[Federal Register Volume 78, Number 119 (Thursday, June 20, 2013)]
[Rules and Regulations]
[Pages 37409-37417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-14710]



[[Page 37409]]

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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG45


Small Business Size Standards: Finance and Insurance and 
Management of Companies and Enterprises

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA) is increasing 
small business size standards for 36 industries in North American 
Industry Classification System (NAICS) Sector 52, Finance and 
Insurance, and for two industries in NAICS Sector 55, Management of 
Companies and Enterprises. In addition, SBA is changing the basis for 
measuring size from assets to annual receipts for one industry in NAICS 
Sector 52, namely, NAICS 522293, International Trade Financing. 
Finally, SBA is deleting NAICS 525930, Real Estate Investment Trusts, 
from its table of size standards. The U.S. Office of Management and 
Budget (OMB) included the financial activities formerly included in 
NAICS 525930 in NAICS 531110, NAICS 531120, NAICS 531130, NAICS 531190, 
and NAICS 525990. As part of its ongoing comprehensive size standards 
review, SBA evaluated all receipts based and assets based size 
standards in NAICS Sectors 52 and 55 to determine whether they should 
be retained or revised. SBA did not review the 1,500-employee size 
standard for NAICS 524126, Direct Property and Casualty Insurance 
Carriers, which it will review in the near future with other employee 
based size standards. This final rule is one of a series of final rules 
that will review size standards of industries grouped by NAICS Sectors.

DATES: This rule is effective July 22, 2013.

FOR FURTHER INFORMATION CONTACT: Jorge Laboy-Bruno, Ph.D., Economist, 
Office of Size Standards, by Phone at (202) 205-6618 or by email at 
[email protected].

SUPPLEMENTARY INFORMATION: 
Introduction:

    To determine eligibility for federal small business assistance 
programs, SBA establishes numeric small business definitions (referred 
to as size standards) for private sector industries in the United 
States. SBA's existing size standards use two primary measures of 
business size--average annual receipts and number of employees. 
However, financial assets, electric output, and refining capacity are 
used as size measures for a few specialized industries. For example, 
currently six size standards in NAICS Sector 52 are based on total 
assets. In addition, SBA's Small Business Investment Company (SBIC), 
7(a), and Certified Development Company (CDC or 504) Loan Programs 
determine small business eligibility using either the industry based 
size standards or alternative tangible net worth and net income based 
size standards. When SBA began the comprehensive size standards review 
in 2007, there were 41 different size standards, covering 1,141 NAICS 
industries and 18 sub-industry activities (i.e., ``exceptions'' in 
SBA's table of size standards). Of these different size standards, 31 
were based on average annual receipts, seven based on number of 
employees, and three based on other measures. Presently, there are a 
total of 1,031 size standards, 516 of which are based on average annual 
receipts, 499 based on number of employees, 10 based on megawatt hours, 
and six based on average assets.
    Over the years, SBA has received comments that its size standards 
have not kept up with changes in the economy, and, in particular with 
changes in the federal contracting marketplace and industry structure. 
SBA last conducted a comprehensive review of size standards during the 
late 1970s and early 1980s. Since then, most reviews of size standards 
have been limited to a few specific industries in response to requests 
from the public and federal agencies. SBA also makes periodic inflation 
adjustments to its monetary based size standards. The latest inflation 
adjustment to size standards was published in the Federal Register on 
July 18, 2008 (73 FR 41237).
    SBA recognizes that changes in industry structure and the federal 
marketplace since the last comprehensive review have rendered existing 
size standards for some industries no longer supportable by current 
data. Accordingly, in 2007, SBA began a comprehensive review of its 
size standards to determine whether existing size standards should be 
retained or revised based on current data on industry structure and 
federal market.
    In addition, on September 27, 2010, the President of the United 
States signed the Small Business Jobs Act of 2010 (Jobs Act). The Jobs 
Act directs SBA to conduct a detailed review of all size standards and 
to make appropriate adjustments to reflect market conditions. 
Specifically, the Jobs Act requires SBA to conduct a detailed review of 
at least one-third of all size standards during every 18-month period 
from the date of its enactment and to review all size standards not 
less frequently than once every 5 years thereafter. Reviewing existing 
small business size standards and making appropriate adjustments based 
on current data is also consistent with Executive Order 13563 on 
improving regulation and regulatory review.
    SBA has chosen not to review all size standards at one time. 
Rather, it is reviewing groups of related industries on a Sector by 
Sector basis.
    As part of SBA's comprehensive review of size standards, the Agency 
reviewed all receipts based and assets based size standards in NAICS 
Sector 52, Finance and Insurance, and in NAICS code Sector 55, 
Management of Companies and Enterprises, to determine whether the 
existing size standards should be retained or revised. After the 
review, on September 11, 2012, SBA published a proposed rule in the 
Federal Register (76 FR 63216) seeking public comment on its proposal 
to increase the assets based and receipts based size standards for 37 
industries in NAICS Sector 52 and two industries in NAICS Sector 55 and 
to change the size measure from average assets to average receipts for 
one industry in NAICS Sector 52. In that proposed rule, SBA did not 
address the 1,500-employee size standard for NAICS 524126, Direct 
Property and Casualty Insurance Carriers. SBA will review NAICS 524126 
in the near future with other employee based size standards.
    In conjunction with the current comprehensive size standards 
review, SBA developed a ``Size Standards Methodology'' for developing, 
reviewing, and modifying size standards, when necessary. SBA published 
the document on its Web site at www.sba.gov/size for public review and 
comment and also included it as a supporting document in the electronic 
docket of the September 11, 2012 proposed rule for NAICS Sector 52 and 
Sector 55 (77 FR 55737) at www.regulations.gov (Docket SBA-2012-0015, 
RIN 3245-AG45).
    In evaluating an industry's size standard, SBA examines its 
characteristics (such as average firm size, startup costs, industry 
competition, and distribution of firms by size) and the level and small 
business share of federal contract dollars in that industry. SBA also 
examines the potential impact a size standard revision might have on 
its financial assistance programs and whether a business concern under 
a revised size standard would be dominant in its industry. SBA analyzed

