What’s new with the HUBZone program for small businesses

In order to advise clients comprehensively, tax and accounting professionals should know about the HUBZone, a U.S. Small Business Administration (SBA) program for small companies that operate and employ people in Historically Under-utilized Business Zones. When small businesses in low-income communities hire low-income residents, this program provides those small businesses with preferential access to federal procurement opportunities. These preferences go to small businesses that obtain HUBZone certification, in part by employing staff who live in a HUBZone.

The SBA recently made it easier to qualify for the HUBZone program. A business must meet the following requirements:

• Be a small business under its primary North American Industry Classification System (NAICS) Code.
• Be at least 51% owned and controlled by U.S. citizens, a community development corporation, an agricultural cooperative, an Alaska Native corporation, a Native Hawaiian organization, or an Indian tribe.
• The company’s principal office must be located in a HUBZone.
• At least 35% of the employees must live in the HUBZone.

Joining the HUBZone program makes your client’s business eligible to compete for the program’s set-aside contracts. The government’s goal is to award 3% of its prime contracts to HUBZone entities annually. HUBZone-certified businesses also get a 10% price evaluation preference in full and open contract competitions.

Recent program improvements

In recent years, the HUBZone program has changed. For starters, the SBA’s New Document Checklist provides every type of organization with complete step-by-step instructions on how to successfully submit the HUBZone application.

Thanks to program changes and improvements, the SBA now provides faster service and processes applications within 60 days of receiving a completed submission. In the past, the processing took almost double the number of days. These clear instructions seem to have helped both the applicant and the SBA in reviewing complete and accurate documents.

Companies must now recertify annually, and once certified, will be eligible for all HUBZone contracts for which they qualify as a small business, for a period of one year. Full documentation reviews will be required every three years.

New HUBZone areas have been designated and expanded federal contracting opportunities. On May 18, 2021, the SBA Administrator Isabella Casillas Guzman announced the expansion of HUBZone. Under the new rule, a governor may submit one petition per year, requesting that the SBA designate certain qualifying areas, including opportunity zones, as “Governor-Designated Covered Areas.” In reviewing a request for designation included in the petition, the administrator may consider how the selections meet the objectives of the state’s economic development strategies.

The newly designated areas will be added to the HUBZone map as “Governor-Designated Covered Areas.” To be eligible for this program, communities must have a population of 50,000 or fewer, an average unemployment rate of at least 120% of the average unemployment rate for the United States or state (whichever is lowest), and be located outside of an urbanized area.

Other details

There is support for long-term investments of small businesses in HUBZone eligible areas. Qualified businesses purchasing buildings or long-term leases of 10 years or more may maintain HUBZone eligibility for up to 10 years, even if the location no longer qualifies as a HUBZone during the 10 years. However, this does not apply to areas categorized as a Redesignated Area or Qualified Disaster Area.

The SBA has made it so much easier for qualified small businesses to participate in the HUBZone program. Pass along the Top Tips for HUBZone Certification Tip Sheet, and help your clients take these steps to get HUBZone certified.

Even if your clients have not qualified in the past, they may be eligible now in a newly designated area. Find out more about these areas on the HUBZone map.