2024-27028. Disaster Assistance Loan Program Updates

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Small Business Administration

1. 13 CFR Part 123
2. RIN 3245-AI20

AGENCY:

U.S. Small Business Administration.

ACTION:

Direct final rule.

SUMMARY:

This direct final rule amends the U.S. Small Business Administration's (SBA or Agency) regulations governing the SBA Disaster Loan Program by revising the definition of contiguous counties, clarifying the timeline for a governor's request to be delivered to an SBA Disaster Assistance Field Operations Center, and modernizing language for clarity and consistency.

DATES:

Effective date: This final rule is effective January 21, 2025 without further action. If significant adverse comment is received, SBA will publish a timely withdrawal of the rule in the Federal Register .

Applicability date: This rule is applicable for disasters declared on or after January 21, 2025.

Comment date: Comments must be received on or before December 20, 2024.

ADDRESSES:

You may submit comments, identified by docket number SBA-2024-0015 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 [e-mail] 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, [phone].

SUPPLEMENTARY INFORMATION:

I. Background

The SBA's Disaster Loan Program provides critical assistance to communities after a disaster. Pursuant to Section 7(b) of the Small Business Act, 15 U.S.C. 636(b) (the Act), the SBA is authorized to make direct loans to homeowners, renters, businesses, and non-profit organizations that have been adversely affected by a disaster. Also pursuant to the Act, the SBA may declare an Agency disaster in areas demonstrating substantial physical or economic damage because of natural or other disasters.

With natural disasters increasing in size, severity, and frequency across the United States and its territories, SBA is expanding the definition of contiguous counties, clarifying certain aspects of disaster declaration requests, and simplifying language to ensure consistency.

SBA believes these changes are necessary to:

• Increase efficiencies in the administration and delivery of the disaster loan program to better achieve mission and improve outcomes for economic recovery,
• Recognize the unique economic circumstances of island chains,
• Clarify the timeline for Governor submissions of disaster requests, and
• Ensure consistency and clarity of language within SBA guidance documents.

II. Description of Regulatory Changes

SBA is amending the language in 13 CFR 123.2 (What are disaster loans and disaster declarations?), 123.3 (How are disaster declarations made?), and 123.4 (What is a disaster area and why is it important?) to update the language from “disaster victims” to “disaster survivors.” This update will modernize the language in the CFR to reflect the strength of those who have survived a disaster. The change will also align the regulations with the terminology currently used by the SBA Disaster Loan Program.

SBA is amending 13 CFR 123.2 to subdivide the paragraph into two separate paragraphs. This technical change separates the definition of disaster loans and disaster declarations into a format easier to comprehend.

SBA is amending the first sentence in 13 CFR 123.3(a)(3)(i), How are disaster declarations made?, to replace the word U.S. possession with “territory” to ( print page 91537) ensure the language is updated with current use and meaning. SBA is also eliminating the word possession in § 123.2(a)(6).

SBA is amending 13 CFR 123.3(a)(3)(iii), How are disaster declarations made?, to include the Chief Executive of an Indian tribal government as an authority that can request an SBA physical disaster declaration. This change clarifies what is already permitted, correcting the previous oversight and aligning with current practice.

SBA is amending the regulatory language in 13 CFR 123.3(a)(5), How are disaster declarations made?, to ensure the language is consistent with the current language in 13 CFR 123.3(a)(3)(iii). This change grants SBA the flexibility to extend the timeframe for submitting declaration requests to the Field Operations Center serving the jurisdiction.

SBA is amending the regulatory definition of “contiguous counties” in 13 CFR 123.4, What is a disaster area and why is it important?, to increase the mileage between counties geographically separated by a minor body of water from one mile to five miles. The geographic separation between counties is being extended to encompass those counties that are separated by minor bodies of water but that have physical and economic connections and commerce needs with the primary county. SBA reviewed disaster areas separated by water and determined that the current one-mile limit is too restrictive. Increasing the geographic separation between counties to 5 miles will enable disaster assistance to reach a broader area. The additional mileage removes the barriers created by wide rivers, such as the Arkansas, Colorado, Columbia, Mississippi, Missouri, Neuse, Ohio, Platte, Red, St. Lawrence, Susquehanna, Tennessee, and Yellowstone rivers. This increase also removes the barriers created by other bodies of water such as smaller lakes and bays.

This rule also revises the definition of “contiguous” to state that individual islands of geographically isolated island chains are contiguous to each other. These islands are unique, because they are isolated from the mainland and other direct commerce hubs. The revised definition states that contiguous island chains include, but are not limited to, Hawai'i, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands. Under the current regulation, these islands are not considered contiguous to each other because the separation between them is more than one mile. However, all of the counties within these island chains are economically reliant on each other for trade and commerce and all are affected by a disaster that impacts one particular island/county.

III. Justification for Direct Final Rule

In general, SBA publishes a rule for public comment before issuing a final rule in accordance with the Administrative Procedure Act. 5 U.S.C. 553. The Administrative Procedure Act provides an exception to this standard rulemaking process, however, where an agency finds good cause to adopt a rule without prior public participation. 5 U.S.C. 553(b)(B). The good cause requirement is satisfied when prior public participation is impracticable, unnecessary, or contrary to the public interest. 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 will go into effect without further action. If the agency receives significant adverse comment, the agency will withdraw 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 significant adverse comments.