[[Page 37410]]

the characteristics of each industry in NAICS Sectors 52 and 55 that 
have receipts-based size standards, mostly using a special tabulation 
obtained from the U.S. Bureau of the Census based on its 2007 Economic 
Census (the latest available).
    To evaluate industries in NAICS Sector 52 that have assets based 
size standards (except for credit unions), SBA evaluated the data from 
the Statistics on Depository Institutions database of the Federal 
Deposit Insurance Corporation between 1984 and 2011 (http://www2.fdic.gov/sdi/main.asp) and data on financial institutions that 
participate in the Department of the Treasury's Minority Bank Deposit 
Program, compiled by the Federal Reserve Board (http://www.federalreserve.gov/releases/mob/ ). For the credit union industry, 
SBA examined the data from call reports for the fourth quarters of 1994 
and 2011 from the National Credit Union Administration Web site (http://www.ncua.gov/DataApps/QCallRptData/Pages/CallRptData.aspx).
    To calculate average assets, SBA used sales to total assets ratios 
from the Risk Management Association's Annual Statement Studies, 2008-
2010.
    To evaluate the federal marketplace, SBA analyzed the level and 
small business share of federal contracts in each of those industries 
using the data from the Federal Procurement Data System--Next 
Generation (FPDS-NG) for fiscal years 2008 to 2010.
    To evaluate the impact of changes to size standards on its loan 
programs, SBA analyzed internal data on its guaranteed loan programs 
for fiscal years 2008 to 2010.
    SBA's ``Size Standards Methodology'' provides a detailed 
description of its analyses of various industry and program factors and 
data sources, and how the Agency uses the results to derive size 
standards. In the proposed rule, SBA detailed how it applied its ``Size 
Standards Methodology'' to review and modify, where necessary, the 
existing receipts based and assets based standards for industries in 
NAICS Sectors 52 and 55. SBA sought comments from the public on a 
number of issues concerning its ``Size Standards Methodology,'' such as 
whether there are alternative methodologies that SBA should consider; 
whether there are alternative or additional factors or data sources 
that SBA should evaluate; whether SBA's approach to establishing small 
business size standards makes sense in the current economic 
environment; whether SBA's applications of anchor size standards are 
appropriate in the current economy; whether there are gaps in SBA's 
methodology because of the lack of comprehensive data; and whether 
there are other facts or issues that SBA should consider.
    In the proposed rule, SBA also sought comments on its proposal to 
increase the receipts based and assets based size standards for 37 
industries in NAICS Sector 52 and two industries in NAICS Sector 55 and 
to change the measure of size from average assets to average receipts 
for NAICS 522293, International Trade Financing. Specifically, SBA 
requested comments on whether the size standards should be revised as 
proposed and whether the proposed revisions are appropriate. SBA also 
invited comments on whether its proposed eight fixed levels for 
receipts based size standards are appropriate and whether the Agency 
should adopt common size standards for certain Industry Groups and 
Subsectors in NAICS Sector 52.
    SBA's analyses suggested a possible lowering of one industry size 
standard in NAICS Sector 52. That industry is NAICS 524210, Insurance 
Agencies and Brokerages. However, SBA explained in the proposed rule 
that lowering size standards would reduce the number of firms that are 
currently eligible to participate in federal small business assistance 
programs and would run counter to what the Federal Government and SBA 
are doing to help small businesses and create jobs. SBA had proposed to 
retain the current size standard for that industry and requested 
comments on whether the Agency should lower the size standard for that 
industry. SBA received no comment opposing its proposal to retain the 
size standard for that industry even if the data supported lowering it. 
SBA has, therefore, determined that size standards that might be 
lowered based on its analyses alone should be retained at their current 
levels.

Summary of Comments

    SBA received five comments on its proposal to increase the asset 
and receipts based size standards for 37 industries and to change the 
size measure from average assets to average receipts for one industry 
in NAICS Sector 52. SBA did not receive any comments on its proposal to 
increase the size standards for the two industries in NAICS Sector 55. 
Four commenters focused on the proposed increase to the size standard 
for credit unions (NAICS 522130) from $175 million in average assets to 
$500 million, while one commented on the size standard for Consumer 
Lending (NAICS 522291), which SBA proposed to increase from $7 million 
in average annual receipts to $35.5 million. All commenters generally 
supported SBA's effort to review and update size standards in NAICS 
Sector 52. These comments can be viewed at www.regulations.gov (Docket 
SBA-2012-0015, RIN 3245-AG45), and are summarized and discussed below.
    A national association representing federal credit unions commented 
on the proposed rule by strongly supporting the proposed increase in 
the size standard for credit unions from $175 million in assets to $500 
million. The commenter stated that the current industry data support 
this increase. It noted that the Consumer Financial Protection Bureau 
(CFPB) created under the Dodd-Frank Wall Street Reform and Protection 
Act (Dodd-Frank Act) uses SBA's size standards to assess the impact of 
its regulations on small entities as required by the Small Business 
Regulatory Enforcement and Flexibility Act (SBREFA). The association 
concluded that the proposed increase would offer credit unions more 
voices in the SBREFA process.
    The next comment, submitted on behalf of the Credit Union National 
Association (CUNA) representing 90 percent of state and federal credit 
unions in the U.S., was also in strong support of SBA's proposal to 
increase the size standard for credit unions from $175 million in 
assets to $500 million. The commenter, similar to the first commenter, 
stated that the proposed size standard, if adopted, will permit more 
credit unions to benefit from provisions that require federal agencies 
to assess and minimize the impact of regulatory costs on small entities 
under the Regulatory Flexibility Act (RFA), SBREFA and Executive Orders 
13272, 13653, and 13579. The commenter added that institutions below 
$500 million in assets lack the necessary personnel (such as a full-
time compliance officer) to meet the compliance requirements.
    The third and fourth commenters were members of the CUNA, 
representing credit unions and their members at the state levels. Both 
commenters strongly supported SBA's proposal to increase the credit 
unions' size standard to $500 million in assets. They echoed the same 
reasons as those provided by industry associations: that a higher size 
standard will allow more credit unions to participate in federal 
rulemaking process under RFA and SBREFA.
    All four commenters representing national and state associations 
and other groups of credit unions and their interests strongly 
supported SBA's proposed increase of the size standard

