[Federal Register Volume 85, Number 73 (Wednesday, April 15, 2020)]
[Rules and Regulations]
[Pages 20817-20821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07673]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

[Docket No. SBA-2020-0019]
RIN 3245-AH35


Business Loan Program Temporary Changes; Paycheck Protection 
Program

AGENCY: U.S. Small Business Administration.

ACTION: Interim final rule.

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SUMMARY: Elsewhere in this issue of the Federal Register, the U.S. 
Small Business Administration (SBA) is publishing an interim final rule 
(the Initial Rule) announcing the implementation of sections 1102 and 
1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES 
Act or the Act). Section 1102 of the Act temporarily adds a new 
program, titled the ``Paycheck Protection Program,'' to the SBA's 7(a) 
Loan Program. Section 1106 of the Act provides for forgiveness of up to 
the full principal amount of qualifying loans guaranteed under the 
Paycheck Protection Program. The Paycheck Protection Program and loan 
forgiveness are intended to provide economic relief to small businesses 
nationwide adversely impacted by the Coronavirus Disease 2019 (COVID-
19). This interim final rule supplements the Initial Rule with 
additional guidance regarding the application of certain affiliate 
rules applicable to SBA's implementation of sections 1102 and 1106 of 
the Act and requests public comment.

DATES: 
    Effective date: This interim final rule is effective April 15, 
2020.
    Applicability date: This interim final rule applies to applications 
submitted under the Paycheck Protection Program through June 30, 2020, 
or until funds made available for this purpose are exhausted.

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    Comment Date: Comments must be received on or before May 15, 2020.

ADDRESSES: You may submit comments, identified by number SBA-2020-0019 
through the Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    SBA will post all comments on www.regulations.gov. If you wish to 
submit confidential business information (CBI) as defined in the User 
Notice at www.regulations.gov, please send an email to [email protected]. 
Highlight the information that you consider to be CBI and explain why 
you believe SBA should hold this information as confidential. SBA will 
review the information and make the final determination whether it will 
publish the information.

FOR FURTHER INFORMATION CONTACT: Call Center Representative at 833-572-
0502, or the local SBA Field Office; the list of offices can be found 
at https://www.sba.gov/tools/local-assistance/districtoffices.

SUPPLEMENTARY INFORMATION: 

I. Background Information

    On March 13, 2020, President Trump declared the ongoing Coronavirus 
Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude 
to warrant an emergency declaration for all States, territories, and 
the District of Columbia. With the COVID-19 emergency, many small 
businesses nationwide are experiencing economic hardship as a direct 
result of the Federal, State, tribal, and local public health measures 
that are being taken to minimize the public's exposure to the virus. 
These measures, some of which are government-mandated, are being 
implemented nationwide and include the closures of restaurants, bars, 
and gyms. In addition, based on the advice of public health officials, 
other measures, such as keeping a safe distance from others or even 
stay-at-home orders, are being implemented, resulting in a dramatic 
decrease in economic activity as the public avoids malls, retail 
stores, and other businesses.
    On March 27, 2020, the President signed the Coronavirus Aid, 
Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L. 
116-136) to provide emergency assistance and health care response for 
individuals, families, and businesses affected by the coronavirus 
pandemic. The Small Business Administration (SBA) received funding and 
authority through the Act to modify existing loan programs and 
establish a new loan program to assist small businesses nationwide 
adversely impacted by the COVID-19 emergency.
    Section 1102 of the Act temporarily permits SBA to guarantee 100 
percent of 7(a) loans under a new program titled the ``Paycheck 
Protection Program.'' Section 1106 of the Act provides for forgiveness 
of up to the full principal amount of qualifying loans guaranteed under 
the Paycheck Protection Program. On April 2, 2020, SBA issued an 
interim final rule (the Initial Rule) announcing the implementation of 
sections 1102 and 1106 of the Act. A more detailed discussion of 
sections 1102 and 1106 of the Act is found in section III of the 
Initial Rule.
    This interim final rule supplements the Initial Rule with 
additional guidance regarding the application of certain affiliate 
rules applicable to SBA's implementation of sections 1102 and 1106 of 
the Act and requests public comment.

