The SBA’s affiliation regulations for its various programs (except SBIR/ STTR/ Business Loans/ Disaster Loans, and Surety Bonds) are found at 13 CFR 121.103. SBA's affiliation rules confirm whether the … 1 That confusion focused on whether to conduct “affiliation” analysis under Section in Title 13 CFR §121.301 (“Section 301(f)”) or §121.103 – the right answer is Section 301(f)). On June 10, year 2, XY submits an offer for Solicitation 2. (i) Venture capital operating companies, as defined in the U.S. Department of Labor regulations found at 29 CFR 2510.3-101(d); (ii) Employee benefit or pension plans established and maintained by the Federal government or any state, or their political subdivisions, or any agency or instrumentality thereof, for the benefit of employees; (iii) Employee benefit or pension plans within the meaning of the Employee Retirement Income Security Act of 1974, as amended (29 U.S.C. Firm A has been in business for five years. SBA will not give present effect to individuals’, concerns’, or other entities’ ability to divest all or part of their ownership interest in order to avoid a finding of affiliation. The new SBA small business affiliation rules for SDVOSB government contracts for small businesses state that when a small business represents itself as an SDVOSB it must also represent that it will comply with the limitation on subcontracting in accordance with 13 CFR 125.6 as part of the initial offer. Size Eligibility Provisions and Standards, Subjgrp 269. These administrative services include tasks such as record retention not related to a specific contract (e.g., employee time and attendance records), maintenance of databases for awarded contracts, monitoring for regulatory compliance, template development, and assisting accounting with invoice preparation as needed. This rule exempts otherwise qualified faith-based organizations from the SBA’s affiliation rules, including those set forth in 13 CFR part 121, where the application of the affiliation rules would substantially burden those organizations’ religious exercise. Electronic Code of Federal Regulations (e-CFR), Part 121. 23 0 obj <>/Filter/FlateDecode/ID[<319D5E42A70910CC120BBBF60BDDDA90><0B4460149FF30043A36512B74058916B>]/Index[14 24]/Info 13 0 R/Length 63/Prev 47986/Root 15 0 R/Size 38/Type/XRef/W[1 2 1]>>stream Individuals or firms that have identical or substantially identical business or economic interests (such as family members, individuals or firms with common investments, or firms that are economically dependent through contractual or other relationships) may be treated as one party with such interests aggregated. (f) Affiliation based on identity of interest. 512(b)(12) if the organization generated unrelated business taxable income. SBA issued an interim final rule on affiliation (posted April 4, 2020) stating that PPP applicants are subject to the affiliation rules set forth in 13 CFR 121.301. If the procurement is to be awarded through the 8(a) BD program, SBA must approve the joint venture pursuant to § 124.513. On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude to warrant an emergency declaration for all States, territories, and the District of Columbia. endstream endobj startxref The most basic example of affiliation is Common Ownership. Affiliation under any of the circumstances described below is sufficient to establish affiliation for applicants for SBA's Business Loan, Disaster Loan, and Surety Bond Programs. Section 121.103. Under SBA regulations, certain affiliation rules are considered when calculating the number of employees of a business to determine whether it meets the SBA size standards for a small business. the. The specific affiliation rule for SBA's financial assistance programs is set forth in 13 CFR § 121.301. (ii) A business concern owned and controlled by an Indian Tribe, ANC, NHO, CDC, or by a wholly-owned entity of an Indian Tribe, ANC, NHO, or CDC, is not considered to be affiliated with another concern owned by that entity based solely on the contractual relations between the two concerns. Under SBA regulations, certain affiliation rules are considered when calculating the number of employees of a business to determine whether it meets the SBA size standards for a small business. (1) Business concerns owned in whole or substantial part by investment companies licensed, or development companies qualifying, under the Small Business Investment Act of 1958, as amended, are not considered affiliates of such investment companies or development companies. W9��� Accordingly, the SBA's affiliation rules, including those set forth in 13 CFR part 121, do not apply to the relationship of any church, convention or association of churches, or other faith-based organization or entity to any other person, group, organization, or entity that is based on a sincere religious teaching or belief or otherwise constitutes a part of the exercise of religion. Affiliation based on identity of interest. 13 CFR 121.301 was most recently updated via an interim final rule entitled “Express Loan Programs; Affiliation Standards”, dated … within a. labor. 13 CFR § 121.301(f)(l). (a) Special rules for ANCs. Therefore, Company Z is deemed to have more than 500 employees, together with … (6) A firm that has an SBA-approved mentor-protégé agreement authorized under § 124.520 or § 125.9 of this chapter is not affiliated with its mentor firm solely because the protégé firm receives assistance from the mentor under the agreement. (vi) Investment companies, as defined under the 1940 Act, which are not registered under the 1940 Act because they are beneficially owned by less than 100 persons, if the company's sales literature or organizational documents indicate that its principal purpose is investment in securities rather than the operation of commercial enterprises. SBA's. �Đ�;1"�n��*W�66��\?