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for credit unions from $175 million in assets to $500 million. They 
were uniform in their reasons for support that the proposed size 
standard will offer more credit unions and their members a greater 
voice in the SBREFA and RFA processes. Thus, in consideration of these 
comments, SBA is adopting, as proposed, $500 million in assets as the 
size standard for credit unions (NAICS 522130).
    The above commenters also urged SBA and its Office of Advocacy to 
support a substantial increase in the size standard that the National 
Credit Union Administration (NCUA) uses to define small entities for 
its programs. They also urged NCUA to review its size standards more 
frequently and use the same SBA established size threshold as other 
federal agencies for purposes of the RFA and similar regulatory 
analyses. While SBA and its Office of Advocacy promote the interests of 
small entities, these issues are beyond the scope of this rule. SBA's 
size standards regulations provide that for purposes of conducting an 
RFA federal agencies may, after consultation with SBA's Office of 
Advocacy, establish a size standard different from SBA's size 
standards, one that is more appropriate for its analysis (13 CFR 
121.903(c)).
    The fifth comment was from the organization representing lenders 
that offer online consumer short-term loans and related products and 
services, including finance companies, mortgage bankers, payday 
lenders, auto finance companies, and other specialty finance companies, 
which fall under NAICS 522291, Consumer Lending. These are non-
depository entities and are subject to, as the commenter indicated, 
federal consumer protection regulations. Although the association 
supported SBA's proposal to increase the size standard for NAICS 522291 
from $7 million in average annual receipts to $35.5 million, it 
contended that for size standards purposes this industry should be 
treated the same as depository financial institutions, because both 
depository and non-depository institutions operate and compete with one 
another in the same marketplace. It urged SBA to reconsider changing 
the size standard for NAICS 522291 from receipts to assets and apply 
the same size standard of $500 million in assets that SBA proposed for 
all depository institutions and credit cards issuing companies. The 
commenter argued that ``assets'' is a better measure of size than 
``receipts'' for all lending institutions.
    The commenter stated that SBA's size standards have become more 
important now than in the past because they are used to determine the 
supervisory jurisdiction of the CFPB and to determine which companies 
are permitted to participate on small business panels about certain 
CFPB's regulations. The commenter added that SBA's table of size 
standards is a default basis for defining what constitutes a small 
entity for SBREFA purposes and that neither CFPB nor SBREFA existed 
when size standards were first created for financial industries. The 
organization concluded that a common size standard of $500 million in 
assets for both depository and non-depository institutions will help 
level the playing field for different types of financial institutions.
    SBA does not accept the commenter's recommendation for three 
reasons. First, when establishing a size standard, SBA considers 
similarity of products and services provided by different industries 
and may consider establishing a common size standard for certain 
closely related industries if supported by industry analysis. With the 
advent of online banking and lending and the emergence of new financial 
products and services, SBA agrees that the distinction between 
depository and non-depository financial institutions may have decreased 
with respect to types of services and products offered. However, the 
data show significant differences in the industry structure for 
depository and non-depository institutions, which does not support the 
creation of a common size standard, as recommended by the commenter. 
For example, based on 2007 Economic Census, Depository Institutions 
averaged 137 employees and $49 million revenue, as compared to 35 
employees and $23 million revenue for Non-depository Institutions 
(excluding the credit card issuing industry for which SBA has an assets 
based size standard). Firms in the consumer lending industry (NAICS 
522291) were even more different, averaging only 28 employees and about 
$12 million revenue. These results clearly do not support the same size 
standard for NAICS 522291 as that for depository institutions. Second, 
assets data are not available for non-depository institutions, while 
receipts data are readily available from the Economic Census. Third, 
based on the 2007 Economic Census, under the proposed $35.5 million 
receipts based size standard, more than 96 percent of firms in NAICS 
522291 will qualify as small and be eligible to participate in the 
SBREFA process and benefit from other provisions to support small 
entities. For comparison, about 92 percent of firms are considered 
small under the current $7 million size standard. With the proposed 
increase, about 175 additional firms that are large under the current 
size standard for NAICS 522291 will become small and be eligible to 
participate in the SBREFA process. Thus, SBA is retaining the receipts 
based size standard for NAICS 522291 and increasing it from $7 million 
to $35.5 million, as proposed.
    Conclusion:
    Based on SBA's analyses of relevant industry and program data and 
the public comments it received on the proposed rule, as discussed 
above, SBA has decided to increase assets based and receipts based size 
standards for 37 industries in NAICS Sector 52. Since there were no 
comments to SBA's proposal to increase the receipts based size 
standards for the two industries in NAICS Sector 55, SBA is also 
adopting them as proposed.
    Additionally, SBA had proposed to change the size measure from 
average assets to average receipts for NAICS 522293, International 
Trade Financing, by replacing the current $175 million assets based 
size standard with a $35.5 million receipts based size standard. As 
detailed in the proposed rule, SBA proposed this change based on its 
review of available industry data. Since SBA received no comments 
against the proposed change, SBA is adopting the $35.5 million receipts 
based size standard for NAICS 522293, as proposed. Those industries and 
their revised size standards are shown Table 1, Summary of Revised Size 
Standards in NAICS Sectors 52 and 55, below.

