[Federal Register Volume 86, Number 11 (Tuesday, January 19, 2021)]
[Proposed Rules]
[Pages 5036-5040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00446]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / 
Proposed Rules  

[[Page 5036]]



SMALL BUSINESS ADMINISTRATION

13 CFR Parts 109, 120, and 123

[Docket Number SBA-2020-0057]
RIN 3245-AH60


Ensuring Equal Treatment for Faith-Based Organizations in SBA's 
Loan and Disaster Assistance Programs

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: The U.S. Small Business Administration (``SBA'' or ``Agency'') 
is proposing to remove five regulatory provisions that run afoul of the 
Free Exercise Clause of the First Amendment. All five provisions make 
certain faith-based organizations ineligible to participate in certain 
SBA business loan and disaster assistance programs because of their 
religious status. Because the provisions exclude a class of potential 
participants based solely on their religious status, the provisions 
violate the Free Exercise Clause of the First Amendment. SBA now 
proposes to remove the provisions to ensure in its business loan and 
disaster assistance programs the equal treatment for faith-based 
organizations that the Constitution requires.

DATES: Comments must be received on or before February 18, 2021.

ADDRESSES: You may submit comments, identified by RIN 3245-AH60, by any 
of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail or Hand Delivery/Courier: Valerie Mills, Executive 
Operations Officer, Office of General Counsel, U.S. Small Business 
Administration, 409 Third Street SW, Washington, DC 20416.
    SBA will post all comments on https://www.regulations.gov. If you 
wish to submit confidential business information (``CBI''), as defined 
in the User Notice at https://www.regulations.gov, please submit the 
information to Valerie Mills, Executive Operations Officer, Office of 
General Counsel, U.S. Small Business Administration, 409 Third Street 
SW, Washington, DC 20416, or 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 on whether it 
will publish the information.

FOR FURTHER INFORMATION CONTACT: Valerie Mills, Executive Operations 
Officer, Office of General Counsel, (202) 619-0539, 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background Information

    Consistent with its April 3, 2020, letter to Congress pursuant to 
28 U.S.C. 530D (``530D letter''), SBA is proposing to remove from the 
Code of Federal Regulations (``CFR'') five provisions that run afoul of 
the Free Exercise Clause of the First Amendment. The provisions that 
SBA proposes to remove consist of the two provisions with which SBA's 
530D letter was concerned and three other, substantially similar 
provisions. All five provisions make certain faith-based organizations 
ineligible to participate in certain SBA business loan and disaster 
assistance programs because of their religious status. Because the 
provisions exclude a class of potential participants solely based on 
their religious status, the provisions violate the Free Exercise Clause 
of the First Amendment, as construed in Trinity Lutheran Church of 
Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017), and Espinoza v. 
Montana Department of Revenue, 140 S. Ct. 2246 (2020). After consulting 
with the Department of Justice, in its 530D letter, SBA already has 
announced its decision not to enforce, apply, or administer two of the 
provisions, as well as its intention to propose amendments to conform 
those provisions to the Constitution. SBA now proposes such amendments, 
as well as amendments to three substantially similar provisions, to 
ensure in its business loan and disaster assistance programs the equal 
treatment for faith-based organizations that the Constitution requires.

A. The Subject Programs

    Intermediary Lending Pilot Program (``ILP''). The Intermediary 
Lending Pilot (``ILP'') program was established as a pilot program 
authorized by the Small Business Jobs Act of 2010, Public Law 111-240 
(2010), to provide loans of up to $1,000,000 to nonprofit 
intermediaries for the purpose of providing loans to small businesses. 
The program authorized SBA to select up to 20 nonprofit intermediaries 
each year to receive loans of up to $1,000,000, subject to the 
availability of funds. Selected ILP intermediaries, in turn, use the 
funds to make loans of up to $200,000 to eligible startup, newly 
established, or growing small businesses. ILP Intermediaries continue 
to relend a portion of the payments received on small business loans 
made under the program until they have fully repaid their loans to SBA.
    Business Loan Programs. SBA provides financial assistance to small 
businesses under three business loan programs: its general business 
loan program authorized by section 7(a) of the Small Business Act, 15 
U.S.C. 636(a) (``7(a) loans''), its microloan program authorized by 
section 7(m) of the Small Business Act, 15 U.S.C. 636(m) 
(``microloans''), and its development company program authorized by 
title V of the Small Business Investment Act, 15 U.S.C. 695-697f (``504 
loans''). 7(a) loans provide financing to eligible small businesses for 
general business purposes and are guaranteed loans by which SBA 
guarantees a portion of a loan made by a lender. Through its 
microloans, SBA makes loans to non-profit intermediaries that in turn 
make short-term loans with a maximum amount of $50,000 to eligible 
small businesses for general business purposes, including the purchase 
of furniture, fixtures, supplies, materials, equipment, and for working 
capital. SBA also makes technical assistance grants to intermediaries 
for use in providing management assistance and counseling to microloan 
borrowers and prospective microloan borrowers. Projects involving 504 
loans require long-term, fixed-asset financing for small businesses. A 
504 project has three main partners: A Third Party Lender provides 50 
percent or more of the financing; a Certified Development Company (CDC) 
provides up to 40 percent of the financing through a 504

