[Federal Register Volume 88, Number 75 (Wednesday, April 19, 2023)]
[Rules and Regulations]
[Pages 24107-24110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08010]



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 Rules and Regulations
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  Federal Register / Vol. 88, No. 75 / Wednesday, April 19, 2023 / 
Rules and Regulations  

[[Page 24107]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 123

RIN 3245-AH33


Disaster Assistance Loan Program Statutory Updates

AGENCY: U.S. Small Business Administration.

ACTION: Direct final rule.

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SUMMARY: SBA is amending the disaster assistance regulations to reflect 
changes made to the Small Business Act by several recent statutes. 
These changes provide two new types of disaster declaration authority 
and revise eligibility for the Military Reservist Economic Injury 
Disaster Loan (MREIDL) program. This direct final rule conforms the 
regulations to the Act by adopting the new statutory requirements 
without change.

DATES: This rule is effective June 5, 2023 without further action, 
unless significant adverse comment is received by May 19, 2023. If 
significant adverse comment is received, SBA will publish a timely 
withdrawal of the rule in the Federal Register.

ADDRESSES: You may submit comments, identified by number SBA-2023-0001 
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 Eric Wall at 
[email protected] and highlight the information that you consider to be 
CBI and explain why you believe SBA should hold this information as 
confidential. All other comments must be submitted through the Federal 
eRulemaking Portal described above. 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: Eric Wall, Office of Disaster Recovery 
and Resilience, 409 3rd St. SW, Washington, DC 20416, (202) 205-6739.

SUPPLEMENTARY INFORMATION: 

I. Background

    This direct final rule implements regulatory changes required by 
three recent laws amending the Small Business Act: The Disaster 
Assistance for Rural Communities Act, Public Law 117-249 (December 20, 
2022); the Coronavirus Aid, Relief, and Economic Security Act (CARES 
Act), Public Law 116-136 (March 27, 2020); and the National Defense 
Authorization Act for Fiscal Year 2020 (NDAA 2020), Public Law 116-92 
(December 20, 2019). SBA has already implemented all of these statutory 
changes except for the new rural declaration authority authorized by 
the Disaster Assistance for Rural Communities Act, which requires SBA 
to issue implementing regulations within 120 days after enactment. The 
specific regulatory changes are further described below.

II. Description of Regulatory Changes

    SBA is revising 13 CFR 123.3, How are disaster declarations made?, 
by adding two additional ways SBA is authorized to declare disasters. 
New paragraph (a)(6) describes SBA's declaration authority under the 
Disaster Assistance for Rural Communities Act. 15 U.S.C. 636(b)(16). 
Under this new authority, SBA is authorized to declare a disaster in a 
``rural area'' upon request by the Governor of the State or the Chief 
Executive of the Indian tribal government in which the rural area is 
located if the following conditions are met: (1) the rural area has 
received a major disaster declaration from the President under Section 
401 of the Robert T. Stafford Disaster Relief and Emergency Assistance 
Act (the Stafford Act) (42 U.S.C. 5170),\1\ (2) individual assistance 
under section 408 of the Stafford Act was not authorized for the rural 
area, and (3) any home, small business concern, private nonprofit 
organization, or small agricultural cooperative in the rural area has 
incurred ``significant damage.'' The Disaster Assistance for Rural 
Communities Act defines ``rural area'' as any county or other political 
subdivision of a State, the District of Columbia, or a territory or 
possession of the United States that is designated as a rural area by 
the Bureau of the Census. The Act defines ``significant damage'' as 
uninsured losses of 40 percent or more of the estimated fair 
replacement value or pre-disaster fair market value of the damaged 
property, whichever is lower. SBA has incorporated these new statutory 
definitions into new Sec.  123.3(a)(6).
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    \1\ SBA notes that the Senate Report to the Disaster Assistance 
for Rural Communities Act states that Congress intends that SBA's 
rural disaster declaration authority is triggered solely in 
situations where the President has declared a major disaster limited 
to public assistance only. S. Rep. No. 117-103, Section I (May 3, 
2022).
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    SBA is also adding paragraph (a)(7) to describe SBA's new 
declaration authority authorized by the CARES Act. 15 U.S.C. 
636(b)(2)(D). Section 1110(f) of the CARES Act provides SBA the 
authority to declare an economic injury disaster following a 
declaration of an emergency involving Federal primary responsibility 
under Section 501(b) of the Stafford Act by the President. 42 U.S.C. 
5191(b). When the President makes such a declaration, SBA will ``deem 
that such an emergency affects each State or subdivision thereof 
(including counties), and that each State or subdivision has sufficient 
economic damage to small business concerns to qualify for assistance 
under this paragraph and [SBA] shall accept applications for such 
assistance immediately.'' See second proviso of paragraph following 15 
U.S.C. 636(b)(2)(E). This means that after the President declares an 
emergency involving Federal primary responsibility under Section 501(b) 
of the Stafford Act, SBA will immediately make an economic injury 
disaster declaration using this new authority. Once SBA makes this 
declaration, small businesses and nonprofit organizations of any size 
would be eligible to apply for economic injury disaster loans.
    SBA is revising 13 CFR 123.4, What is a disaster area and why is it 
important?, to provide that contiguous counties are not included in the 
disaster area for rural disaster declarations. SBA is adopting this 
interpretation based on clear Congressional intent, as stated in the 
Senate Report to the Disaster Assistance for Rural Communities Act: 
``The SBA declaration authorized under

