Short Take: SBA Confirms Last Year’s Monetary-Based Size Standards Inflation Increases
January 25, 2016
The Small Business Administration (SBA) has published a Final Rule, effective January 25, 2016, adopting, as issued, SBAs 2014 Interim Final Rule, previously discussed here, increasing SBAs monetary-based size standards to account for inflation since 2008. These adjustments, which resulted in size standard increases of approximately 8.73% (rounded to the nearest $500,000), were made pursuant to 13 C.F.R. § 121.102(c), which requires SBA to examine the impact of inflation on monetary-based size standards at least once every five years, and were in addition to earlier implemented increases to SBAs monetary-based size standards as part of SBAs comprehensive size standards review pursuant to Section 1344 of the Small Business Jobs Act of 2010 (Pub. L. 111-240).
In responding to comments, SBA reiterates that the 8.73% increase was calculated based on changes in the Gross Domestic Product (GDP) price index since the previous inflation adjustment published in July 2008. One commentator suggested SBA should instead use the Consumer Price Index (CPI). SBA responded that the commentator did not provide a convincing justification, but SBA would consider such option in making future inflation adjustments. SBA also rejected a suggestion that SBA use a smaller $100,000 rounding increment, stating that such would overcomplicate SBAs size standards with too many different size standards. However, SBA stated that it will consider applying an alternative rounding amount in future adjustments. SBA also stated that it considered whether inflation over the 19 months since the Interim Rule was published on June 12, 2014, warranted a further increase, but concluded that the intervening inflation is not sufficient to warrant an additional increase at this time.
The Final Rule also confirms SBAs application of the 8.73% inflation adjustment to (1) the Tangible Net Worth and Net Income based alternative size standards for the Small Business Investment Company (SBIC) Program (13 C.F.R. § 121.301(c)); (2) Sales or Leases of Government Property Other than Manufacturing (13 C.F.R. § 121.502); and (3) Stockpile Purchases (13 C.F.R. § 121.512), as well as SBAs prior determination to not increase the tangible net worth and net income based alternative size standards for SBAs 504 and 7(a) Loan Programs (13 C.F.R. § 121.301(b)).
This Final Rule removes uncertainty and makes permanent the increased monetary-based size standards that have been in place since July 14, 2014. The currently applicable size standards may be found at 13 C.F.R. § 121.201.
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