                                          Table 1--Summary of Revised Size Standards in NAICS Sectors 52 and 55
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                                                                                 Current size standard  ($
        NAICS Code                             NAICS Title                                million)                Revised size standard  ($ million)
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522110....................  Commercial Banking \8\...........................  $175 million in assets \8\...  $500 million in assets.\8\
522120....................  Savings Institutions \8\.........................  $175 million in assets \8\...  $500 million in assets.\8\
522130....................  Credit Unions \8\................................  $175 million in assets \8\...  $500 million in assets.\8\
522190....................  Other Depository Credit intermediation \8\.......  $175 million in assets \8\...  $500 million in assets.\8\

[[Page 37412]]

 
522210....................  Credit Card Issuing \8\..........................  $175 million in assets \8\...  $500 million in assets.\8\
522220....................  Sales Financing..................................  $7.0.........................  $35.5.
522291....................  Consumer Lending.................................  $7.0.........................  $35.5.
522292....................  Real Estate Credit...............................  $7.0.........................  $35.5.
522293....................  International Trade Financing....................  $175 million in assets \8\...  $35.5.
522294....................  Secondary Market Financing.......................  $7.0.........................  $35.5.
522298....................  All Other Non-depository Credit Intermediation...  $7.0.........................  $35.5.
522320....................  Financial Transactions Processing, Reserve, and    $7.0.........................  $35.5.
                             Clearinghouse Activities.
522390....................  Other Activities Related to Credit Intermediation  $7.0.........................  $19.0.
523110....................  Investment Banking and Securities Dealing........  $7.0.........................  $35.5.
523120....................  Securities Brokerage.............................  $7.0.........................  $35.5.
523130....................  Commodity Contracts Dealing......................  $7.0.........................  $35.5.
523140....................  Commodity Contracts Brokerage....................  $7.0.........................  $35.5.
523210....................  Securities and Commodity Exchanges...............  $7.0.........................  $35.5.
523910....................  Miscellaneous Intermediation.....................  $7.0.........................  $35.5.
523920....................  Portfolio Management.............................  $7.0.........................  $35.5.
523930....................  Investment Advice................................  $7.0.........................  $35.5.
523991....................  Trust, Fiduciary and Custody Activities..........  $7.0.........................  $35.5.
523999....................  Miscellaneous Financial Investment Activities....  $7.0.........................  $35.5.
524113....................  Direct Life Insurance Carriers...................  $7.0.........................  $35.5.
524114....................  Direct Health and Medical Insurance Carriers.....  $7.0.........................  $35.5.
524127....................  Direct Title Insurance Carriers..................  $7.0.........................  $35.5.
524128....................  Other Direct Insurance (except Life, Health and    $7.0.........................  $35.5.
                             Medical) Carriers.
524130....................  Reinsurance Carriers.............................  $7.0.........................  $35.5.
524291....................  Claims Adjusting.................................  $7.0.........................  $19.0.
524292....................  Third Party Administration of Insurance and        $7.0.........................  $30.0.
                             Pension Funds.
524298....................  All Other Insurance Related Activities...........  $7.0.........................  $14.0.
525110....................  Pension Funds....................................  $7.0.........................  $30.0.
525120....................  Health and Welfare Funds.........................  $7.0.........................  $30.0.
525190....................  Other Insurance Funds............................  $7.0.........................  $30.0.
525910....................  Open[dash]End Investment Funds...................  $7.0.........................  $30.0.
525920....................  Trusts, Estates, and Agency Accounts.............  $7.0.........................  $30.0.
525990....................  Other Financial Vehicles.........................  $7.0.........................  $30.0.
551111....................  Offices of Bank Holding Companies................  $7.0.........................  $19.0.
551112....................  Offices of Other Holding Companies...............  $7.0.........................  $19.0.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For the reasons stated above and in the proposed rule, SBA has 
decided to retain the current receipts based size standard for NAICS 
524210, Insurance Agencies and Brokerages, for which analytical results 
suggested lowering it. Maintaining the current size standard for NAICS 
524210 is consistent with SBA's recent final rules on NAICS Sector 44-
45, Retail Trade (75 FR 61597, (October 6, 2010)); NAICS Sector 72, 
Accommodation and Food Services (75 FR 61604, (October 6, 2010)); NAICS 
Sector 81, Other Services (75 FR 61591, (October 6, 2010)); NAICS 
Sector 54, Professional, Scientific and Technical Services (77 FR 7490 
(February 10, 2012)); NAICS Sector 48-49, Transportation and 
Warehousing (77 FR 10943 (February 24, 2012)); NAICS Sector 51, 
Information (77 FR 72702 (December 6, 2012)); NAICS Sector 53, Real 
Estate and Rental and Leasing (77 FR 88747 (September 24, 2012)); NAICS 
Sector 56, Administrative and Support, Waste Management and Remediation 
Services (77 FR 72691 (December 6, 2012)); NAICS Sector 61, Educational 
Services (77 FR 58739 (September 24, 2012)); and NAICS Sector 62, 
Health Care and Social Assistance (77 FR 58755 (September 24, 2012)).
    SBA is also retaining the existing receipts based size standard for 
one industry in NAICS Sector 52 for which the results supported it at 
its current level. As stated earlier, SBA did not review NAICS 524126, 
Direct Property and Casualty Insurance Carriers, that has an employee 
based size standard, which the Agency will review in the near future 
with other employee based standards. Until then, SBA is retaining the 
current employee based size standard for that industry.
    Finally, SBA is deleting NAICS 525930, Real Estate Investment 
Trusts (REIT), from its table of size standards because the NAICS code 
no longer exists. In its 2007 NAICS update, OMB deleted NAICS 525930 
and incorporated its various activities in NAICS 525990, NAICS 531110, 
NAICS 531120, NAICS 531130, and NAICS 531190. SBA has analyzed and 
addressed the size standards for all of those industries and the 
activities formerly included in NAICS 525930. In this rule, SBA is 
increasing the size standard for NAICS 525990 to $30 million. SBA's 
September 24, 2012 final rule on Sector 53, Real Estate, Rental, and 
Leasing (77 FR 58747), established a $25.5 million size standard for 
the other four industries which include REIT activities.

