By: Lindsay Simmons and Eric Whytsell
On June 12, 2014 the Small Business Administration (SBA) published an Interim Final Rule under which SBA adjusts its monetary-based size standards to account for inflation that has occurred since 2008. These adjustments are in addition to the recent revisions to SBA’s size standards issued as part of its comprehensive size standards review. The rule goes into effect on July 14, 2014.
Almost every monetary-based size standard has been adjusted upward. For example, the size standard that defines “small” for Job Corps Center operations contractors, a subcategory under NAICS Code 611519, has been adjusted upward from $35.5 million to $38.5 million. Click here to see a full chart of all increased size standards.
In addition, SBA has adjusted three program-specific receipts based size standards: (1) Sales or Leases of Government Property (other than manufacturing); (2) stockpile purchasing; and (3) the alternative size standard for the Small Business Investment Company (“SBIC”) Program that is based on tangible net worth and net income. According to SBA, many businesses have lost or are about to lose small business eligibility under SBA’s monetary based size standards as a result of the inflation. Thus, SBA believes the adjustments are necessary and that “any delay in the adoption of inflation adjusted size standards could cause serious harm to those businesses and others that are about to exceed current size standards.” However, the SBA has not adjusted the new tangible net worth and income based alternative size standard established under the Small Business Jobs Act of 2010 for its 7(a) and 504 Loan Programs. Nor does the instant rule alter the $750,000 receipts based size standard set by statute for agricultural industries.
The SBA issued its adjustments in an interim final rule without first soliciting public comment in recognition of the relatively long time that has passed since the last adjustment and the fact that many businesses may have lost small business size status solely as a result of inflation during that period. As a result, SBA is immediately implementing this rule rather than delaying its issuance until after it completes notice and comment rulemaking. SBA believes that such a delay would be “contrary to the public interest as it would delay the eligibility of those businesses for Federal small business assistance, perhaps forcing some of them to cease operations before a final rule could be promulgated under the standard rulemaking process.”
In any event, the public has not been entirely excluded from the rulemaking process, as the SBA has requested comments on the rule. They must be submitted on or before August 11, 2014.
Lindsay Simmons and J. Eric Whytsell are the attorneys responsible for the content of this article.
© Jackson Kelly PLLC 2014