HUBZone Program Improvements: FAQs

(updated 3/1/2024) 1

In February 2020, SBA published an FAQs document related to two rules published in 2019. Since

then, the Office ofthe HUBZone Program has received questions and information that has prompted

refinement, clarification, or repeating of certain guidance, contained here.

General Questions

1. Why did the U.S. Small Business Administration (SBA) amend the regulations governing

the HUBZone program?

In 2019, SBA published a final rule amending the HUBZone regulations to make it easier for small

businesses to utilize the HUBZone program. Changes to the HUBZone program will make it more

attractive to small businesses to invest in HUBZones and hire HUBZone residents, providing greater

impact to communities, and making it easier for federal agencies to meet their goals to award 3 percent

of contracts to certified HUBZone small businesses.

2. When did the rule changes take effect?

The final rule was published on November 26, 2019 (84 FR 65222) and was effective December 26, 2019.

Principal Office Requirement

1. Whatis the “long-term investment provision”?

A new provision in the final rule, which is referred to as the “long-term investment

provision,” incentivizes firms to make long-term investments in qualifying HUBZones by allowing them.

to maintain their principal office for up to 10 years and continue to be considered to meet the principal

office requirement even if the area loses its HUBZone designation.

Under this new provision, a firm that has made a long-term investment (i.e., purchased a building or

entered a lease of at least 10 years) in a principal office in a Qualified Census Tract, Qualified NonMetropolitan County, Indian Reservation, Qualified Base Closure Area, or Governor-Designated Covered

Area at the time of its initial certification or certification anniversary date occurring after December 26,

2019, will be deemed to have its principal office located in a HUBZone for up to 10 years from the date

of that certification or certification anniversary date, as long as the firm maintains the long-term lease

or continues to own the property, and as long as that location continues to be the firm’s principal

office. See 13 CFR § 126.200(c)(1).

SBA is providing the following policy clarifications regarding this provision: 
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• This provision may be applied to allow a firm to maintain its HUBZone status for a period of up

to 10 years. The 10-year clock starts on the firm’s HUBZone certification date (if the investment

was made prior to the firm’s certification) or on the firm’s certification anniversary

date that follows the execution of the lease or deed (if the investment was made after the

firm’s certification). For example, if a firm was certified on May 1, 2020, and purchased a

building on December 1, 2020, the 10-year clock would start when the firm recertifies as

of May 1, 2021.

• A firm is only eligible for this provision if the firm purchased a building or signed a long-term

lease after December 26, 2019 (the effective date of the final rule implementing this provision).

• A firm is only eligible for this provision if its principal office is located in a Qualified Census

Tract, Qualified Non-Metropolitan County, Qualified Base Closure Area, Indian Reservation,

or Governor-Designated Covered Area at the time of the firm’s certification (if the investment

was made prior to the firm’s certification) or at the time of the investment (if the investment

was made after the firm’s certification).

• A firm is not eligible for this provision if its principal office is located in a Redesignated Area or

Qualified Disaster Area at the time of the firm’s certification (if the investment was made

prior to the firm’s certification) or at the time of the investment (if the investment was made

after the firm’s certification).

However, if a firm’s principal office is in a location that is designated as both a qualifying area

(e.g., Qualified Census Tract) and a non-qualifying area (e.g., Redesignated Area) at the time of

the firm’s certification (if the investment was made prior to the firm’s certification) or the time

of the investment (if the investment was made after the firm’s certification), the firm would be

eligible for this provision. (Note: SBA may grandfather in firms that demonstrate they made

investments in QDAs between December 26, 2019 and June 30, 2021, in reliance on prior

guidance from SBA. SBA will review requests for grandfathering on a case-by-case basis.)

• A firm is not eligible for this provision if its principal office is shared with one or more

other businesses.

• A firm is not eligible for this provision if its principal office is a home office (e.g., a location

that also serves as a residence).

2. How does a firm invoke the long-term investment provision?

At the time of a firm’s annual recertification, the firm must indicate whether its principal office is no

longer in a qualifying HUBZone as of its certification anniversary date, but it meets the requirements of

the long-term investment provision and is able to provide supporting documentation to demonstrate

its compliance with the long-term investment provision.

3. What supporting documentation will SBA require from a firm invoking the long-term

investment provision?

To demonstrate eligibility for the long-term investment provision, a firm must submit the following

supporting documentation (at a minimum):

• A copy of the deed or lease for the principal office, showing that the investment was made (i.e.,
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the lease/deed was executed) after December 26, 2019 (the effective date of the final rule

implementing this provision). 

