Key Details: The Small Business Administration (SBA) issued a final and interim final rule titled “Small Business Size Standards: Adjustment of Monetary-Based Size Standards, Disadvantage Thresholds, and 8(a) Eligibility Thresholds for Inflation” on November 17. This notice is comprised of the following primary components:
These changes are in effect beginning December 19, 2022, and should be welcomed by small businesses. As such, small businesses that are participants of the programs mentioned above, and businesses looking to apply to these programs are encouraged to review the final rule. Interested parties are encouraged to submit comments on the interim final provisions of the rule. Comments are due by January 17, 2023.
Per the SBA’s Size Standards Methodology whitepaper, the SBA reviews small business size standards and adjusts thresholds based on the following primary reasons:
In July 2019, the SBA completed a second five-year rolling review of monetary-based industry size standards after an inflation adjustment. The SBA adopted a policy of only increasing size standards when the industry structure and market conditions warranted an increase in response to the COVID-19 pandemic. As such, the interim final rule provision of the regulatory action provides assurance to the public that the SBA is monitoring inflation to determine size standard adjustments.
The interim final rule provision adjusts receipts-based industry size standards. The SBA calculated an inflation rate of 13.65% by analyzing the Gross Domestic Product (GDP) price index for the base period (4th quarter of 2018) and comparing it to the price index for the end period (2nd quarter of 2022).
The SBA utilized this inflation rate and adjusted all receipts-based size standards by multiplying their current level by 1.1365 and rounding the result to the nearest $500,000. For the agricultural industry, the results were rounded to the nearest $250,000. The SBA rule contains a chart of all revenue-based size standard changes here. Businesses are encouraged to review these size changes internally and to consider these increases when determining SBA program eligibility. The following table includes examples of changes by NAICS code:
NAICS Code |
Industry Name |
Current Size Standard ($ million) |
Inflation Adjusted Size Standard ($ million) |
237310 |
Highway, Street, and Bridge Construction |
39.5 |
45.0 |
541330 |
Engineering Services |
22.5 |
25.5 |
541519 |
Other Computer Related Services |
30.0 |
34.0 |
811310 |
Commercial and Industrial Machinery and Equipment |
11.0 |
12.5 |
These changes have been published as an interim final rule with comments due by January 17, 2023. Interested parties are encouraged to submit comments to the SBA and to analyze the impact these changes may have on their businesses.
Small businesses participating in the EDWOSB and 8(a) programs are currently subject to various threshold requirements relating to net worth, aggregate gross income (AGI), and total assets. The SBA made inflation adjustments to these eligibility thresholds effective as of December 19, 2022. These inflation adjustments may enable small businesses to maintain eligibility or qualify for these programs in the future. As such, small businesses are encouraged to thoroughly review these eligibility thresholds for compliance.
The following table shows the new inflation-adjusted thresholds:
Threshold Item |
Prior Threshold |
Adjusted Threshold |
Net Worth |
$750,000 |
$850,000 |
Adjusted Gross Income |
$350,000 |
$400,000 |
Total Assets |
$6,000,000 |
$6,500,000 |
Net Worth Requirements:
AGI Requirements:
The SBA EDWOSB and 8(a) programs are a great way for qualified small businesses to get a head start building their contract portfolio. Through inflation adjusted thresholds and lowered competition, owners will have a higher chance of winning more contracts to grow their business. Small businesses are encouraged to review the rules relating to revenue-based size standard adjustments and to consider these new thresholds when applying for SBA programs. Contractors of the programs or businesses looking to apply to these programs are encouraged to contact Ryan & Wetmore with questions or concerns regarding their specific income or tax situation and to discuss program and tax planning services.
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