Compliance With Executive Orders 12866, 13563, 12988 and 13132, the 
Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
final rule is not a ``significant regulatory action'' for purposes of 
Executive Order 12866. In order to help explain the need of this rule 
and its potential benefits and costs, SBA is providing below a Cost 
Benefit Analysis of the rule. This is also not a ``major rule'' under 
the Congressional Review Act, 5 U.S.C. 800.

[[Page 37413]]

Cost Benefit Analysis

1. Is there a need for the regulatory action?

    The size standards revisions in NAICS Sector 52, Finance and 
Insurance, and NAICS Sector 55, Management of Companies and 
Enterprises, will better reflect the economic characteristics of small 
businesses and the Federal Government marketplace in those Sectors. 
SBA's mission is to aid and assist small businesses through a variety 
of financial, procurement, business development, and advocacy programs. 
To determine the intended beneficiaries of these programs, SBA 
establishes distinct definitions of which businesses are deemed small 
businesses. The Small Business Act (the Act) (15 U.S.C. 632(a)) 
delegates to SBA's Administrator the responsibility for establishing 
small business definitions. The Act also requires that small business 
definitions vary to reflect industry differences. The Small Business 
Jobs Act of 2010 also requires SBA to review all size standards and 
make necessary adjustments to reflect market conditions. The 
supplementary information section of this final rule and the proposed 
rule explains SBA's methodology for analyzing a size standard for a 
particular industry.

2. What are the potential benefits and costs of this regulatory action?

    The most significant benefit to businesses obtaining small business 
status because of this final rule is gaining eligibility for federal 
small business assistance programs. These include SBA's financial 
assistance programs, economic injury disaster loans, and federal 
procurement programs intended for small businesses. Federal procurement 
programs provide targeted opportunities for small businesses under 
SBA's business development programs, such as 8(a), Small Disadvantaged 
Businesses (SDB), small businesses located in Historically 
Underutilized Business Zones (HUBZone), women-owned small businesses 
(WOSB), Economically Disadvantaged Women Owned Small Businesses 
(EDWOSB) and service-disabled veteran-owned small businesses (SDVOSB). 
These programs help small businesses become more knowledgeable, stable, 
and competitive. Other federal agencies may also use SBA's size 
standards for a variety of other regulatory and program purposes. SBA 
is increasing 33 receipts based size standards in Sector 52 and Sector 
55. SBA estimates that more than 5,400 firms, not small under current 
size standards, will become small and therefore eligible for these 
programs. That is about 2.2 percent of all firms classified as small 
under the current receipts based size standards in NAICS Sectors 52 and 
55. This will increase the small business share of total receipts of 
all industries with receipts based size standards within NAICS Sectors 
52 and 55 from 5.1 percent under the current size standards to 7.5 
percent under the revised size standards. Additionally, due to the 
increase to the assets based size standard from $175 million to $500 
million for four industries in NAICS Sector 52 (i.e., NAICS 522110, 
522120, 522190 and 522210), approximately 2,000 additional depository 
institutions, including about 25 minority owned financial institutions, 
will qualify as small. This will increase the small business share of 
total assets in those industries from 2.5 percent under the current 
assets based size standard to 7 percent for all financial institutions 
and from 14.4 percent to 33 percent for minority owned institutions. In 
addition, the increase from $175 million to $500 million in assets will 
enable about 550 credit unions to obtain small entity status. However, 
because they are organized as not-for-profit entities, they would not 
qualify for federal programs intended for small business concerns (see 
13 CFR 121.105). They may be eligible for other federal programs and 
regulatory purposes for which being organized as not-for-profit 
entities is not a limiting factor.
    The following groups will benefit from the revisions to size 
standards adopted in this rule: (1) Some businesses that are above the 
current size standards may gain small business status under the higher 
size standards, thereby enabling them to participate in federal small 
business assistance programs; (2) growing small businesses that are 
close to exceeding the current size standards will be able to retain 
their small business status under the higher size standards, thereby 
enabling them to continue their participation in the programs; (3) 
federal agencies will have a larger pool of small businesses from which 
to draw for their small business procurement programs; (4) prime 
contractors that could benefit from agreements with the minority owned 
depository institutions in meeting their subcontracting goals and 
credits; and (5) potentially small business communities could benefit 
from increased banking activities in the area.
    SBA estimates that firms gaining small business status under the 
revised size standards could receive federal contracts totaling $8 
million to $10 million annually under SBA's small business, 8(a), SDB, 
HUBZone, WOSB and EDWOSB, and SDVOSB Programs, and other unrestricted 
procurements. The added competition for many of these procurements can 
also result in lower prices to the Government for procurements reserved 
for small businesses, but SBA cannot quantify this benefit.
    Under SBA's 7(a) and 504 Loan Programs, based on the fiscal years 
2008-2010 data, SBA estimates up to 30 additional loans totaling about 
$4 million to $5 million in federal loan guarantees could be made to 
these newly defined small businesses under the revised size standards. 
Increasing the size standards will likely result in more small business 
guaranteed loans to businesses in these industries, but it is 
impractical to estimate exactly the number and total amount of loans. 
There are two reasons for this: (1) Under the Jobs Act, SBA can now 
guarantee substantially larger loans than in the past; and (2) the Jobs 
Act established an alternative size standard ($15 million in tangible 
net worth and $5 million in net income after income taxes) for business 
concerns that do not meet the size standards for their industry. 
Therefore, SBA finds it difficult to quantify the actual impact of the 
revised size standards on its 7(a) and 504 Loan Programs.
    Newly defined small businesses will also benefit from SBA's 
Economic Injury Disaster (EID) Loan Program. Since this program is 
contingent on the occurrence and severity of a disaster, SBA cannot 
make a meaningful estimate of this impact.
    To the extent that those 7,400 newly defined small firms (including 
5,400 firms under the receipts based size standards in 33 industries 
and 2,000 firms under the assets based size standards in four 
industries) could become active in federal procurement programs, the 
revised size standards may entail some additional administrative costs 
to the government associated with there being more bidders on small 
business procurement opportunities. In addition, there will be more 
firms seeking SBA's guaranteed loans, more firms eligible for 
enrollment in the Systems of Award Management's (SAM) Dynamic Small 
Business Search database, and more firms seeking certification as 8(a) 
or HUBZone firms or qualifying for small business, WOSB and EDWOSB, 
SDVOSB, and SDB status. Among those newly defined small businesses 
seeking SBA's assistance, there could be some additional costs 
associated with compliance and verification of small business status 
and protests of small business status. SBA believes that these

