The National Defense Authorization Act, which was enacted on December 12, 2017, authorized changes to the Small Business Act to include “Governor-designated covered areas” under the HUBZone program

A direct final rule issued by the U.S. Small Business Administration (SBA) will allow governors to petition the federal agency to designate Historically Underutilized Business Zone (HUBZone) status to certain covered areas.

A covered area is an area in a state that is located outside of an urbanized area, as determined by the Census Bureau, with a population of not more than 50,000, and for which the average unemployment rate is at least 120% of the average unemployment percentage. 

The rule was published in the Federal Register and will be effective January 1, 2020, unless substantial adverse comment is received by December 15, 2019.

Benefits for small businesses

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

Pilkerton added that “governors may petition to include Opportunity Zones that do not otherwise qualify as HUBZones. The direct final rule is a step in the right direction because it will give governors additional tools to revitalize their communities.”

Requirements overview

Under the new rule, a governor may submit one petition each year for a covered area or areas. Then, Administrator will consider the following requirements:

  • The potential for job creation and investment in the covered area
  • The demonstrated interest of small businesses in the covered area to be designated as a Governor-designated covered area
  • How state and local government officials have incorporated the covered area into an economic development strategy
  • 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.

For information about the HUBZone program, click here.

For more information on Opportunity Zones and Opportunity Funds, visit this website