[[Page 5037]]

debenture (guaranteed 100% by SBA); and an applicant (Borrower) injects 
at least 10 percent of the financing.
    Economic Injury Disaster Loan Program (``EIDL''). The Economic 
Injury Disaster Loan (``EIDL'') program provides economic relief to 
eligible small businesses and private nonprofit organizations that 
experience substantial economic injury as a direct result of a declared 
disaster. Substantial economic injury is such that a business concern 
is unable to meet its obligations as they mature or to pay its ordinary 
and necessary operating expenses. EIDL loan proceeds may be used only 
for working capital necessary to carry on the business concern until 
resumption of normal operations and for expenditures necessary to 
alleviate the specific economic injury, but not to exceed that which 
the business concern could have provided had the injury not occurred.
    Military Reservist Economic Injury Disaster Loan Program 
(``MREIDL''). The Military Reservist Economic Injury Disaster Loan 
(``MREIDL'') program provides loan funds to eligible small businesses 
to meet their ordinary and necessary operating expenses that they could 
have met, but are unable to meet, because an essential employee was 
called up to active service for a period of more than 30 consecutive 
days in his or her role as a military reservist. The loans provide the 
amount of working capital that eligible small businesses need to pay 
their necessary obligations as they mature until operations return to 
normal after the essential employee is released from active service. 
Loans can be provided for a maximum amount of $2,000,000 and a maximum 
term of 30 years.
    Immediate Disaster Assistance Program (``IDAP''). The Immediate 
Disaster Assistance Program (``IDAP'') is a guaranteed disaster loan 
program for small businesses that have suffered physical damage or 
economic injury due to a declared disaster. An IDAP loan is an interim 
loan in an amount not to exceed $25,000 made by an IDAP lender to meet 
the immediate business needs of an IDAP borrower while approval of 
long-term financing from a disaster loan is pending with SBA. 
Currently, there is no funding available for IDAP loans.

B. Religious-Status-Based Exclusions in the Subject Programs and 
Conflict With Recent Supreme Court Decisions Construing the Free 
Exercise Clause

