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SBA Proposes Rules that Could Have Significant Impact on ANCs

August 29, 2022

Overview

The SBA has published a notice of “Tribal Consultation for Ownership and Control and Contractual Assistance; Requirements for the 8(a) Business Development (BD) Program and other Planned 8(a) BD Program Regulatory Proposals.”

The notice states that SBA is “planning to issue a proposed rule concerning the 8(a) BD program regulations . . . to clarify regulatory provisions relating to both program eligibility and 8(a) contracts to eliminate confusion among small businesses and procuring activities.” The SBA is not currently proposing regulations, but rather is requesting comments on approaches and issues that it is considering addressing in future regulations.

The issues that SBA wants to address, and that it may propose regulations on, are significant and could have impacts on Alaska Native Corporations and Native Tribes that have companies operating in the SBA’s 8(a) program. 

Specifically, the SBA is requesting comments on the following:

  • Should the SBA require ANCs and Tribes to establish a Community Benefits Plan that lays out their commitments to “give back” to the Native community in specific identified ways?
  • Should the SBA impose “consequences” on ANCs and Tribes when estimated revenues are obtained but not all of the benefits identified in the Community Benefits Plan are given to the community, in order to encourage those entities to meet those commitments? 
  • If the SBA adopts regulations imposing “consequences” on ANCs and Tribes for not meeting the commitments included in their Community Benefits Plans, what consequences should be imposed? The SBA identified two potential consequences:
    • disallowing the ANC/Tribe from admitting any new entities to the SBA’s 8(a) program until the ANC/Tribe meets all of the commitments in the Community Benefits Plans of their 8(a) entities; or
    • restricting the award of sole source 8(a) contracts to any 8(a) entity owned by the ANC/Tribe if the SBA determines that the ANC/Tribe has not made good faith efforts to meet the commitments set forth in their Community Benefits Plans.
  • Should the SBA adopt a rule requiring ANCs/Tribes to contribute a target percentage of the aggregate revenues that they receive from their 8(a) entities to their shareholders/Tribal members as a cash contribution? In connection with that, the SBA is seeking comments on the following issues as well:
    • Should the target percentage be distributed as a cash contribution?
    • Should the target percentage be tied to the ANC/Tribe’s gross 8(a) receipts or to their profits?
    • Should the target percentage increase be based on how long the ANC/Tribe has had 8(a) entities or on the number of 8(a) entities the ANC/Tribe owns?
    • Should non-cash contributions or investments in the community be considered in this measurement, including, but not limited to, community member employment?
    • Are there any other measures SBA should consider to promote the dual purposes of Tribal/ANC/Native Hawaiian Organizations’ participation in the 8(a) BD program?

These proposed changes raise significant issues for ANCs, including the potential implications regarding their settlement trusts and a lack of understanding of the extensive corporate resources that are put toward shareholder issues. They could also have the impact of requiring ANCs/Tribes to divert resources that would go to business development and expansion, in favor of dividends or other cash payments to shareholders/Tribal members.

All ANCs should carefully track this issue and consider submitting comments in response to the SBA’s indication that it is exploring these options.

Related article: SBA’s Proposed Revisions to 8(a) Regulations

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.

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