83 FR 4005 - Ownership and Control of Service-Disabled Veteran-Owned Small Business Concerns
SMALL BUSINESS ADMINISTRATION Federal Register Volume 83, Issue 19 (January 29, 2018)
Federal Register Volume 83, Issue 19 (January 29, 2018)
| Page Range | 4005-4011 | |
| FR Document | 2018-01392 |
[Federal Register Volume 83, Number 19 (Monday, January 29, 2018)] [Proposed Rules] [Pages 4005-4011] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-01392] ======================================================================= ----------------------------------------------------------------------- SMALL BUSINESS ADMINISTRATION 13 CFR Part 125 RIN 3245-AG85 Ownership and Control of Service-Disabled Veteran-Owned Small Business Concerns AGENCY: U.S. Small Business Administration. ACTION: Proposed rule. ----------------------------------------------------------------------- SUMMARY: The U.S. Small Business Administration (SBA or Agency) proposes to amend its regulations to implement provisions of The National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017). The NDAA 2017 placed the responsibility for issuing regulations relating to ownership and control for the Department of Veterans Affairs verification of Veteran-Owned (VO) and Service-Disabled Veteran-Owned (SDVO) Small Business Concern (SBC) with the SBA. Pursuant to NDAA 2017, there will be one definition of ownership and control for these concerns, which will apply to the Department of Veterans Affairs in its verification and Vets First Contracting Program procurements, and all other government acquisitions which require self- certification. The legislation also provides that in certain circumstances a [[Page 4006]] firm can qualify as VO or SDVO when there is a surviving spouse or an employee stock ownership plan (ESOP). DATES: Comments must be received on or before March 30, 2018. ADDRESSES: You may submit comments, identified by RIN 3245-AG85, by any of the following methods:Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. For mail, paper, disk, or CD/ROM submissions: Brenda Fernandez, U.S. Small Business Administration, Office of Policy, Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 20416. Hand Delivery/Courier: Brenda Fernandez, U.S. Small Business Administration, Office of Policy, Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 20416. SBA will post all comments on www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov, please submit the information to Brenda Fernandez, U.S. Small Business Administration, Office of Policy, Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 20416, or send an email to [email protected]. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make the final determination on whether it will publish the information. FOR FURTHER INFORMATION CONTACT: Brenda Fernandez, Office of Policy, Planning and Liaison, 409 Third Street SW, Washington, DC 20416; (202) 205-7337; [email protected]. SUPPLEMENTARY INFORMATION: The Vets First Contracting Program within the Department of Veterans Affairs (VA) was created under the Veterans Benefits, Health Care, and Information Technology Act of 2006 (Public Law, P.L. 109-461). This contracting program was created for Veteran- Owned Small Businesses and expanded the Service-Disabled Veteran-Owned contracting program for VA procurements. Approved firms are eligible to participate in Veteran-Owned Small Business (VOSB) and Service-Disabled Veteran-Owned Small Business (SDVOSB) set-asides issued by VA. More information regarding the Vets First Contracting Program can be found on the Department of Veterans Affairs website at https://www.va.gov/osdbu/faqs/109461.asp. The National Defense Authorization Act of 2017 (Pub. L. 114-328), section 1832, amended section 3(q) of the Small Business Act (15 U.S.C. 632(q)) and section 8127 of title 38, United States Code, to standardize definitions for VOSBs and SDVOSBs. This section also requires the Secretary of Veterans Affairs to use the regulations established by the Small Business Administration (SBA) for establishing ownership and control of VOSBs and SDVOSBs. The Secretary would continue to determine whether individuals are veterans or service- disabled veterans and would be responsible for verification of applicant firms. Challenges to the status of a VOSB or SDVOSB based upon issues of ownership or control would be decided by the administrative judges at the SBA's Office of Hearings and Appeals (OHA). In drafting this proposed rule, SBA consulted with VA in order to properly understand VA's positions and implement the statutory requirements in a way that is consistent with both SBA's and VA's interpretations. Section-by-Section Analysis Section 125.11 In response to the NDAA 2017 changes, SBA is proposing to amend the definitions in Sec. 125.11 by incorporating language from VA's regulations and also from SBA's 8(a) Business Development (BD) program regulations. SBA is proposing to define a surviving spouse and the requirements for a surviving spouse-owned SDVO SBC to maintain program eligibility. Further, SBA is proposing to add definitions for Daily Business Operations, Negative Control, Participant, and Unconditional Ownership. The added definitions are being adopted from SBA's 8(a) BD regulations found in part 124. SBA is adding a definition for Employee Stock Ownership Plan (ESOP). This definition is adopted from Sec. 1832(a)(6). SBA is also proposing to replace the definitions of permanent caregiver, service-disabled veteran (SDV), and surviving spouse. SBA is adding a new definition for service-disabled veteran with a permanent and severe disability. These definitions are being updated in consultation with VA in an effort to ensure consistency across programs at both Agencies. SBA is also adding a definition for small business concerns. Concerns will need to meet all the requirements of part 121, including Sec. 121.105(a)(1), which requires that the firm be organized for profit, ``with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.'' This definition will address how to generally determine the size of a concern. VO and SDVO SBCs will still be required to meet size standards corresponding to the NAICS code assigned to each contract pursuant to Sec. Sec. 125.14 and 125.15. In addition, SBA is proposing to add a definition for ``extraordinary circumstances'' under