The new rule, which is currently open for a 30-day public comment period, aims to remove restrictions that exclude religious organizations from some SBA business loans and disaster assistance programs.
Specifically, the Code of Federal Regulations currently states that businesses whose “principal activity” is “teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting” are not eligible to participate in SBA assistance programs.
Those restrictions, according to the SBA proposal, violate the Free Exercise Clause of the First Amendment because they “exclude a class of potential participants based solely on their religious status.”
The proposed rule, if passed as is, will allow the previously ineligible businesses to take part in seven SBA programs, namely the Intermediary Lending Pilot program (ILP), SBA Business Loan Programs, The Economic Injury Disaster Loan program, the Military Reservist Economic Injury Disaster Loan Program, and the Immediate Disaster Assistance Program.
The SBA also cited President Donald Trump’s May 2017 executive order, which states that “federal law protects the freedom of Americans and their organizations to exercise religion and participate fully in civic life without undue interference by the Federal Government.”
“America’s faith-based small businesses and organizations play a vital role in providing employment opportunities, products, and essential educational, training and youth social services that benefit both our local communities and the overall national economy,” SBA Administrator Jovita Carranza said in a statement. “Today’s proposed rule would ensure that these businesses and organizations are not forced to choose between their faith and the SBA financial assistance that they need to continue serving the public and employing our neighbors.”
The proposal comes at the end of Trump’s first term, which is marked by an effort to give faith-based organizations an equal footing when competing for taxpayer-funded grants against their secular counterparts. This effort is backed by the U.S. Supreme Court’s June 2020 ruling in the case Espinoza v. Montana Department of Revenue. In that case, the court held that a state doesn’t have to subsidize private education, but once it does, it cannot withhold those money from certain schools just because they’re religious.
“The Court correctly concludes that Montana’s no-aid provision expressly discriminates against religion in violation of the Free Exercise Clause,” Justice Clarence Thomas wrote in his concurring opinion. “And it properly provides relief to Montana religious schools and the petitioners who wish to use Montana’s scholarship program to send their children to such schools.”