Civil Monetary Penalties Inflation Adjustments

<RULE> SMALL BUSINESS ADMINISTRATION <CFR>13 CFR Parts 107, 120, 142, and 146</CFR> <RIN>RIN 3245-AI01</RIN> <SUBJECT>Civil Monetary Penalties Inflation Adjustments</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> U.S. Small Business Administration. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Small Business Administration (SBA) is amending its regulations to adjust for inflation the amount of certain civil monetary penalties that are within the jurisdiction of the agency. These adjustments comply with the requirement in the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, to make annual adjustments to the penalties. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This rule is effective June 5, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Arlene Embrey, 202-205-6976 or at <E T="03">arlene.embrey@sba.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> On November 2, 2015, the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Inflation Adjustment Act), Public Law 114-74, 129 Stat. 584, was enacted. This act amended the Federal Civil Penalties Inflation Adjustment Act of 1990, Public Law 101-410, 104 Stat. 890 (the 1990 Inflation Adjustment Act), to improve the effectiveness of civil monetary penalties and to maintain their deterrent effect. The 2015 Inflation Adjustment Act required agencies to issue a final rule by August 1, 2016, to adjust the level of civil monetary penalties with an initial “catch-up” adjustment and to annually adjust these monetary penalties for inflation by January 15 of each subsequent year. Based on the definition of a “civil monetary penalty” in the 1990 Inflation Adjustment Act, agencies are to make adjustments only to the civil penalties that (i) are for a specific monetary amount as provided by Federal law or have a maximum amount provided for by Federal law; (ii) are assessed or enforced by an agency; and (iii) are enforced or assessed in an administrative proceeding or a civil action in the Federal courts. Therefore, penalties that are stated as a percentage of an indeterminate amount or as a function of a violation (penalties that encompass actual damages incurred) are not to be adjusted. SBA published in the <E T="04">Federal Register</E> an interim final rule with its initial adjustments to the civil monetary penalties, including an initial “catch-up” adjustment, on May 19, 2016 (81 FR 31489) with an effective date of August 1, 2016. SBA published its first annual adjustments to the monetary penalties on February 9, 2017 (82 FR 9967), with an immediate effective date. SBA published its subsequent annual adjustments for 2018 on February 21, 2018 (83 FR 7361), for 2019 on April 1, 2019 (84 FR 12059), for 2020 on March 10, 2020 (85 FR 13725), for 2021 on September 24, 2021 (86 FR 52955), for 2022 on May 11, 2022 (87 FR 28756), and for 2023 on August 1, 2023 (88 FR 50003) all with immediate effective dates. This rule will establish the adjusted penalty amounts for 2024 with an immediate effective date upon publication. On December 19, 2023, the Office of Management and Budget (OMB) published its annual guidance memorandum for 2024 civil monetary penalties inflation adjustments (M-24-07, Implementation of Penalty Inflation Adjustments for 2024 pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015). The memorandum provides the formula for calculating the annual adjustments based on the Consumer Price Index for all Urban Consumers (CPI-U) for the month of October preceding the adjustment, and specifically on the change between the October CPI-U preceding the date of adjustment and the prior year's CPI-U. Based on this methodology, the 2024 civil monetary penalty inflation adjustment factor is 1.03241 (October 2023 CPI-U (307.671)/October 2022 CPI-U (298.012)). The annual adjustment amounts identified in this rule were obtained by applying this multiplier of 1.03241 to those penalty amounts that were published in SBA's 2023 adjustments to civil monetary penalties at 88 FR 50003 (August 1, 2023). <HD SOURCE="HD1">II. Civil Money Penalties Adjusted by This Rule</HD> This rule adjusts civil monetary penalties authorized by the Small Business Act, the Small Business Investment Act of 1958 (SBI Act), the Program Fraud Civil Remedies Act, and the Byrd Amendment to the Federal Regulation of Lobbying Act. These penalties and the implementing regulations are discussed below. <E T="03">1. 13 CFR 107.665—Civil Penalties.