[Federal Register Volume 81, Number 97 (Thursday, May 19, 2016)]
[Rules and Regulations]
[Pages 31489-31492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-11868]



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  Federal Register / Vol. 81, No. 97 / Thursday, May 19, 2016 / Rules 
and Regulations  

[[Page 31489]]



SMALL BUSINESS ADMINISTRATION

13 CFR Parts 107, 120, 121, 124, 125, 126, 127, 142, and 146

RIN 3245-AG80


Civil Penalties Inflation Adjustments

AGENCY: Small Business Administration.

ACTION: Interim final rule with request for comments.

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

SUMMARY: The Small Business Administration (SBA) is amending its 
regulations to adjust for inflation the amount of certain civil 
monetary penalty that is within the jurisdiction of the agency. This 
adjustment is required by the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended by the Federal Civil Penalties 
Inflation Adjustment Act Improvements Act of 2015. This rule also makes 
technical amendments to the regulations governing misrepresentations in 
SBA contracting programs to add a cross reference to the regulation 
that contains the applicable penalty amounts for misrepresentations and 
to correct a citation in the same regulations. Finally, the rule makes 
a technical amendment to an existing regulation governing small 
business investment companies to add a cross reference to a new civil 
penalty provision.

DATES: Effective Date: This rule is effective on August 1, 2016.
    Comment Date: Comments must be received on or before July 18, 2016.

ADDRESSES: You may submit comments, identified by RIN 3245-AG80 by any 
of the following methods:
     Federal Rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail or Hand Delivery/Courier: Arlene Embrey, 409 Third 
Street SW., Washington, DC 20416.
    SBA will post all comments on http://www.Regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at http://www.Regulations.gov, please submit the 
information to Arlene Embrey, Trial Attorney, 409 Third Street SW., 
Washington, DC 20416 and highlight the information that you consider to 
be CBI and explain why you believe this information should be held 
confidential. SBA will review the information and make a final 
determination of whether the information will be published or not.

FOR FURTHER INFORMATION CONTACT: Arlene Embrey, 202-205-6976, or at 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    On November 2, 2015, the President signed into law the Federal 
Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 
2015 Inflation Adjustment Improvements Act), Public Law 114-74, 129 
Stat. 584. This act amended the Federal Civil Penalties Inflation 
Adjustment Act of 1990, Public Law 101-410, 104 Stat 890 (the 1990 
Inflation Adjustment Act), to improve the effectiveness of civil 
monetary penalties and to maintain their deterrent effect. The 2015 
Inflation Adjustment Improvements Act requires agencies to issue an 
interim final rule (IFR) to: (1) Adjust the level of civil monetary 
penalties with an initial ``catch-up'' adjustment; and (2) make 
subsequent annual adjustments for inflation beginning January 2017.
    Based on the definition of a ``civil monetary penalty'' in the 1990 
Inflation Adjustment Act, agencies are to make adjustments to the civil 
penalties that (i) are for a specific monetary amount as provided by 
federal law or have a maximum amount provided for by Federal law; (ii) 
are assessed or enforced by an agency; and (iii) are enforced or 
assessed in an administrative proceeding or a civil action in the 
Federal courts. SBA has identified the civil penalties SBA is 
responsible for assessing or enforcing and in this IFR sets forth the 
initial adjustments to those penalties that fall within the definition 
of civil monetary penalties. Penalties that are stated as a percentage 
of an indeterminate amount or as a function of a violation (penalties 
that encompass actual damages incurred) are not adjusted by this rule.
    The formula for making this initial adjustment under the 2015 
Inflation Adjustment Improvement Act requires agencies to use as a 
base, the Consumer Price Index for the month of October preceding the 
adjustment, which in this instance is October 2015. SBA has not 
previously adjusted any of the penalties discussed in this rule. 
Therefore, based on this formula and the OMB guidance implementing the 
inflation adjustment requirements, for each penalty being adjusted in 
this rule, SBA identified the year and corresponding amounts for which 
the maximum penalty level or range was last established or adjusted. 
SBA then modified the applicable penalty or penalty ranges by (1) 
identifying the last date a penalty or penalty range was modified; (2) 
multiplying the current penalty or penalty range by a multiplier 
identified for the applicable year in which the penalty or penalty 
range was last established or modified based on the Consumer Price 
Index for October 2015; and (3) ensuring that the product of (1) and 
(2) did not exceed 150% of the penalty or penalty range that was in 
effect on November 2, 2015.