which a service disabled veteran owner would not have full control over a firm's decision-making process, but would not render the firm ineligible as a firm owned and controlled by one or more service disabled veterans. This definition will be used to identify discrete circumstances that SBA views as rare. The new definition will be used to allow minority equity holders to have negative control over these enumerated instances. SBA proposes five limited circumstances in which a service-disabled veteran owner will not have full control over the decision making process. Under the proposed rule, these five circumstances would be exclusive, and SBA would not recognize any other facts or circumstances that would allow negative control by individuals that are not service-disabled. Section 125.12 SBA is proposing to amend Sec. 125.12(b), which pertains to the requirement for ownership of a partnership. SBA's current regulation requires service-disabled veterans to own at least 51% of each type of partnership interest. Therefore, if a partnership had general partners and limited partners it was required that the service disabled veteran be both a general and limited partner. SBA is proposing to change the requirement so that service-disabled veterans will need to own at least 51% of the aggregate voting interest in the partnership. SBA is proposing to add Sec. 125.12(d). This proposed paragraph incorporates the new statutory language with regard to public companies and ownership. Specifically, it should be noted that this language does not include any equity held by an ESOP when determining ownership for a publicly owned business. SBA is proposing to add a new Sec. 125.12(g). This new paragraph and its subparagraphs would provide clarity with regard to requirements for dividends and distributions. SBA's existing regulations require that ownership must also entail all the privileges and benefits of ownership. This new paragraph is adopted from SBA's 8(a) BD regulations in part 124. In general, one's right to receive [[Page 4007]] benefits, compensation, and the ultimate value of one's equity should be consistent with the purported amount of equity. For example, it is not consistent with SBA's regulations for a firm to state that a service-disabled veteran owns 60 percent of the equity but records show that he or she is entitled only to a smaller amount of the firm's profit, or that the residual value of that equity is less than 60 percent if the firm is sold. SBA is proposing to add new Sec. Sec. 125.12(h) and (i). Pursuant to proposed Sec. 125.12(h), ownership decisions would be decided without regard to community property laws. This provision is similar to SBA's ownership regulations for women owned businesses. See 13 CFR 127.201. SBA is also adopting regulations to allow firms owned by surviving spouses of service-disabled veterans to remain eligible for the program, and Sec. 125.12(i) provides the guidelines for this continued eligibility. Basically, this provision would allow the transfer of ownership in a SDVO SBC from a serviced-disabled veteran to his or her spouse upon the death of the service-disabled veteran without adversely affecting the firm's status as a SDVO SBC. Section 125.13 SBA is proposing to add several new paragraphs to Sec. 125.13. These proposed paragraphs incorporate provisions from SBA's 8(a) BD program and VA's former ownership and control regulations. SBA has always used 8(a) BD program regulations for guidance on eligibility issues for SDVO SBCs, and SBA will continue to do so. SBA proposing to adopt some but not all of its 8(a) BD regulations should not be interpreted as SBA abandoning this position. SBA is adding these specific regulations to add clarity and consistency, but SBA will continue to rely on part 124 for guidance. Many of the newly incorporated regulations deal with control by non-service-disabled veterans. These changes are intended to provide more clarity about the roles that non-service-disabled veterans can serve without creating control issues that may affect the concern's eligibility. SBA is proposing to add language to describe how to determine if an SDV controls the Board of Directors in Sec. 125.13(e). This language is adopted from SBA's 8(a) BD regulations and is being added to provide more clarity. SBA is proposing language that will require firms to provide notification of supermajority voting requirements in Sec. 125.13(f). This regulation will simplify the procedures for reviewing eligibility criteria related to super majority requirements. Proposed Sec. Sec. 125.13(h), (i), and (j) adopt policies and language from SBA's 8(a) BD program and VA's regulations. These provisions provide guidance on when SBA may find that a non-service- disabled veteran controls the firm. These regulations add more clarity and detail to specific issues such as quorum requirements and loan arrangements with non-service-disabled veterans. SBA is proposing to add rebuttable presumptions Sec. 125.13(k) and (l). Proposed Sec. 125.13(k) would add a rebuttable presumption that a person not working for a firm regularly during normal working hours does not control the firm. This is not a full time devotion requirement. It just makes clear that this is a factor that SBA will consider, but is clearly rebuttable by providing evidence of control. Similarly, proposed Sec. 125.13(l) would add a rebuttable presumption regarding place of work. In this case, it deals with an SDV owner who does not live or work nears the firm's headquarters or its worksites. SBA will assume that this indicates a lack of control. The main issue in these instances is over delegation of authority to non-SDV individuals who do work at the office and who are at the work sites. SBA's regulations require control over day to day operations and remote observation and over delegation is not the same as control. As noted in this proposed rule, this is a rebuttable presumption. SBA is proposing to add Sec. 125.13(m), an exception to the control requirements in ``extraordinary circumstances.'' As noted above, SBA is proposing a new definition for extraordinary circumstances that includes a limited and exhaustive list of five circumstances. This proposed rule will allow an exception to the general requirement that SDVs control long term decision making. SBA is proposing to add Sec. 