Dear HUBZone Entrepreneur,
The
past weeks have been unprecedented as the country comes to grips with
the COVID-19 global pandemic. We recognize that small business owners
like you may continue to be impacted by events that lie ahead. SBA is
here to support you as best we can.
For the most recent information regarding SBA’s disaster support assistance related to COVID-19, please access SBA’s website: SBA Disaster Assistance
Anticipating
the federal government will continue to purchase goods and services,
SBA has identified flexibilities to support HUBZone enterprises in
obtaining and maintaining their certification during this period.
This email summarizes the following updates of interest to HUBZone enterprises:
I. HUBZone Program flexibilities during COVID-19
II. HUBZone Program updates related to a regulation change
Please join us for a special webinar on Wednesday, March 25 at 2:00 pm, during which we will review the information contained in this email. You may register for the conference here after which you will receive an email containing a personalized access link.
I. HUBZone Program flexibilities during COVID-19
How
can firms maintain the 35% HUBZone residency requirement if some
employees are college students whose residence hall has closed? SBA
recognizes that some HUBZone employees are students who have been
called home to locations no longer in a HUBZone, even though they
continue to work remotely, impacting firms’ ability to maintain the 35%
HUBZone residency requirement. SBA will determine affected firms’
compliance with the 35% HUBZone residency requirement by reviewing
documentation showing where the impacted employee lived prior to the
COVID-19 response measures being put in place. Accordingly, a firm that
has a HUBZone employee that was required to move from student housing
to a non-HUBZone location AND continues to work for the HUBZone firm,
the firm may continue to count that employee as a HUBZone resident by
providing documentation showing: 1) the university/college closed the
student’s residence and 2) the employee has been maintained on the
payroll. This applies only to students who, at the time of the firm’s
application for certification or recertification, were already on
payroll and had residency established prior to the university closing
student housing.
How can firms maintain compliance with the Principal Office requirement if their employees are required to telework? SBA recognizes that if all of a firm’s employees are required to telework
in response to the COVID-19 pandemic, this might impact a firm’s
ability to comply with the HUBZone program’s principal office
requirement. In response to this concern, SBA will determine affected
firms’ compliance with the principal office requirement by reviewing the
firm’s compliance prior to the telework measures being put in place.
Accordingly, at the time of application for certification or
recertification, a firm that has placed its employees on mandatory
telework will have to provide documentation showing where its employees
performed their work prior to requiring telework. Such an applicant
will also be required to provide a signed statement that: the firm put
all their employees on telework associated with social distancing in
response to the COVID-19 pandemic; the teleworking measure is temporary
in nature; and the employees will return to their normal work location
once the teleworking measures have been lifted.
How
can firms maintain compliance with the requirement for uninterrupted
and continued employment for “Legacy HUBZone employees,” as outlined in
the HUBZone regulations at 13 C.F.R. 126.200(d)(ii)(3), if employees are
laid off or on extended sick leave?
The revised HUBZone regulations, which became effective December 26,
2019, allow firms to count “Legacy” HUBZone resident employees as
permanent HUBZone resident employees if they are able to demonstrate
that the employee was a HUBZone resident for 180 days prior to and for
180 days following the firm’s HUBZone certification or recertification.
In addition, the requirement states, “The certified HUBZone small
business concern must maintain records of the employee’s original
HUBZone address, as well as records of the individual’s continued and uninterrupted employment
by the HUBZone small business concern, for the duration of the
concern’s participation in the HUBZone program.” SBA recognizes that
many firms have placed employees on extended (unpaid) sick leave status
or are contemplating layoffs. SBA will allow HUBZone companies to place
an employee in a temporary
non-paid status such as FMLA to care for themselves or a sick family
member during COVID-19 if the firm attests to their intent to put such
individuals back on payroll after the period of extended sick
leave. However, there is no such exception for employees that have been
laid-off. If a firm lays off an individual, that individual cannot be
counted as a “legacy HUBZone employee” for any future HUBZone
certification or recertification.
Can the HUBZone Program expedite my application for certification? SBA may expedite the application of any firm that submits a complete package for certification and indicates that they intend to respond to a specified solicitation that relates to COVID-19.
Can the HUBZone Program waive or reduce the 35% residency requirement? This statutory requirement would necessitate Congressional action to change.
II. HUBZone Program updates related to a change in regulations
When and why did SBA propose new rule changes to the HUBZone program?
The SBA proposed new regulations to make it easier for small businesses
to participate in the HUBZone program. These changes will make the
program more attractive for small businesses to invest in HUBZones and
hire HUBZone residents, providing greater impact to communities and
making it easier for federal agencies to meet their goal to award 3
percent of contracts to certified HUBZone small businesses. The rule change was published in November 2019 and took effect December 26, 2019.