II. Civil Money Penalties Adjusted by This Rule

    This rule makes adjustments to civil monetary penalties authorized 
by the Small Business Act, the Small Business Investment Act of 1958 
(SBIAct), the Program Fraud Civil Remedies Act and the Byrd Amendment 
to the Federal Regulation of Lobbying Act. These penalties and the 
implementing regulations are discussed below.

1. 13 CFR 107.665

    SBA licenses, regulates and provides financial assistance to 
financial entities called small business investment companies (SBICs). 
Pursuant to section 315 of the Small Business Investment Act of 1958, 
15 U.S.C. 687g, SBA may impose a penalty on any SBIC that fails to 
comply with SBA's regulations or directives governing the filing of 
regular or special reports. That civil penalty is not more than $100 
for each and every day of the continuance of the SBIC's failure to file 
such report, unless the SBIC can show that its failure was due to a 
reasonable cause. SBA has not incorporated this penalty in its 
regulation. Therefore, a new section is being added to 13 CFR part 107 
that will include the adjusted civil penalty.
    The adjusted civil penalty amount was calculated by multiplying the

[[Page 31490]]

current civil penalty by the multiplier of 7.22912 established under 
the 2015 Inflation Adjustment Improvements Act for civil penalties last 
amended or established in 1966, to reach a product of $723 rounded to 
the nearest dollar. However, because the adjusted amount is more than 
the catch up adjustment cap of 150% (or $250), the new civil penalty 
amount is $250 for each and every day the SBIC fails to file the 
respective report.

2. 13 CFR 120.465

    According to the regulations at Sec.  120.465, any small business 
lending company (SBLC) that violates a regulation or written directive 
issued by the SBA Administrator regarding the filing of any regular or 
special report is subject to a civil penalty of not more than $5,000 
for each day the company fails to file the report, unless the small 
business lending company can show that there is reasonable cause for 
its failure to file. This penalty, authorized by section 23(j) of the 
Small Business Act, 15 U.S.C. 650(j), was established in 2004.
    This rule amends Sec.  120.465(b) to adjust the civil penalty from 
not more than $5,000 for each day of the continuance of the failure to 
file the respective report to not more than $6,229 for each day the 
small business lending company fails to file the report. The new civil 
penalty amount was calculated by multiplying the current civil penalty 
by the multiplier of 1.24588 established under the 2015 Inflation 
Adjustment Improvements Act for civil penalties last amended or 
established in 2004, to reach a product of $6,229, rounding to the 
nearest dollar. The adjusted amount is not more than the catch up 
adjustment cap of 150% (or $7,500) allowed.

3. 13 CFR 142.1(b)

    SBA has promulgated regulations at 13 CFR part 142 to implement the 
civil penalties authorized by the Program Fraud Civil Remedies Act of 
1986 (PFCRA), 31 U.S.C. 3801-3812. Under the regulation, a person who 
submits, or causes to be submitted, a false claim or a false statement 
to SBA is subject to a civil penalty of not more than $5,000 for each 
statement or claim. This penalty is applicable to violations for making 
misrepresentations to obtain benefits from an SBA financial assistance 
or contracting program, has not been adjusted previously.
    This rule amends Sec.  142.1(b) to adjust the current civil penalty 
amount from $5,000 to $10,781 per claim. The adjusted amount was 
calculated by multiplying the current penalty of $5,000 by the 
multiplier established under the 2015 Inflation Adjustment Improvements 
Act of 2.15628 for civil penalties last established or amended by 
statute in 1986, to reach a product of $10,781, rounding to the nearest 
dollar. The adjusted amount is less than the 150% catch-up adjustment 
cap (or $12,500) allowed.