125.13(n), an exception to the control requirements when an individual in the reserves is recalled to active duty. SBA and VA do not think a firm owned by an SDV should lose its status due to the necessary military commitments of its owner when serving the nation. Sections 125.22 and 125.23 SBA is proposing to make changes to Sec. Sec. 125.22 and 125.23 to correct cross citations that were not updated when SBA renumbered its regulations. SBA is also proposing to update the values for sole source awards contained in Sec. 125.23 in order to be consistent with the inflationary adjustments made to those amounts in the Federal Acquisition Regulation (FAR). Compliance With Executive Orders 12866, 12988, 13132, and 13771, the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-612) Executive Order 12866 OMB has determined that this rule does not constitute a ``significant regulatory action'' under Executive Order 12866. This rule is also not a major rule under the Congressional Review Act, 5 U.S.C. 800. This proposed rule would amend the rules concerning ownership and control of VO and SDVO SBCs. As such, the rule has no effect on the amount or dollar value of any Federal contract requirements or of any financial assistance provided through SBA or VA. Therefore, the rule is not likely to have an annual economic effect of $100 million or more, result in a major increase in costs or prices, or have a significant adverse effect on competition or the United States economy. In addition, this rule does not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency, materially alter the budgetary impact of entitlements, grants, user fees, loan programs or the rights and obligations of such recipients, nor raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. This rule is part of a joint effort by the VA and SBA to reduce the regulatory burden on the veteran business community. This rule will consolidate ownership and control requirements in one regulation thus eliminating duplicate functions. Prior to the enactment of this regulation business owners had the burden of complying with both regulations. This regulation will eliminate that burden. The single rule will help streamline the verification and certification processes which will save business owners time and money. This will also lead to less confusion. Executive Order 12988 This action meets applicable standards set forth in section 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect. Executive Order 13132 This rule does not have Federalism implications as defined in Executive Order 13132. It will not have substantial [[Page 4008]] direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in the Executive Order. As such it does not warrant the preparation of a Federalism Assessment. Executive Order 13771 This proposed rule is expected to be an Executive Order 13771 deregulatory action. Details on the estimated cost savings of this proposed rule can be found in the rule's economic analysis. This rule is part of a joint effort by the VA and SBA to reduce the regulatory burden on the veteran business community. This rule will consolidate ownership and control requirements in one regulation thus eliminating duplicate functions. Prior to the enactment of this regulation business owners had the burden of complying with both regulations. This regulation will eliminate that burden. The single rule will help streamline the verification and certification processes which will save business owners time and money. This will also lead to less confusion. Paperwork Reduction Act The SBA has determined that this rule does not impose additional reporting or recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C. Chapter 35. However, this rule does include an information collection for the VA and the OMB approval number for this collection is 2900-0675. Regulatory Flexibility Act The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. Small entities include small businesses, small not-for-profit organizations, and small governmental jurisdictions. Section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis, if the rulemaking is not expected to have a significant economic impact on a substantial number of small entities. This proposed rule will merge SBA and VA regulations concerning ownership and control of VO and SDVO SBCs as directed by Congress. The proposed regulation is not attempting new regulation, but to streamline two already existing regulations into a single regulatory framework. While SBA does not anticipate that this proposed rule would have a significant economic impact on any small business, we do welcome comments from any small business setting out how and to what degree this proposed rule would affect it economically. There are approximately 21,000 firms registered as SDVO SBCs in SAM and approximately 13,000 firms that have been certified by the VA. To a large extent SBA's and the VA's ownership and control rules were substantially similar in terms of the regulatory language, and in many instances identical. Thus the vast majority of these firms will not be impacted by this rule. For example, this rule will not impact firms that are 100% owned and control by an SDV. To the extent there are differences in SBA's and the VA's ownership and control rules, this rule will reduce cost and positively impact all SDVO firms, because there will be one set of criteria to measure SDV ownership and control throughout the Federal government. Further, SBA's current rules do not ignore ESOPs when determining ownership, which means firms that are majority owned by ESOPs are not eligible for SDVO set-asides or sole source awards. We have no data on the number of firms that this rule will be impact, but the number is very small. After consulting with industry representatives, many firms owned by ESOPs are entirely owned by the ESOP, especially those that operate in industries with employee based size standards. Those firms will still not qualify if this rule is finalized because there is still a 51% SDV ownership requirement of the remaining ownership interest, not including ESOPs. However, some firms that intend to institute an ESOP may do so in way that allows the firm to qualify under this rule, once it is finalized. With respect to surviving spouse, SBA's current rules do not recognize ownership or control by a surviving