II. Comments and Immediate Effective Date

    The intent of the Act is that SBA provide relief to America's small 
businesses expeditiously. This intent, along with the dramatic decrease 
in economic activity nationwide, provides good cause for SBA to 
dispense with the 30-day delayed effective date provided in the 
Administrative Procedure Act (5 U.S.C. 553(b)(3)(B)). Specifically, 
small businesses need to be informed on how to apply for a loan and the 
terms of the loan under section 1102 of the Act as soon as possible 
because the last day to apply for and receive a loan is June 30, 2020. 
The immediate effective date of this interim final rule will benefit 
small businesses so that they can immediately apply for the loan with a 
better understanding of loan terms and conditions. This interim final 
rule is effective without advance notice and public comment because 
section 1114 of the Act authorizes SBA to issue regulations to 
implement Title 1 of the Act without regard to notice requirements. 
This rule is being issued to allow for immediate implementation of this 
program. Although this interim final rule is effective immediately, 
comments are solicited from interested members of the public on all 
aspects of the interim final rule. These comments must be submitted on 
or before May 15, 2020. The SBA will consider these comments and the 
need for making any revisions as a result of these comments.

III. Affiliate Rules for Paycheck Protection Program

Overview

    The CARES Act was enacted to provide immediate assistance to 
individuals, families, and organizations affected by the COVID-19 
emergency. Among the provisions contained in the CARES Act are 
provisions authorizing SBA to temporarily guarantee loans under the 
Paycheck Protection Program (PPP). Loans under the PPP will be 100 
percent guaranteed by SBA, and the full principal amount of the loans 
may qualify for loan forgiveness. Additional information about the PPP 
is available in the Initial Rule.
1. Affiliation Rules Generally
Are affiliates considered together for purposes of determining 
eligibility?
    In most cases, a borrower will be considered together with its 
affiliates for purposes of determining eligibility for the PPP.\1\ 
Under SBA rules, entities may be considered affiliates based on factors 
including stock ownership, overlapping management,\2\ and identity of 
interest. 13 CFR 121.301.
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    \1\ Section 7(a)(36)(D)(iv) of the Small Business Act (15 U.S.C. 
636(a)(36)(D)(iv), as added by the Act, waives the affiliation rules 
contained in Sec.  121.103 for (1) any business concern with not 
more than 500 employees that, as of the date on which the loan is 
disbursed, is assigned a North American Industry Classification 
System code beginning with 72; (2) any business concern operating as 
a franchise that is assigned a franchise identifier code by the 
Administration; and (3) any business concern that receives financial 
assistance from a company licensed under section 301 of the Small 
Business Investment Act of 1958 (15 U.S.C. 681). This interim final 
rule has no effect on these statutory waivers, which remain in full 
force and effect. As a result, the affiliation rules contained in 
section 121.301 also do not apply to these types of entities.
    \2\ In order to help potential borrowers identify other 
businesses with which they may be deemed to be affiliated under the 
common management standard, the Borrower Application Form, SBA Form 
2483, released on April 2, 2020, requires applicants to list other 
businesses with which they have common management. The information 
supplied by the applicant in response to that information request 
should be used by applicants as they assess whether they have 
affiliates that should be included in their number of employees 
reported on SBA Form 2483.
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How do SBA's affiliation rules affect my eligibility and apply to me 
under the PPP?
    An entity generally is eligible for the PPP if it, combined with 
its affiliates, is a small business as defined in section 3 of the 
Small Business Act (15 U.S.C. 632), or (1) has 500 or fewer employees 
whose principal place of residence is in the United States or is a 
business that operates in a certain industry and meets applicable SBA 
employee-based size standards for that industry, and (2) is a

[[Page 20819]]