���%��2�oi^k& X�o���?\���N�$�ʝ�۹�z��+�*���l�h@p��P;UO����tScNv �A��� ���C���Br�/�v�n������ܕ۴���i���jPa�g�dnU���Y=�iYm��ݻl|Lfl�5+#SJ��v�����"�i�����Ū\gņ�gE���}�U��zL+��� � ��紱~Ē��r�WߵMj��^��z!��%"�,y�qˤ�;;����a��J A�fe! Un ­ employment.'' SBA affiliation and the importance of maintaining SBA size rules are also very important for small business loan programs and grant programs. (5) In determining whether affiliation exists, SBA will consider the totality of the circumstances, and may find affiliation even though no single factor is sufficient to constitute affiliation. On July 13, Joint Venture AB submits an offer for Solicitation 3. SBA Affiliation Regulations The SBA’s affiliation regulations for its various programs (except SBIR/ STTR/ Business Loans/ Disaster Loans, and Surety Bonds) are found at 13 CFR 121.103. SBA affiliation rules require the JV agreement to specify the roles and responsibilities of the SBA joint venture partners, including how the joint venture will comply with the requirement of 13 CFR 124.513 (d) that the 8(a) BD Participant perform at least 40% of the company’s work. 414(e)(3)(D). 1601 et seq. (9) In the case of a solicitation for a bundled contract, a small business contractor may enter into a Small Business Teaming Arrangement with one or more small business subcontractors and submit an offer as a small business without regard to affiliation, so long as each team member is small for the size standard assigned to the contract or subcontract. • Myth 2: The SBA’s affiliation rules, especially the excep-tions, can be read in isolation. Efforts at the holding company or parent level to identify possible procurement opportunities for specific subsidiary companies may properly be considered “common administrative services” under the exception to affiliation. The SBA has indicated that lenders are not required to make an independent determination regarding the applicability of affiliation rules under 13 CFR § 121.301 to borrowers. @����8�5�#k�ȚF9ľ���q��v��͆r���a#w�]q����L�5�[y�YؖK�"��= ��������m���������O�n�A������j�&D�#n%��֒�B4�-֍n+�(C�T�Ԓ���u4����z�K�r);\��A.U��ћ�_eiޡ����FH_�,�Z�matP�Pqv5�������h� The terms “church” and “convention or association of churches” have the same meaning that they have in 26 U.S.C. The SBA’s general rule of affiliation is that two businesses will be considered affiliates if one owns or has the ability to control the other. The regulations are available online at http://www.ecfr.gov. Affiliation may be found in either case for other reasons as set forth in this section. These meas… On August 6, year 2, XY receives a second contract. (2) Agreements to open or continue negotiations towards the possibility of a merger or a sale of stock at some later date are not considered “agreements in principle” and are thus not given present effect. At some point, however, such a longstanding inter-relationship or contractual dependence between the same joint venture partners will lead to a finding of general affiliation between and among them. The specific affiliation rule for SBA's financial assistance programs is set forth in 13 CFR § 121.301. Four tests for affiliation based on control apply to participants in the Paycheck Protection Program.1For purposes of the determining the number of employees of an applicant to the Paycheck Protection Program, the applicant is considered together … Under SBA’s affiliation rules, 13 CFR 121.301(f)(1) and (3), Company Y and Company Z are affiliates of one another because they are under the common control of Company X, which wholly owns both companies. (ii) Two firms approved by SBA to be a mentor and protégé under § 125.9 of this chapter may joint venture as a small business for any Federal government prime contract or subcontract, provided the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement, and the joint venture meets the requirements of §§ 124.513 (c) and (d), §§ 125.8(b) and (c), §§ 125.18(b)(2) and (3), §§ 126.616(c) and (d), or §§ 127.506(c) and (d) of this chapter, as appropriate. (8) These exceptions to affiliation and any others set forth in § 121.702 apply for purposes of SBA's SBIR and STTR programs. SBA’s rules on affiliation for its programs (except SBIR and STTR) are found at 13 C.F.R. At the proposal or bid preparation stage of business development, the appropriate subsidiary company for the opportunity has been identified and a representative of that company must be involved in preparing an appropriate offer. Borrowers must apply the affiliation rules that appear in 13 CFR 121.301(f), as set forth in the Second PPP Interim Final Rule (85 FR 20817). h�bbd``b`�@�� H��@��$!