[Federal Register: April 23, 1998 (Volume 63, Number 78)] [Proposed Rules] [Page 20140-20141] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr23ap98-27] ----------------------------------------------------------------------- SMALL BUSINESS ADMINISTRATION 13 CFR Part 123 Disaster Loan Program AGENCY: Small Business Administration (SBA). ACTION: Proposed rule. ----------------------------------------------------------------------- SUMMARY: SBA is proposing to amend its regulations to conform the eligibility criteria for disaster loans to those applicable in SBA's business loan program. Thus, under the proposed rule, a business could not obtain a physical disaster loan if it is engaged in any illegal activity; if it is a government owned entity (other than one owned or controlled by a Native American tribe); or if it engages in products or services of a prurient sexual nature. Under the proposed rule, a business would not be eligible for an economic injury disaster loan if more than one-third of its revenues are from legal gambling operations or from packaging SBA loans; if it is principally engaged in teaching or indoctrinating religion; or is primarily engaged in political or lobbying activities. DATES: Comments must be submitted on or before May 26, 1998. ADDRESSES: Comments may be mailed to Bernard Kulik, Associate Administrator for Disaster Assistance, Small Business Administration, 409 Third Street, SW., Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: Bernard Kulik, 202-205-6734. SUPPLEMENTARY INFORMATION: Under the proposed rule, SBA would amend Sec. 123.201 of its regulations so that an applicant would not be eligible for a physical disaster business loan if it is engaged in any illegal activity; if it is a government owned entity (other than a business owned or controlled by a Native American tribe); or if the business (1) presents live performances of a prurient sexual nature or (2) derives directly or indirectly more than de minimis gross revenue from activities of a prurient sexual nature. This proposed rule would codify SBA's existing policy of using the same ineligibility criteria for SBA's disaster and business loan programs. Thus, a business that would not be eligible to receive an SBA guaranteed business loan because it met these criteria, would also not be eligible to obtain a physical disaster loan. Under this proposed rule amending Sec. 123.301 of SBA's regulations, a business would not be eligible for an economic injury disaster loan if it (1) derived more than one-third of its gross annual revenue from legal gambling activities; (2) earned more than one-third of its gross annual revenue from packaging SBA loans; (3) was principally engaged in teaching, instructing, counselling or indoctrinating religion or religious beliefs, whether in a religious or secular setting; or (4) primarily engaged in political or lobbying activities. These proposed changes would codify SBA's existing policy of using the same ineligibility criteria for its economic injury disaster and business loan program. Thus, if a business is not eligible, because of these criteria, for an SBA guaranteed loan under the business loan program, it would not be eligible for an economic injury disaster loan. SBA is proposing to correct a typographical error in Sec. 123.202(a) by substituting ``lesser'' for ``greater'' in the first sentence which would then read: ``Disaster business loans, including both physical disaster and economic injury loans to the same borrower, together with its affiliates, cannot exceed the lesser of the uncompensated physical loss and economic injury or $1.5 million.'' This would ensure that an applicant receives disaster assistance for an uncompensated loss or injury without obtaining excessive SBA assistance at lower than market rates. Compliance With Executive Orders 12612, 12778, and 12866, the Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork Reduction Act (44 U.S.C. Ch 35) SBA certifies that this proposed rule does not constitute a significant rule within the meaning of Executive Order 12866 and does not have significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. et seq. It is not likely to have an annual economic effect of $100 million or more, result in a major increase in costs or prices, or have a significant adverse effect on competition or the United States economy. This proposed rule codifies current SBA practices and will not affect additional businesses or impose any costs For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch 35, SBA certifies that this proposed rule contains no new reporting or record keeping requirements. For purposes of Executive Order 12612, SBA certifies that this proposed rule has no federalism implications warranting the preparation of a Federalism Assessment. For purposes of Executive Order 12778, SBA certifies that this rule is drafted, to the extent practicable, in accordance with the standards set forth in section 2 of that Order. (Catalog of Federal Domestic Assistance Programs, No. 59.012 and 59.008) List of Subjects in 13 CFR Part 123 Disaster assistance, Loan programs-business, Small businesses. Accordingly, pursuant to the authority contained in section 5(b)(6) of the Small Business Act (15 U.S.C. 634(b)(6)), SBA proposes to amend part 123, chapter I, title 13, Code of Federal Regulations, as follows: PART 123--DISASTER LOAN ASSISTANCE 1. The authority citation for part 123 would continue to read as follows: Authority: 15 U.S.C. 634(b)(6), 636(b), 636(c) and 636(f); Pub. L. 102-395, 106 Stat. 1828, 1864; and Pub. L. 103-75, 107 Stat. 739. 2. Section 123.201 would be amended by adding paragraphs (d), (e), and (f) to read as follows: Sec. 123.201 When am I not eligible to apply for a physical disaster business loan? * * * * * (d) You are not eligible if your business is engaged in any illegal activity. (e) You are not eligible if you are a government owned entity (except for a business owned or controlled by a Native American tribe). (f) You are not eligible if your business: (1) Presents live performances of a prurient sexual nature or (2) Derives directly or indirectly more than de minimis gross revenue through the sale of products or services, or the [[Page 20141]] presentation of any depictions or displays, of a prurient sexual nature. 3. Section 123.202(a) would be amended by revising the first sentence to read as follows: Sec. 123.202 How much can my business borrow with a physical disaster business loan? (a) Disaster business loans, including both physical disaster and economic injury loans to the same borrower, together with its affiliates, cannot exceed the lesser of the uncompensated physical loss and economic injury or $1.5 million. * * * 4. Section 123.301 would be amended by removing ``gambling'' and ``loan packaging'' in paragraph (a), removing ``or'' at the end of paragraph (c), removing the period and adding ``; or'' at the end of paragraph (d), and adding paragraphs (e), (f), (g), and (h) to read as follows: Sec. 123.301 When would my business not be eligible to apply for an economic injury disaster loan? * * * * * (e) Deriving more than one-third of gross annual revenue from legal gambling activities; (f) A loan packager which earns more than one-third of its gross annual revenue from packaging SBA loans; (g) Principally engaged in teaching, instructing, counselling or indoctrinating religion or religious beliefs, whether in a religious or secular setting; or (h) Primarily engaged in political or lobbying activities. Dated: April 14, 1998. Aida Alvarez, Administrator. [FR Doc. 98-10757 Filed 4-22-98; 8:45 am] BILLING CODE 8025-01-P