• A copy of the HUBZone Map determination for the principal office location, showing that at the

time of the firm’s certification (if the investment was made prior to the firm’s certification) or

at the time of the investment (if the investment was made after the firm’s certification)), the

firm’s principal office was in a Qualified Census Tract, Qualified Non-Metropolitan County,

Qualified Base Closure Area, Indian Reservation, or Governor-Designated Covered Area.

4. Why are firms with principal offices in Redesignated Areas and Qualified Disaster Areas

unable to qualify for the long-term investment provision?

The long-term investment provision was intended to incentivize firms to make long-term investments in

qualifying HUBZones. Redesignated Areas were excluded from this provision in our initial guidance

because Redesignated Areas are areas that have lost their status as Qualified Census Tracts or Qualified

Non-Metropolitan Counties and have been given a three-year “transition period” in which to relocate to

a new HUBZone if they wish to continue participating in the HUBZone program. However, nearly all

Redesignated Areas across the U.S. were designated as Qualified Disaster Areas following the COVID-19

pandemic disaster declarations issued in March and April of 2020. Given that nearly all Redesignated

Areas became Qualified Disaster Areas, and all of these Qualified Disaster Areas have now been

extended through June 30, 2023 due to the extension of the map freeze, SBA ultimately determined that

unless Qualified Disaster Areas also were excluded from this provision, the original exclusion for

Redesignated Areas would be rendered meaningless. See the clarifications above under : “What is the

“long-term investment provision”?

5. How will SBA treatfirms with offices in shared working spaces?

In order for a shared working space to meet the definition of “principal office” for purposes

of HUBZone certification and annual recertification, SBA will require the following:

• A signed lease that meets the following requirements:

a. The lease must include start and end dates. For initial applications, the start date must

be at least 30 days prior to the date of application submission and the end date must be at

least 90 days after the date of application submission. If a firm is on a month-to-month

lease, a firm must be able to prove their lease is still active at the time of certification. For

annual recertification, the start date must be at least 30 days prior to the

firm’s certification anniversary date and the end date must be at least 30 days

after the firm’s certification anniversary date.

b. The lease must indicate that the firm has dedicated space within the shared facility. Office

space will be considered “dedicated space” if it is: not shared with other firms; only

accessible to the firm; only accessible through a lockable door; and available to the firm

without limitations during regular business hours. If the lease does not indicate that the

firm has dedicated space, the firm must obtain a statement from the property manager (or

other authorized representative of the lessor of the shared working space) that confirms

that the dedicated space leased by the firm: is not shared with other firms; is only

accessible to the firm; is only accessible through a lockable door; and is available to the

firm without limitations during regular business hours. Shared office spaces that do not

have dedicated space will not be considered to meet the principal officerequirement.
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c. The lease must indicate that the dedicated space contains sufficient work surface area, as

well as furniture and equipment (e.g., desks and chairs) to accommodate the number of

employees claimed to work from this location. If the lease does not clearly indicate this,

provide photos to demonstrate that the dedicated space contains sufficient work surface

area, as well as furniture and equipment (e.g., desks and chairs) to accommodate the

number of employees claimed to work from this location. Shared office spaces that do

not have sufficient work surface area will not be considered to meet the principal office

requirement.

• For leases that include utilities, the firm must also provide proof of rental payment in the form

of canceled checks (front and back), bank statements, and/or proof of credit card transactions

covering the relevant time period.

• Firms may be asked to provide photos and/or a live virtual walk-through of their dedicated

space and of the entire shared working space.

35 Percent HUBZone Employee Residency Requirement

1. Whatis the new HUBZone “legacy employee” provision?

The final rule published on November 26, 2019 included a provision related to the 35 percent HUBZone

residency requirement that is intended to provide flexibility to HUBZone firms and to avoid penalizing

successful HUBZone firms with employees who, as a result of the firm’s success, have increased

flexibility in deciding where to live.

The new provision is referred to as the “legacy employee” provision and is found in SBA’s regulations at

13 CFR § 126.200(d)(3). Under this new provision, a “legacy employee” is an employee who no longer

resides in a HUBZone but may continue to be counted as a HUBZone resident employee if he/she:

resided in a HUBZone for at least 180 days prior to the firm’s certification (or certification anniversary

date) occurring after December 26, 2019; continued to live in a HUBZone for at least 180 days

immediately after certification (or certification anniversary date); and has remained an employee of the

firm (i.e., worked at least 40 hours per month) since that time.

SBA is providing the following clarifications to this provision: 

• This provision only applies to employees who resided in a Qualified Census Tract, Qualified

Non-Metropolitan County, Indian Reservation, Qualified Base Closure Area, or GovernorDesignated Covered Area during the relevant time periods (i.e., 180 days before and 180 days

after the firm’s certification or certification anniversary date, whichever is applicable).

