WASHINGTON – A direct final rule issued by the U.S. Small Business Administration today will now allow governors to petition the federal agency to designate Historically Underutilized Business Zone (HUBZone) status to certain rural and suburban areas.

These areas are determined by the Census Bureau and defined as those with a population of 50,000 or less and for which the average unemployment rate is at least 120% of the average unemployment rate. The newly issued rule was published in the Federal Register and will be effective January 1, 2020, unless significant adverse comment is received by December 16, 2019.

“This expansion of HUBZone areas will provide a valuable resource to small businesses in underserved communities to foster economic development and job creation – creating a pathway to the middle class for the residents of distressed areas,” said Acting SBA Administrator Chris Pilkerton.

According to SBA Regional Administrator Steve Bulger, who oversees the federal agency’s operation in New Jersey, New York, Puerto Rico and the U.S. Virgin Islands, The National Defense Authorization Act, enacted by Congress on December 12, 2017 and signed into law by President Donald Trump, authorized changes to the Small Business Act to include “Governor-designated covered areas” under the HUBZone program.

Under the new rule, a state governor may submit one petition per year for a covered area or areas.

In reviewing a request for designation included in the petition, the SBA Administrator may consider:
• The potential for job creation and investment in the
covered area;
• The demonstrated interest of small businesses in the
covered area to be designated as a Governor-designated
covered area;

• How state and local government officials have
incorporated the covered area into an economic
development strategy; and

• If the covered area was a HUBZone before becoming the
subject of the petition, the impact on the covered area if
the Administrator did not approve the petition.

“This new rule will better assist and provide more small businesses in high-unemployment and low income communities an economic boost from the HUBZone federal contracting program,” said Bulger. “With our nation in the midst of its longest economic expansion, President Trump and the SBA are committed to continuing fostering economic growth through job growth, capital investment and economic development.”

SBA New Jersey District Director Al Titone said, “SBA also anticipates that included within the covered areas that a governor may seek to be designated as a qualified HUBZone area are Opportunity Zones, authorized by Section 13823 of the Tax Cuts and Jobs Act of 2017, Public Law 115-97, that do not otherwise qualify as HUBZones.

“In 2018, New Jersey small businesses received $2.1 billion in federal contracts,” said Titone. “However, only 0.69 percent of that total or $65 million was generated through the HUBZone program,” he added. “We see the new rule as a way of bolstering the program in parts of New Jersey, which could lead to more small business owners qualifying and benefiting from contracting opportunities in areas of the state that aren’t currently classified as HUBZones.”

For information about the HUBZone program, visit www.sba.gov/hubzone.

For more information on Opportunity Zones and Opportunity Funds, see https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions
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About Opportunity Zones
Opportunity Zones provide a tax break in which investors can use capital gains to support long-term economic development in more than 8,700 designated low-income communities across the country. An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.

About the U.S. Small Business Administration
The U.S. Small Business Administration makes the American dream of business ownership a reality.
As the only go-to resource and voice for small businesses backed by the strength of the federal government, the SBA empowers entrepreneurs and small business owners with the resources and support they need to start, grow or expand their businesses, or recover from a declared disaster. The federal agency delivers services through an extensive network of SBA field offices and partnerships with public and private organizations. To learn more, visit www.sba.gov.