U.S. GOVERNMENT ACCOUNTABILITY OFFICE DETERMINATION LETTER

On 2026-07-14, Senator Edward J. Markey (D-MA) delivered a floor speech titled "U.S. GOVERNMENT ACCOUNTABILITY OFFICE DETERMINATION LETTER" in the Senate.

U.S. GOVERNMENT ACCOUNTABILITY OFFICE DETERMINATION LETTER

Congressional Record, Volume 172 Issue 114 (Tuesday, July 14, 2026) [Congressional Record Volume 172, Number 114 (Tuesday, July 14, 2026)] [Senate] [Pages S3929-S3931] From the Congressional Record Online through the Government Publishing Office [ www.gpo.gov ] U.S. GOVERNMENT ACCOUNTABILITY OFFICE DETERMINATION LETTER Mr. MARKEY. Mr. President, I ask unanimous consent that the Government Accountability Office's determination letter on the matter of ``U.S. Small Business Administration--Applicability of the Congressional Review Act to Policy and Procedural Notices Updating Citizenship and Residency Requirements for 7(a) and 504 Loans,'' dated July 1, 2026, be printed in the Congressional Record. There being no objection, the material was ordered to be printed in the Record, as follows: Decision Matter of: U.S. Small Business Administration--Applicability of the Congressional Review Act to Policy and Procedural Notices Updating Citizenship and Residency Requirements for 7(a) and 504 Loans. File: B-338157. Date: July 1, 2026. digest In February 2026, the U.S. Small Business Administration (SBA) issued a Policy Notice and a Procedural Notice (together, the 2026 Notices) that modified its standard operating procedures governing the 7(a) and 504 loan programs. Through the 2026 Notices, SBA began requiring that 100 percent of all direct and/or indirect owners of a small business applicant for one of the loan programs be U.S. citizens or U.S. nationals who have their principal residence in the U.S., its territories, or possessions. The Congressional Review Act (CRA) requires that before a rule can take effect, an agency must submit the rule to both the House of Representatives and the Senate, as well as the Comptroller General. CRA adopts the definition of a rule under the Administrative Procedure Act (APA) but excludes certain categories of rules from coverage. We conclude that the 2026 Notices meet the APA definition of a rule and no CRA exception applies. Therefore, the 2026 Notices are a rule subject to CRA's submission requirements. decision On February 2, 2026, the U.S. Small Business Administration (SBA) issued a Policy Notice, and on February 11, 2026, SBA issued a Procedural Notice (together, the 2026 Notices). The 2026 Notices modified SBA's standard operating procedure (SOP) 50 10, Lender and Development Company Loan Programs, which contains SBA's loan origination policies and procedures governing its 7(a) and 504 loan programs. After the 2026 Notices took effect on March 1, 2026, 100 percent of all direct and/or indirect owners of a small business applicant were required to be U.S. citizens or U.S. nationals who have their principal residence in the United States, its territories, or possessions. We received a request for a decision as to whether the 2026 Notices are a rule for purposes of the Congressional Review Act (CRA). Our practice when rendering decisions is to contact the relevant agencies to obtain factual information and their legal views on the subject of the request. Accordingly, we reached out to SBA on March 3, 2026. SBA did not provide a response with its views. background 7(a) and 504 Loans SBA guarantees loans to small businesses through several programs, including the 7(a) and 504 loan programs. In fiscal year 2025, SBA guaranteed approximately $45 billion in 7(a) and 504 loans to more than 85,000 small businesses. According to SBA, the 7(a) loan program is SBA's primary business loan program for providing financial assistance to small businesses. For 7(a) loans, a lender initiates the loan to a small business and, if SBA agrees to guarantee the loan, the lender funds and services the loan. If the borrower defaults on the loan, the lender and SBA share in the loss, if any, in accordance with the percentage guaranteed by SBA. For most 7(a) loan programs, SBA guarantees up to 85 percent of loans of $150,000 or less, and up to 75 percent of loans above $150,000, except as otherwise authorized by law. Similarly, the 504 loan program provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation. According to SBA, 504 loans are issued through a partnership with Certified Development Companies (CDC) and private sector third party lenders. CDCs are generally non-profit corporations certified and regulated by SBA to package, process, close, and service 504 loans. For 504 loans, up to 40 percent of the loan is covered by the CDC, and SBA guarantees 100 percent of that amount. The remainder of the 504 loan amount is financed through a contribution by the applicant small business and from third party lenders. To implement its programs, SBA provides guidance to relevant parties--including lenders, SBA employees, and various agency partners--through several categories of documents. According to SBA, policy notices are used to convey a