Gather around, children, while I tell you a story about the scariest, most terrifying thing of all. Not murder, not vampires or ghosts…proposed regulatory changes. Mwa ha ha! On Halloween, the Small Business Administration published a proposed rule that would make substantial changes to Historically Underutilized Business Zone (HUBZone) regulations, including rules for eligibility, certification and recertification, and oversight. These changes are open for public comment until New Year’s Eve 2018 (so December 31, 2018), but, if adopted as written, could have the effect of making the lives of HUBZone companies easier and simpler. Highlights of the new regulations include:

  • 35% Residency Requirement: SBA proposes to treat individuals as HUBZone residents if they were an employee of the HUBZone firm and resided in a HUBZone at the time the firm was certified or re-certified as HUBZone eligible, even if the individual lives in an area that no longer qualifies as a HUBZone, or the individual moves to a non-HUBZone area.
  • Certification and Recertification: Annual recertification will be required, rather than recertification every three years. In exchange for reducing the recertification timeframe, SBA is removing the requirement for immediate certification at the time of submission of every offer and every award of a HUBZone contract. Specifically, under the proposed § 126.501(a), “once SBA certifies a concern as eligible to participate in the HUBZone program, the concern would be treated as an eligible HUBZone small business for all HUBZone contracts for which the concern qualifies as small for a period of one year from the date of its initial certification or its annual recertification.”
  • “Attempt to Maintain”: HUBZone firms are required to attempt to maintain compliance with a 35% residency requirement for employees of the firm. SBA is proposing to amend the definition of “attempt to maintain” such that firms that fall below at 20% threshold will be decertified from the HUBZone program unless they can demonstrate that they meet that threshold, and continue to attempt to hire additional HUBZone residents in order to reach the 35% requirement. SBA is actively seeking comment on how to implement the “attempt to maintain” rules, so if you have any bright ideas, I’m sure they would love to hear them.

Other items of interest:

  • Re: how SBA will determine residency, SBA “…proposes that ‘‘reside’’ means to live at a location full-time and for at least 180 days immediately prior to the date of application or date of recertification, as applicable.”
  • § 126.204, SBA “…proposes to clarify that a HUBZone small business concern may have affiliates, but the affiliate’s employees may be counted as employees of the HUBZone applicant/ participant when determining the concern’s compliance with the principal office and 35% percent HUBZone residency requirements.”
  • § 126.207, SBA proposes to “…clarify that a HUBZone small business concern may have multiple offices, as long as the firm’s principal office is located in a HUBZone.”
  • § 126.306, SBA claims that it will, “when practicable”, make a final decision on complete HUBZone applications within 90 days of receipt.

These proposed changes and many, many more can be downloaded here. It has been over 20 years since the HUBZone rules were established, and this is the first “comprehensive regulatory amendment to the HUBZone program since the program’s initial implementation nearly twenty years ago…”, so don’t miss out on your chance to comment. Apparently, like Pennywise the Dancing Clown, these opportunities don’t come around very often!

If you have any questions about the current or proposed rules, please contact me. Thanks!