</E> SBA licenses, regulates, and provides financial assistance to financial entities called small business investment companies (SBICs). Pursuant to section 315 of the SBI Act, 15 U.S.C. 687g, SBA may impose a penalty on any SBIC for each day that it fails to comply with SBA's regulations or directives governing the filing of regular or special reports. The penalty for non-compliance is incorporated in § 107.665 of the SBIC program regulations. This rule amends § 107.665 to adjust the current civil penalty from $314 to $324 per day of failure to file. The current civil penalty of $314 was multiplied by the multiplier of 1.03241 to reach a product of $324, rounded to the nearest dollar. <E T="03">2. 13 CFR 120.465—Civil penalty for late submission of required reports.</E> According to the regulations at § 120.465, any SBA Supervised Lender, as defined in 13 CFR 120.10, that violates a regulation or written directive issued by the SBA Administrator regarding the filing of any regular or special report is subject to the civil penalty amount stated in § 120.465(b) for each day the company fails to file the report, unless the SBA Supervised Lender can show that there is reasonable cause for its failure to file. This penalty is authorized by section 23(j)(1) of the Small Business Act, 15 U.S.C. 650(j)(1). This rule amends § 120.465(b) to adjust the current civil penalty to $8,058 per day of failure to file from $7,805 per day of failure to file. The current civil penalty of $7,805 was multiplied by the multiplier of 1.03241 to reach a product of $8,058, rounded to the nearest dollar. <E T="03">3. 13 CFR 120.1500—Types of Formal Enforcement Actions—SBA Lenders.</E> According to the regulations at § 120.1500(b), SBA may assess a civil monetary penalty against a 7(a) Lender. In determining whether to assess a civil monetary penalty and, if so, in what amount, SBA may consider: the gravity ( <E T="03">e.g.,</E> severity and frequency) of the violation; the history of previous violations; the financial resources and good faith of the 7(a) Lender; and any other matters as justice may require. This penalty is authorized by the Small Business Act, 15 U.S.C. 657t(e)(2)(B). This rule amends § 120.1500(b)(2) to adjust the current civil penalty from $289,504 to $298,887. The current civil penalty of $289,504 was multiplied by the multiplier of 1.03241 to reach a product of $298,887, rounded to the nearest dollar. <E T="03">4. 13 CFR 142.1—Overview of Regulations.</E> SBA has promulgated regulations at 13 CFR part 142 to implement the civil penalties authorized by the Program Fraud Civil Remedies Act of 1986 (PFCRA), 31 U.S.C. 3801-3812. Under the current regulation at 13 CFR 142.1(b), a person who submits, or causes to be submitted, a false claim or a false statement to SBA is subject to a civil penalty of not more than $13,508 for each statement or claim. This rule amends § 142.1(b) to adjust the current civil penalty from $13,508 to $13,946. The adjusted civil penalty amount was calculated by multiplying the current civil penalty of $13,508 by the multiplier of 1.03241 to reach a product of $13,946, rounded to the nearest dollar. <E T="03">5. 13 CFR 146.400—Penalties.</E> SBA's regulations at 13 CFR part 146 govern lobbying activities by recipients of Federal financial assistance. These regulations implement the authority in 31 U.S.C. 1352 and impose penalties on any recipient that fails to comply with certain requirements in the part. Specifically, under § 146.400(a) and (b), penalties may be imposed on those who make prohibited expenditures or fail to file the required disclosure forms or to amend such forms, if necessary. This rule amends § 146.400(a) and (b) to adjust the current civil penalty amounts to “not less than $24,496 and not more than $244,958.” The current civil penalty amounts of $23,727 and $237,268 were multiplied by the multiplier of 1.03241 to reach a product of $24,496 and $244,958, respectively, rounded to the nearest dollar. This rule also amends § 146.400(e) to adjust the civil penalty that may be imposed for a first-time violation of § 146.400(a) and (b) to $24,496 and to adjust the civil penalty that may be imposed for second and subsequent offenses to “not less than $24,496 and not more than $244,958.” The current civil penalty amounts of $23,327 and $237,268 were multiplied by the multiplier of 1.03241 to reach a product of $24,496 and $244,958, respectively, rounded to the nearest dollar. <HD SOURCE="HD1">Compliance With Executive Orders 12866, 12988, 13132, and the Administrative Procedure Act (5 U.S.C. 553), the Congressional Review Act (5 U.S.C. 801-808), the Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory Flexibility Act (5 U.S.C. 601-612)</HD> <HD SOURCE="HD2">Executive Order 12866</HD> The Office of Management and Budget has determined that this final rule is not a significant regulatory action under Executive Order 12866. <HD SOURCE="HD2">Executive Order 12988</HD> 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 am ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 16k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━