    Current regulatory provisions governing the ILP, Business Loan 
programs, EIDL, MREIDL, and IDAP all render ineligible to participate 
businesses that are ``[p]rincipally engaged in''--or businesses whose 
``principal activity'' is--``teaching, instructing, counseling or 
indoctrinating religion or religious beliefs, whether in a religious or 
secular setting.'' 13 CFR 109.400(b)(11), 120.110(k), 123.301(g), 
123.502(n), 123.702(b)(6). Notably, these exclusions of otherwise-
eligible participants are based not on any religious use of business 
loan funds or disaster assistance, but rather are based on the 
religious activities in which they generally engage, precluding them 
from even secular uses of business loan funds and disaster assistance. 
In short, they categorically disqualify otherwise-eligible faith-based 
organizations from receiving business loan funds and disaster 
assistance solely on account of their religious status.
    In two recent decisions, the Supreme Court has made clear that such 
religious-status-based exclusions from a public benefit violate the 
Free Exercise Clause of the First Amendment.
    In Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 
2012 (2017), the Court examined a state's ``policy of categorically 
disqualifying churches and other religious organizations from receiving 
grants under its playground resurfacing program.'' Id. at 2017. The 
Court held that the policy violated the Free Exercise Clause. It 
explained that ``[t]he Free Exercise Clause `protect[s] religious 
observers against unequal treatment' and subjects to the strictest 
scrutiny laws that target the religious for `special disabilities' 
based on their `religious status.' '' Id. at 2019 (quoting Church of 
Lukumi Babulu Aye, Inc. v. Hialeah, 508 U.S. 520, 533, 542 (1993)). The 
Court noted that it repeatedly had applied this ``basic principle'' to 
``confirm[ ] that denying a generally available benefit solely on 
account of religious identity imposes a penalty on the free exercise of 
religion that can be justified only by a state interest `of the highest 
order.' '' Id. (quoting McDaniel v. Paty, 435 U.S. 618, 628 (1978) 
(plurality opinion)). The state policy failed this stringent test. The 
Court concluded that, ``[i]n the face of the clear infringement on free 
exercise before us,'' the State's proffered interest--a ``policy 
preference for skating as far as possible from religious establishment 
concerns,'' even where the Establishment Clause did not prohibit the 
funding at issue--``cannot qualify as compelling.'' Id. at 2024.
    Three years later, in Espinoza v. Montana Department of Revenue, 
140 S. Ct. 2246 (2020), the Court examined a state-court decision that 
had applied a state constitutional provision to invalidate a tax-credit 
scholarships program solely on the ground that some scholarship 
recipients had sought to use their scholarships at religious schools. 
The question presented was ``whether the Free Exercise Clause 
precluded'' the state court ``from applying [the state constitutional] 
provision to bar religious schools from the scholarship program.'' Id. 
at 2254. The Court answered that question in the affirmative. The Court 
began by reiterating the basic principle that ``[t]he Free Exercise 
Clause . . . `protects religious observers against unequal treatment' 
and against `laws that impose special disabilities on the basis of 
religious status,''' id. (quoting Trinity Lutheran, 137 S. Ct. at 
2019), and by noting Trinity Lutheran's `` `unremarkable' conclusion 
that disqualifying otherwise eligible recipients from a public benefit 
`solely because of their religious character' imposes `a penalty on the 
free exercise of religion that triggers the most exacting scrutiny,' '' 
id. at 2255 (quoting Trinity Lutheran, 137 S. Ct. at 2021). The Court 
then observed that, as construed by the state court, the state 
constitutional provision ``bars religious schools from public benefits 
solely because of the religious character of the schools'' and ``also 
bars parents who wish to send their children to a religious school from 
those same benefits, again solely because of the religious character of 
the school.'' Id. at 2255. The Court was unpersuaded by the State's 
assertion that the status-based exclusion aimed to prevent religious 
uses of funds. ``Status-based discrimination,'' the Court concluded, 
``remains status based even if one of its goals or effects is 
preventing religious organizations from putting aid to religious 
uses.'' Id. at 2256. Accordingly, the Court held ``that strict scrutiny 
applies under Trinity Lutheran because [the state constitutional] 
provision discriminates based on religious status,'' id. at 2257, and 
that, like the state policy it examined in Trinity Lutheran, the state 
constitutional provision under review failed that test, id. at 2260-63.
    Like the state policy that the Court declared unconstitutional in 
Trinity Lutheran and the state constitutional provision that the Court 
declared unconstitutional in Espinoza, the five subject provisions deny 
a public benefit solely on account of religious status. Each 
categorically renders ineligible to participate in an SBA business loan 
or disaster assistance program all businesses that are ``[p]rincipally 
engaged in''--or businesses whose ``principal activity'' is--
``teaching, instructing, counseling or indoctrinating religion or 
religious beliefs, whether in a religious or secular setting.'' 13 CFR 
109.400(b)(11), 120.110(k), 123.301(g),

[[Page 5038]]