[[Page 37414]]

added administrative costs will be minimal because mechanisms are 
already in place to handle these requirements.
    Additionally, some Federal Government contracts may have higher 
costs. With a greater number of businesses defined as small under the 
revised size standards, federal agencies may choose to set aside more 
contracts for competition among small businesses rather than using full 
and open competition. The movement from unrestricted to small business 
set-aside contracting might result in competition among fewer total 
bidders, although there will be more small businesses eligible to 
submit offers. However, the additional costs associated with fewer 
bidders are expected to be minor since, by law, procurements may be set 
aside for small businesses or reserved for the 8(a), HUBZone, WOSB and 
EDWOSB, or SDVOSB Programs only if awards are expected to be made at 
fair and reasonable prices. In addition, there may be higher costs when 
more full and open contracts are awarded to HUBZone businesses that 
receive price evaluation preferences.
    The size standards revisions may have some distributional effects 
among large and small businesses. Although SBA cannot estimate with 
certainty the actual outcome of the gains and losses among small and 
large businesses, it can identify several probable impacts. There may 
be a transfer of some federal contracts to small businesses from large 
businesses. Large businesses may have fewer federal contract 
opportunities as federal agencies decide to set aside more federal 
contracts for small businesses. In addition, some federal contracts may 
be awarded to HUBZone concerns instead of large businesses since these 
firms may be eligible for a price evaluation preference for contracts 
when they compete on a full and open basis. Similarly, currently 
defined small businesses may obtain fewer federal contracts due to the 
increased competition from more businesses defined as small. This 
transfer may be offset by a greater number of federal procurements set 
aside for all small businesses. The number of newly defined and 
expanding small businesses that are willing and able to sell to the 
Federal Government will limit the potential transfer of contracts from 
large and currently defined small businesses. SBA cannot estimate the 
potential distributional impacts of these transfers with any degree of 
precision.
    The revisions to the existing size standards in NAICS Sectors 52 
and 55 that are adopted in this final rule are consistent with SBA's 
statutory mandate to assist small business. This regulatory action 
promotes the Administration's objectives. One of SBA's goals in support 
of the Administration's objectives is to help individual small 
businesses succeed through fair and equitable access to capital and 
credit, Government contracts, and management and technical assistance. 
Reviewing and modifying size standards, when appropriate, ensures that 
intended beneficiaries have access to small business programs designed 
to assist them.

Executive Order 13563

    A description of the need for this regulatory action and benefits 
and costs associated with this action including possible distributional 
impacts that relate to Executive Order 13563 is included above in the 
Cost Benefit Analysis under Executive Order 12866.
    In an effort to engage interested parties in this action, SBA 
presented its size standards methodology (discussed above under 
Supplementary Information) to various industry associations and trade 
groups. SBA also met with a number of industry groups to get their 
feedback on its methodology and other size standards issues. In 
addition, SBA presented its size standards methodology to businesses in 
13 cities in the U.S. and sought their input as part of Jobs Act tours. 
The presentation also included information on the latest status of the 
comprehensive size standards review and on how interested parties can 
provide SBA with input and feedback on size standards review. Moreover, 
SBA presented the same information to Department of Defense (DoD) 
contracting personnel at their annual training conference. It included 
updates on what size standards SBA was currently reviewing and its 
plans to review in the future.
    Furthermore, when SBA issued the proposed rule, it notified by 
email the individuals, government procurement personnel, and companies 
that had in recent years exhibited an interest in size standards for 
NAICS Sectors 52 and 55 so they could comment.
    Additionally, SBA sent letters to the Directors of the Offices of 
Small and Disadvantaged Business Utilization (OSDBU) at several federal 
agencies with considerable procurement responsibilities requesting 
their feedback on how the agencies use SBA's size standards and whether 
current size standards meet their programmatic needs (both procurement 
and non-procurement). SBA gave appropriate consideration to all input, 
suggestions, recommendations, and relevant information obtained from 
industry groups, individual businesses, and federal agencies in 
preparing the proposed rule and this final rule.
    The review of size standards in NAICS Sectors 52 and 55 is 
consistent with EO 13563, Section 6, calling for retrospective analyses 
of existing rules. The last comprehensive review of size standards 
occurred during the late 1970s and early 1980s. Since then, except for 
periodic adjustments for monetary based size standards, most reviews of 
size standards were limited to a few specific industries in response to 
requests from the public and federal agencies. SBA recognizes that 
changes in industry structure and the federal marketplace over time 
have rendered existing size standards for some industries no longer 
supportable by current data. Accordingly, in 2007, SBA began a 
comprehensive review of its size standards to ensure that existing size 
standards have supportable bases and to revise them when necessary. In 
addition, the Jobs Act requires SBA to conduct a detailed review of all 
size standards and to make appropriate adjustments to reflect market 
conditions. Specifically, the Jobs Act requires SBA to conduct a 
detailed review of at least one-third of all size standards during 
every18-month period from the date of its enactment and do a complete 
review of all size standards not less frequently than once every 5 
years thereafter.

