Small Business Act and Financial Assistance

DEAR COLLEAGUE LETTER

DCL-96-23

DATE: May 10, 1996

TO: State IV-D Directors

SUBJECT: Small Business Act and financial assistance

Dear Colleague:

This is to inform you that the Small Business Administration has issued regulations implementing section 612 of P.L. 103-403, the Small Business Administration Reauthorization and Amendments Act of 1994.  This law amends section 4 of the Small Business Act (15 U.S.C. 633) by adding a new subsection (4)(f) that requires each recipient of financial assistance, whether direct loan or loan guarantee, under the Small Business Act to certify that the recipient is not more than 60 days delinquent in paying child support, whether under a court or administrative child support order or repayment agreement between the recipient and custodial parent or State child support enforcement agency.  OCSE Dear Colleague letter 94-64 described this law.

The Small Business Administration issued interim final regulations  (PDF) at 13 CFR 116.42 to 116.44 on May 26, 1995 (60 FR 27870); a copy is attached  (PDF).  On December 15, 1995 (at 60 FR 64356, p.64377), the Small Business Administration proposed to revise and renumber the regulation , as part of a larger initiative to streamline and consolidate its regulations.  A final rule based on this proposed rule was issued January 31,1996 (61 FR 3226, p.3242); a copy is attached .  As part of this final rule, the regulation implementing section 612 of P.L. 103-403 was re-codified at 13 CFR 120.171 .

The May 26, 1995 interim final rule discusses SBA's regulation in relation to the legislative intent provided by the conference language. However, neither the December 15, 1995 proposed rule nor the January 31, 1996 final rule contained further explanatory or background discussion about the child support enforcement provision.

Questions regarding the SBA's regulation should be directed to: John R. Cox; Associate Administrator for Financial Assistance; Small Business Administration; 409 3rd Street, S.W.; Washington, D.C. 20416.

Sincerely,

David Gray Ross
Deputy Director
Office of Child Support Enforcement

cc:Regional Administrators, Regions I - X; CSE Program Managers, Regions I - X

SMALL BUSINESS ADMINISTRATION

13 CFR Part 116

Policies of General Application

AGENCY: Small Business Administration (SBA).

ACTION: Interim final rule with request for comments.

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SUMMARY: On October 22, 1994, the President signed Public Law 103-403, The Small Business Administration Reauthorization and Amendments Act of 1994. Section 612 of that Act requires SBA to promulgate regulations by April 22, 1995 which require certification by any recipient of financial assistance under the Small Business Act that such recipient is not delinquent on a court order or other formal agreement requiring payment of child support. This interim final rule, published in accordance with Public Law 103-403, implements this requirement.

DATES: This rule becomes effective May 26, 1995. Comments by June 26, 1995.

ADDRESSES: Comments should be sent to John R. Cox, Associate Administrator for Financial Assistance, Small Business Administration, 409 Third Street, SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: John R. Cox, (202) 205-6490.

SUPPLEMENTARY INFORMATION: Public Law 103-403 required SBA, among other things, to promulgate regulations which require certification by any recipient of Agency financial assistance under the Small Business Act that the recipient is not delinquent on a court order or other formal agreement requiring payment of child support. In that regard, Section 612 of Pub. L. 103-403,October 22, 1994, states:

(f) Certification of Compliance with Child Support

Obligations.--

(1) In General. For financial assistance approved after the promulgation of final regulations to implement this section, each recipient of financial assistance under this Act, including a recipient of a direct loan or a loan guarantee, shall certify that the recipient is not more than 60 days delinquent under the terms of any--

(A) administrative order;

(B) court order; or

(C) repayment agreement entered into between the recipient and the custodial parent or State agency providing child support enforcement services, that requires the recipient to pay child support, as such is defined in section 462(b) of the Social Security Act.

(2) Enforcement. Not later than 6 months after the date of enactment of this subsection, the Administration shall promulgate such regulations as may be necessary to enforce compliance with the requirements of this subsection.[Emphasis added.]

The Conference Report language on this section is useful in providing guidance for implementing this requirement. (See Report 103-824 to accompany S. 2060.) It provides:

Sec. 612. Certification of compliance with child support obligations.

Both bills contained provisions requiring SBA borrowers to certify that they are not in violation of any court order or agreement requiring the payment of child support. The conference report contains the same provision with a clarification with court orders, administrative orders, or agreements, specifically 60 days or more in arrears.