123.502(n), 123.702(b)(6). Notably, none of these exclusions concerns 
religious uses of business loan or disaster assistance funds. Instead, 
each prohibits an otherwise-eligible applicant from receiving such 
funds solely on account of its religious activities, even if it uses 
the funds for secular purposes. And any interest in prohibiting 
religious uses of funds cannot justify such a sweeping, status-based 
exclusion. As the Court held in Espinoza, ``[s]tatus-based 
discrimination remains status based even if one of its goals or effects 
is preventing religious organizations from putting aid to religious 
uses.'' 140 S. Ct. at 2256. Moreover, SBA cannot identify any other 
possible interest underlying the subject provisions, much less one that 
would pass muster under the `` `strictest scrutiny,' '' id. at 2257 
(quoting Trinity Lutheran, 137 S. Ct. at 2019), that the Court applies 
to such religious-status-based exclusions.
    In addition, the five subject regulatory provisions cannot be 
justified under Locke v. Davey, 540 U.S. 712 (2004), because they are 
not restrictions on religious uses of business loans or disaster 
assistance. Rather, they exclude certain recipients from even secular 
uses of business loans and disaster assistance based solely on their 
religious status.
    Therefore, the five subject provisions--13 CFR 109.400(b)(11), 
120.110(k), 123.301(g), 123.502(n), and 123.702(b)(6)--are inconsistent 
with the Free Exercise Clause of the First Amendment, as construed by 
the Supreme Court in Trinity Lutheran and Espinoza.

C. SBA's 530D Letter and Subsequent Review of SBA Regulations

    In light of the Supreme Court's decision in Trinity Lutheran, and 
after consultation with the U.S. Department of Justice, SBA determined 
that the religious-status-based exclusions in its Business Loan and 
EIDL programs--13 CFR 120.110(k) and 123.301(g)--are unconstitutional. 
In a letter submitted on April 3, 2020, pursuant to 28 U.S.C. 530D, SBA 
informed Congress of its determination. SBA explained that the 
provisions ``impermissibly exclude a class of potential recipients 
based solely on their religious identity, just like the State policy 
that was struck down in Trinity Lutheran''; that they ``categorically 
exclude religious organizations simply because they are religious''; 
and that ``[t]hese status-based prohibitions also cannot be justified 
under Locke v. Davey, 540 U.S. 712 (2004)'' because they ``are not 
limited to religious uses of business loans or economic disaster 
assistance, but rather exclude certain recipients from even secular 
uses based on their religious character.'' SBA notified Congress that 
it would ``refrain from enforcing, applying, or administering'' the 
subject provisions, and that it intended to ``propose amendments to 13 
CFR 120.110 and 123.301 that will conform these provisions to the 
Constitution.''
    Since submitting its 530D letter, SBA has reviewed its other 
regulations and identified three other substantially similar 
provisions--13 CFR 109.400(b)(11), 123.502(n), and 123.702(b)(6)--that 
suffer from the same constitutional defect identified in the 530D 
letter. Accordingly, SBA now proposes to remove all five of the invalid 
provisions to conform its regulations to the requirements of the Free 
Exercise Clause.

D. President Trump's Executive Order 13798 and the Attorney General's 
Memorandum on Religious Liberty

    SBA's proposal not only follows from recent Supreme Court precedent 
and will ensure compliance with the Constitution, but also accords with 
Executive Branch policy. On May 4, 2017, President Trump issued 
Executive Order 13798, Presidential Executive Order Promoting Free 
Speech and Religious Liberty, 82 FR 21675 (May 9, 2017). Executive 
Order 13798 states that ``Federal law protects the freedom of Americans 
and their organizations to exercise religion and participate fully in 
civic life without undue interference by the Federal Government'' and 
further provides that the executive branch will honor and enforce those 
protections. It also directed the Attorney General to ``issue guidance 
interpreting religious liberty protections in Federal law.'' 82 FR at 
21675. Pursuant to this instruction, the Attorney General, on October 
6, 2017, issued the Memorandum for All Executive Departments and 
Agencies, ``Federal Law Protections for Religious Liberty,'' 82 FR 
49668 (Oct. 26, 2017) (the ``Attorney General's Memorandum on Religious 
Liberty'').
    Consistent with Trinity Lutheran, the Attorney General's Memorandum 
on Religious Liberty emphasized that individuals and organizations do 
not forfeit religious-liberty protections by receiving government 
grants or otherwise interacting with Federal, state, or local 
governments, and that ``government may not exclude religious 
organizations as such from secular aid programs . . . when the aid is 
not being used for explicitly religious activities such as worship or 
proselytization.'' 82 FR at 49669.