4. 13 CFR 146.400(a), (b), (e)

    SBA has promulgated regulations at 13 CFR part 146 to govern 
lobbying activities by recipients of federal financial assistance. 
These regulations implement the authority in 31 U.S.C. 1352, which was 
established in 1989 and imposes penalties on any recipient that fails 
to comply with certain requirements in the part. Specifically, 
penalties may be imposed on those who make prohibited expenditures or 
fail to file the required disclosure forms or to amend such forms, if 
necessary. The regulations at Sec.  146.400(a) and (b) currently impose 
``a civil penalty of not less than $10,000 and no more than $100,000'' 
for each prohibited expenditure or failure to file or amend the 
disclosure forms. These penalties have not been adjusted previously. 
Notwithstanding the penalties in paragraphs (a) and (b) described 
above, the lobbying regulations at Sec.  146.400(e) provide that first 
offenders under those paragraphs are subject to a maximum civil penalty 
of $10,000, absent aggravating circumstances.
    This rule amends Sec.  146.400 (a) and (b), to adjust the current 
civil penalty amounts from ``not less than $10,000 and not more than 
$100,000'' to ``not less than $18,936 and not more than $189,361.'' The 
penalty in paragraph (e) is being amended from $10,000 to $18,936. The 
new civil penalty amounts were calculated by multiplying the current 
civil penalty of $10,000 by the multiplier of 1.89361 established under 
the 2015 Inflation Adjustment Improvements Act for civil penalties last 
established or amended by statute in 1989 to reach a product of 
$18,936, rounding to the nearest dollar. The current maximum civil 
penalty of $100,000 was also adjusted using the same method and 
multiplier to reach a product of $189,361. Each of these adjusted 
penalty amounts is less than the allowed 150% catch-up adjustment cap 
(or $25,000 and $250,000, respectively).

III. Technical Amendments

    This rule also makes technical amendments to six program-specific 
regulations that reference the civil monetary penalties for 
misrepresentation by an applicant for certain SBA program benefits. 
Each of these regulations, with the heading Civil Penalties, states 
that program participants or applicants are subject to penalties 
``under the False Claims Act and under the Program Fraud Civil Remedies 
Act'' but do not reference SBA's PFCRA implementing regulations. In 
this rule, SBA amends each of the following regulations to add that 
reference: (1) Sec.  121.108(e)(2) (for misrepresentation of an 
applicant's size status as a small business); (2) Sec.  121.411(i)(2) 
(for misrepresentation in SBA's Section 8(d) Subcontracting Program); 
(3) Sec.  124.1015(e)(2) (for misrepresentation of status as a small 
disadvantaged business); (4) Sec.  125.29(e)(2) (for misrepresentation 
of status as a small disadvantaged veteran owned small business); (5) 
Sec.  126.900(e)(2) (for misrepresentation of HUBZone status); and (6) 
Sec.  127.700(e)(2) (for misrepresentation of status as either a Woman 
Owned Small Business or an Economically Disadvantaged Woman Owned Small 
Business). This rule also corrects a typographical error in each of the 
regulations listed in order to correct the statutory citation for 
PFCRA, which currently reads ``331 U.S.C. 3801'' instead of ``31 U.S.C. 
3801''.
    Finally, this rule also makes a technical amendment to Sec.  
107.670(b) to replace the statutory reference to section 315 of the 
Small Business Investment Act with a reference to Sec.  107.665, which 
is a new section being added by this rule to implement the penalty 
authorized by section 315 of the SBIAct.

IV. Justification for Interim Final Rule

    The 2015 Inflation Adjustment Improvements Act specifically 
authorizes agencies to promulgate rulemaking for the adjustment to 
their civil monetary penalties through an interim final rule.
Compliance With Executive Orders 12866, 12988, and 13132, and the 
Paperwork Reduction Act (44 U.S.S. Ch. 35) and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)
Executive Order 12866
    The Office of Management and Budget (OMB) has determined that this 
interim final rule does not constitute a significant regulatory action 
under Executive Order 12866. This is also not a major rule under the 
Congressional Review Act, 5 U.S.C. 800.
Executive Order 12988
    This action meets applicable standards set forth in Sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce

[[Page 31491]]

burden. The action does not have retroactive or preemptive effect.
Executive Order 13132
    For the purpose of Executive Order 13132, SBA has determined that 
the rule 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 responsibilities among the various levels of 
government. Therefore, this interim final rule has no federalism 
implications warranting preparation of a federalism assessment.
Paperwork Reduction Act
    SBA has determined that this rule does not impose additional 
reporting or recordkeeping requirements.
Regulatory Flexibility Act (RFA)
    The RFA requires agencies to consider the effect of their 
regulatory actions on small entities, including small non-profit 
businesses, and small local governments. Pursuant to the RFA, when an 
agency issues a rule the agency must prepare an analysis that describes 
whether the impact of the rule will have a significant economic impact 
on a substantial number of such small entities. However, the RFA 
requires such analysis only where notice and comment rulemaking is 
required. As stated above, SBA has express statutory authority to issue 
an interim final rule. Since notice and comment is not required before 
this rule is issued, SBA is not required to prepare a regulatory 
analysis.

List of Subjects

13 CFR Part 107

    Investment companies, Loan programs-business, Reporting and 
recordkeeping requirements, Small businesses.

13 CFR Part 120

    Loan programs--business, Reporting and recordkeeping requirements, 
Small businesses.

13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Loan programs--business, 
Small businesses.

13 CFR Part 124

    Administrative practice and procedure, Government procurement, 
Hawaiian Natives, Indians--business and finance, Minority businesses, 
Reporting and recordkeeping requirements, Technical assistance.

13 CFR Part 125

    Government contracts, Government procurement, Reporting and 
recordkeeping requirements, Small businesses, Technical assistance, 
Veterans.

13 CFR Part 126

    Administrative practice and procedure, Government procurement, 
Penalties, Reporting and recordkeeping requirements, Small businesses.

13 CFR Part 127

    Government contracts, Reporting and recordkeeping requirements, 
Small businesses.

13 CFR Part 142

    Administrative practice and procedure, Claims, Fraud, Penalties.

13 CFR Part 146

    Government contracts, Grant programs, Loan programs, Lobbying, 
Penalties, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, SBA amends 13 CFR parts 
107, 120, 121, 124, 125, 126, 127, 142, and 146 as follows:

PART 107--SMALL BUSINESS INVESTMENT COMPANIES

0
1. The authority citation for part 107 is revised to read as follows:

    Authority:  15 U.S.C. 681 et seq., 683, 687(c), 687b, 687d, 
687g, 687m.


0
2. Add Sec.  107.665 to subpart F to read as follows:


Sec.  107.665  Civil penalties.

    Except as provided in Sec.  107.670, a Licensee that violates any 
regulation or written directive issued by SBA, requiring the filing of 
any regular or special report pursuant to this part, shall be fined a 
civil penalty of not more than $250 for each day the Licensee fails to 
file such report. The civil penalties provided for in this section 
shall accrue to the United States and may be recovered in a civil 
action brought by the SBA.


Sec.  107.670  [Amended]

0
3. In Sec.  107.670(b), remove the words ``provision of section 315(a) 
of the Act'' and add in their place the words ``stated in Sec.  
107.665''.

PART 120--BUSINESS LOANS

0
4. The authority citation for part 120 continues to read as follows:

    Authority:  15 U.S.C. 634(b)(6), (b)(7), (b)(14), (h), and note, 
636(a), (h) and (m), 650, 687(f), 696(3), and 697(a) and (e); Public 
Law 111-5, 123 Stat. 115, Public Law 111-240, 124 Stat. 2504.


Sec.  120.465  [Amended]

0
5. Paragraph (b) of Sec.  120.465 is amended by removing ``$5,000'' and 
adding in its place ``$6,299''.

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
6. The authority citation for part 121 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 662, and 694a(9).


0
7. Revise Sec.  121.108(e)(2) to read as follows:


Sec.  121.108  What are the penalties for misrepresentation of size 
status?

