In the past month or so, there have been several significant regulatory changes that will have a positive impact on Native Hawaiian Organization (NHO)-owned firms. In addition, we had the privilege of hearing from and meeting with SBA Officials to discuss and further clarify some of these regulatory changes. This blog post provides a summary of these regulatory changes and their impact on NHOs.
Under previous regulations, NHOs established economic disadvantage through their board members. That is, a majority of an NHO's board had to be Native Hawaiian AND economically disadvantaged (personal net worth under $250,000 for new NHOs and under $750,000 for continuing eligibility). This presented challenges for NHOs, especially the new NHOs because it has been difficult to find individuals that have the capabilities, experience and qualifications to manage/operate an NHO, but who also are economically disadvantaged in the eyes of SBA. Specifically, if you have substantial management experience and qualifications, then presumably you have achieved financial success over the life of your career.
On July 25, 2016, the SBA published a Final Rule which changed the manner in which NHOs establish economic disadvantage. Economic disadvantage will no longer be based on the board; instead, in order to establish that an NHO is economically disadvantaged, it must demonstrate that it will principally benefit economically disadvantaged Native Hawaiians. To do this, the NHO must provide data on the Native Hawaiian community it intends to serve, including:
- The number of Native Hawaiians in the community that the NHO intends to serve;
- The present Native Hawaiian unemployment rate of those individuals;
- The per capita income of those Native Hawaiians, excluding judgment awards;
- The percentage of those Native Hawaiians below the poverty level; and
- The access to capital of those Native Hawaiians.
We intend to provide updates and further blog posts on this subject, so stay tuned.
NHOs are Now Eligible for HUBZone Certification
On August 4, 2016, the SBA issued a Final Rule implementing provisions of the 2016 National Defense Authorization Act which authorized NHOs to own HUBZone small business concerns. Previously, NHOs were not able to have their for-profit companies pursue HUBZone certification. Assuming that an NHO-owned firm is otherwise able to meet the HUBZone eligibility requirements, this new rule provides NHO-owned firms with significant opportunities, because many agencies and prime contractors generally have difficulty meeting their HUBZone goals.
This was any issue that many in the NHO community fought hard to have changed given that the other entity-owned firms (i.e., Tribes and ANCs) were able to pursue HUBZone certification. Thanks to the hard work of the NHOs and the Hawaii Congressional Delegation, particularly the late Congressman Mark Takai, NHO-owned firms are now on equal footing with the other entity-owned firms with respect to HUBZone certification.
Currently, not all areas of Oahu are considered HUBZone; rather, there are pockets and in order to determine whether a specific address is located in a HUBZone, you would need to enter the address into the SBA's HUBZone map. However, with respect to the neighbor islands, each island in its entirety is considered a HUBZone. We learned last week at an event held at SBA's Hawaii District Office, that much of the island of Maui will be losing its HUBZone status in 2018, so for those of you with principal offices/employees located on Maui, this is something you need to consider and possibly adjust for with respect to HUBZone certification.
NHOs are Now Eligible for SBIR Awards
SBIR stands for Small Business Innovation Research and STTR stands for Small Business Technology Transfer. Both programs provide federal funds to qualified awardees. In a nutshell, the SBIR program encourages domestic companies to engage in research and development that has the potential for commercialization. The STTR program expands funding opportunities in the federal innovation arena and focuses on expansion of public/private sector partnerships between small businesses and nonprofit research institutions.
Both programs have different phases and funding opportunities associated with each phase. The SBIR program is highly competitive but provides small businesses with many funding opportunities. In Hawaii, the High Technology Development Corporation provides matching funds to Hawaii's SBIR/STTR awardees. For more information, please click HERE.
Previously, NHO-owned firms were not eligible for SBIR/STTR awards due to the way the SBA's regulations defined eligibility. Effective August 24, 2016, NHO-owned firms are now eligible to receive SBIR/STTR awards due to the new regulation (see 13 CFR 121.702 (a)(1)(i)). This is significant and exciting news for those NHO-owned firms that are already doing or are interested in doing more R&D.
For more information on the new regulations or on NHOs, please contact us at: email@example.com.