SBA finalizes significant changes to HUBZone eligibility and certification requirements

SBA published its final rule on 17 December 17 2024 implementing sweeping updates to the HUBZone program’s eligibility and certification requirements. The new rule takes effect today, 16 January 16 2025, and introduces changes that streamline compliance while responding to feedback from more than 650 public comments. Notably, the updates reduce certain administrative burdens but also impose new certification standards and clarify residency requirements. Note:

• Residency requirement changes: Employees must now reside in a HUBZone for at least 90 days (down from 180) before the relevant date of review.
• Recertification adjustments: HUBZone firms will recertify every three years instead of annually.
• Definition of “principal office”: Virtual offices no longer qualify, and businesses using shared workspaces must prove they have dedicated, properly equipped spaces.
• Telework policies: SBA rejected a proposed increase to the residency threshold for firms with fully remote employees, maintaining the 35% minimum requirement.
• Tightened employee definition: HUBZone employees must work at least 10 hours per week for each of the four weeks preceding the relevant date (versus the prior 40 hours per month). Leased employees remain eligible, but in-kind contributions no longer count as compensation. Independent contractors are now explicitly excluded.

The rule also mandates that firms be eligible at the time of their offer for HUBZone contracts, introducing stricter compliance requirements for contract awards. These updates are expected to impact certification timelines and operations for participating small businesses. For a deeper dive, see the Federal Register notice and PilieroMazza’s analysis.