spouse. Although the VA does allow firms owned and controlled by surviving spouses to qualify under its certification program, the number of firms that qualify under the exception is extremely small. To the extent firms qualify under the surviving spouse exception the benefit will be positive, not negative. Firms that were previously not eligible to continue as SDVO firms will be able to continue for a period of time, when and if this rule is finalized. Therefore, the Administrator of SBA determines, under 5 U.S.C. 605(b), that this proposed rule would not have a significant economic impact on a substantial number of small entities. List of Subjects in 13 CFR Part 125 Government contracts, Government procurement, Reporting and recordkeeping requirements, Small businesses, Technical assistance, Veterans. Accordingly, for the reasons stated in the preamble, SBA proposes to amend 13 CFR part 125 as follows: PART 125--GOVERNMENT CONTRACTING PROGRAMS 0 1. The authority citation for part 125 is revised to read as follows: Authority: 15 U.S.C. 632(p), (q), 634(b)(6), 637, 644, 657(f), 657q; and 657s; 38 U.S.C. 501 and 8127. 0 2. Revise Sec. 125.11 to read as follows: Sec. 125.11 What definitions are important in the Service-Disabled Veteran-Owned (SDVO) Small Business Concern (SBC) program? Contracting officer has the meaning given such term in section 27(f)(5) of the Office of Federal Procurement Policy Act (41 U.S.C. 423(f)(5)). Daily business operations include, but are not limited to, the marketing, production, sales, and administrative functions of the firm, as well as the supervision of the executive team, the implementation of policies and the setting of the strategic direction of the firm. ESOP has the meaning given the term ``employee stock ownership plan'' in section 4975(e)(7) of the Internal Revenue Code of 1986 (26 U.S.C. 4975(e)(7)). Extraordinary circumstances. For purposes of this part, extraordinary circumstances are only the following: (1) Adding a new equity stakeholder; (2) Dissolution of the company; (3) Sale of the company; (4) The merger of the company; and (5) Company declaring bankruptcy. Negative control has the same meaning as that set forth in Sec. 121.103(a)(3) of this chapter. Participant means a veteran-owned small business concern that has verified status in the Vendor Information Pages database, available at https://www.vip.vetbiz.gov/. Permanent caregiver, for purposes of this part, is the spouse, or an individual, 18 years of age or older, who is legally designated, in writing, to undertake responsibility for managing the well-being of the service-disabled veteran with a permanent and severe disability, as determined by Department of Veterans Affairs' Veterans Benefits Administration, to include housing, health and safety. A permanent caregiver may, but does not need to, reside in the same household as the service-disabled veteran with a permanent and severe disability. In the case of a service-disabled veteran with a permanent and severe disability lacking legal capacity, the permanent [[Page 4009]] caregiver shall be a parent, guardian, or person having legal custody. There may be no more than one permanent caregiver per service-disabled veteran with a permanent and severe disability. (1) A permanent caregiver may be appointed, in a number of ways, including: (i) By a court of competent jurisdiction; (ii) By the Department of Veterans Affairs, National Caregiver Support Program, as the Primary Family Caregiver of a Veteran participating in the Program of Comprehensive Assistance for Family Caregivers (this designation is subject to the Veteran and the caregiver meeting other specific criteria as established by law and the Secretary and may be revoked if the eligibility criteria do not continue to be met); or (iii) By a legal designation. (2) Any appointment of a permanent caregiver must in all cases be accompanied by a written determination from the Department of Veterans Affairs that the veteran has a permanent and total service-connected disability as set forth in 38 CFR 3.340 for purposes of receiving disability compensation or a disability pension. The appointment must also delineate why the permanent caregiver is given the appointment, must include the consent of the veteran to the appointment and how the appointment would contribute to managing the veteran's well-being. Small business concern owned and controlled by service-disabled veterans (also known as a Service-Disabled Veteran-Owned SBC) means any of the following: (1) A small business concern-- (i) Not less than 51 percent of which is owned by one or more service-disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock (not including any stock owned by an ESOP) of which is owned by one or more service- disabled veterans; and (ii) The management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran; (2) A small business concern-- (i) Not less than 51 percent of which is owned by one or more service-disabled veterans with a disability that is rated by the Secretary of Veterans Affairs as a permanent and total disability who are unable to manage the daily business operations of such concern; or (ii) In the case of a publicly owned business, not less than 51 percent of the stock (not including any stock owned by an ESOP) of which is owned by one or more such veterans. Service-connected has the meaning given that term in 38 U.S.C. 101(16). Service-disabled veteran is a veteran who possesses either a valid disability rating letter issued by the Department of Veterans Affairs, establishing a service-connected rating between 0 and 100 percent, or a valid disability determination from the Department of Defense or is registered in the Beneficiary Identification and Records Locator Subsystem maintained by Department of Veterans Affairs' Veterans Benefits Administration as a service-disabled veteran. Reservists or members of the National Guard disabled from a disease or injury incurred or aggravated in line of duty or while in training status also qualify. Service-disabled veteran with a permanent and severe disability means a veteran with a service-connected disability that has been determined by the Department of Veterans Affairs, in writing, to have a permanent and total service-connected disability as set forth in 38 CFR 3.340 for purposes of receiving disability