II. Section by Section Analysis

A. Section 109.400--Eligible Small Business Concerns

    SBA is proposing to amend 13 CFR 109.400 to remove paragraphs 
(b)(11) and (b)(12) and redesignate the following paragraphs 
accordingly. 13 CFR 109.400(b) currently enumerates a list of ``types 
of businesses'' that ``are not eligible to receive a loan from an ILP 
Intermediary under'' the ILP. Included in this list is 13 CFR 
109.400(b)(11), ``[b]usinesses principally engaged in teaching, 
instructing, counseling or indoctrinating religion or religious 
beliefs, whether in a religious or secular setting[.]'' This exclusion 
based on religious status violates the Free Exercise Clause of the 
First Amendment to the Constitution. Therefore, SBA proposes to remove 
it but leave intact the other exclusions listed in 13 CFR 109.400(b).

B. Section 120.110--What businesses are ineligible for SBA business 
loans?

    SBA is proposing to amend 13 CFR 120.110 to remove paragraphs (k) 
and (l) and redesignate the following paragraphs accordingly. 13 CFR 
120.110 currently enumerates a list of ``types of businesses'' that 
``are ineligible for SBA business loans.'' Included in this list is 13 
CFR 120.110(k), ``[b]usinesses principally engaged in teaching, 
instructing, counseling or indoctrinating religion or religious 
beliefs, whether in a religious or secular setting[.]'' This exclusion 
based on religious status violates the Free Exercise Clause of the 
First Amendment to the Constitution. Therefore, SBA proposes to remove 
it but leave intact the other exclusions listed in 13 CFR 120.110.

C. Section 123.301--When would my business not be eligible to apply for 
an Economic Injury Disaster Loan?

    SBA is proposing to amend 13 CFR 123.301 to remove paragraph (g) 
and redesignate the following paragraph accordingly. 13 CFR 123.301 
currently enumerates a list of types of businesses that ``are not 
eligible for an economic [injury] disaster loan.'' Included in this 
list is 13 CFR 123.301(g), businesses that are ``[p]rincipally engaged 
in teaching, instructing, counseling or indoctrinating religion or 
religious beliefs, whether in a religious or secular setting[.]'' This 
exclusion based on religious status violates the Free Exercise Clause 
of the First Amendment to the Constitution. Therefore, SBA proposes to 
remove it but leave intact the other exclusions listed in 13 CFR 
123.301.

[[Page 5039]]

D. Section 123.502--Under what circumstances is your business 
ineligible to be considered for a Military Reservist Economic Injury 
Disaster loan?

    SBA is proposing to amend 13 CFR 123.502 to remove paragraph (n) 
and redesignate the following paragraph accordingly. 13 CFR 123.502 
currently enumerates a list of types of businesses that are 
``ineligible for a Military Reservist EIDL.'' Included in this list is 
13 CFR 123.502(n), listing businesses whose ``[p]rincipal activity is 
teaching, instructing, counseling or indoctrinating religion or 
religious beliefs, whether in a religious or secular setting[.]'' This 
exclusion based on religious status violates the Free Exercise Clause 
of the First Amendment to the Constitution. Therefore, SBA proposes to 
remove it but leave intact the other exclusions listed in 13 CFR 
123.502.

E. Section 123.702--What are the eligibility requirements for an IDAP 
loan?

    SBA is proposing to amend 13 CFR 123.702 to remove paragraph (b)(6) 
and redesignate the following paragraphs accordingly. 13 CFR 123.702(b) 
currently enumerates a list of types of businesses that are ``not 
eligible for an IDAP loan.'' Included in this list is 13 CFR 
123.702(b)(6), businesses that are ``[p]rincipally engaged in teaching, 
instructing, counseling or indoctrinating religion or religious 
beliefs, whether in a religious or secular setting[.]'' This exclusion 
based on religious status violates the Free Exercise Clause of the 
First Amendment to the Constitution. Therefore, SBA proposes to remove 
it but leave intact the other exclusions listed in 13 CFR 123.702(b).