Executive Order 12988

    This action meets applicable standards set forth in Sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.

Executive Order 13132

    For purposes of Executive Order 13132, SBA has determined that this 
final rule will not have substantial, direct effects on the States, on 
the relationship between the national government and the States, or on 
the distribution of power and responsibilities among the various levels 
of government. Therefore, SBA has determined that this final rule has 
no federalism implications warranting preparation of a federalism 
assessment.

Paperwork Reduction Act

    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this final rule will not impose any new 
reporting or record keeping requirements.

[[Page 37415]]

Final Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this final rule may 
have a significant impact on a substantial number of small businesses 
in NAICS Sector 52, Finance and Insurance, and NAICS Sector 55, 
Management of Companies and Enterprises. As described above, this final 
rule may affect small businesses seeking federal contracts, loans under 
SBA's 7(a), 504 and EID Loan Programs, and assistance under other 
federal small business programs, as well as subcontracting programs.
    Immediately below, SBA sets forth a final regulatory flexibility 
analysis of this rule addressing the following questions: (1) What are 
the need for and objective of the rule? (2) What are SBA's description 
and estimate of the number of small businesses to which the rule will 
apply? (3) What are the projected reporting, record keeping, and other 
compliance requirements of the rule? (4) What are the relevant federal 
rules that may duplicate, overlap, or conflict with the rule? and (5) 
What alternatives will allow the Agency to accomplish its regulatory 
objectives while minimizing the impact on small businesses?

1. What are the need for and objective of the rule?

    Changes in industry structure, technological changes, productivity 
growth, mergers and acquisitions, and updated industry definitions have 
changed the structure of many industries in NAICS Sectors 52 and 55. 
Such changes can be sufficient to support revisions to current size 
standards for some industries. Based on the analysis of the latest data 
available, SBA believes that the revised standards in this final rule 
more appropriately reflect the size of businesses that need federal 
assistance. The Jobs Act also requires SBA to review all size standards 
and make necessary adjustments to reflect market conditions.

2. What are SBA's description and estimate of the number of small 
businesses to which the rule will apply?

    SBA estimates that more than 5,400 additional firms will become 
small because of revisions to receipts based size standards for 33 
industries in NAICS Sectors 52 and 55. That represents 2.2 percent of 
total firms that are small under current receipts based size standards 
in all industries within these Sectors. This will result in an increase 
in the small business share of total receipts in those industries from 
5.1 percent under the current size standards to 7.5 percent under the 
revised size standards. Additionally, due to the increase in the assets 
based size standard for four industries within NAICS Sector 52 about 
2,000 additional financial institutions will qualify as small, 
including about 25 minority owned financial institutions that could be 
eligible to participate in agreements with prime contractors for 
subcontracting goals and credits. In addition, about 550 additional 
credit unions would qualify as small entities under the $500 million 
assets based size standard, but they would not qualify for federal 
programs intended for small businesses because they are not-for profit 
entities. However, they may qualify as small entities for other federal 
programs and regulatory proposes. The revised size standards will 
enable more small businesses to retain their small business status for 
a longer period. Many firms may have lost their eligibility and find it 
difficult to compete at current size standards with significantly 
larger companies. The change in size standards, as discussed herein, 
will have a positive competitive impact on existing small businesses 
and on those that exceed the size standards but are on the very low end 
of those that are not small. They might otherwise be called or referred 
to as mid-sized businesses, although SBA only defines what is small; 
other entities are other than small.

3. What are the projected reporting, record keeping and other 
compliance requirements of the rule?

    The revisions to size standards impose no additional reporting or 
record keeping requirements on small businesses. However, qualifying 
for federal procurement and a number of other programs requires that 
entities register in the System for Award Management (SAM) database and 
certify at least once annually that they are small. Therefore, 
businesses opting to participate in those programs must comply with SAM 
requirements. There are no costs associated with SAM registration or 
certification. Revising size standards alters the access to federal 
programs that assist small businesses, but they neither impose a 
regulatory burden nor regulate nor control business behavior.

4. What are the relevant federal rules, which may duplicate, overlap or 
conflict with the rule?

    Under section 3(a)(2)(C) of the Small Business Act, 15 U.S.C. 
632(a)(2)(c), federal agencies must use SBA's size standards to define 
a small business, unless specifically authorized by statute to do 
otherwise. In 1995, SBA published in the Federal Register a list of 
statutory and regulatory size standards that identified the application 
of SBA's size standards as well as other size standards used by federal 
agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any 
federal rule that would duplicate or conflict with establishing size 
standards.
    However, the Small Business Act and SBA's small business size 
regulations allow federal agencies to develop different size standards 
if they believe that SBA's size standards are not appropriate for their 
programs, with the approval of SBA's Administrator (13 CFR 121.903). 
The Regulatory Flexibility Act authorizes an Agency to establish an 
alternative small business definition, after consultation with the 
Office of Advocacy of the U.S. Small Business Administration (5 U.S.C. 
601(3)).