compensation or a disability pension. Small business concern means a concern that, with its affiliates, meets the size standard corresponding to the NAICS code for its primary industry, pursuant to part 121 of this chapter. Surviving spouse has the meaning given the term in 38 U.S.C. 101(3). Unconditional ownership means ownership that is not subject to conditions precedent, conditions subsequent, executory agreements, voting trusts, restrictions on or assignments of voting rights, or other arrangements causing or potentially causing ownership benefits to go to another (other than after death or incapacity). The pledge or encumbrance of stock or other ownership interest as collateral, including seller-financed transactions, does not affect the unconditional nature of ownership if the terms follow normal commercial practices and the owner retains control absent violations of the terms. Veteran has the meaning given the term in 38 U.S.C. 101(2). Reservists or members of the National Guard called to Federal active duty or disabled from a disease or injury incurred or aggravated in line of duty or while in training status also qualify as a veteran. Veteran owned small business concern means a small business concern: (1) Not less than 51 percent of which is owned by one or more veterans or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more veterans; and (2) The management and daily business operations of which are controlled by one or more veterans. All of the provisions of Subpart B apply for purposes of determining ownership and control. 0 3. Amend Sec. 125.12 by: 0 a. Revising the introductory text; 0 b. Revising the first sentence in paragraph (b); 0 c. Adding a sentence at the end of paragraph (d); and 0 d. Adding paragraphs (g) through (i). The revisions and additions read as follows: Sec. 125.12 Who does SBA consider to own an SDVO SBC? Generally, a concern must be at least 51% unconditionally and directly owned by one or more service-disabled veterans. More specifically: * * * * * (b) * * * In the case of a concern which is a partnership, at least 51% of aggregate voting interest must be unconditionally owned by one or more service-disabled veterans. * * * * * * * * (d) * * * In the case of a publicly owned business, not less than 51 percent of the stock (not including any stock owned by an ESOP) must be unconditionally owned by one or more veterans. * * * * * (g) Dividends and distributions. One or more service-disabled veterans must be entitled to receive: (1) At least 51 percent of the annual distribution of profits paid to the owners of a corporation, partnership, or limited liability company concern; (2) 100 percent of the value of each share of stock owned by them in the event that the stock or member interest is sold; and (3) At least 51 percent of the retained earnings of the concern and 100 percent of the unencumbered value of each share of stock or member interest owned in the event of dissolution of the corporation, partnership, or limited liability company. (4) An eligible individual's ability to share in the profits of the concern must be commensurate with the extent of his/her ownership interest in that concern. (h) Community property. Ownership will be determined without regard to community property laws. (i) Surviving spouse. (1) A small business concern owned and controlled [[Page 4010]] by one or more service-disabled veterans immediately prior to the death of a service-disabled veteran who was the owner of the concern, the death of whom causes the concern to be less than 51 percent owned by one or more service-disabled veterans, will continue to qualify as a small business concern owned and controlled by service-disabled veterans during the time period if: (i) The surviving spouse of the deceased veteran acquires such veteran's ownership interest in such concern; (ii) Such veteran had a service-connected disability (as defined in 38 U.S.C. 101(16)) rated as 100 percent disabling under the laws administered by the Secretary of Veterans Affairs or such veteran died as a result of a service-connected disability; and (iii) For a participant, immediately prior to the death of such veteran, and during the period described in paragraph (i)(2) of this section, the small business concern is included in the database described in 38 U.S.C. 8127(f). (2) The time period described in paragraph (i)(1)(iii) of this section is the time period beginning on the date of the veteran's death and ending on the earlier of-- (i) The date on which the surviving spouse remarries; (ii) The date on which the surviving spouse relinquishes an ownership interest in the small business concern; or (iii) The date that is 10 years after the date of the death of the veteran. 0 4. Amend Sec. 125.13 by revising paragraph (e) and adding paragraphs (f) through (n) to read as follows: Sec. 125.13 Who does SBA consider to control an SDVO SBC? * * * * * (e) Control over a corporation. One or more service-disabled veterans (or in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran) must control the Board of Directors of the concern. (1) SBA will deem service-disabled veteran individuals to control the Board of Directors where: (i) A single service-disabled veteran individual owns 100% of all voting stock of an applicant or concern; (ii) A single service-disabled veteran individual owns at least 51% of all voting stock of an applicant or concern, the individual is on the Board of Directors and no super majority voting requirements exist for shareholders to approve corporation actions. Where super majority voting requirements are provided for in the concern's articles of incorporation, its by-laws, or by state law, the service-disabled veteran individual must own at least the percent of the voting stock needed to overcome any such super majority voting requirements; or (iii) More than one service-disabled veteran shareholder seeks to qualify the concern (i.e., no one individual owns 51%), each such individual is on the Board of Directors, together they own at least 51% of all voting stock of the concern, no super majority voting requirements exist, and the service-disabled veteran shareholders can demonstrate that they have made enforceable arrangements to permit one of them to vote the stock of all as a block without a shareholder meeting. Where the concern has super majority