[Federal Register Volume 81, Number 150 (Thursday, August 4, 2016)]
[Rules and Regulations]
[Pages 51312-51314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18251]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 126

RIN 3245-AG81


HUBZone and National Defense Authorization Act for Fiscal Year 
2016 Amendments

AGENCY: U.S. Small Business Administration.

ACTION: Direct final rule.

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SUMMARY: This direct final rule contains several amendments to the 
regulations governing the HUBZone Program. The U.S. Small Business 
Administration (SBA) is making changes to its regulations to implement 
section 866 of the National Defense Authorization Act for Fiscal Year 
2016 (2016 NDAA). Section 866 of the 2016 NDAA made the following 
changes to the HUBZone program: authorized Native Hawaiian 
Organizations to own HUBZone small business concerns; expanded the 
definition of ``base closure area'' under the HUBZone program; and 
authorized the inclusion of ``qualified disaster areas'' under the 
HUBZone program. This direct final rule would implement these changes 
in SBA's regulations.

DATES: This rule is effective on October 3, 2016 without further 
action, unless significant adverse comment is received by September 6, 
2016. If significant adverse comment is received, SBA will publish a 
timely withdrawal of the rule in the Federal Register.

ADDRESSES: You may submit comments, identified by RIN 3245-AG81 by any 
of the following methods:
     Federal Rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail or Hand Delivery/Courier: Mariana Pardo, Director, 
HUBZone Program, 409 Third Street SW., Washington, DC 20416.
    SBA will post all comments on http://www.Regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at http://www.Regulations.gov, please submit the 
information to Mariana Pardo, Director, HUBZone Program, 409 Third 
Street SW., Washington, DC 20416 and highlight the information that you 
consider to be CBI and explain why you believe this information should 
be held confidential. SBA will review the information and make a final 
determination of whether the information will be published or not.

FOR FURTHER INFORMATION CONTACT: Mariana Pardo, Director, HUBZone 
Program, 409 Third Street SW., Washington, DC 20416, 202-205-2985, 
[email protected].

SUPPLEMENTARY INFORMATION: 
    This direct final rule implements several conforming amendments to 
SBA regulations from the National Defense Authorization Act for Fiscal 
Year 2016, Public Law 114-92, 129 Stat. 726, November 25, 2015 (2016 
NDAA). The 2016 NDAA became effective on November 25, 2015. Section 866 
of the 2016 NDAA made the following changes to the HUBZone program: 
authorized Native Hawaiian Organizations (NHOs) to own HUBZone small 
business concerns; expanded the definition of ``base closure area'' 
under the HUBZone program; and authorized the inclusion of ``qualified 
disaster areas'' under the HUBZone program.
    SBA seeks to amend its HUBZone regulations to mirror the changes 
the 2016 NDAA made to the Small Business Act, and to avoid public 
confusion and possible misinterpretations of SBA's HUBZone program. 
Since these are conforming amendments, with no extraneous 
interpretation or other expanded materials, SBA expects no significant 
adverse comments. Based on that fact, SBA has decided to proceed with a 
direct final rule giving the public 30 days to comment. If SBA receives 
a significant adverse comment during the comment period, SBA will 
withdraw the rule, and proceed with a new proposed rule. The statute 
makes the following changes:
     General Summary--Expands the HUBZone program to assist 
small businesses in disasters areas and base closure areas and provides 
equal treatment under the HUBZone program for small businesses owned by 
NHOs.
     ``Major Disaster'' Areas--Treats major disaster areas as 
HUBZones for a period of 5 years. Applies to census tracts and 
nonmetropolitan counties (NMC) located in ``major disaster'' areas, if 
such census tract or NMC lost its HUBZone eligibility within the past 5 
years or will lose its HUBZone eligibility within 2 years after the 
major disaster.
     ``Catastrophic Incident'' Areas--Treats areas where 
catastrophic incidents occurred as HUBZones for a period of 10 years. 
Applies to census tracts and NMCs located in areas where catastrophic 
incidents occurred, if such census tract or NMC lost its HUBZone 
eligibility within the past 5 years or will lose its HUBZone 
eligibility within 2 years after the catastrophic incident.
     Base Closures Areas (BRAC)--Extends HUBZone eligibility 
for BRACs to 8 years (up from 5) and expands HUBZone eligibility to 
census tracts and NMCs that (1) contain BRACs, (2) intersect with 
BRACs, (3) are contiguous to BRACs, or (4) are contiguous to any census 
tract or NMC described in (1) through (3).
     Native Hawaiian Organizations (NHO)--Allows small 
businesses owned by NHOs to qualify as HUBZone companies.
    In order to implement the changes made by section 866 of the 2016 
NDAA, SBA is amending Sec. Sec.  126.103 and 126.200 of its 
regulations.
    SBA is amending Sec.  126.103 by revising the definitions of the 
terms ``Base closure area'', ``HUBZone'', ``HUBZone small business 
concern (HUBZone SBC)'', and ``Qualified base closure area'', and by 
adding new definitions for the terms ``Native Hawaiian Organization 
(NHO)'' and ``Qualified disaster area''. This rules adopts the 
definitions of these terms provided in amended sections 3(p)(1), 
3(p)(3), 3(p)(4)(D), and new section 3(p)(4)(E), of the Small Business 
Act, 15 U.S.C. 632(p)(1), 632(p)(3), 632(p)(4)(D), 632(p)(4)(E).
    SBA is amending Sec.  126.200 by revising paragraph (b)(1) to 
implement the statutory authority for HUBZone small business concerns 
to be wholly or partly owned by NHOs. This rule adopts the language 
provided in new section 3(p)(3)(D) of the Small Business Act, 15 U.S.C. 
632(p)(3)(D).