tax-exempt nonprofit organization described in section 501(c)(3) of the 
Internal Revenue Code (IRC), a tax-exempt veterans organization 
described in section 501(c)(19) of the IRC, a Tribal business concern 
described in section 31(b)(2)(C) of the Small Business Act, or any 
other business concern. Prior to the Act, the nonprofit organizations 
listed above were not eligible for SBA Business Loan Programs under 
section 7(a) of the Small Business Act; only for-profit small business 
concerns were eligible. The Act made such nonprofit organizations not 
only eligible for the PPP, but also subjected them to SBA's affiliation 
rules. Specifically, section 1102 of the Act provides that the 
provisions applicable to affiliations under 13 CFR 121.103 apply with 
respect to nonprofit organizations and veterans organizations in the 
same manner as with respect to small business concerns. However, the 
detailed affiliation standards contained in Sec.  121.103 currently do 
not apply to PPP borrowers, because Sec.  121.103(a)(8) provides that 
applicants in SBA's Business Loan Programs (which include the PPP) are 
subject to the affiliation rule contained in 13 CFR 121.301.
2. Faith-Based Organizations
    This rule exempts otherwise qualified faith-based organizations 
from the SBA's affiliation rules, including those set forth in 13 CFR 
part 121, where the application of the affiliation rules would 
substantially burden those organizations' religious exercise. This 
exemption is required, or at a minimum authorized, by the Religious 
Freedom Restoration Act (RFRA) (Pub. L. 103-141), which provides that 
the ``[g]overnment shall not substantially burden a person's exercise 
of religion'' unless the government can ``demonstrate[] that 
application of the burden'' to the person is both ``in furtherance of a 
compelling governmental interest'' and ``the least restrictive means of 
furthering that compelling governmental interest.'' 42 U.S.C. 2000bb-1.
    A substantial burden under RFRA includes both government action 
that compels a person to violate his sincere religious beliefs or 
suffer a penalty, see, e.g., Burwell v. Hobby Lobby Stores, Inc., 573 
U.S. 682, 726 (2014), and the imposition of a substantial burden 
through ``indirect'' measures. Thomas v. Review Bd. of Ind. Emp. Sec. 
Div., 450 U.S. 707, 717-18 (1981). Notably, the government imposes a 
substantial burden on religious exercise when it ``conditions receipt 
of an important benefit upon conduct proscribed by a religious faith, 
or where it denies such a benefit because of conduct mandated by 
religious belief.'' Id. at 718. For example, in Sherbert v. Verner, 374 
U.S. 398 (1963), a State denied the plaintiff unemployment benefits 
because she would not work on Saturday, the Sabbath of her faith. Id. 
at 400-01. Even though no ``sanctions directly compel[led]'' her to 
work on Saturday, the Supreme Court held that the State's denial of 
benefits ``puts the same kind of burden upon the free exercise of 
religion as would a fine imposed against [her] for her Saturday 
worship.'' Id. at 404. As the Court observed, the State's framework 
``forces her to choose between following the precepts of her religion 
and forfeiting benefits, on the one hand, and abandoning one of the 
precepts of her religion in order to accept work, on the other hand.'' 
Id. Consistent with these precedents, RFRA explicitly contemplates that 
``the denial of government funding, benefits, or exemptions'' may 
violate its protections. 42 U.S.C. 2000bb-4.
    SBA is aware of the existence of faith-based organizations that 
would qualify for relief under the CARES Act but for their affiliation 
with other entities as an aspect of their religious practice. Supreme 
Court precedent has long recognized that the organizational structure 
of faith-based entities may itself be a matter of significant religious 
concern and that faith-based organizations are therefore guaranteed the 
``power to decide for themselves, free from state interference, matters 
of church government as well as those of faith and doctrine.'' Kedroff 
v. St. Nicholas Cathedral of Russian Orthodox Church in N. Am., 344 
U.S. 94, 116 (1952). Moreover, an assessment of the extent to which 
questions concerning religious polity rest upon theological or other 
religious foundations presents particular difficulties, for the First 
Amendment ``forbids civil courts'' from ``the interpretation of 
particular church doctrines and the importance of those doctrines to 
the religion.'' Presbyterian Church v. Mary Elizabeth Blue Hull Mem'l 
Presbyterian Church, 393 U.S. 440, 450 (1969). A number of faith-based 
organizations understand their affiliation with other religious 
entities as a part of their exercise of religion, as a mandate given 
the ``hierarchical or connectional'' structure of their church, Jones 
v. Wolf, 443 U.S. 595, 597 (1979), or as an expression of their sincere 
religious belief. Cf. 1 W. Cole Durham & Robert Smith, Religious 
Organizations and the Law section 8.19 (Westlaw rev. ed. 2017) 
(``Religious organizations, such as parishes or mission centers, 
normally tend to choose the civil-property-holding structures that most 
closely mirror their own ecclesiology or polity.''). Either affiliation 
decision falls within the definition of ``religious exercise'' that 
applies to RFRA, which ``includes any exercise of religion, whether or 
not compelled by, or central to, a system of religious belief.'' See 42 
U.S.C. 2000cc-5(7)(A); 2000bb-2(4) (``the term `exercise of religion' 
means religious exercise, as defined in section 2000cc-5 of this 
title'').
    As applied to these faith-based organizations, the affiliation 
rules would impose a substantial burden. The affiliation rules would 
deny an important benefit (participation in a program for which they 
would otherwise be eligible under the CARES Act) because of the 
exercise of sincere religious belief (affiliation with other religious 
entities).
    The Administrator has also concluded that she does not have a 
compelling interest in denying emergency assistance to faith-based 
organizations that are facing the same economic hardship to which the 
CARES Act responded and who would be eligible for PPP but for their 
faith-based organizational and associational decisions. This conclusion 
is reinforced by the fact that the affiliation rules already contain 
numerous exemptions, see generally 13 CFR 121.103(b), ranging from 
``[b]usiness concerns owned and controlled by Indian Tribes, Alaska 
Native Corporations, [and] Native Hawaiian Organizations,'' id. Sec.  
121.103(b)(2)(i) to ``member shareholders of a small agricultural 
cooperative.'' Id. Sec.  121.103(b)(7). In light of these exemptions, 
it is difficult to maintain that denying relief to these faith-based 
organizations is necessary to further a compelling government interest, 
let alone the least restrictive means of doing so. See Church of the 
Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520, 547 (1993) 
(``[A] law cannot be regarded as protecting an interest of the highest 
order when it leaves appreciable damage to that supposedly vital 
interest unprohibited.'') (cleaned up); Gonzales v. O Centro Espirita 
Beneficiente Uniao do Vegetal, 546 U.S. 418, 433 (2006) (applying same 
principle under RFRA). SBA accordingly must exempt faith-based 
organizations that would otherwise be disqualified from the PPP based 
on features of those organizations' affiliations that are a matter of 
sincere religious exercise as defined in 42 U.S.C. 2000bb-2.
    This action is also supported by 15 U.S.C. 634(b)(6), which 
authorizes the Administrator to ``make such rules and regulations as he 
deems necessary to