voting requirements, the service-disabled veteran shareholders must own at least that percentage of voting stock needed to overcome any such super majority ownership requirements. In the case of super majority ownership requirements, the service-disabled veteran shareholders can demonstrate that they have made enforceable arrangements to permit one of them to vote the stock of all as a block without a shareholder meeting. (2) Where an applicant or concern does not meet the requirements set forth in paragraph (e)(1) of this section, the service-disabled veteran individual(s) upon whom eligibility is based must control the Board of Directors through actual numbers of voting directors or, where permitted by state law, through weighted voting (e.g., in a concern having a two-person Board of Directors where one individual on the Board is service-disabled veteran and one is not, the service-disabled veteran vote must be weighted--worth more than one vote--in order for the concern to be eligible). Where a concern seeks to comply with this paragraph: (i) Provisions for the establishment of a quorum cannot permit non- service-disabled veteran Directors to control the Board of Directors, directly or indirectly; (ii) Any Executive Committee of Directors must be controlled by service-disabled veteran directors unless the Executive Committee can only make recommendations to and cannot independently exercise the authority of the Board of Directors. (3) Non-voting, advisory, or honorary Directors may be appointed without affecting service-disabled veteran individuals' control of the Board of Directors. (4) Arrangements regarding the structure and voting rights of the Board of Directors must comply with applicable state law. (f) Super majority requirements. One or more service-disabled veterans must meet all super majority voting requirements. An applicant must inform the Department of Veterans Affairs, when applicable, of any super majority voting requirements provided for in its articles of incorporation, its by-laws, by state law, or otherwise. Similarly, after being verified, a participant must inform the Department of Veterans Affairs of changes regarding super majority voting requirements. (g) Licenses. A firm must obtain and keep current any and all required permits, licenses, and charters, required to operate the business. (h) Unexercised rights. A service-disabled veteran owner's unexercised right to cause a change in the control or management of the applicant concern does not in itself constitute control and management, regardless of how quickly or easily the right could be exercised. (i) Control by non-service-disabled veterans. Non-service-disabled veteran individuals or entities may not control the firm. Non-service- disabled veteran individuals or entities may be found to control or have the power to control a firm in any of the following circumstances, which are illustrative only and not inclusive: (1) Be a former employer or a principal of a former employer, unless it is determined that the relationship between the former employer or principal and the eligible individual or concern does not give the former employer actual control over the concern and such relationship is in the best interests of the concern (2) In circumstances where non-service-disabled veterans receive compensation from the firm in any form as directors, officers or employees, including dividends, that exceeds the compensation to be received by the highest officer (usually CEO or President). The highest ranking officer may elect to take a lower amount than the total compensation and distribution of profits that are received by a non- veteran only upon demonstrating that it helps the concern. (3) In circumstances where the concern is co-located with another firm in the same or similar line of business, and that firm or an owner, director, officer, or manager, or a direct relative of an owner, director, officer, or manager of that firm owns an equity interest in the firm. (4) In circumstances where the concern shares employees, resources, equipment, or any type of services, whether by oral or written agreement [[Page 4011]] with another firm in the same or similar line of business, and that firm or an owner, director, officer, or manager, or a direct relative of an owner, director, officer, or manager of that firm owns an equity interest in the concern. (5) A non-service-disabled veteran individual or entity, having an equity interest in the concern, provides critical financial or bonding support. (6) In circumstances where a critical license is held by a non- service-disabled individual, or other entity, the non-service-disabled individual or entity may be found to control the firm. A critical license is considered any license that would normally be required of firms operating in the same field or industry, regardless of whether a specific license is required on a specific contract. (7) Business relationships exist with non-service-disabled veteran individuals or entities which cause such dependence that the applicant or concern cannot exercise independent business judgment without great economic risk. (j) Critical financing. A non-service-disabled veteran individual or entity may be found to control the concern through loan arrangements with the concern or the service-disabled veteran(s). Providing a loan or a loan guaranty on commercially reasonable terms does not, by itself, give a non-service-disabled veteran individual or entity the power to control a firm, but when taken into consideration with other factors may be used to find that a non-service-disabled firm or individual controls the concern. (k) Normal business hours. There is a rebuttable presumption that a service-disabled veteran does not control the firm when the service- disabled veteran is not able to work for the firm during the normal working hours that businesses in that industry normally work. This may include, but is not limited to, other full-time or part-time employment, being a full-time or part-time student, or any other activity or obligation that prevents the service-disabled veteran from actively working for the firm during normal business operating hours. (l) Close proximity. There is rebuttable presumption that a service-disabled veteran does not control the firm if that individual is not located within a