[[Page 24108]]

paragraph 16 of section 7(b) may not be applied to contiguous 
counties.'' S. Rep. No. 117-103, Section IV (May 3, 2022). When SBA 
makes a rural disaster declaration, physical and economic injury 
disaster loans will be available only in the declared disaster area, 
not in any counties or political subdivisions that are contiguous to 
the declared area.
    SBA is also revising this provision to state that when SBA issues 
an economic injury disaster declaration in response to a determination 
of an emergency involving Federal primary responsibility by the 
President, the disaster area shall include each State or subdivision 
thereof (including counties) included in the President's emergency 
determination. If the President determines that a nation-wide emergency 
exists, then SBA will issue a nation-wide economic injury disaster 
declaration.
    SBA is revising several sections in 13 CFR part 123, subpart F, 
Military Reservist Economic Injury Disaster Loans, to reflect changes 
made by Sec. 877 of the NDAA 2020. The NDAA 2020 expanded eligibility 
for Military Reservist Economic Injury Disaster Loans (MREIDLs) from 
reservists called to ``active duty'' to reservists called to ``active 
service.'' The term ``active service'' has the meaning given in 10 
U.S.C. 101(d)(3) and includes both ``active duty'' and ``full time 
National Guard duty.'' \2\ The NDAA also removed the requirement that 
the reservist be serving during a ``period of military conflict'' and 
replaced it with the requirement that the reservist be serving for a 
period of more than 30 consecutive days.\3\
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    \2\ ``Active duty'' is defined as full-time duty in the active 
military service of the United States. Such term includes full-time 
training duty, annual training duty, and attendance, while in the 
active military service, at a school designated as a service school 
by law or by the Secretary of the military department concerned. 10 
U.S.C. 101(d)(1). The term ``full-time National Guard duty'' means 
training or other duty, other than inactive duty, performed by a 
member of the Army National Guard of the United States or the Air 
National Guard of the United States in the member's status as a 
member of the National Guard of a State or territory, the 
Commonwealth of Puerto Rico, or the District of Columbia under 
section 316, 502, 503, 504, or 505 of title 32 [32 USCS Sec. Sec.  
316, 502, 503, 504, or 505] for which the member is entitled to pay 
from the United States or for which the member has waived pay from 
the United States. 10 U.S.C. 101(d)(5).
    \3\ ``Period of military conflict'' was defined as (i) a period 
of war declared by the Congress; (ii) a period of national emergency 
declared by the Congress or by the President; or (iii) a period of a 
contingency operation, as defined in section 101(a) of title 10, 
United States Code. See Sec. 402(a) of Public Law 106-50, (August 
17, 1999).
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    SBA is revising 13 CFR 123.500, Definitions, paragraph (b) to 
reflect the new definition of military reservist as a member of a 
reserve component of the Armed Forces ordered to active service. SBA is 
also revising paragraph (c) to remove the definition of ``period of 
military conflict'' and replace it with the definition of ``active 
service'', as provided in the NDAA 2020.
    SBA is revising 13 CFR 123.501, Under what circumstances is our 
business eligible to be considered for a Military Reservist Economic 
Injury Disaster Loan?, to remove the words ``active duty'' and replace 
them with ``active service'' in paragraph (a). SBA is also revising 
paragraph (c) to remove the requirement that the essential employee be 
called to active duty during a military conflict and replace it with 
the requirement that the essential employee be called to active service 
for a period of more than 30 consecutive days.
    SBA is similarly revising 13 CFR 123.507, Under what circumstances 
will SBA consider waiving the $2 million loan limit?, to remove the 
requirement that the essential employee be called to active duty during 
a military conflict and replace it with the requirement that the 
essential employee be called to active service for a period of more 
than 30 consecutive days.
    Finally, SBA is revising Sec. Sec.  123.503, 123.504(a) and (f), 
123.505, 123.506, 123.507, and 123.511 to remove the words ``active 
duty'' and replace them with ``active service.'' All of the changes to 
13 CFR subpart F have already been implemented; this direct final rule 
merely updates the regulations to reflect current statutory 
requirements.