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

A. Executive Order 12866

    Under Executive Order 12866, the Office of Information and 
Regulatory Affairs (OIRA) must determine whether this regulatory action 
is ``significant'' and, therefore, subject to the requirements of the 
executive order and subject to review by the Office of Management and 
Budget (OMB). Section 3(f) of Executive Order 12866 defines a 
``significant regulatory action'' as an action likely to result in a 
regulation that may (1) have an annual effect on the economy of $100 
million or more or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or state, local, or tribal 
governments or communities (also referred to as an ``economically 
significant'' regulation); (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impacts of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in 
Executive Order 12866.
    OIRA has determined that this proposed rule is a significant, but 
not economically significant, regulatory action subject to review by 
OMB under section 3(f) of Executive Order 12866.
    The proposed rule removes paragraphs that excluded from SBA's loan 
and disaster assistance programs types of businesses that were 
``principally engaged in teaching, instructing, counseling or 
indoctrinating religion or religious beliefs . . . .''
    Executive Order 12866 requires assessment of available 
alternatives. An alternative to the proposed rule's elimination of 
invalid provisions is to take no action regarding the invalid 
exclusions. This alternative is untenable as it would leave in place 
provisions that are invalid under the Free Exercise Clause. The other 
alternative to the proposed rule's elimination of the invalid 
provisions is to create new restrictions barring religious uses of 
business loans and disaster assistance. This alternative is unnecessary 
under the First Amendment; \1\ would create unnecessary regulation as 
current regulations already specify--in secular terms--the permissible 
uses of funds; \2\ and would thus be inconsistent with the 
Administration's deregulatory agenda, see Executive Order 13771, 
Presidential Executive Order on Reducing Regulation and Controlling 
Regulatory Costs, 82 FR 9,339 (Feb. 3, 2017).
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    \1\ See Religious Restrictions on Capital Financing for 
Historically Black Colleges and Universities, 43 Op. O.L.C.--**7-15 
(Aug. 15, 2019) (slip op.) (analyzing a loan program substantially 
similar to SBA's business loan programs and concluding that the 
Establishment Clause did not require any use-of-funds restrictions); 
Authority of FEMA to Provide Disaster Assistance to Seattle Hebrew 
Academy, 26 Op. O.L.C. 114, 122-32 (2002) (analyzing a disaster 
assistance program substantially similar to SBA's disaster 
assistance programs and concluding that the Establishment Clause 
permitted the provision of disaster assistance to a religious 
school).
    \2\ See 13 CFR 109.430, 120.120, 120.130, 120.131, 123.303, 
123.508, 123.509, and 123.704.
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    In accordance with Executive Order 12866, SBA has assessed the 
potential costs and benefits of this regulatory action. SBA estimates 
that no quantifiable effects exist from this proposed rule relative to 
a baseline that represents the state of SBA's programs in the absence 
of this action. Because these exclusions are not enforceable (and, 
indeed, SBA has informed Congress of its determination not to enforce 
13 CFR 120.110(k) and 123.301(g)), SBA expects the removal of these 
exclusions to impose no additional costs or significant benefits.
    In terms of benefits, SBA recognizes a nonquantifiable benefit to 
religious liberty that comes from removing exclusions of faith-based 
organizations, in conflict with the Free Exercise Clause. SBA also 
recognizes a nonquantifiable benefit to participants in SBA's loan and 
disaster assistance programs that comes from increased clarity in the 
regulatory requirements that apply to faith-based organizations 
operating in these programs. Benefits may also accrue from the 
increased capacity of faith-based social-service providers to provide 
services, both because these providers will be able to allocate 
resources with less uncertainty and because more faith-based 
organizations may participate. The SBA does not expect the proposed 
rule to materially alter the budgetary impact of its loan programs or 
the rights and obligations of recipients.

B. Executive Order 13771

    This proposed rule is not expected to be an Executive Order 13771 
regulatory action.

C. 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 burden. The action does not 
have retroactive or preemptive effect.

D. Executive Order 13132

    This proposed rule does not have federalism implications as defined 
in Executive Order 13132. It would 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, as specified in the Executive Order. 
As such it does not warrant the preparation of a Federalism Assessment.

E. Paperwork Reduction Act, 44 U.S.C., Ch. 35

    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this rule will not

[[Page 5040]]

impose any new reporting or record keeping requirements.