reasonable commute to firm's headquarters and/ or job-sites locations, regardless of the firm's industry. The service- disabled veteran's ability to answer emails, communicate by telephone, or to communicate at a distance by other technological means, while delegating the responsibility of managing the concern to others is not by itself a reasonable rebuttal. (m) Exception for ``extraordinary circumstances.'' SBA will not find that a lack of control exists where a service-disabled veteran does not have the unilateral power and authority to make decisions in ``extraordinary circumstances.'' The only circumstances in which this exception applies are those articulated in the definition. (n) Exception for reservists recalled to active duty. Notwithstanding the provisions of this section requiring a service- disabled veteran to control the daily business operations and long-term strategic planning of a concern, where a service-disabled veteran individual upon whom eligibility is based is a reserve component member in the United States military who has been recalled to active duty, the concern may elect to designate in writing one or more individuals to control the concern on behalf of the service-disabled veteran during the period of active duty. The concern will not be considered ineligible based on the absence of the service-disabled veteran during the period of active duty. The concern must keep records evidencing the active duty and the written designation of control, and provide those documents to VA, and if requested to SBA. 0 5. Amend Sec. 125.22 by revising paragraph (a) to read as follows: Sec. 125.22 When may a contracting officer set-aside a procurement for SDVO SBCs? (a) The contracting officer first must review a requirement to determine whether it is excluded from SDVO contracting pursuant to Sec. 125.21. * * * * * 0 6. Amend Sec. 125.23 by revising paragraphs (a) and (b) to read as follows: Sec. 125.23 When may a contracting officer award sole source contracts to SDVO SBCs? * * * * * (a) None of the provisions of Sec. 125.21 or Sec. 125.22 apply; (b) The anticipated award price of the contract (including options) will not exceed $6,500,000 in the case of a contract assigned a NAICS code for manufacturing, or $4,000,000 in the case of any other contract opportunity; * * * * * Dated: January 18, 2018. Linda E. McMahon, Administrator. [FR Doc. 2018-01392 Filed 1-26-18; 8:45 am] BILLING CODE 8025-01-P
![Federal Register / Vol. 83, No. 19 / Monday, January 29, 2018 / Proposed Rules 4005
must be filed in accordance with the expenditure, and list the states in Alternatives A and B
paragraphs (b) and (c) of this section which the communication is publicly (iv) A statement that indicates
and 11 CFR 109.10(c) and (d), if the disseminated or otherwise publicly whether such expenditure was in
independent expenditure is made in distributed. support of, or in opposition to a
support of or opposition to a candidate candidate, together with the candidate’s
in a presidential primary election and is § 104.20 [Amended]
name and office sought; if the
publicly distributed or otherwise ■ 7. In § 104.20:
expenditure meets the criteria set forth
publicly disseminated in more than __ ■ a. Redesignate paragraphs (c)(6)
in § 104.3(b)(3)(vii)(C), memo text must
states but does not refer to any through (c)(9) as paragraphs (c)(7) be used to indicate the states in which
particular state, the date of the election through (c)(10). the communication is distributed, as
is the date of the next upcoming ■ b. Revise the heading and add new prescribed in that section;
presidential primary election among the paragraph (c)(6) to read as follows:
presidential primary elections to be held Alternative C
in the states in which the independent § 104.20 Reporting electioneering
communications (52 U.S.C. 30104(f)). (iv) A statement that indicates
expenditure is publicly distributed or whether such expenditure was in
disseminated. * * * * * support of, or in opposition to a
Alternative C (c) * * * candidate, together with the candidate’s
(2) Multistate independent Alternatives A and B name and office sought; if the
expenditures. (i) If an independent expenditure meets the criteria set forth
(6) If the election identified pursuant in § 104.3(b)(3)(vii)(C), the
expenditure is made in support of or to paragraph (c)(5) of this section is a
opposition to a candidate in a communication must be reported in
presidential primary election and the accordance with § 104.4(f)(2);
presidential primary election and is electioneering communication is
publicly distributed or otherwise * * * * *
publicly distributed or otherwise
publicly disseminated in more than __ disseminated in more than __ states but On behalf of the Commission.
states but does not refer to any does not refer to any particular state, the Dated: January 17, 2018.
particular state, the political committee electioneering communication shall be Caroline C. Hunter,
must allocate the total amount of the reported as a single communication, and Chair, Federal Election Commission.
expenditure among each of the states the states in which it constitutes an
where it is publicly distributed or [FR Doc. 2018–01074 Filed 1–26–18; 8:45 am]
electioneering communication (as
disseminated and where the BILLING CODE 6715–01–P
defined in 11 CFR 100.29(a)) shall be
presidential primary election has yet to
indicated in memo text.
occur, according to the number of
Congressional districts apportioned to Alternative C SMALL BUSINESS ADMINISTRATION
each such state relative to the total
(6) If the election identified pursuant 13 CFR Part 125
number of Congressional districts in all
to paragraph (c)(5) of this section is a
such states. RIN 3245–AG85
(ii) If the communication is publicly presidential primary election and the
distributed or otherwise publicly electioneering communication is
publicly distributed or otherwise Ownership and Control of Service-
disseminated up to and including the Disabled Veteran-Owned Small
20th day before the next upcoming disseminated in more than __ states but
does not refer to any particular state, the Business Concerns
presidential primary election in any of
the states, and the amount calculated in cost of the electioneering AGENCY: U.S. Small Business
paragraph (f)(2)(i) of this section communication shall be allocated Administration.
