[Federal Register Volume 84, Number 221 (Friday, November 15, 2019)]
[Rules and Regulations]
[Pages 62447-62449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24610]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 126

RIN 3245-AH06


HUBZone Program Provisions for Governor-Designated Covered Areas

AGENCY: U.S. Small Business Administration.

ACTION: Direct final rule; request for comments.

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SUMMARY: This direct final rule contains amendments to the regulations 
governing the HUBZone Program. The U.S. Small Business Administration 
(SBA) is making changes to its regulations to implement provisions of 
the National Defense Authorization Act for Fiscal Year 2018 which 
authorized the inclusion of ``Governor-designated covered areas'' under 
the HUBZone program. This direct final rule would merely replicate 
these statutory changes into SBA's regulations.

DATES: This rule is effective on January 1, 2020, without further 
action, unless significant adverse comment is received by December 16, 
2019. 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-AH06, by any 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     For Mail, Paper, Disk, or CD-ROM Submissions: Bruce Purdy, 
U.S. Small Business Administration, Office of the HUBZone Program, 409 
Third Street SW, 8th Floor, Washington, DC 20416.
     Hand Delivery/Courier: Bruce Purdy, U.S. Small Business 
Administration, Office of the HUBZone Program, 409 Third Street SW, 8th 
Floor, Washington, DC 20416.
    SBA will post all comments on www.regulations.gov. If you wish to 
submit confidential business information (CBI) as defined in the User 
Notice at www.regulations.gov, please submit the information to Bruce 
Purdy, U.S. Small Business Administration, Office of the HUBZone 
Program, 409 Third Street SW, 8th Floor, Washington, DC 20416, or send 
an email to [email protected]. Highlight the information that you 
consider to be CBI and explain why you believe SBA should hold this 
information as confidential. SBA will review the information and make 
the final determination on whether it will publish the information.

FOR FURTHER INFORMATION CONTACT: Bruce Purdy, Deputy Director, Office 
of the HUBZone Program, 409 Third Street SW, Washington, DC 20416, 202-
205-7554, [email protected].

SUPPLEMENTARY INFORMATION: This direct final rule implements a 
conforming amendment to SBA's regulations from the National Defense 
Authorization Act for Fiscal Year 2018, Public Law 115-91 (2018 NDAA). 
The 2018 NDAA became effective on December 12, 2017. Section 1701(e) of 
the 2018 NDAA authorized the inclusion of ``Governor-designated covered 
areas'' under the HUBZone program. Section 1701(j) of the 2018 NDAA 
provides that section 1701(e) shall be effective January 1, 2020.
    SBA seeks to amend its HUBZone rules to mirror the changes made to 
the Small Business Act, 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. Therefore, SBA 
has decided to proceed with a direct final rule. If SBA receives a 
significant adverse comment during the comment period, SBA will 
withdraw the rule, and proceed with a new proposed rule.
    In order to implement the changes made by section 1701(e) of the 
2018 NDAA, SBA is amending Sec.  126.103 of its regulations by adding a 
new definition for the term ``Governor-designated covered area'', 
revising the definition of the term ``HUBZone'' to include Governor-
designated covered areas, and adding a new Sec.  126.104 to implement 
the statutory process by which a Governor can petition and the SBA 
Administrator may designate a specific covered area to be a qualified 
HUBZone area. The statute provides the guidelines under which a 
petition will be considered. Specifically, the Administrator will 
consider the following: The potential for job creation and investment 
in the covered area; the demonstrated interest of small business 
concerns 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. SBA 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.

Compliance With Executive Orders 12866, 13771, 13563, 12988, 13132, 
13175, the Paperwork Reduction Act (44 U.S.C. Ch. 35), the Regulatory 
Flexibility Act (5 U.S.C. 601-612), and the Administrative Procedure 
Act

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

[[Page 62448]]

not a major rule under Congressional Review Act.

Executive Order 13771

    This rule is not an Executive Order 13771 regulatory action because 
this rule is not significant under Executive Order 12866.

Executive Order 13563

    Executive Order 13563 reaffirms the principles of Executive Order 
12866 while calling for improvements in the nation's regulatory system 
to promote predictability, to reduce uncertainty, and to use the best, 
most innovative, and least burdensome tools for achieving regulatory 
ends. The executive order directs agencies to consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public where these approaches are relevant, feasible, 
and consistent with regulatory objectives. Executive Order 13563 also 
requires that regulations be based on the open exchange of information 
and perspectives among state and local officials, affected stakeholders 
in the private sector, and the public as a whole. SBA has developed 
this rule in a manner consistent with these requirements. While 
developing this rule, SBA responded to specific inquiries from 
government officials and the public regarding the implementation of the 
statutory authority for Governor-designated covered areas and discussed 
the implementation of the authority at nationwide conferences, 
including the HUBZone Council Conference. SBA continues to communicate 
with the public by responding to inquiries regarding this new 
authority.

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

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect 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. This direct final rule would allow State Governors to 
petition SBA to designate as HUBZones certain areas that would 
otherwise not qualify as HUBZones. A Governor's petition must delineate 
the areas to be included and show: (1) The potential for job creation 
and investment in the covered area; (2) the demonstrated interest of 
small business concerns in the covered area to be designated as a 
Governor-designated covered area; (3) how State and local government 
officials have incorporated the covered area into an economic 
development strategy; and (4) 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. Governors may only 
submit one petition for their State every year and must annually 
provide data on Governor-designated covered areas previously approved 
by the SBA Administrator.
    We have analyzed this direct final rule and have determined that it 
is consistent with the fundamental federalism principles and preemption 
requirements described in Executive Order 13132.