Compliance With Executive Orders 12866, 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 
direct final rule does not constitute a significant regulatory action 
under Executive Order 12866. This rule is also not a major rule under 
the Congressional Review Act, 5 U.S.C. 800.

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.

[[Page 51313]]

Executive Order 13132

    For the purposes of Executive Order 13132, SBA has determined that 
this direct 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, for the purpose of Executive 
Order 13132, Federalism, SBA has determined that this direct final rule 
has no federalism implications warranting preparation of a federalism 
assessment.

Paperwork Reduction Act, 44 U.S.C., Ch. 35

    SBA has determined that this direct final rule does not impose 
additional reporting or recordkeeping requirements under the Paperwork 
Reduction Act, 44 U.S.C., Chapter 35.

Regulatory Flexibility Act, 5 U.S.C. 601-612

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, small non-profit enterprises, and small local 
governments. Pursuant to the RFA, when an agency issues a rulemaking, 
the agency must prepare a regulatory flexibility analysis which 
describes the impact of the rule on small entities. However, section 
605 of the RFA allows an agency to certify a rule, in lieu of preparing 
an analysis, if the rulemaking is not expected to have a significant 
economic impact on a substantial number of small entities. Within the 
meaning of RFA, SBA certifies that this direct rule will not have a 
significant economic impact on a substantial number of small entities.

List of Subjects in 13 CFR Part 126

    Administrative practice and procedure, Government procurement, 
Small businesses.

    Accordingly, for the reasons stated in the supplementary 
information, SBA amends 13 CFR part 126 as follows:

PART 126--HUBZONE PROGRAM

0
1. The authority for 13 CFR part 126 continues to read as follows:

    Authority:  15 U.S.C. 632(a), 632(j), 632(p), 644 and 657a.


0
2. Amend Sec.  126.103 by revising the definitions of ``Base closure 
area'', ``HUBZone'', ``HUBZone small business concern (HUBZone SBC)'', 
and ``Qualified base closure area'' and by adding new definitions 
alphabetically for the terms ``Native Hawaiian Organization (NHO)'' and 
``Qualified disaster area'', to read as follows:


Sec.  [thinsp]126.103  What definitions are important in the HUBZone 
program?

* * * * *
    Base closure area means:
    (1) Lands within the external boundaries of a military installation 
that were closed through a privatization process under the authority 
of:
    (i) The Defense Base Closure and Realignment Act of 1990 (part A of 
title XXIX of division B of Pub. L. 101-510; 10 U.S.C. 2687 note);
    (ii) Title II of the Defense Authorization Amendments and Base 
Closure and Realignment Act (Pub. L. 100-526; 10 U.S.C. 2687 note);
    (iii) 10 U.S.C. 2687; or
    (iv) Any other provision of law authorizing or directing the 
Secretary of Defense or the Secretary of a military department to 
dispose of real property at the military installation for purposes 
relating to base closures of redevelopment, while retaining the 
authority to enter into a leaseback of all or a portion of the property 
for military use;
    (2) The census tract or nonmetropolitan county (excluding any 
qualified census tract and any qualified non-metropolitan county) in 
which the lands described in paragraph (1) of this definition are 
wholly contained;
    (3) A census tract or nonmetropolitan county (excluding any 
qualified census tract and any qualified non-metropolitan county) the 
boundaries of which intersect the area described in paragraph (1) of 
this definition; and
    (4) A census tract or nonmetropolitan county (excluding any 
qualified census tract and any qualified non-metropolitan county) the 
boundaries of which are contiguous to the area described in paragraph 
(2) or paragraph (3) of this definition.
* * * * *
    HUBZone means a historically underutilized business zone, which is 
an area located within one or more:
    (1) Qualified census tracts;
    (2) Qualified non-metropolitan counties;
    (3) Lands within the external boundaries of an Indian reservation;
    (4) Qualified base closure areas;
    (5) Redesignated areas; or
    (6) Qualified disaster areas.
    HUBZone small business concern (HUBZone SBC) means an SBC that is:
    (1) At least 51% owned and controlled by 1 or more persons, each of 
whom is a United States citizen;
    (2) An ANC owned and controlled by Natives (as determined pursuant 
to section 29(e)(1) of the ANCSA, 43 U.S.C. 1626(e)(1));
    (3) A direct or indirect subsidiary corporation, joint venture, or 
partnership of an ANC qualifying pursuant to section 29(e)(1) of the 
ANCSA, 43 U.S.C. 1626(e)(1)), if that subsidiary, joint venture, or 
partnership is owned and controlled by Natives (as determined pursuant 
to section 29(e)(2) of the ANCSA, 43 U.S.C. 1626(e)(2));
    (4) Wholly owned by one or more Indian Tribal Governments, or by a 
corporation that is wholly owned by one or more Indian Tribal 
Governments;
    (5) An SBC that is owned in part by one or more Indian Tribal 
Governments or in part by a corporation that is wholly owned by one or 
more Indian Tribal Governments, if all other owners are either United 
States citizens or SBCs;
    (6) An SBC that is wholly owned by a CDC or owned in part by one or 
more CDCs, if all other owners are either United States citizens or 
SBCs;
    (7) An SBC that is a small agricultural cooperative organized or 
incorporated in the United States, wholly owned by one or more small 
agricultural cooperatives organized or incorporated in the United 
States or owned in part by one or more small agricultural cooperatives 
organized or incorporated in the United States, provided that all other 
owners are small business concerns or United States citizens;
    (8) Wholly owned by one or more Native Hawaiian Organizations, or 
by a corporation that is wholly owned by one or more Native Hawaiian 
Organizations; or
    (9) Owned in part by one or more Native Hawaiian Organizations or 
by a corporation that is wholly owned by one or more Native Hawaiian 
Organizations, if all other owners are either United States citizens or 
small business concerns.
* * * * *
    Native Hawaiian Organization (NHO) means any community service 
organization serving Native Hawaiians in the State of Hawaii which is a 
not-for-profit organziation chartered by the State of Hawaii, is 
controlled by Native Hawaiians, and whose business activities will 
principally benefit such Native Hawaiians.
* * * * *
    Qualified base closure area means:
    (1) A base closure area that is treated as a HUBZone for a period 
of not less than 8 years, beginning on the date the military 
installation undergoes final closure and ending on the latter of the 
following:
    (i) The date the Administrator makes a final determination as to 
whether or not to implement the applicable designations in accordance 
with the