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carry out the authority vested in him by or pursuant to this chapter.'' 
As relevant here, the CARES Act expanded eligibility for the covered 
loans during the covered period for nonprofit organizations that employ 
not more than 500 employees or, if applicable, the size standard in 
number of employees established by the Administrator for the industry 
in which the nonprofit organization operates. 15 U.S.C. 
636(a)(36)(D)(i). That expansion posed unique concerns for the 
Administrator, who is tasked with applying the ``provisions applicable 
to affiliations under section 121.103 of title 13, Code of Federal 
Regulations, or any successor thereto, . . . with respect to a 
nonprofit organization and a veterans organizations in the same manner 
as with respect to a small business concern.'' Id. 636(a)(36)(D)(vi). 
Although these rules may easily be applied to faith-based organizations 
in many cases, their application to certain faith-based organizations 
presents significant challenges, in particular because of the large 
number of faith-based organizations who would now be eligible for the 
PPP but for their religious exercise.
    As discussed above, carrying the affiliation rules over to all 
faith-based organizations without modification would raise concerns 
under RFRA. Moreover, application of the affiliation rules, which, for 
example, provide for assessment of whether one faith-based organization 
``controls or has the power to control'' another organization, 13 CFR 
121.103(a)(1), could involve SBA in questions of church governance 
concerning ``the allocation of power within a (hierarchical) church so 
as to decide . . . religious law (governing church polity),'' in 
violation of the First Amendment. Serbian E. Orthodox Diocese for the 
U.S.A. & Canada v. Milivojevich, 426 U.S. 696, 709 (1979) (internal 
quotation marks omitted)). Finally, affiliation rules developed in the 
context of for-profit enterprises present significant administrative 
difficulties where faith-based organizations are concerned. For 
example, ``the notion of corporate subsidiarity or affiliation in civil 
law is entirely foreign to the polity of religious organizations,'' and 
there is a significant risk that civil authorities will 
``mischaracterize or misinterpret the polity of a religious body.'' 1 
W. Cole Durham & Robert Smith, Religious Organizations and the Law 
sections 8.19, 8.21 (discussing examples of judicial 
mischaracterizations). Consistent with these concerns, it is also 
notable that other areas of federal law approach issues analogous to 
affiliation differently for religious organizations. See, e.g., 26 
U.S.C. 512 (b)(12).
    For these reasons, in addition to the RFRA mandate, the 
Administrator has determined that it is appropriate to exercise the 
authority granted under 15 U.S.C. 634(b)(6) to exempt from application 
of SBA's affiliation rules faith-based organizations that would 
otherwise be disqualified from participation in PPP because of 
affiliations that are a part of their religious exercise.
    Accordingly, the SBA's affiliation rules, including those set forth 
in 13 CFR part 121, do not apply to the relationship of any church, 
convention or association of churches, or other faith-based 
organization or entity to any other person, group, organization, or 
entity that is based on a sincere religious teaching or belief or 
otherwise constitutes a part of the exercise of religion. This includes 
any relationship to a parent or subsidiary and other applicable aspects 
of organizational structure or form. A faith-based organization seeking 
loans under this program may rely on a reasonable, good faith 
interpretation in determining whether its relationship to any other 
person, group, organization, or entity is exempt from the affiliation 
rules under this provision, and SBA will not assess, and will not 
require participating lenders to assess, the reasonableness of the 
faith-based organization's determination.
3. Additional Information
    SBA may provide further guidance, if needed, through SBA notices 
and a program guide which will be posted on SBA's website at 
www.sba.gov.
    Questions on the Paycheck Protection Program 7(a) Loans may be 
directed to the Lender Relations Specialist in the local SBA Field 
Office. The local SBA Field Office may be found at https://www.sba.gov/tools/local-assistance/districtoffices.

