(a) Ownership. In order to be eligible for HUBZone certification and to remain certified, a small business concern must be owned in accordance with this paragraph. The concern must be:

(1) At least 51% owned and controlled by one or more individuals who are United States citizens;

(2) An ANC or at least 51% owned by an ANC or a wholly-owned business entity of an ANC;

(3) At least 51% owned by one or more Indian Tribal Governments, or by a corporation that is wholly owned by one or more Indian Tribal Governments;

(4) At least 51% owned by one or more CDCs;

(5) A small agricultural cooperative organized or incorporated in the United States, or at least 51% owned by one or more small agricultural cooperatives organized or incorporated in the United States; or

(6) At least 51% owned by one or more NHOs, or by a corporation that is wholly owned by one or more NHOs.

(b) Size. (1) In order to be eligible for HUBZone certification and recertification, a concern, together with its affiliates, must qualify as a small business concern as defined in part 121 of this chapter under the size standard corresponding to any NAICS code listed in its profile in SAM (or successor system). In determining whether a concern qualifies as small under the size standard corresponding to a specific NAICS code, SBA will accept the concern's size representation in SAM (or successor system), unless there is evidence indicating that the concern is other than small. SBA will request a formal size determination pursuant to § 121.1001(b)(8) of this chapter where any information it possesses calls into question the concern's SAM size representation.

(2) In order to be eligible for a HUBZone contract, a certified HUBZone small business concern must qualify as small under the size standard corresponding to the NAICS code assigned to the HUBZone contract.

(3) If the concern is a small agricultural cooperative, in determining size, the small agricultural cooperative is treated as a “business concern” and its member shareholders are not considered affiliated with the cooperative by virtue of their membership in the cooperative.

(c) Principal office. In order to be eligible for HUBZone certification, a concern's principal office must be located in a HUBZone, except for concerns owned in whole or in part by one or more Indian Tribal Governments.

(1) Long-term investment—(i) General. A concern that has purchased a building or entered a long-term lease of at least 10 years for a property in a HUBZone (other than in a Redesignated Area or Qualified Disaster Area) will be deemed to have its principal office located in a HUBZone for up to 10 years from the date of the investment, as long as that building or property qualifies as the concern's principal office and continues to qualify as the concern's principal office, and as long as the firm maintains the long-term lease or continues to be the sole owner of the property.

(ii) Commencement of 10-year period. The 10-year principal office long-term investment protection period starts to run on the firm's HUBZone certification date (if the investment was made prior to the firm's certification) or on the date of the investment (if the investment was made after the firm's HUBZone certification date).

(iii) Exceptions. The following do not qualify for this provision:

(A) An office located in a Redesignated Area or Qualified Disaster Area at the time of initial HUBZone certification;

(B) An office that is shared with one or more other concerns or individuals;

(C) Any location being used as a personal residence; or

(D) An investment made within 180 calendar days of the expiration of an area's designation as a Qualified Census Tract, Qualified Non-Metropolitan County, Governor-Designated Covered Area, or Qualified Base Closure Area.

(2) Tribally-owned concerns. A concern that is owned in whole or in part by one or more Indian Tribal Governments (or by a corporation that is wholly owned by Indian Tribal Governments) must either:

(i) Maintain a principal office located in a HUBZone and ensure that at least 35% of its employees reside in a HUBZone as provided in paragraph (d)(1) of this section; or

(ii) Certify that when performing a HUBZone contract, at least 35% of its employees engaged in performing that contract will reside within any Indian reservation governed by one or more of the Indian Tribal Government owners, or reside within any HUBZone adjacent to such Indian reservation.

(d) Employees. (1) General. In order to be eligible for HUBZone certification, at least 35% of a concern's employees must qualify as HUBZone resident employees. When determining the percentage of employees that must reside in a HUBZone to meet the 35% HUBZone residency requirement, if the percentage results in a fraction, SBA rounds to the nearest whole number, except for a firm with only one employee. For firms with only one employee, that one employee must reside in a HUBZone.

(2) Tribally-owned concerns. If the concern is owned in whole or in part by one or more Indian Tribal Governments (or by a corporation that is wholly owned by one or more Indian Tribal Governments), see paragraph (c)(2) of this section.

(3) Legacy HUBZone employees. (i) An individual will be considered a Legacy HUBZone Employee and count as a HUBZone resident employee, even if the employee subsequently moves to a location that is not in a HUBZone or the area in which the employee's residence is located no longer qualifies as a HUBZone, if the individual:

(A) Continues to live in a HUBZone for at least 180 calendar days immediately after the firm's HUBZone certification date (or recertification date); and

(B) Continues to meet the definition of “employee” in § 126.103 continuously and without interruption.

(ii) A certified HUBZone small business concern may have up to four Legacy HUBZone Employees at a given time, but must have at least one other HUBZone employee in order for any legacy employee to count as a HUBZone employee.

(iii) The certified HUBZone small business concern must maintain records of the Legacy HUBZone Employee's original HUBZone address, as well as records of any HUBZone other address in which the individual resided, as well as records of the individual's continuous and uninterrupted employment by the HUBZone small business concern, for the duration of the concern's participation in the HUBZone program. In order to demonstrate that an individual resided in a HUBZone for 180 days after certification (or recertification), the concern must submit to SBA copies of leases, utility bills, or property tax records.

