Growing small businesses facing the possible loss of small business status got two more years of “growing room” from Congress and the President on December 17th. On that day, the President signed The Small Business Runway Extension Act of 2018 that changed to 5 years from 3 years the time period used to qualify as a small business under revenue-based NAICS codes. Now, whether a company is a small business will be determined on the basis of its average annual gross receipts over a period of five years.
This two-year extension will give small businesses more time to develop their competitiveness and infrastructure before entering the open-marketplace. It will also reduce the impact of rapid-years growth that spike a small business’s revenue leading to a loss of small business status. Click here to view two-sentence law and the accompanying House Report.
The SBA issued an Information Notice on December 21, 2018, in which it stated its interpretation of when the Runway Extension Act becomes effective. In that notice, the SBA stated that because the Act does not include an effective date, “[t]he change made by the Runway Extension Act is not presently effective and is therefore not applicable to present contracts, offers, or bids until implemented through the standard rule-making process.” Thus, SBA is requiring business to continue to report their receipts on a three-year average until SBA updates its regulations to implement the Act.
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Terry O’Connor is a Partner at Berenzweig Leonard. Terry and Stephanie Wilson lead the firm’s Government Contracts practice. Terry can be reached at toconnor@berenzweiglaw.com.