$�f`bd��``$���x�@� ) Affiliation may arise among two or more persons with an identity of interest. BLUF –Secular nonprofits are subject to standard SBA affiliation rules under 13 CFR 121.301(f); faith-based organizations are largely exempt from those rules. applicant agrees to use. (i) Business concerns owned and controlled by Indian Tribes, Alaska Native Corporations (ANCs) organized pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. Pursuant to the Updated Affiliation Guidance, however, PPP borrowers can test affiliation using the more narrow affiliation rules of 13 CFR 121.301. Labor publication ‘‘Area Trends. Exception to affiliation for certain joint ventures. (1) A person (including any individual, concern or other entity) that owns, or has the power to control, 50 percent or more of a concern's voting stock, or a block of voting stock which is large compared to other outstanding blocks of voting stock, controls or has the power to control the concern. Affiliation under any of the circumstances described below is sufficient to establish affiliation for applicants for SBA's Business Loan, Disaster Loan, and Surety Bond Programs. (1) Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party or parties controls or has the power to control both. assistance program, are. A joint venture is an association of individuals and/or concerns with interests in any degree or proportion consorting to engage in and carry out no more than three specific or limited-purpose business ventures for joint profit over a two year period, for which purpose they combine their efforts, property, money, skill, or knowledge, but not on a continuing or permanent basis for conducting business generally. (iii) Two firms approved by SBA to be a mentor and protégé under § 124.520 of these regulations may joint venture as a small business for any Federal government prime contract or subcontract, provided the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement and, for purposes of 8(a) sole source requirements, has not reached the dollar limit set forth in § 124.519 of these regulations. (h) Affiliation based on joint ventures. On June 6, Joint Venture AB submits an offer for Solicitation 2. (5) For financial, management or technical assistance under the Small Business Investment Act of 1958, as amended, (an applicant is not affiliated with the investors listed in paragraphs (b)(5) (i) through (vi) of this section. If a faith-based organization indicates any relationship that may pertain to affiliation, such as ownership of, ownership by, or common management with any other organization, on or in connection with a loan application, and if the faith-based organization applying for a loan falls within the terms of the exemption described in paragraph (b)(10)(i) of this section with respect to that relationship, the faith-based organization may indicate on a separate sheet that it is entitled to the exemption. INTRODUCTION As the Small Business Administration (SBA) and the Department of the Treasury roll out their emergency relief programs under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), guidance related […] See 85 FR 20817 (April 15, 2020). (a) Special rules for ANCs. Under SBA’s affiliation rules for the financial assistance programs, SBA may find a loan applicant to be affiliated … On May 22, year 2, XY submits an offer for Solicitation 1. surplus area. The same two (or more) entities may create additional joint ventures, and each new joint venture entity may be awarded up to three contracts in accordance with this section. With the COVID-19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, tribal, and local public health measures that are being taken to minimize the public's exposure to the virus. “ [T]he SBA’s affiliation rules, including those set forth in 13 CFR part 121, do not apply to the relationship of any church, convention or association of churches, or other faith-based organization or entity to any other person, group, organization, or entity that is based on a sincere religious teaching or belief or otherwise constitutes a part of the exercise of religion.” (4) Business concerns which lease employees from concerns primarily engaged in leasing employees to other businesses or which enter into a co-employer arrangement with a Professional Employer Organization (PEO) are not affiliated with the leasing company or PEO solely on the basis of a leasing agreement. On December 15, year 3, XY submits an offer for Solicitation 3. %PDF-1.5 %���� Outside of a few exceptions listed in the CARES Act and noted below, affiliation must be considered when evaluating eligibility for SBA loans. Even though the award of the three contracts would give Joint Venture AB a total of five contract awards, it could receive those awards without causing general affiliation between its joint venture partners because Joint Venture AB had not yet received three contract awards as of the dates of the offers for each of three solicitations at issue. SBA defines the terms affiliation and affiliates in 13 CFR 121.103, which has general coverage and references to other SBA affiliation rules. They would only escape affiliate if they met the statutory exemption for SBA affiliation rules. SBA affiliation rules require the JV agreement to specify the roles and responsibilities of the SBA joint venture partners, including how the joint venture will comply with the requirement of 13 CFR 124.513 (d) that the 8 (a) BD Participant perform at least 40% of the company’s work. Background In 1958, Congress enacted the Small Business Act, which The affiliation rules described above are waived under the PPP program for any of the following 3 reasons: (1) any business concern with less than 500 employees that, as of the date on which the loan is funded, is assigned a North American Industry Classification System (NAICS) code beginning with the digits 72; (2) any business concern operating as a franchise that is assigned a franchise identifier code … On April 2, Joint Venture AB submits an offer for Solicitation 1. (2) Contract administration services that are administrative in nature may constitute administrative services that can be shared, and would fall within the exception to affiliation. For purposes of this provision and in order to facilitate tracking of