• This provision does not apply to employees who resided in a Redesignated Area or Qualified

Disaster Area during the relevant time periods.However, if an employee resided in a location

that was designated as both a qualifying area (e.g., Qualified Census Tract) and a nonqualifying area (e.g., Redesignated Area), this provision would apply.

• A firm is only eligible for this provision if it has a principal office or made a qualified longterm investment in a principal office in a Qualified Census Tract,Qualified NonMetropolitan County, Qualified Base Closure Area, Indian Reservation, or GovernorDesignated Covered Area. (Updated March 1, 2024)

• A firm is not eligible for this provision if its principal office is located in a Redesignated Area or a
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Qualified Disaster Area. However, if a firm’s principal office is in a location that is designated

as both a qualifying area (e.g., Qualified Census Tract) and a non-qualifying area (e.g.,

Redesignated Area), this provision would apply. 

• The certification or certification anniversary date being used to establish the employee as

a “legacy employee” must be after December 26, 2019 (the effective date of the final rule

implementing this provision).

2. How does a firm invoke the “legacy employee” provision?

A firm must indicate at the time of its annual recertification if fewer than 35 percent of its employees

reside in a HUBZone, but it meets the HUBZone residency requirement with the inclusion of “legacy

employees.” Firms that only meet the HUBZone residency requirement due to the inclusionof

“legacy employees” must be prepared to provide supporting documentation to demonstrate that

those individuals they believe to be “legacy employees” in fact meet the requirements of the

provision.

3. What supporting documentation will SBA require from a firm claiming to have one or

more “legacy employees”?

The supporting documentation required to demonstrate that an individual meets the definition of

a “legacy employee” shall include (at a minimum):

• Residency documents showing that the individual lived in a HUBZone for at least 180 days prior

to the firm’s initial HUBZone certification date or certification anniversary date (whichever is

applicable);

• Residency documents showing that the individual continued to live in a HUBZone for at least

180 days after the firm’s certification or certification anniversary date (whichever is

applicable);

• Payroll records showing that the individual has continued to meet the HUBZone definition of

“employee” (including working for at least 40 hours per month for the HUBZone firm) on a

continuous and uninterrupted basis since the time the individual was counted as a HUBZone

resident.

4. If a HUBZone employee of a certified HUBZone firm moves out of the HUBZone,

when is the company required tonotify SBA of this change?

Starting December 26, 2019, the HUBZone regulations no longer make reference to “material changes”

and no longer contain a requirement to notify SBA if fewer than 35 percent of employees reside in

HUBZones (aside from the requirement that a firm performing a HUBZone contract notify SBA if it falls

below 20 percent). There is no requirement to notify SBA if an employee moves out of a HUBZone.

5. If a company supplied a voterregistration card that does not have an issuance date, will

that be considered acceptable proof of residence in a HUBZone?

Where the documentation provided to demonstrate HUBZone residency does not include both an

issuance and expiration date, SBA will require a signed statement attesting to the individual’s dates of

residency and residency documents to verify that the individual resided in a HUBZone for at least 180

days prior to the firm’s application date.

6. Is an employee required to live in the same HUBZone for 180 days prior to a firm’s
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HUBZone application date (or certification anniversary date) to be considered a HUBZone

resident?

An employee is not required to live in the same HUBZone for the 180-day period in order to be

considered a HUBZone resident. An employee may move between HUBZones and still be considered a 

HUBZone resident, as long as the employee lived in a HUBZone continuously for the entire 180-day

period.

7. Can a firm pay employees to live in a HUBZone?

A firm cannot simply pay an individual to live in a HUBZone and have the person count as an employee.

The individual must be performing legitimate work for the firm. SBA addressed this issue in the final rule

published on November 26, 2019, where SBA discussed how to treat third-party businesses that

specialize in providing HUBZone employees. In the final rule, SBA explained that this would be allowable 

where the arrangement appears legitimate and the HUBZone applicant (or recertifying HUBZone 

participant) shows that the workers being hired through the third-party business are doing legitimate 

work. Evidence that the arrangement is legitimate includes evidence that the company providing the 

HUBZone employees is a legitimate leasing company that is primarily engaged in the business of leasing 

employees to other businesses. For additional information, see Info Notice 6000-849335, HUBZone 

Resident Employee Work Requirement and "Attempt to Maintain" Requirement (sba.gov)

8. Will HUBZone applicants and recertifying HUBZone firms be able to count individuals who

are on temporary medical leave (e.g., maternity leave or extended illness) as HUBZone

employees?