Compliance With Executive Orders 12866, 12988, 13132, and 13771, the 
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Orders 12866, 13563, and 13771

    This interim final rule is economically significant for the 
purposes of Executive Orders 12866 and 13563, and is considered a major 
rule under the Congressional Review Act. SBA, however, is proceeding 
under the emergency provision at Executive Order 12866 Section 
6(a)(3)(D) based on the need to move expeditiously to mitigate the 
current economic conditions arising from the COVID-19 emergency. This 
rule's designation under Executive Order 13771 will be informed by 
public comment.

Executive Order 12988

    SBA has drafted this rule, to the extent practicable, in accordance 
with the standards set forth in section 3(a) and 3(b)(2) of Executive 
Order 12988, to minimize litigation, eliminate ambiguity, and reduce 
burden. The rule has no preemptive or retroactive effect.

Executive Order 13132

    SBA has determined that this 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 layers of government. Therefore, SBA 
has determined that this rule has no federalism implications warranting 
preparation of a federalism assessment.

Paperwork Reduction Act, 44 U.S.C. Chapter 35

    SBA has determined that this rule will impose recordkeeping or 
reporting requirements under the Paperwork Reduction Act (``PRA''). SBA 
has obtained emergency approval under OMB Control Number 3245-0407 for 
the information collection (IC) required to implement the program 
described above. This IC consists of Form 2483 (Paycheck Protection 
Program Application Form) and SBA Form 2484 (Paycheck Protection 
Program Lender's Application for 7(a) Loan Guaranty) SBA Form 3506 
(CARES Act Section 1102 Lender Agreement), and SBA Form 3507 (CARES Act 
Section 1102 Lender Agreement--Non-Bank and Non-Insured Depository 
Institution Lender). The collection is approved for use until October 
31, 2020.
    The Regulatory Flexibility Act (RFA) generally requires that when 
an agency issues a proposed rule, or a final rule pursuant to section 
553(b) of the APA or another law, the agency must prepare a regulatory 
flexibility analysis that meets the requirements of the RFA and publish 
such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to describe the impact of a 
rulemaking on small entities by providing a regulatory impact analysis. 
Such analysis must address the consideration of regulatory options that 
would lessen the economic effect of the rule on small entities. The RFA 
defines a ``small entity'' as (1) a proprietary firm meeting the size 
standards of the Small Business