[[Page 51314]]

results of the decennial census conducted after the area was initially 
designated as a base closure area; or
    (ii) The date 8 years after the base closure area was initially 
designated as a HUBZone.
    (2) However, if a base closure area was treated as a HUBZone at any 
time after 2010, it shall be treated as a HUBZone until such time as 
the Administrator makes a final determination as to whether or not to 
implement the applicable designations in accordance with the results of 
the 2020 decennial census.
* * * * *
    Qualified disaster area means any census tract or nonmetropolitan 
county located in an area for which the President has declared a major 
disaster under section 401 of the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act (42 U.S.C. 5170), or located in an area in 
which a catastrophic incident has occurred if such census tract or 
nonmetropolitan county ceased to be categorized as either a qualified 
census tract or qualified nonmetropolitan county, as applicable, during 
the period beginning 5 years before the date on which the President 
declared the major disaster or the catastrophic incident occurred and 
ending 2 years after such date. However, the following exceptions 
apply:
    (1) In the case of a major disaster declared by the President, a 
census tract or nonmetropolitan county may be a qualified disaster area 
only during the 5-year period beginning on the date on which the 
President declared the major disaster for the area in which the census 
tract or nonmetropolitan county is located; and
    (2) In the case of a catastrophic incident, a census tract or 
nonmetropolitan county may be a qualified disaster area only during the 
10-year period beginning on the date on which the catastrophic incident 
occurred in the area in which the census tract or nonmetropolitan 
county is located.
* * * * *

0
3. Amend Sec.  126.200 by revising paragraph (b)(1) to read as follows:


Sec.  126.200  What requirements must a concern meet to receive SBA 
certification as a qualified HUBZone SBC?

* * * * *
    (b) Concerns owned by U.S. citizens, ANCs, NHOs, or CDCs.--(1) 
Ownership. (i) The concern must be at least 51% unconditionally and 
directly owned and controlled by persons who are United States 
citizens;

    Example:  A concern that is a partnership owned 50% by an 
individual who is a United States citizen and 50% by someone who is 
not a United States citizen, is not an eligible concern because it 
is not at least 51% owned by United States citizens.

    (ii) The concern must be an ANC owned and controlled by Natives 
(determined pursuant to section 29(e)(1) of the ANCSA); or a direct or 
indirect subsidiary corporation, joint venture, or partnership of an 
ANC qualifying pursuant to section 29(e)(1) of ANCSA, if that 
subsidiary, joint venture, or partnership is owned and controlled by 
Natives (determined pursuant to section 29(e)(2)) of the ANCSA);
    (iii) The concern must be wholly owned by one or more NHOs, or by a 
corporation that is wholly owned by one or more NHOs, or owned in part 
by one or more NHOs, if all other owners are either United States 
citizens or small business concerns; or
    (iv) The concern must be wholly owned by a CDC, or owned in part by 
one or more CDCs, if all other owners are either United States citizens 
or SBCs.
* * * * *

    Dated: July 22, 2016.
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2016-18251 Filed 8-3-16; 8:45 am]
 BILLING CODE 8025-01-P