Where an employee is on temporary medical leave due to maternity leave or extended illness, SBA may

count the individual as an employee of the firm if the firm can demonstrate that the following

conditions apply:

• The individual must appear on the payroll for the period of review.

• The individual’s time in unpaid status cannot exceed 12 weeks within a 12-month period.

• The firm must provide evidence that the individual was a paid employee prior to the leave and

demonstrate when the unpaid leave began.

9. When does SBA consider an individual obtained from a leasing concern to be an employee

for HUBZone program purposes?

In general, individuals obtained from a leasing concern are considered employees for HUBZone

purposes. However, SBA policy precludes counting as employees for HUBZone purposes those workers

who are “leased” from a third-party business that is not a legitimate employee leasing concern. A

legitimate leasing company is one that is primarily engaged in leasing employees to other

businesses. SBA also will not consider such individuals to be employees where the applicant has not

shown that the individuals being hired through the third-party business are doing legitimate work for

the applicant firm. For additional information, see Info Notice 6000-849335, HUBZone Resident 

Employee Work Requirement and "Attempt to Maintain" Requirement (sba.gov)

10. Why is SBA requiring job descriptions for all HUBZone employees that are working for the 

firm less than 30 hours per week?
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The HUBZone regulations define the term “employee” to mean an individual employed on a full-time, 

part-time, or other basis, so long as that individual works a minimum of 40 hours during the four-week 

period immediately prior to the relevant date of review. However, SBA has continued to encounter 

concerns that the 40 hours per month standard may not be sufficient to stimulate employment in 

HUBZone areas. Thus, to help ensure that HUBZone firms are providing meaningful employment 

opportunities for residents of HUBZone areas, the HUBZone program will now require job descriptions

for all HUBZone employees who are working less than 30 hours per week. This requirement applies to 

HUBZone program applicants and HUBZone firms subject to a program examination. 

In addition, analysts reviewing applications or conducting program examinations may request 

information demonstrating that each part-time individual is performing the work outlined in their job 

description, including but not limited to the following: resumes; detailed timesheets; evidence of 

onboarding and/or training; evidence of regular communication with management (such as emails, 

meeting notes, etc.); and/or evidence of tangible work product commensurate with the hours reflected 

on payroll. For additional information, see Info Notice 6000-849335, HUBZone Resident Employee Work 

Requirement and "Attempt to Maintain" Requirement (sba.gov)

11. What information must be included in a job description?

In general, to meet this requirement, job descriptions will need to address, at a minimum: the job title,

the individual’s duties and responsibilities, the expected work product, and the general job schedule.

If a job description covers more than one employee, provide a list of employees covered under that

just description.

12. What will happen if I don’t provide a job description?

SBA will interpret the failure to submit a job description as an indication that an employee is not

performing meaningful work for the firm and the individual will not be considered an employee for

HUBZone program purposes. Applicants that do not meet the 35% HUBZone residency requirement

due to failure to submit the required documentation will be deemed ineligible to participate in the

HUBZone Program and their application will either be withdrawn or declined. Certified HUBZone small

businesses that are found to not meet the 35% HUBZone residency requirement due to failure to

submit the required documentation will be deemed ineligible to participate in the HUBZone Program

and proposed for decertification.

Annual Recertification

1. When are firms required to recertify their eligibility?

All certified HUBZone small businesses must annually recertify that they continue to meet the HUBZone

eligibility requirements as of the anniversary of their original HUBZone certification date. This means

that if a firm is certified on March 1, 2021, it will have to recertify annually within 30 days of March 1 that

it continues to meet the HUBZone eligibility requirements as of that date.

2. Where can I find additional information on the annualrecertification process?

Please see the Continuing Eligibility for the HUBZone Program: How Does Annual Recertification Work?

(sba.gov) fact sheet on the HUBZone website.
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HUBZone Contracts

1. Is a certified HUBZone firm eligible to compete for HUBZone set-asides while having fewer 

than35 percent of its employees residing in HUBZones?

A certified HUBZone firm is eligible to compete for HUBZone set-aside awards if it: is a certified HUBZone 

small business concern in the Dynamic Small Business Search (DSBS) database at the time of its offer; 

met the HUBZone requirements at the time of its most recent certification anniversary date (or at the 

time of its original HUBZone certification, if it has been in the program for less than a year); and

completed its annual recertification, if it has been in the program for longer than a year. After being

awarded a HUBZone contract, a certified HUBZone firmmust “attempt to maintain” compliance with the 

35 percent HUBZone residency requirement during contract performance, which means that at least 20 

percent of its employees must be HUBZone residents. If the firm falls below 20 percent HUBZone 

residency while performing a HUBZone contract, this is considered a failure to “attempt to maintain” 

compliance with the HUBZone residency requirement, and the firm is required by the HUBZone 

regulations to notify SBA within 30 days of falling below 20 percent.