II. Justification for Direct Final Rule

    Agencies typically utilize direct final rulemakings for routine, 
non-controversial regulatory actions that are unlikely to receive 
adverse comments. In direct final rulemaking, an agency publishes a 
final rule with a statement that the rule will go into effect unless 
the agency receives significant adverse comment within a specified 
period. Significant adverse comments are comments that provide strong 
justifications why the rule should not be adopted or for changing the 
rule. If the agency receives no significant adverse comment in response 
to the direct final rule, the rule goes into effect. If the agency 
receives significant adverse comment, the agency withdraws the direct 
final rule and may instead issue a proposed rulemaking.
    SBA has determined that the regulatory changes addressed in this 
direct final rulemaking are routine, non-controversial, and not likely 
to result in adverse comments. SBA is implementing changes required by 
statute and, with the exception of the rural disaster declaration 
authority, all of the changes are already in effect--SBA is merely 
updating the regulations in order to conform to the statute. In 
implementing the rural disaster declaration authority, SBA is adopting 
regulations that conform to the statute and legislative history without 
any extraneous interpretation. Because the changes in this rule are 
prescribed by statute, SBA does not expect significant adverse 
comments.

Compliance With Executive Orders 12866, 12988, 13132, 13175, the 
Congressional Review Act (5 U.S.C. 801-808), Paperwork Reduction Act 
(44 U.S.C., Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-
612)

Executive Orders 12866 and 13563

    The Office of Management and Budget has determined that this rule 
is not a significant regulatory action under Executive Order 12866, and 
a Regulatory Impact Analysis is not required. No action is warranted 
for Executive Order 13563 as the rule is not significant and no 
Regulatory Impact Analysis is required.

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 preemptive effect or retroactive effect.

Executive Order 13132

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

Executive Order 13175

    This rule does not have tribal implications under Executive Order 
13175, Consultation and Coordination with Indian Tribal Governments, 
because it does not have a substantial direct effect on one or more 
Indian tribes, on the relationship between the Federal Government and 
Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.

Congressional Review Act

    Subtitle E of the Small Business Regulatory Enforcement Fairness 
Act of

[[Page 24109]]

1996, also known as the Congressional Review Act or CRA, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. SBA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States. A 
major rule under the CRA cannot take effect until 60 days after it is 
published in the Federal Register. The Office of Information and 
Regulatory Affairs has determined that this rule is not a ``major 
rule'' as defined by 5 U.S.C. 804(2). Therefore, this rule is not 
subject to the 60-day restriction.

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

    SBA has determined that this rule does not impose additional 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act, 44 U.S.C., Chapter 35.

Regulatory Flexibility Act, 5 U.S.C. 601

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, 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.
    Rules that are exempt from notice and comment are also exempt from 
the RFA requirements, including conducting a regulatory flexibility 
analysis, such as when--among other exceptions--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 Act, Ch. 1. p. 9. 
Since this rule is exempt from notice and comment, SBA is not required 
to conduct a regulatory flexibility analysis.

List of Subjects in 13 CFR Part 123

    Disaster assistance, Loan mitigation, Loan programs--physical 
disaster (home, business).