Executive Order 13175

    This rule does not have tribal implications under Executive Order 
13175, Consultation and Coordination with Indian Tribal Governments, 
because it would not have a substantial direct effect on one or more 
Indian tribes, on the relationship between the Federal Government and 
Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.

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

    SBA has determined that this direct final rule imposes reporting 
requirements under the Paperwork Reduction Act (PRA). Specifically, the 
rule would require State Governors to submit petitions to SBA in order 
for SBA to determine whether to designate certain areas as Governor-
designated covered areas. At a minimum, such petitions would provide a 
list of covered areas for which the Governor requests designation and 
information on the potential for job creation and investment in the 
covered area, the demonstrated interest of small business concerns 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. As permitted by 13 CFR 1320.13, SBA sought emergency PRA 
review and approval of this information collection, including waiver of 
the required 60-day public comment notice, from the Office of 
Management and Budget (OMB). OMB approved SBA's request and assigned 
OMB Control Number 3245-0403. Before this approval expires on April 30, 
2020, SBA will publish the 60-day notice in the Federal Register and 
resubmit this information collection to OMB for standard review. The 
disposition of any comments received will be addressed with that 
resubmission.

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 the RFA, SBA certifies that this direct rule will not have a 
significant economic impact on a substantial number of small entities.

Administrative Procedure Act--Justification for Direct Final Rule

    In general, SBA publishes a rule for public comment before issuing 
a final rule, in accordance with the Administrative Procedure Act, 5 
U.S.C. 553. The Administrative Procedure Act provides an exception to 
this standard rulemaking process, however, where an agency finds good 
cause to adopt a rule without prior public participation. 5 U.S.C. 
553(b)(3)(B). The good cause requirement is satisfied when prior public 
participation is impracticable, unnecessary, or contrary to the public 
interest.
    SBA is publishing this rule as a direct final rule because public 
participation is unnecessary. SBA views this as a non-controversial 
administrative action because it merely implements a change required by 
the Small Business Act, as amended by section 1701(e) of the National 
Defense Authorization Act for Fiscal Year 2018, Public Law 115-91 (2018 
NDAA). This rule will be effective on the date shown in the DATES 
section unless SBA receives any significant adverse comments on or 
before the deadline for comments set forth in the DATES section. 
Significant adverse comments are comments that provide

[[Page 62449]]

strong justifications why the rule should not be adopted or for 
changing the rule. SBA does not expect to receive any significant 
adverse comments because the rule simply mirrors the statutory language 
contained in section 1701(e) of the 2018 NDAA, with no extraneous 
interpretation or other expanded text. Implementation of this change 
will benefit the public by expanding the HUBZone program and will allow 
SBA to meet the statutory deadline mandated by section 1701(j) of the 
2018 NDAA, which provides that this change is effective January 1, 
2020. If SBA receives any significant adverse comments, SBA will 
publish a notice in the Federal Register withdrawing this rule before 
the effective date. If SBA receives no significant adverse comments, 
SBA will publish a document in the Federal Register confirming the 
effective date.

List of Subjects in 13 CFR Part 126

    Administrative practice and procedure, Government procurement, 
Small businesses.

    Accordingly, for the reasons stated in the preamble, 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 adding a definition alphabetically for the 
term ``Governor-designated covered area'' and revising the definition 
of the term ``HUBZone'' to read as follows:


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

* * * * *
    Governor-designated covered area means an area that the 
Administrator has designated as a HUBZone by approving a Governor-
generated petition as described in Sec.  126.104.
    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) Redesignated areas;
    (5) Qualified base closure areas;
    (6) Qualified disaster areas; or
    (7) Governor-designated covered areas.
* * * * *

0
3. Add Sec.  126.104 to read as follows:


Sec.  126.104   How can a Governor petition for the designation of a 
Governor-designated covered area?

    (a) For a specific covered area to receive a designation as a 
Governor-designated covered area, the Governor of the State in which 
the identified covered area is wholly contained shall include such area 
in a petition to the Administrator requesting such a designation. In 
reviewing a request for designation included in such a petition, the 
Administrator may consider--
    (1) The potential for job creation and investment in the covered 
area;
    (2) The demonstrated interest of small business concerns in the 
covered area to be designated as a Governor-designated covered area;
    (3) How State and local government officials have incorporated the 
covered area into an economic development strategy; and
    (4) 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.
    (b) Each calendar year, a Governor may submit not more than 1 
petition described in this section. Such petition shall include all 
covered areas in a State for which the Governor seeks designation as a 
Governor-designated covered area, except that the total number of 
covered areas included in such petition may not exceed 10 percent of 
the total number of covered areas in the State.
    (c) If the Administrator grants a petition described in this 
section, the Governor of the Governor-designated covered area shall, 
not less frequently than annually, submit data to the Administrator 
certifying that each Governor-designated covered area continues to meet 
the requirements of paragraph (d)(1) of this section.
    (d) In this section:
    (1) The term ``covered area'' means an area in a State--
    (i) That is located outside of an urbanized area, as determined by 
the Bureau of the Census;
    (ii) With a population of not more than 50,000; and
    (iii) For which the average unemployment rate is not less than 120 
percent of the average unemployment rate of the United States or of the 
State in which the covered area is located, whichever is less, based on 
the most recent data available from the American Community Survey 
conducted by the Bureau of the Census.
    (2) The term ``Governor'' means the chief executive of a State.
    (3) The term ``State'' means each of the States of the United 
States, the District of Columbia, the Commonwealth of Puerto Rico, the 
United States Virgin Islands, Guam, the Commonwealth of the Northern 
Mariana Islands, or American Samoa.

Christopher Pilkerton,
Acting Administrator.
[FR Doc. 2019-24610 Filed 11-14-19; 8:45 am]
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