Updates to HUBZone Guidance
The HUBZone program has been going through a multitude of readjustments over the past couple of months, largely due to lasting effects of the COVID-19 pandemic. This month the SBA issued changes to their HUBZone FAQs, this time specifically targeting HUBZone firms with offices located in Redesignated Areas and Qualified Disaster Areas (QDAs).
Our biggest takeaways from this round of changes primarily revolve around caveats to the SBA’s long-term investment rule, and new regulations in regards to legacy employees. Firms located in a QDA or home office are still not permitted to utilize the SBA’s long-term investment rule, which rewards firms for making long-term investments by allowing them to meet the principal office requirement for up to 10 years, even if the area loses its HUBZone designation. The SBA will however allow a firm located in a QDA or home office to benefit from the long-term investment rule if the firm can prove it made a long-term investment in its principal office between December 26, 2019, and June 30, 2021.
In terms of changing rules regarding legacy employees, the most recent FAQ has issued quite a number of ‘grace periods’ First and foremost, the SBA has confirmed that it would grandfather in any HUBZone firm that completed its recertification between December 26, 2019, and June 30, 2021, and claimed legacy HUBZone employees who lived in Redesignated Areas and Qualified Disaster Areas.
The SBA has also provided HUBZone firms a grace period, until December 31, 2021, to do the following:
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
Utilize legacy HUBZone employees, even if the firm’s principal office is located in a Redesignated Area or QDA
Count legacy HUBZone employees based on an annual certification date prior to December 26, 2019
HUBZone firms only have until December 31st to take advantage of this period, however, for come January 1, 2022, HUBZone firms will no longer be permitted to take part in the actions listed above. While the next four months certainly act as a buffer period, HUBZone firms looking to stay ahead of the curve should definitely set some time aside to formulate a plan of action for when this grace period ends.
In terms of identifying whether or not your firm falls in a Redesignated Area or not, keep in mind that the HUBZone maps are currently frozen until June 30, 2023. Because of this freeze, not only are Qualified Census Tracts, Qualified Non-Metropolitan Counties, or Redesignated Areas barred from being added or removed from the HUBZone map, and but Qualified Base Closure Areas currently set to expire on December 31, 2021 will now expire on June 30, 2023. SBA also recently designated over 400 new counties as Qualified HUBZones, potentially shifting whether or not a firm resides in a Redesignated Area, or an actual HUBZone area.