    For the reasons set forth in the preamble, the SBA amends 13 CFR 
part 123 as follows:

PART 123--DISASTER LOAN PROGRAM

0
1. The authority citation for part 123 is revised to read as follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 636(d), 657n, and 
9009.


0
2. Amend Sec.  123.3 by revising paragraph (a) introductory text and 
adding paragraphs (a)(6) and (7) to read as follows:


Sec.  123.3  How are disaster declarations made?

    (a) There are seven ways in which disaster declarations are issued 
which make SBA disaster loans possible:
* * * * *
    (6) SBA makes a physical disaster declaration in a rural area 
(rural disaster declaration) upon request from the Governor of the 
State or the Chief Executive of the Indian tribal government in which 
the rural area is located. Rural area means any county or other 
political subdivision of a State, the District of Columbia, or a 
territory or possession of the United States that is designated as a 
rural area by the Bureau of the Census. The following conditions must 
be met:
    (i) The President has declared a Major Disaster for the rural area, 
but has not authorized individual assistance; and
    (ii) Any home, small business concern, private nonprofit 
organization, or small agricultural cooperative in the rural area has 
incurred significant damage. Significant damage means uninsured losses 
of 40 percent or more of the estimated fair replacement value or pre-
disaster fair market value of the damaged property, whichever is lower.
    (7) SBA makes an economic injury disaster declaration in response 
to a determination of an emergency involving Federal primary 
responsibility by the President.
* * * * *

0
3. Revise Sec.  123.4 to read as follows:


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

    Each disaster declaration defines the geographical areas affected 
by the disaster. Only those victims located in the declared disaster 
area are eligible to apply for SBA disaster loans. When the President 
declares a major disaster, the Federal Emergency Management Agency 
defines the disaster area. In major disasters, economic injury disaster 
loans and IDAP 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 or IDAP loans in counties contiguous to 
the disaster area. Except for rural disaster declarations (as defined 
in Sec.  123.3), disaster declarations issued by SBA include contiguous 
counties for both physical, economic injury and, in some cases IDAP 
assistance. Rural disaster declarations do not include assistance for 
contiguous counties. Contiguous counties or other political 
subdivisions are those land areas which abut the land area of the 
declared disaster area without geographic separation other than by a 
minor body of water, not to exceed one mile between the land areas of 
such counties. When SBA issues an economic injury disaster declaration 
in response to a determination of an emergency involving Federal 
primary responsibility by the President, the disaster area shall 
include each State or subdivision thereof (including counties) included 
in the President's emergency determination.

0
4. Amend Sec.  123.500 by revising paragraphs (b) and (c) to read as 
follows:


Sec.  123.500  Definitions.

* * * * *
    (b) Military reservist is a member of a reserve component of the 
Armed Forces ordered to active service.
    (c) Active service has the meaning given in 10 U.S.C. 101(d)(3):
    (1) Service on active duty; or
    (2) Full-time National Guard duty.
* * * * *

0
5. Amend Sec.  123.501 by revising paragraphs (a) and (c) to read as 
follows:


Sec.  123.501  Under what circumstances is our business eligible to be 
considered 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 service,
* * * * *
    (c) The essential employee has been called-up to active service for 
a period of more than 30 consecutive days,
* * * * *

0
6. Amend Sec.  123.507 by revising paragraph (b) to read as follows:


Sec.  123.507  Under what circumstances will SBA consider waiving the 
$2 million loan limit?

* * * * *
    (b) Your small business is in imminent danger of going out of 
business as a result of one or more essential employees being called up 
to active service for a period of more than 30 consecutive days, and a 
loan in excess of $2 million is necessary to reopen or keep open the 
small business; and
* * * * *

[[Page 24110]]

Sec.  123.503, 123.504, 123.505, 123.506, 123.511  [Amended]

0
7. In addition to the amendments set forth above, in part 123, remove 
the words ``active duty'' and add in their place the words ``active 
service'' in the following places:
0
a. Section 123.503;
0
b. Section 123.504(a) (three places) and (f);
0
c. Section 123.505 heading and text;
0
d. Section 123.506; and
0
e. Section 123.511 (two places).

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2023-08010 Filed 4-18-23; 8:45 am]
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