(iv) The certification date or recertification date being used to establish the HUBZone residency of the employee must be after December 26, 2019.

(v) The following individuals do not qualify as Legacy HUBZone Employees:

(A) An individual who initially qualified as a HUBZone Resident Employee by residing in a Redesignated Area or a Qualified Disaster Area; and

(B) An individual who works less than 30 hours per week.

(e) Attempt to maintain. (1) At the time of application, each recertification required by § 126.500(a), and offer for a HUBZone contract, a concern must certify that it will “attempt to maintain” (see § 126.103) having at least 35% of its employees reside in a HUBZone during the performance of any HUBZone contract it receives.

(2) At the time of recertification, a firm that is currently performing a HUBZone contract and falls below the 35% HUBZone residency requirement may recertify as a HUBZone small business concern as long as at least 20% of its total employees reside in a HUBZone and it is making substantive and documented efforts to meet the HUBZone residency requirement.

(3) During performance of a HUBZone contract, a HUBZone small business concern must attempt to maintain having at least 35% of its employees residing in HUBZones.

(f) Suspension and Debarment. At the time of application and at all times while a concern is HUBZone-certified, such concern and any of its owners must not have an active exclusion in SAM.

(g) Federal financial obligations. A business concern is ineligible to be certified as a HUBZone small business concern or to participate in the HUBZone program if either the concern or any of its principals has failed to pay significant financial obligations owed to the Federal Government, including unresolved tax liens and defaults on Federal loans or other Federally assisted financing. However, a small business concern may be eligible if the concern or the affected principals can demonstrate that they are current on an approved repayment plan, or the financial obligations owed have been settled and discharged/forgiven by the Federal Government.

For purposes of qualifying for HUBZone certification, SBA considers any person who owns any legal or equitable interest in a concern to be an owner of the concern. If an Employee Stock Ownership Plan owns all or part of the concern, SBA considers each stock trustee and plan member to be an owner. If a trust owns all or part of the concern, SBA considers each trustee and trust beneficiary to be an owner. In addition:

(a) Corporations. SBA considers any person who owns stock, whether voting or non-voting, to be an owner. SBA considers options to purchase stock and the right to convert debentures into voting stock to have been exercised.

(b) Partnerships. SBA considers all partners, whether general or limited, to be owners in a partnership.

(c) Sole proprietorships. The proprietor is the owner.

(d) Limited liability companies. SBA considers each member to be an owner of a limited liability company.

Control means both the day-to-day management and long-term decision-making authority for the HUBZone small business concern. Many persons may share control of a concern, including each of those occupying the following positions: officer, director, general partner, managing partner, managing member and manager.

(a) A HUBZone small business concern may have affiliates, provided that the HUBZone small business concern, together with its affiliates, qualifies as a small business concern as defined in part 121 of this chapter under the size standard corresponding to any NAICS code listed in its profile in SAM (or successor system), except as otherwise provided for small agricultural cooperatives.gov in § 126.103.

(b) Employees of affiliates are not automatically considered employees of a HUBZone applicant or HUBZone small business concern solely on the basis of affiliation.

(c) The employees of an affiliate may be counted as employees of a HUBZone applicant or HUBZone small business concern for purposes of determining compliance with the HUBZone program's principal office and 35% residency requirements in certain circumstances. In determining whether individuals should be counted as employees of a HUBZone applicant or HUBZone small business concern, SBA will consider the totality of circumstances, including criteria used by the IRS for Federal income tax purposes and those set forth in SBA's Size Policy Statement No. 1. Employees of the concern's affiliate will not be counted as the concern's employees if there is a clear line of fracture between the concern and its affiliate.

(1) SBA generally will find that there is a clear line of fracture where the concern demonstrates that it does not share employees, facilities, or equipment with the affiliate; has different customers or lines of business (or is distinctly segregated geographically); and does not receive significant contracts or financial assistance from the affiliate.

(2) The use of common administrative services between parent and/or sister concerns by itself will not result in an affiliate's employees being counted as employees of the HUBZone applicant or HUBZone small business concern.

(3) Minimal business activity between the concern and its affiliate alone will not result in an affiliate's employees being counted as employees of the HUBZone applicant or HUBZone small business concern.

(4) SBA will not treat the employees of one company as employees of another for HUBZone program purposes if the two firms would not be considered affiliated for size purposes under Part 121 of this chapter.

Participants in other SBA programs may be certified as HUBZone small business concerns if they meet all of the requirements set forth in this part.

Nonmanufacturers (referred to in the HUBZone Act of 1997 as “regular dealers”) may be certified as HUBZone small business concerns if they meet all of the requirements set forth in § 126.200. For purposes of this part, a “nonmanufacturer” is defined in § 121.406(b) of this chapter.

A HUBZone small business concern may have offices or facilities in multiple HUBZones or even outside a HUBZone. However, in order to be certified as a HUBZone small business concern, the concern's principal office must be located in a HUBZone (except see § 126.200(c)(2) for concerns owned by Indian Tribal Governments).