What are the new rules around recertification?
All firms will be required to undergo an annual recertification rather
than a triennial recertification, with a full documentation review
taking place every three years. Once certified, a firm is eligible for
all HUBZone contracts for which the business qualifies as small, for a
period of one year from the date of its initial certification or most
recent recertification (unless the concern acquires, is acquired by, or
merges with another firm during that period). Prior to this change, in
order to be eligible for a HUBZone contract, firms had to prove their
HUBZone eligibility at both the time of offer and the time of award,
lengthening the procurement process for HUBZone firms uniquely among all
small businesses—and serving as a disincentive for federal agencies to
contract with HUBZone companies.
When and how will annual recertification begin?
SBA has experienced a delay in the implementation of our new annual
recertification process. Firms which, based on the prior triennial
recertification schedule, were due for recertification in 2020 will be
contacted automatically by the HUBZone Certification and Tracking System
(HCTS) and will be required to recertify on the anniversary date of
their initial certification. (For example, if a firm was initially
certified on December 1, 2017, the firm will receive a notice from HCTS
that it is due to recertify its HUBZone status within 30 days of
December 1, 2020.) All other firms (which were not scheduled to
recertify in 2020 under the triennial recertification rules) will
continue to be considered eligible as of the date of their initial
certification or most recent recertification, and must be prepared to
prove their eligibility at that time if their HUBZone status is
protested in connection with a HUBZone solicitation issued after
December 26, 2019. Until such time as we have introduced a fully
automated recertification process for all firms, we will also allow
firms to voluntarily recertify on the anniversary date of their initial
certification, if they choose to do so. We will advise firms within the
next two weeks regarding the process for voluntary recertification on
their anniversary date.
Are Governors now permitted to ask SBA to designate HUBZones?
A new Governor-designated covered areas initiative that became
effective on January 1, 2020, represents an opportunity to expand the
HUBZone program to reach more distressed rural communities. The new
authority allows state governors to petition SBA to designate as
HUBZones rural areas with populations under 50,000 and unemployment
levels of 120 percent of the U.S. or state average. SBA will provide
updates and update the HUBZone maps to reflect newly covered areas.
Are there other changes to the HUBZone maps?
SBA has frozen the HUBZone maps through 2021, until the results of the
2020 Census are available. This will provide the program and
participating small businesses with an opportunity to transition to a
new requirement to update the maps and designations on five-year
intervals, starting after the 2020 Census. Five-year HUBZone updates
will enable small businesses to plan and invest in their HUBZone
communities without fear that their designation may change from one year
to the next, thus providing stability for both the community and
HUBZone businesses. While the maps are frozen, no new Qualified
Non-Metropolitan Counties, Qualified Census Tracts, or Redesignated
Areas will be removed from or added to the maps. However, SBA will
continue to add locations approved through the new Governor-designated
covered areas initiative, qualified base closure areas, qualified
disaster areas, and Indian lands, as any new data is received.
How has the definition of the Principal Office changed?
A new provision in the HUBZone regulations allows small businesses
that invest in HUBZones by purchasing a building or entering a long-term
lease (of 10 years or more) to maintain HUBZone eligibility for up to
10 years, even if at some point the office location no longer qualifies
as a HUBZone. This provision does not apply to offices located in areas
categorized on the HUBZone map as Redesignated areas.
Are there changes to the 35% HUBZone employee residency requirement?
The new rule allows HUBZone companies to retain long-term “Legacy”
HUBZone resident employees as permanent HUBZone resident employees,
under certain circumstances. An employee who resides in a HUBZone for
at least six months (180 days) at the time of certification or
recertification, and continues to reside in a HUBZone for at least six
months (180 days) after such time, may continue to be considered a
HUBZone resident so long as they are continuously employed by the firm,
even if he/she moves to a non-HUBZone area, or if the area of his/her
residence loses HUBZone geographical eligibility. If the firm wants to
count such a “Legacy” employee as a HUBZone resident for the duration of
the individual’s employment, then at the time of any subsequent
recertification, the firm will be required to identify any such employee
and provide supporting documentation demonstrating that the individual
resided in a HUBZone for 180 days before and after certification and
that the individual has been an employee of the firm for the entire
period of time since the firm’s certification.
How may I obtain help or learn more about the HUBZone Program? The following resources may be accessed for additional support:
Please let us know if you have additional questions.
Sincerely,
Lori Gillen
Director
Office of the HUBZone Program