the number of contract awards made to a joint venture, a joint venture: Must be in writing and must do business under its own name; must be identified as a joint venture in the System for Award Management (SAM); may be in the form of a formal or informal partnership or exist as a separate limited liability company or other separate legal entity; and, if it exists as a formal separate legal entity, may not be populated with individuals intended to perform contracts awarded to the joint venture (i.e., the joint venture may have its own separate employees to perform administrative functions, but may not have its own separate employees to perform contracts awarded to the joint venture). You just learned about: Normal Affiliation Rules For more information, check out this related resource: Funding a Business 1001, et seq. Business Affiliation Rule (13 CFR 121.103) The following is subject to additional SBA guidance and clarification of the new PPP SBA 7(a) loan program. This presumption may be rebutted by a showing that such control or power to control does not in fact exist. (c) Affiliation based on stock ownership. Here, the SBA also “deem[s] a minority shareholder to be in control, if that individual or entity has the ability, under the concern’s charte… (ii) Business concerns owned and controlled by Indian Tribes, ANCs, NHOs, CDCs, or wholly-owned entities of Indian Tribes, ANCs, NHOs, or CDCs, are not considered to be affiliated with other concerns owned by these entities because of their common ownership or common management. (7) For SBA's Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, the bases for affiliation are set forth in §121.702. The term “organization” has the meaning given in 26 U.S.C. Having a mentor under SBA regulations allow the two companies to enter into a joint venture agreement while still avoiding tradition SBA affiliation rules. [T]he detailed affiliation standards contained in section 121.103 currently do not apply to PPP borrowers, because section 121.103 (a) (8) provides that applicants in SBA’s Business Loan … [Redbox begins.] See 85 FR 20817 (April 15, 2020). BLUF –Secular nonprofits are subject to standard SBA affiliation rules under 13 CFR 121.301(f); faith-based organizations are largely exempt from those rules. This exemption is required, or at a minimum authorized, by the Religious Freedom Restoration Act (RFRA) (P.L. § 121.103 The regulations are available online at Title 13 Part 121 of the Code of Federal Regulations (CFR). § 121.103 How does SBA determine affiliation? If the procurement is to be awarded other than through the 8(a) BD program (e.g., small business set aside, HUBZone set aside), SBA need not approve the joint venture prior to award, but if the size status of the joint venture is protested, the provisions of §§ 124.513(c) and (d) will apply. The first principle of affiliation is affiliation based on ownership. SBA defines the terms affiliation and affiliates in 13 CFR 121.103, which has general coverage and references to other SBA affiliation rules. (i) The relationship of a faith-based organization to another organization is not considered an affiliation with the other organization under this subpart if the relationship is based on a religious teaching or belief or otherwise constitutes a part of the exercise of religion. the Surety Bond Guarantee. What is the SBA's OStensible COntractor Rule? Firm A has been in business for 9 months and has two contracts. In either case, after contract performance is complete, the 8(a) partner to the joint venture must submit a report to its servicing SBA district office explaining how the applicable performance of work requirements were met for the contract. before actually doing so. These size standards are set forth in 13 CFR 121.201. Affiliation based on franchise and license agreements. 636(a)(36)(D) are satisfied for any faith-based organization having not more than 500 employees (including individuals employed on a full-time, part-time, or other basis) that pays Federal payroll taxes using its own Internal Revenue Service Employer Identification Number (EIN) or that would support a deduction under the second sentence of 26 U.S.C. A concern may rebut such an affiliation determination by demonstrating a clear line of fracture between the two concerns. 414(m)(6)(A). This does not mean to imply that one or more representatives of a holding company or parent entity cannot also be involved in preparing an offer. Section 121.103(a)(8) of the Small Business Act provides that applicants in SBA’s Business Loan Programs, which would include the PPP, are subject to the affiliation rules contained in 13 CFR 121.301. A small business concern as defined in section 3 of the Small Business Act (15 USC 632), and subject to SBA’s affiliation rules under 13 CFR 121.301(f) unless specifically waived in the Act; B. Affiliation may be found for other reasons. A PPP loan applicant is an affiliate of an individual, concern or entity that owns or has the power to control more than 50 percent of the business’s voting equity. Small business concerns owned and controlled by ANCs are eligible for participation in the 8(a) program and must meet the eligibility criteria set forth in § 124.112 to the extent the criteria are not inconsistent with this section. This SBA regulation provides some general principles of affiliation but notes that for applicants in SBA’s Business Loan, Disaster Loan, and Surety Bond Guarantee Programs, the size standards and bases for affiliation are set forth in 13 CFR 121.301. 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