* * * * *
    (e) * * *
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, the Program 
Fraud Civil Remedies Act, 31 U.S.C. 3801-3812 and any other applicable 
laws or regulations, including 13 CFR part 142.
* * * * *

0
8. Revise Sec.  121.411(i)(2) to read as follows:


Sec.  121.411  What are the size procedures for SBA's Section 8(d) 
Subcontracting Program?

* * * * *
    (i) * * *
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, the Program 
Fraud Civil Remedies Act, 31 U.S.C. 3801-3812 and any other applicable 
laws or regulations, including 13 CFR part 142.
* * * * *

PART 124--8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS 
STATUS DETERMINATIONS

0
9. The authority citation for part 124 continues to read as follows:

    Authority:  15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d), 644 and 
Pub. L. 99-661, Pub. L. 100-656, sec. 1207, Pub. L. 101-37, Pub. L. 
101-574, section 8021, Pub. L. 108-87, and 42 U.S.C. 9815.

0
10. Revise Sec.  124.1015(e)(2) to read as follows:


Sec.  124.1015  What are the requirements for representing SDB status, 
and what are the penalties for misrepresentation?

* * * * *
    (e) * * *
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties

[[Page 31492]]

under the False Claims Act, 31 U.S.C. 3729-3733, the Program Fraud 
Civil Remedies Act, 31 U.S.C. 3801-3812, and any other applicable laws 
or regulations, including 13 CFR part 142.
* * * * *

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
11. The authority citation for part 125 continues to read as follows:

    Authority:  15 U.S.C. 632(p), (q); 634(b)(6), 637, 644, 657f, 
and 657q.


0
12. Revise Sec.  125.29(e)(2) to read as follows:


Sec.  125.29  What are the requirements for representing SDVO SBC 
status, and what are the penalties for misrepresentation?

* * * * *
    (e) * * *
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, the Program 
Fraud Civil Remedies Act, 31 U.S.C. 3801-3812, and any other applicable 
laws or regulations, including 13 CFR part 142.
* * * * *

PART 126--HUBZONE PROGRAM

0
13. The authority citation for part 126 continues to read as follows:

    Authority:  15 U.S.C. 632(a), 632(j), 632(p), 644 and 657a.

0
14. Revise Sec.  126.900(e)(2) to read as follows:


Sec.  126.900  What are the requirements for representing HUBZone 
status, and what are the penalties for misrepresentation?

* * * * *
    (e) * * *
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, the Program 
Fraud Civil Remedies Act, 31 U.S.C. 3801-3812, and any other applicable 
laws or regulations, including 13 CFR part 142.
* * * * *

PART 127--WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT PROGRAM

0
15. The authority citation for part 127 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 637(m), and 644.


0
16. Revise Sec.  127.700(e)(2) to read as follows:


Sec.  127.700  What are the requirements for representing EDWOSB or 
WOSB status, and what are the penalties for misrepresentation?

* * * * *
    (e) * * *
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, the Program 
Fraud Civil Remedies Act, 31 U.S.C. 3801-3812, and any other applicable 
laws or regulations, including 13 CFR part 142.
* * * * *

PART 142--PROGRAM FRAUD CIVIL REMEDIES ACT REGULATIONS

0
17. The authority citation for part 142 continues to read as follows:

    Authority:  15 U.S.C. 634(b); 31 U.S.C. 3803(g)(2).


Sec.  142.1  [Amended]

0
18. Paragraph (b) of Sec.  142.1 is amended by removing ``$5,000'' and 
adding in its place ``$10,781''.

PART 146--NEW RESTRICTIONS ON LOBBYING

0
19. The authority citation for part 146 continues to read as follows:

    Authority:  Section 319, Pub. L. 101-121 (31 U.S.C. 1352); 15 
U.S.C. 634(b)(6).


Sec.  146.400  [Amended]

0
20. Paragraphs (a), (b), and (e) of Sec.  146.400 are amended by 
removing ``$10,000'' wherever it appears and adding in its place 
``$18,936'' and by removing ``$100,000'' and adding in its place 
``$189,361''.

Maria Contreras-Sweet,
Administrator.
[FR Doc. 2016-11868 Filed 5-18-16; 8:45 am]
 BILLING CODE 8025-01-P