change in policy, while procedural notices are used to convey a change in process or procedures. Both policy notices and procedural notices may be permanent or temporary. SBA's SOPs are permanent directives that set forth the policies and procedures relating to SBA's programs and activities. SBA's regulations note that lenders must comply with loan program requirements for the 7(a) and 504 programs, which include SBA SOPs. SOP 50 10 SBA's SOP 50 10, Lender and Development Company Loan Programs, contains SBA's loan origination policies and procedures governing the 7(a) and 504 loan programs. The most recent version of SOP 50 10, version 8, took effect on June 1, 2025 (SOP 50 10 8, or the SOP). The SOP provides requirements that lenders and CDCs must follow when administering loans under the 7(a) and 504 programs. For example, Section A of the SOP, entitled ``Core Requirements for All 7(a) and 504 Loans,'' states that ``7(a) Lenders and CDCs . . . must always start by reviewing the contents of this section.'' The SOP also states that ``7(a) Lenders must comply with the Core requirements in Section A and with the detailed guidance provided for each delivery method in the applicable chapter of Section B'' and that ``CDCs must comply with the Core requirements in Section A and with the detailed guidance provided for the delivery of 504 Loan Program loans.'' Chapter 1 of Section A outlines the primary applicant eligibility requirements for the 7(a) and 504 loan programs. In particular, Paragraph F of Chapter 1 provides additional information regarding the loan eligibility of businesses owned by non-U.S. citizens. Prior to the changes made by the documents examined in this decision, the SOP stated that, among other things, ``SBA financing is limited to businesses with 100% direct and/or indirect owners and SBA-required guarantors . . . that are U.S. citizens, U.S. Nationals, or who are Lawful Permanent Residents (LPRs) (commonly referred to as ``green card holders''), and comply with the requirements in this Paragraph.'' All direct and indirect owners and guarantors were also required to [[Page S3930]] have their primary residence in the United States, its territories, or possessions. The SOP also requires that SBA lenders certify that no direct and/or indirect owner or guarantor is an ``Ineligible Person.'' In part, the SOP previously defined ineligible persons for the purpose of 7(a) and 504 loans as ``foreign nationals, those granted asylum, refugees, visa holders, nonimmigrant aliens under 8 U.S.C. Sec. 1101(a)(15), those under Deferred Action for Childhood Arrivals . . . and undocumented aliens who are in the U.S. illegally.'' On December 19, 2025, SBA issued Procedural Notice 5000- 872050 (2025 Procedural Notice). The 2025 Procedural Notice is addressed to all SBA employees, 7(a) lenders, and CDCs, and announced that, among other changes, SBA was revising Section A, Chapter 1, Paragraph F of SOP 50 10 8. In particular, the 2025 Procedural Notice stated that while the general rule remained that 100 percent of all direct and/or indirect owners of applicant businesses must be U.S. citizens, U.S. nationals, or LPRs who have their principal residence in the United States, its territories, or possessions, the following groups would be allowed to have up to five percent direct and/or indirect ownership in a borrower in the aggregate: (1) Individuals who are not U.S. citizens, U.S. nationals, or LPRs, and are not ineligible persons but are instead foreign nationals living outside the U.S.; (2) U.S. citizens, U.S. nationals, or LPRs whose principal residence is outside the U.S., its territories, or possessions; and (3) aliens with conditional LPR status (collectively, the Five Percent Exception). These changes took effect for all 7(a) and 504 loan applications approved by SBA on or after January 1, 2026. Policy Notice and Procedural Notice In 2026, SBA issued Policy and Procedural Notices that further modified the eligibility and selection criteria for 7(a) and 504 loans. On February 2, 2026, SBA published the Policy Notice. The Policy Notice, which is also addressed to all SBA employees, 7(a) lenders, and CDCs, announced the rescission of the 2025 Procedural Notice, thereby removing the Five Percent Exception. Beginning March 1, 2026, 100 percent of all direct and/or indirect owners of a small business applicant were required to be U.S. citizens or U.S. nationals who have their principal residence in the U.S., its territories, or possessions. LPRs would no longer be eligible to own any percentage interest in an applicant borrower, among other things. The Policy Notice notes that it made these changes consistent with 13 C.F.R. Sec. 120.100 and Executive Order No. 14159, Protecting the American People Against Invasion. The Executive Order states that it ``ensures that the Federal Government protects the American people by faithfully executing the immigration laws of the United States,'' and instructs the Office of Management and Budget to ensure that agencies take action to ``identify and stop the provision of any public benefits to