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Administration (SBA); (2) a nonprofit organization that is not dominant 
in its field; or (3) a small government jurisdiction with a population 
of less than 50,000. 5 U.S.C. 601(3)-(6). Except for such small 
government jurisdictions, neither State nor local governments are 
``small entities.'' Similarly, for purposes of the RFA, individual 
persons are not small entities.
    The requirement to conduct a regulatory impact analysis does not 
apply if the head of the agency ``certifies that the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities.'' 5 U.S.C. 605(b). The agency must, however, publish 
the certification in the Federal Register at the time of publication of 
the rule, ``along with a statement providing the factual basis for such 
certification.'' If the agency head has not waived the requirements for 
a regulatory flexibility analysis in accordance with the RFA's waiver 
provision, and no other RFA exception applies, the agency must prepare 
the regulatory flexibility analysis and publish it in the Federal 
Register at the time of promulgation or, if the rule is promulgated in 
response to an emergency that makes timely compliance impracticable, 
within 180 days of publication of the final rule. 5 U.S.C. 604(a), 
608(b).
    Rules that are exempt from notice and comment are also exempt from 
the RFA requirements, including conducting a regulatory flexibility 
analysis, when among other things the agency for good cause finds that 
notice and public procedure are impracticable, unnecessary, or contrary 
to the public interest. SBA Office of Advocacy guide: How to Comply 
with the Regulatory Flexibility Ac. Ch.1. p.9. Accordingly, SBA is not 
required to conduct a regulatory flexibility analysis.

List of Subjects in 13 CFR Part 121

    Administrative practice and procedure, Authority delegations 
(Government agencies), Intergovernmental relations, Investigations, 
Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, the Small Business 
Administration amends 13 CFR part 121 as set forth below:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 is revised to read as follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and 
694a(9); Pub. L. 116-136, Section 1114.


0
2. Amend Sec.  121.103 by adding paragraph (b)(10) to read as follows:


Sec.  121.103   How does SBA determine affiliation?

* * * * *
    (b) * * *
    (10)(i) The relationship of a faith-based organization to another 
organization is not considered an affiliation with the other 
organization under this subpart if the relationship is based on a 
religious teaching or belief or otherwise constitutes a part of the 
exercise of religion. In addition, the eligibility criteria set forth 
in 15 U.S.C. 636(a)(36)(D) are satisfied for any faith-based 
organization having not more than 500 employees (including individuals 
employed on a full-time, part-time, or other basis) that pays Federal 
payroll taxes using its own Internal Revenue Service Employer 
Identification Number (EIN) or that would support a deduction under the 
second sentence of 26 U.S.C. 512(b)(12) if the organization generated 
unrelated business taxable income. For purposes of this paragraph 
(b)(10), the term ``faith-based organization'' includes, but is not 
limited to, any organization associated with a church or convention or 
association of churches within the meaning of 26 U.S.C. 414(e)(3)(D). 
The term ``organization'' has the meaning given in 26 U.S.C. 
414(m)(6)(A). The terms ``church'' and ``convention or association of 
churches'' have the same meaning that they have in 26 U.S.C. 414.
    (ii) No specific process or filing is necessary to claim the 
benefit of the exemption in paragraph (b)(10)(i) of this section. In 
applying for a loan under the Paycheck Protection Program (PPP), a 
faith-based organization may make all necessary certifications with 
respect to common ownership or management or other eligibility criteria 
based upon affiliation, if the organization would be an eligible 
borrower but for application of SBA affiliation rules and if the 
organization falls within the terms of the exemption described in 
paragraph (b)(10)(i) of this section. If a faith-based organization 
indicates any relationship that may pertain to affiliation, such as 
ownership of, ownership by, or common management with any other 
organization, on or in connection with a loan application, and if the 
faith-based organization applying for a loan falls within the terms of 
the exemption described in paragraph (b)(10)(i) of this section with 
respect to that relationship, the faith-based organization may indicate 
on a separate sheet that it is entitled to the exemption. That sheet 
may be identified as addendum A, and no further listing of the other 
organization or description of the relationship to that organization is 
required. See appendix A to this part for a sample ``Addendum A'', but 
the format need not be used as long as the substance is the same.
* * * * *

0
3. Add appendix A to part 121 to read as follows:

Appendix A to Part 121--Paycheck Protection Program Sample Addendum A

[Sample]

ADDENDUM A

    [check] The Applicant claims an exemption from all SBA affiliation 
rules applicable to Paycheck Protection Program loan eligibility 
because the Applicant has made a reasonable, good faith determination 
that the Applicant qualifies for a religious exemption under 13 CFR 
121.103(b)(10), which says that ``[t]he relationship of a faith-based 
organization to another organization is not considered an affiliation 
with the other organization . . . if the relationship is based on a 
religious teaching or belief or otherwise constitutes a part of the 
exercise of religion.''

Jovita Carranza,
Administrator.
[FR Doc. 2020-07673 Filed 4-10-20; 4:15 pm]
 BILLING CODE P