Herbert 
L. Mitchell, Associate Administrator, Office of Disaster Assistance, 
U.S. Small Business Administration, 409 3rd Street, SW., Washington, DC 
20416

FOR FURTHER INFORMATION CONTACT: Becky Brantley, Loan Specialist, 
Office of Disaster Assistance, 202-205-6734.

SUPPLEMENTARY INFORMATION: Section 206 of the Disaster Mitigation Act 
of 2000 (Public Law 106-390) (``Act'') replaces the Individual and 
Family Grant Assistance Program (``IFG'') with the Assistance to 
Individuals and Household Program (``IHP''). Under this interim final 
rule, SBA will implement its disaster loan program when the President 
declares a major disaster, or declares an emergency, and activates the 
IHP. SBA is revising Sec.  123.3(a)(1) of its regulations to reflect 
the statutory changes.
    Section 205 of the Act amends section 5172 of Title 42, United 
States Code. Under the Act, if the President declares a major disaster 
that includes, or is limited to public assistance, a private nonprofit 
facility (``PNP'') which provides non-critical services (of a 
governmental nature) must first apply to SBA for a disaster loan for 
permanent repairs and/or replacement work, before it can seek grant 
assistance from the Federal Emergency Management Agency (``FEMA'') with 
respect to such non-critical services. If SBA determines that the PNP 
non-critical facility is ineligible for a disaster loan or the PNP has 
obtained the maximum amount for which the SBA determines the facility 
is eligible, the PNP may then apply to FEMA for grant assistance for 
permanent repairs for its unmet disaster-related needs. Such PNPs may 
apply directly to FEMA for emergency repairs.
    Owners of facilities that provide critical services (of a 
governmental nature) may apply directly to FEMA for grant assistance 
for both emergency and permanent repairs. Section 205 of the Act 
defines ``critical services'' to include power, water, sewer, 
wastewater treatment, communications, and emergency medical care. It is 
the responsibility of FEMA to provide guidelines with respect to these 
services.
    PNPs which operate both critical and non-critical facilities (that 
provide essential services of a governmental nature) will have to make 
separate applications to FEMA and SBA. Currently, SBA rules allow only 
for the activation of its disaster loan program in the event of a major 
disaster declaration by the President that includes individual 
assistance (the Individuals and Family Grant Program). In such case, 
all PNP facilities are eligible to apply for SBA disaster loan 
assistance.
    Under this interim final rule, SBA is amending Sec.  123.3 of its 
regulations to provide that SBA would activate its disaster loan 
program for PNPs that provide essential services of a governmental 
nature when the President declares a major disaster that does not 
include individual assistance but is limited to, or includes, public 
assistance. SBA would use FEMA's guidelines to ascertain if a PNP was 
seeking assistance for its delivery of such services.
    In this interim final rule, SBA is amending Sec.  123.4 of its 
regulations to preclude businesses in contiguous counties from being 
eligible for SBA economic injury disaster loans in circumstances 
described above. Thus, if the President makes a major disaster 
declaration that does not include individual assistance but includes, 
or is limited to, public assistance, and PNPs are eligible for disaster 
loan assistance from SBA, the interim final rule would not allow small 
businesses in counties contiguous to the declared disaster area to be 
eligible for SBA economic injury loans. This is because the authorized 
public assistance is limited to the counties identified in the 
declaration.
    SBA is amending Sec.  123.101(c) of its regulations by inserting 
the new ``Individuals and Household Program'' in lieu of the old 
``Individual and Family Grant Program.''
    SBA is making technical corrections in Sec.  123.501 of its 
regulations, relating to the eligibility of a business for a military 
reservist economic injury disaster loan (EIDL). The purpose of the 
regulatory change is to clarify that the business must be small at the 
time the essential employee is called to active duty. A business that 
was not small at that time would fall outside the parameters of SBA 
regulations, and this regulatory change would make that clear. SBA is 
adding the same criteria to military reservist EIDL as now applies to 
regular EIDL: the business, its affiliates and 20% or more owners have 
used all reasonably available funds and that it is unable to obtain 
credit elsewhere. These are the same requirements prescribed in Sec.  
123.300(b) with respect to regular EIDL assistance.

[[Page 64518]]

Justification for Publication as an Interim Final Rule

    In general, SBA publishes a rule for public comment before issuing 
a final rule, in accordance with the Administrative Procedure Act (APA) 
and SBA regulations, 5 U.S.C. 553 and 13 CFR 101.108. The APA provides 
for an exception to this standard rule-making process, however, where 
an Agency finds good cause to adopt a rule without prior public 
participation. 5 U.S.C. 555(b)(3)(B). The good cause requirement is 
satisfied when prior public participation is impractical, 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 might arise 
where an Agency must issue a rule without written public participation. 
On January 23, 2002, FEMA published proposed rules to implement the Act 
for Federal disaster assistance to individuals and households (67 FR 
3411). FEMA anticipates issuing an interim final rule about the same 
time that SBA publishes its interim final rule. Under FEMA's 
regulation, three important changes will occur:
    (1) The ``Individual and Family Grant Program'' (``IFG'') will not 
be in existence for disasters declared on or after October 15, 2002.
    (2) FEMA has renamed their program as ``Assistance to Individuals 
and Households Program'' (``IHP'').
    (3) FEMA's rule would include the flexibility for the President to 
activate IHP when the President issues an emergency declaration.
    These changes have a direct effect on SBA since Sec.  123.3(a)(1) 
of SBA's regulations presently states that SBA disaster operations are 
activated when ``the President declares a Major Disaster and authorizes 
Federal assistance, including individual assistance (temporary housing 
and Individual and Family Grant Assistance).'' Therefore, under current 
rules, SBA's disaster assistance can only be activated when IFG is 
being offered. Since, under FEMA's rule, IFG will no longer exist, 
SBA's IFG reference is no longer applicable.
    If a Presidential major disaster declaration activates FEMA's IHP, 
SBA's programs must be amended to reflect the existence of IHP in its 
regulations. SBA's concern is that disasters can be declared at any 
time, and its regulations must be amended to incorporate the Act's 
changes so that SBA's disaster programs can be appropriately activated 
when a major disaster occurs. Any delay in the adoption of these 
changes to SBA's regulations could cause serious harm to victims of 
disasters declared by the President since IFG assistance no longer 
exists.
    Accordingly, SBA finds that good cause exists to publish this rule 
as an interim final rule in light of the urgent need to make disaster 
loans available to individuals and homeowners when the President 
declares a major, or emergency, disaster declaration that authorizes 
Federal assistance to Individuals and Households. SBA needs to 
coordinate its disaster rules with the revised FEMA program which 
should be effective at the same time that this rule is effective.

