The Small Business Administration (SBA) has once again updated its HUBZone FAQs—this time with welcome changes for HUBZone firms with principal offices located in Redesignated Areas and / or Qualified Disaster Areas (QDA). The latest FAQs state that they were effective June 24, 2021, but we saw them for the first time on SBA’s website earlier this month. Below are our top five takeaways from the latest FAQs.
- While SBA’s FAQs continue to state that a firm located in a QDA or home office cannot take advantage of SBA’s long-term investment rule, the FAQs now confirm that SBA will allow a firm located in a QDA or home office to use the long-term investment rule if the firm demonstrates that it made a long-term investment in its principal office between December 26, 2019, and June 30, 2021, in reliance on SBA’s final rule and prior guidance.
- SBA will grandfather in HUBZone firms that recertified between December 26, 2019, and June 30, 2021, and claimed legacy HUBZone employees who resided in Redesignated Areas and / or QDAs during the 360-day period necessary to qualify as a legacy HUBZone employee.
- SBA is providing a grace period, until December 31, 2021, during which HUBZone firms may count legacy HUBZone employees who lived in a Redesignated Area and / or QDA during the 360-day period necessary to qualify as a legacy HUBZone employee. However, starting January 1, 2022, HUBZone firms will not be able to count legacy HUBZone employees if the employees resided in a Redesignated Area and / or QDA at any time during the relevant 360-day period.
- SBA’s grace period, through December 31, 2021, also allows a HUBZone firm to utilize legacy HUBZone employees even if the firm’s principal office is located in a Redesignated Area and / or QDA. However, starting January 1, 2022, HUBZone firms with principal offices in Redesignated Areas and / or QDAs will not be permitted to use the legacy HUBZone employee rule.
- Until December 31, 2021, SBA will allow firms to count legacy HUBZone employees based on an annual certification date prior to December 26, 2019. However, starting January 1, 2022, firms will not be able to count employees as legacy HUBZone employees if the relevant 360-day period occurred prior to December 26, 2019.
Regarding the HUBZone maps, as we discussed in a prior client alert here, SBA recently extended the HUBZone map freeze through June 30, 2023. Due to the map freeze, no Qualified Census Tracts, Qualified Non-Metropolitan Counties, or Redesignated Areas may be added to or removed from the HUBZone Map. Additionally, all Qualified Base Closure Areas currently expiring on December 31, 2021, will now expire on June 30, 2023. On the heels of extending the map freeze, SBA has now designated over 400 new counties as Qualified HUBZones. Many counties previously considered to be Redesignated Areas are now full-fledged HUBZone areas. If your business is a HUBZone, we recommend that you check the HUBZone Map to see if there has been a change in the status of your county.
Please contact Jon Williams and Anna Wright, members of PilieroMazza’s Government Contracts Group, if you would like additional information on these updates or if you have questions about HUBZone Program compliance.