F. Regulatory Flexibility Act, 5 U.S.C. 601-612

    When an agency issues a rulemaking proposal, the Regulatory 
Flexibility Act (``RFA'') generally requires the agency to ``prepare 
and make available for public comment an initial regulatory flexibility 
analysis'' that will ``describe the impact of the proposed rule on 
small entities.'' 5 U.S.C. 603(a). But the RFA allows the head of an 
agency to certify a rule, in lieu of preparing an analysis, if the 
proposed rulemaking is not expected to have a significant economic 
impact on a substantial number of small entities. 5 U.S.C. 605(b).
    The RFA defines ``small entity'' to include small businesses, small 
organizations, and small governmental jurisdictions. 5 U.S.C. 601(6). 
This proposed rule concerns participation in SBA's business loan and 
disaster assistance programs by certain faith-based organizations. As 
such, the rule relates to small organizations.
    Small organizations that are the subject of this proposed rule 
include entities in NAICS Code 813110--Religious Organizations. 
According to the Census Bureau's Statistics of U.S. Businesses (SUSB), 
in 2012, approximately 182,000 organizations in this NAICS code met the 
definition for SBA's Small Business Size Standards, as updated in 
2019.\3\ The number of those organizations that meet the general 
requirements for eligibility to participate in SBA's business loan and 
disaster assistance programs is likely much smaller.
---------------------------------------------------------------------------

    \3\ According to the SUSB, 183,411 establishments were under 
NAICS Code 813110 in 2012, the last year for which this data set is 
available. Of the total number of establishments, 181,298 have 
annual receipts under $7.5 million. SBA uses a revenue standard for 
determining small businesses in NAICS 813110. In the 2019 SBA Table 
of Size Standards, that revenue standard was $8 million and below. 
SUSB information is arranged in dollar ranges of receipt size, with 
the next category ranging from above $7.5 million to $9,999,999, 
which is in excess of SBA's small business standard. 660 
establishments were in that category.
---------------------------------------------------------------------------

    Considering that the proposed rule imposes no costs while ensuring 
that SBA's regulations conform with requirements of the Free Exercise 
Clause, SBA estimates that the proposed rulemaking will not have a 
significant economic impact on a substantial number of small entities. 
SBA does not believe that the impact will be significant within any 
size groupings because this proposed rule eliminates invalid provisions 
in its business loan and disaster assistance programs. Accordingly, the 
Administrator of the SBA hereby certifies that this rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities. SBA invites comment from members of the public who 
believe there will be a significant impact on any small entities, 
including small businesses.

List of Subjects

13 CFR Part 109

    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 123

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

    Accordingly, for the reasons stated in the preamble, SBA proposes 
to amend 13 CFR parts 109, 120, and 123 as follows:

PART 109--INTERMEDIATE LENDING PILOT PROGRAM

0
1. The authority citation for 13 CFR part 109 continues to read as 
follows:

    Authority: 15 U.S.C. 634(b)(6), (b)(7), and 636(l).


Sec.  109.400  [Amended]

0
2. Amend Sec.  109.400 by removing paragraph (b)(11) and redesignating 
paragraphs (b)(13) through (23) as paragraphs (b)(11) through (21), 
respectively.

PART 120--BUSINESS LOANS

0
3. The authority citation for 13 CFR 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), and note, 650, 657t, and note, 657u, and 
note, 687(f), 696(3) and (7), and note, and 697(a) and (e), and 
note.


Sec.  120.110  [Amended]

0
4. Amend Sec.  120.110 by removing paragraph (k) and redesignating 
paragraphs (m) through (s) as paragraphs (k) through (q), respectively.

PART 123--DISASTER LOAN PROGRAM

0
5. The authority citation for 13 CFR part 123 continues to read as 
follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 636(d), and 657n.


Sec.  123.301  [Amended]

0
6. Amend Sec.  123.301 by:
0
a. Adding the word ``or'' to the end of paragraph (f); and
0
b. Removing paragraph (g) and redesignating paragraph (h) as paragraph 
(g).


Sec.  123.502  [Amended]

0
7. Amend Sec.  123.502 by:
0
a. Adding the word ``or'' to the end of paragraph (m); and
0
b. Removing paragraph (n) and redesignating paragraph (o) as paragraph 
(n).


Sec.  123.702  [Amended]

0
8. Amend Sec.  123.702 by removing paragraph (b)(6) and redesignating 
paragraphs (b)(7) through (25) as paragraphs (b)(6) through (24), 
respectively.

    Signed in Washington, DC.
Jovita Carranza,
Administrator.
[FR Doc. 2021-00446 Filed 1-14-21; 11:15 am]
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