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 interim final rule effective for major 
disasters declared on or after October 15, 2002.
    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 
Justification for Publication as an Interim Final 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 has an obligation, under section 4(d) of the Small Business 
Act, to act in the public interest in offering disaster loan assistance 
to victims of declared disasters. Pursuant to that statutory authority, 
SBA has determined that it is in the public interest to give immediate 
effect to the changes in the activation of SBA's disaster loan program 
and that it would be impractical to delay such implementation. SBA also 
notes that the failure to adopt this rule immediately would work to the 
detriment of many disaster victims.
    Although this rule is being published as an interim final rule, 
comments are hereby solicited from the public. These comments must be 
received by December 20, 2002. SBA will consider these comments in 
making any necessary revisions to these regulations.

Compliance With Executive Orders 12866, 12988, 13132, the Regulatory 
Flexibility Act (15 U.S.C. 601-612), and the Paperwork Reduction Act 
(44 U.S.C. Ch. 35)

    OMB has determined that this rule does not constitute a significant 
rule within the meaning of Executive Order 12866. The rule conforms SBA 
rules to the requirements of the Act and FEMA's implementing 
regulations. The rule is not likely to have an annual effect on the 
economy of $100 million or more, result in a major increase in costs or 
prices, or have a significant adverse effect on competition or the U.S. 
economy.
    SBA has determined that this rule does not impose any additional 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act, 44 U.S.C., Chapter 35.
    For the purposes of Executive Order 13132, SBA has determined that 
this rule has no federalism implications warranting preparation of a 
federalism assessment.
    SBA has determined 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. 601-612.
    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 paragraph 3 of that Order.

List of Subjects in 13 CFR Part 123

    Disaster assistance, Loan programs--business, 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); Pub. L. 102-395, 
106 Stat. 1828, 1864; Pub. L. 103-75, 107 Stat. 739; Pub. L. 106-50, 
113 Stat. 245.

    2. Amend Sec.  123.3 by revising paragraph (a)(1), redesignating 
paragraphs (a)(2), (a)(3), and (a)(4) as paragraphs (a)(3), (a)(4), and 
(a)(5), respectively, and adding a new paragraph (a)(2) to read as 
follows:


Sec.  123.3  How are disaster declarations made?

    (a) * * *
    (1) The President declares a Major Disaster, or declares an 
emergency, and authorizes Federal Assistance, including

[[Page 64519]]

individual assistance (Assistance to Individuals and Households 
Program).
    (2) If the President declares a Major Disaster limited to public 
assistance only, a private nonprofit facility which provides non-
critical services under guidelines of the Federal Emergency Management 
Agency (FEMA) must first apply to SBA for disaster loan assistance for 
such non-critical services before it could seek grant assistance from 
FEMA.
* * * * *

    3. Amend Sec.  123.4 by revising the fourth sentence to read as 
follows:


Sec.  123.4  What is a disaster area and why is it important?

    * * * In major disasters, economic injury disaster loans may be 
made for victims in contiguous counties or other political 
subdivisions, provided, however, that with respect to major disasters 
which authorize public assistance only, SBA shall not make economic 
injury disaster loans in counties contiguous to the disaster area. * * 
*

    4. Amend Sec.  123.101 by revising paragraph (c) to read as 
follows:


Sec.  123.101  When am I not eligible for a home disaster loan?

* * * * *
    (c) Your damaged property can be repaired or replaced with the 
proceeds of insurance, gifts or other compensation, including 
condemnation awards (with one exception), these amounts must either be 
deducted from the amount of the claimed losses or, if received after 
SBA has approved and disbursed a loan, must be paid to SBA as principal 
payments on your loan. You must notify SBA of any such recoveries 
collected after receiving an SBA disaster loan. The one exception 
applies to amounts received under the Individuals and Household Program 
of the Federal Emergency Management Agency solely to meet an emergency 
need pending processing of an SBA loan. In such an event, you must 
repay the financial assistance with SBA loan proceeds if it was used 
for purposes also eligible for an SBA loan;
* * * * *

    5. Amend Sec.  123.501 by revising paragraph (a), removing ``and'' 
at the end of paragraph (c), removing the period at the end of 
paragraph (d) and adding ``, and'' in its place, and adding a new 
paragraph (e) to read as follows:


Sec.  123.501  When is your business eligible to apply for a Military 
Reservist Economic Injury Disaster Loan?

* * * * *
    (a) It is a small business as defined in 13 CFR part 121 when the 
essential employee was called to active duty,
* * * * *
    (e) 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).

Hector V. Barreto,
Administrator.
[FR Doc. 02-26403 Filed 10-18-02; 8:45 am]
BILLING CODE 8025-01-P