2. When must an agency verify an offeror’s HUBZone eligibility in SAM/DSBS when awarding a 

task order that is set aside for a HUBZone small business on a non-HUBZone Multiple

Award Contract?

A contracting officer must verify a company’s HUBZone eligibility in the System for Award Management

(SAM.gov) or the Dynamic Small Business Search (DSBS) database prior to awarding a task order that is

set aside for HUBZone small business concerns, where the Multiple Award Contract itself was issued in

full and open competition (note this does not apply to task orders under Federal Supply Schedule

contracts).

If the firm is not a certified HUBZone small business concern at the time of its offer for such an order, the

contracting officer will not be able to award the task order to the firm.

3. Does the “attempt to maintain” rule apply to HUBZone joint ventures?

If a certified HUBZone small business concern forms a HUBZone joint venture and the joint venture is

awarded a HUBZone set-aside contract, the HUBZone-certified joint venture partner is required to

“attempt to maintain” compliance with the 35 percent HUBZone residency requirement during the

performance of that contract. If that HUBZone joint venture is performing the HUBZone contract at the

time of the certified HUBZone firm’s certification anniversary date, then the certified HUBZone firm must 

have at least 20 percent HUBZone residency on its certification anniversary date in order to recertify its 

HUBZone status to SBA.

Governor-Designated Covered Areas

1. What are Governor-Designated Covered Areas?

The 2018 National Defense Authorization Act authorized a new type of HUBZone designation, known as

“Governor-Designated Covered Areas.” This authority provides new opportunities to expand the

HUBZone program into distressed rural communities by allowing state governors to petition SBA once a

year to designate certain rural areas as HUBZones.

2. Whatis considered a “covered area”?
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The term “covered area” means a census tract or non-metropolitan county: that is located outside of an

“urbanized area” as determined by the Bureau of the Census; with a population of not more than

50,000; and for which the average unemployment rate is at least 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. The total number of covered areas included in each petition may not exceed 10

percent of the total number of the covered areas in the state.

3. How does a governor submit a petition to SBA, and what happens after a petition is

submitted?

Governors may submit petitions to SBA via email to HZGovernors@sba.gov.

While there is no required format for the petitions, the petitions should include a list of the requested

covered areas and address the criteria listed in SBA’s regulations at 13 C.F.R. § 126.104. SBA will review

the petitions and issue a written response to the requesting Governor’s office informing the office of our

decision to grant, partially grant, or deny the petition. When a petition is granted, SBA will update the

HUBZone Map to reflect the newly designated HUBZone areas. These areas will be identified on the

HUBZone Map as “Governor-Designated Covered Areas” and will be treated as HUBZones for at least

one year.

HUBZone Certification

1. Have there been any changes to the application and review process?

In order to meet a statutory requirement to process all complete applications within 60 days, the

HUBZone program introduced the following improvements, as described in SBA Procedural Notice

6000-20015 (February 23, 2021):

• Shorter timeframe for validating an application from 10 business days to two business days.

• Shorter timeframe for uploading documents from 10 business days to three business days.

• Shorter timeframe for system to automatically close a case for non-response to five days.

• Requesting submission of employee and principal office information on a pilot eligibility

workbook tool available on the website.

• Declining an application for lack of response if a firm does not respond or voluntarily withdraw

their application within required timeframe.

• Removing requirement for application signature page to be notarized and mailed to the

HUBZone office.

• Removing requirement to input financial information.

In addition, firms are now required to upload documents through a more streamlined process utilizing

BOX.

2. What additionalresources are available to help applicants submit complete applications

so that they may be reviewed more quickly?

The HUBZone program has introduced a new application tip sheet, eligibility workbook tool, and an

updated supporting document guide and checklist to help firms be fully prepared with all required

documents before initiating the online application.
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Application support is also available as follows:

• Visit our website: www.sba.gov/hubzone

• Contact our customer support Help Desk at HUBZone@sba.gov

• Join our weekly call: The HUBZone program offers eligibility assistance every Tuesday and

Thursday from 2 to 3 p.m. ET. For call in information, see sba.gov/HUBZone.

3. Where do I find the statutes and regulations governing the HUBZone program?

• Statutory Authority: Small Business Act, 15 U.S.C. §§ 632(p), 657a

• HUBZone Program Regulations: 13 CFR Part 126

• Size Regulations: 13 CFR Part 121

(updated 3/1/2024)