Compliance With Executive Orders 12866, 12988, 13132, 13175, 13563, 14094 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, 13563 and 14094

SBA is issuing this direct final rulemaking in conformance with Executive Orders 12866, 13563, and 14094. Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 14094 reaffirms, supplements, and updates Executive Order 12866 and further directs agencies to solicit and consider input from a wide range of affected and interested parties through a variety of means. The Office of Management and Budget has determined that this rule does not constitute a significant regulatory action under Executive Order 12866, as amended by Executive Order 14094. SBA has developed this rule in a manner consistent with these requirements and thoroughly examined the costs and benefits as well as availability of regulatory alternatives associated with its implementation.

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, on the distribution of power and responsibilities between the Federal Government and Indian Tribes and no substantial direct compliance costs on Indian Tribal governments nor any rules with Tribal implications that preempts Tribal law.

Congressional Review Act

This rule has been determined not to meet the criteria set forth in 5 U.S.C. 804(2). SBA will submit the rule to Congress and the Government Accountability Office consistent with ( print page 91538) the Congressional Review Act's requirements.

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) and economic injury disaster (business)

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

PART 123—DISASTER LOAN PROGRAM

1. The authority citation for part 123 continues to read as follows:

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

2. Revise § 123.2 to read as follows:

§ 123.2

What are disaster loans and disaster declarations?

(a) SBA offers low interest, fixed rate loans to disaster survivors, enabling them to repair or replace property damaged or destroyed in declared disasters. It also offers such loans to affected small businesses to help them recover from economic injury caused by such disasters. SBA also offers interim guaranteed disaster loans, in participation with financial institutions, to affected small businesses (“IDAP loans”).

(b) Disaster declarations are official notices recognizing that specific geographic areas have been damaged by floods and other acts of nature, riots, civil disorders, or industrial accidents such as oil spills. These disasters are sudden events which cause severe physical damage, and do not include slower physical occurrences such as shoreline erosion or gradual land settling. However, for purposes of economic injury disaster loans only, they do include droughts and below average water levels in the Great Lakes or on any body of water in the United States that supports commerce by small businesses. Sudden events that cause substantial economic injury may be disasters even if they do not cause physical damage to a survivor's property. Past examples include ocean conditions causing significant displacement (major ocean currents) or closure (toxic algae blooms) of customary fishing waters, as well as contamination of food or other products for human consumption from unforeseeable and unintended events beyond the control of the survivors.

3. Amend § 123.3 by revising (a)(3)(i) and (iii), (a)(5), (a)(6) introductory text, and (b) to read as follows:

§ 123.3

How are disaster declarations made?

(a) * * *

(3) * * *

(i) In any county or other smaller political subdivision of a State or U.S. territory, at least 25 homes or 25 businesses, or a combination of at least 25 homes, businesses, or other eligible institutions, each sustain 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; or

* * * * *

(iii) The Governor of the State or the Chief Executive of the Indian Tribal government in which the disaster occurred submits a written request to SBA for a physical disaster declaration by SBA. This request should be delivered to the Disaster Assistance Field Operations Center serving the jurisdiction within 60 days of the date of the disaster.

* * * * *

(5) SBA makes an economic injury declaration in reliance on a state certification that at least five small business concerns in a disaster area have suffered substantial economic injury as a result of the disaster and are in need of financial assistance not otherwise available on reasonable terms. The state certification must be signed by the Governor, must specify the county or counties or other political subdivision in which the disaster occurred, and should be delivered (with supporting documentation) to the Disaster Assistance Field Operations Center serving the jurisdiction within 120 days of the disaster occurrence. When a Governor certifies with respect to a drought or to below average water levels, the supporting documentation must include findings which show that conditions during the incident period meet or exceed the U.S. Drought Monitor (USDM) standard of “severe” (Intensity level D-2 to D-4). The USDM may be found at https://droughtmonitor.unl.edu/​. With respect to below average water levels, the supplementary information accompanying the certification must include findings which establish long-term average water levels based on recorded historical data, show that current water levels are below long-term average levels, and demonstrate that economic injury has occurred as a direct result of the low water levels. Not later than 30 days after SBA receives a certification by a Governor, it shall respond in writing with its decision and its reasons.

(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 of the United States that is designated as a rural area by the Bureau of the Census. The following conditions must be met:

* * * * *

(b) SBA publishes notice of any disaster declaration in the Federal Register . The published notice will identify the kinds of assistance available, the date and nature of the disaster, and the deadline and location for filing loan applications. Additionally, SBA will use the local media to inform potential loan applicants where to obtain loan applications and otherwise to assist disaster survivors in applying for disaster loans. SBA will accept applications after the announced deadline only when SBA determines that the late filing resulted from substantial causes beyond the control of the applicant.

4. Revise § 123.4 to read as follows:

§ 123.4

What is a disaster area and why is it important?

Each disaster declaration defines the geographical areas affected by the ( print page 91539) disaster. Only those survivors 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 survivors 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 § 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 five miles between the land areas of such counties. The individual islands of geographically isolated island chains, including Hawai'i, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands, are also designated as contiguous to each other. 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.

5. Revise § 123.503 to read as follows:

§ 123.503

When can you apply for a Military Reservist EIDL?

Your small business can apply for a Military Reservist EIDL any time beginning on the date the essential employee receives notice of expected call-up and ending one year after the date the essential employee is discharged or released from active service. The Associate Administrator for the Office of Disaster Recovery and Resilience (AA/ODR&R) or designee may extend the one-year limit by no more than one additional year after finding extraordinary or unforeseeable circumstances.

Isabella Casillas Guzman,

Administrator.