While intending to strengthen federal policy in support of family support obligations, the conferees recognize that economic circumstances may from time to time cause a parent to be late in such payments. It is not the intent of the conferees to subject minor lapses to the criminal and civil penalties contained in both the Small Business Act and the False Statements Act for false representations made to the agency in the course of a loan application or other application for assistance. Hence, the conference agreement provides for a certification that the applicant is not more than 60 days late in making any child support payment required by court order or agreement. Loan applicants should be advised of this provision at the outset of the application process, but certification pursuant to this section may be made as part of the loan closing.

Thus, certification at the time of application does not appear to be required, although it may be used as a means for``weeding out'' delinquents. In the alternative, certification at the time of closing is consistent with the intent of Congress, and these regulations require such certification.

SBA has also determined that the intent of the legislation is to require individuals who are subject to agreements requiring the payment of child support to make the required certifications. Many of the applicants for SBA financial assistance are corporations, partnerships and sole proprietorships. For purposes of these regulations, SBA will require any owner or partner holding 50% or more of the voting interests of an applicant (a principal) to certify.

Finally, SBA takes the position that the statute intends coverage only for its business loan and disaster loan program; i.e. financial assistance made available under the Small Business Act. Therefore, only applicants for assistance under those programs will be required to make the required certifications.

In practice, after the effective date of these regulations, SBA or its participating lender will notify the principals of all applicants for assistance under the business and disaster loan programs at the time of application that they must certify to compliance with outstanding court orders or agreements requiring the payment of child support. The required certification will be made a condition of the loan authorization which if not satisfied will be a ground for not closing the loan.

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

For purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., SBA certifies that this final rule does not have a significant economic impact on a substantial number of small entities.

BAS certifies that this final rule does not constitute a significant regulatory action for the purposes of Executive Order 12866, since the change is not likely to result in an annual effect on the economy of $100 million or more.

SBA certifies that this final rule does not impose additional reporting or recordkeeping requirements which would be subject to the Paperwork Reduction Act, 44 U.S.C. Chapter 35.

This final rule does not have federalism implications warranting the preparation of a Federalism Assessment in accordance with Executive Order 12612.

For purposes of Executive Order 12778, SBA certifies that this final rule is drafted, to the extent practicable, in accordance with the standards set forth in section 2 of that Order.

Because this final rule reflects a reporting requirement imposed by Pub. L. 103-403, and is required to be effective by April 22, 1995, SBA is publishing this final rule without opportunity for prior public comment pursuant to 5 U.S.C. 553(b)(A). However, SBA solicits and will consider any comments it receives with respect to this final rule in making future adjustments.

(Catalog of Federal Domestic Assistance Program Nos. 59.001, 59.002, 59.008, 59.012, 59.021)

List of Subjects in 13 CFR Part 116

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 amends part 116, chapter I, title 13, Code of Federal Regulations, as follows:

1. Subpart F is added to read as follows:

Subpart F--Compliance With Child Support Obligations.

Sec.116.42 Policy.

116.43 Certification.

116.44 Recipient.

Authority: Sec. 612 of Pub. L. 103-403, 108 Stat. 4175.

Subpart F--Compliance With Child Support Obligations

Sec. 116.42 Policy.

It is the policy of SBA that each recipient of financial assistance under the Small Business Act shall certify that the recipient is not more than 60 days delinquent under any administrative order, court order, or repayment agreement between the recipient and the custodial parent or a State agency providing child support enforcement services that requires the recipient to pay child support as that term is defined in section 462(b) of the Social Security Act.

Sec. 116.43 Certification.

The certification required to comply with the statement of policy expressed in Sec. 116.41 shall be a condition of all financial assistance granted under sections 7 (a) and (b) of the Small Business Act.

Sec. 116.44 Recipient.

For purposes of this subpart the term recipient shall mean an owner of 50% or more of the ownership interest of an applicant for assistance under section 7 (a) or (b) of the Small Business Act.

Dated: April 26, 1995.

Cassandra M. Pulley,

Deputy Administrator.

[FR Doc. 95-12647 Filed 5-25-95; 8:45 am]

BILLING CODE 8025-01-M

[Federal Register: January 31, 1996 (Volume 61, Number 21)]

[Rules and Regulations]

[Page 3226-3266]

From the Federal Register Online via GPO Access

[wais.access.gpo.gov]

SMALL BUSINESS ADMINISTRATION
13 CFR Parts 108, 116, 120, 122, 131

Business Loan Programs

Agency: Small Business Administration (SBA).

Action: Final rule.

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page 3242

Sec. 120.171  Compliance with child support obligations.

Any holder of 50% or more of the ownership interest in the recipient of an SBA loan must certify that he or she is not more than 60 days delinquent on any obligation to pay child support arising under:

(a) An administrative order;

(b) A court order;

(c) A repayment agreement between the holder and a custodial parent; or

(d) A repayment agreement between the holder and a State agency providing child support enforcement services.