5. What alternatives will allow the Agency to accomplish its regulatory 
objectives while minimizing the impact on small entities?

    By law, SBA is required to develop numerical size standards for 
establishing eligibility for federal small business assistance 
programs. Other than varying size standards by industry and changing 
the size measures, no practical alternative exists to the systems of 
numerical size standards.

List of Subjects in 13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Individuals with 
disabilities, Loan programs--business, Reporting and recordkeeping 
requirements, Small businesses.

    For the reasons set forth in the preamble, SBA amends part 13 CFR 
part 121 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 continues to read as follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 662, and 694a(9).


0
2. In Sec.  121.201, amend the table ``Small Business Size Standards by 
NAICS Industry'' as follows:
0
a. In Sec.  121.201, in the table, revise the entries for ``522110'', 
``522120'', ``522130'', ``522190'', ``522210'', ``522220'', ``522291'', 
``522292'', ``522293'', ``522294'', ``522298'', ``522320'', ``522390'', 
``523110'', ``523120'', ``523130'', ``523140'', ``523210'', ``523910'', 
``523920'',

[[Page 37416]]

``523930'', ``523991'', ``523999'', ``524113'', ``524114'', ``524127'', 
``524128'', ``524130'', ``524291'', ``524292'', ``524298'', ``525110'', 
``525120'', ``525190'', ``525910'', ``525920'', ``525990'', ``551111'', 
and ``551112''.
0
b. Remove the entry for 525930.
0
c. Revise footnote 8.
    The revisions read as follows:


Sec.  121.201  What size standards has SBA identified by North American 
Industry Classification System codes?

* * * * *

                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                                                                 Size standards
     NAICS Codes              NAICS U.S. industry title         Size standards  in millions of    in number of
                                                                            dollars                 employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
522110..............  Commercial Banking \8\..................  \8\$500 million in assets       ................
522120..............  Savings Institutions \8\................  \8\ $500 million in assets      ................
522130..............  Credit Unions...........................  \8\ $500 million in assets      ................
522190..............  Other Depository Credit Intermediation    \8\ $500 million in assets      ................
                       \8\.
522210..............  Credit Card Issuing \8\.................  \8\ $500 million in assets      ................
522220..............  Sales Financing.........................  $35.5                           ................
522291..............  Consumer Lending........................  $35.5                           ................
522292..............  Real Estate Credit......................  $35.5                           ................
522293..............  International Trade Financing...........  $35.5                           ................
522294..............  Secondary Market Financing..............  $35.5                           ................
522298..............  All Other Nondepository Credit            $35.5                           ................
                       Intermediation.
 
                                                  * * * * * * *
522320..............  Financial Transactions Processing,        $35.5                           ................
                       Reserve, and Clearing House Activities.
522390..............  Other Activities Related to Credit        $19.0                           ................
                       Intermediation.
 
                                                  * * * * * * *
523110..............  Investment Banking and Securities         $35.5                           ................
                       Dealing.
523120..............  Securities Brokerage....................  $35.5                           ................
523130..............  Commodity Contracts Dealing.............  $35.5                           ................
523140..............  Commodity Contracts Brokerage...........  $35.5                           ................
523210..............  Securities and Commodity Exchanges......  $35.5                           ................
523910..............  Miscellaneous Intermediation............  $35.5                           ................
523920..............  Portfolio Management....................  $35.5                           ................
523930..............  Investment Advice.......................  $35.5                           ................
523991..............  Trust, Fiduciary and Custody Activities.  $35.5                           ................
523999..............  Miscellaneous Financial Investment        $35.5                           ................
                       Activities.
 
                                                  * * * * * * *
524113..............  Direct Life Insurance Carriers..........  $35.5                           ................
524114..............  Direct Health and Medical Insurance       $35.5                           ................
                       Carriers.
 
                                                  * * * * * * *
524127..............  Direct Title Insurance Carriers.........  $35.5                           ................
524128..............  Other Direct Insurance (except Life,      $35.5                           ................
                       Health and Medical) Carriers.
524130..............  Reinsurance Carriers....................  $35.5                           ................
 
                                                  * * * * * * *
524291..............  Claims Adjusting........................  $19.0                           ................
524292..............  Third Party Administration of Insurance   $30.0                           ................
                       and Pension Funds.
524298..............  All Other Insurance Related Activities..  $14.0                           ................
 
                                                  * * * * * * *
525110..............  Pension Funds...........................  $30.0                           ................
525120..............  Health and Welfare Funds................  $30.0                           ................
525190..............  Other Insurance Funds...................  $30.0                           ................
525910..............  Open[dash]End Investment Funds..........  $30.0                           ................
525920..............  Trusts, Estates, and Agency Accounts....  $30.0                           ................
525990..............  Other Financial Vehicles................  $30.0                           ................
 
                                                  * * * * * * *
551111..............  Offices of Bank Holding Companies.......  $19.0                           ................
551112..............  Offices of Other Holding Companies......  $19.0                           ................
----------------------------------------------------------------------------------------------------------------
Footnotes
* * * * *
8. NAICS Codes 522110, 522120, 522130, 522190, and 522210--A financial institution's assets are determined by
  averaging the assets reported on its four quarterly financial statements for the preceding year. ``Assets''
  for the purposes of this size standard means the assets defined according to the Federal Financial
  Institutions Examination Council 041 call report form for NAICS codes 522110, 522120, 522190, and 522210 and
  the National Credit Union Administration 5300 call report form for NAICS code 522130.


[[Page 37417]]

* * * * *

    Dated: June 13, 2013.
Karen G. Mills,
Administrator.
[FR Doc. 2013-14710 Filed 6-19-13; 8:45 am]
BILLING CODE 8025-01-P