aggregates to $10,000 or more with among the states where it is publicly
ACTION: Proposed rule.
respect to any of the states in that distributed or otherwise disseminated in
calendar year, the political committee accordance with § 104.4(f)(2)(A). SUMMARY: The U.S. Small Business
must file a 48-hour report in accordance * * * * * Administration (SBA or Agency)
with paragraph (b)(2) of this section. proposes to amend its regulations to
(iii) If the communication is publicly PART 109—COORDINATED AND implement provisions of The National
distributed or otherwise publicly INDEPENDENT EXPENDITURES (52 Defense Authorization Act for Fiscal
disseminated after the 20th day but U.S.C. 30101(17), 30116(A) AND (D), Year 2017 (NDAA 2017). The NDAA
more than 24 hours before 12:01 a.m. of AND PUBLIC LAW 107–155 SEC. 2017 placed the responsibility for
the day of the next upcoming 214(C)) issuing regulations relating to
presidential primary election in any of ownership and control for the
■ 8. The authority citation for part 109
the states, and the amount calculated in Department of Veterans Affairs
continues to read as follows:
paragraph (f)(2)(i) of this section verification of Veteran-Owned (VO) and
aggregates to $1,000 or more with Authority: 52 U.S.C. 30101(17), 30104(c), Service-Disabled Veteran-Owned
respect to any of the states, the political 30111(a)(8), 30116, 30120; Sec. 214(c), (SDVO) Small Business Concern (SBC)
Pub. L. 107–155, 116 Stat. 81. with the SBA. Pursuant to NDAA 2017,
committee must file a 24-hour report in
accordance with paragraph (c) of this 9. Revise paragraph (e)(1)(iv) of there will be one definition of
sradovich on DSK3GMQ082PROD with PROPOSALS
■
section. § 109.10 as follows: ownership and control for these
(iv) For any report of an independent concerns, which will apply to the
expenditure included on a political § 109.10 How do political committees and Department of Veterans Affairs in its
committee’s regular report under other persons report independent verification and Vets First Contracting
expenditures?
paragraph (b)(1) of this section, or any Program procurements, and all other
48- or 24-hour report of an independent * * * * * government acquisitions which require
expenditure, the political committee (e) * * * self-certification. The legislation also
must indicate the date and amount of (1) * * * provides that in certain circumstances a
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![Federal Register / Vol. 83, No. 19 / Monday, January 29, 2018 / Proposed Rules 4011
with another firm in the same or similar managing the concern to others is not by NATIONAL LABOR RELATIONS
line of business, and that firm or an itself a reasonable rebuttal. BOARD
owner, director, officer, or manager, or (m) Exception for ‘‘extraordinary
a direct relative of an owner, director, circumstances.’’ SBA will not find that 29 CFR Parts 101 and 102
officer, or manager of that firm owns an a lack of control exists where a service- RIN 3142–AA12
equity interest in the concern. disabled veteran does not have the
(5) A non-service-disabled veteran unilateral power and authority to make Representation-Case Procedures
individual or entity, having an equity
decisions in ‘‘extraordinary AGENCY: National Labor Relations
interest in the concern, provides critical
circumstances.’’ The only circumstances Board.
financial or bonding support.
(6) In circumstances where a critical in which this exception applies are
those articulated in the definition. ACTION: Request for information;
license is held by a non-service-disabled extension of time to submit responses.
individual, or other entity, the non- (n) Exception for reservists recalled to
service-disabled individual or entity active duty. Notwithstanding the SUMMARY: The National Labor Relations
may be found to control the firm. A provisions of this section requiring a Board (the Board) published a Request
critical license is considered any license service-disabled veteran to control the for Information in the Federal Register
that would normally be required of daily business operations and long-term on December 14, 2017, seeking
firms operating in the same field or strategic planning of a concern, where a information from the public regarding
industry, regardless of whether a service-disabled veteran individual its representation election regulations,
specific license is required on a specific upon whom eligibility is based is a with a specific focus on amendments to
contract. reserve component member in the the Board’s representation case
(7) Business relationships exist with United States military who has been procedures adopted by the Board’s final
non-service-disabled veteran recalled to active duty, the concern may rule published on December 15, 2014.
individuals or entities which cause such elect to designate in writing one or more The date to submit responses to the
dependence that the applicant or individuals to control the concern on request for information is extended for
concern cannot exercise independent behalf of the service-disabled veteran three days as a result of the lapse in
business judgment without great during the period of active duty. The appropriations for the Federal
economic risk. concern will not be considered government. The Board is also granting
(j) Critical financing. A non-service- ineligible based on the absence of the an additional 30 days to file responses
disabled veteran individual or entity service-disabled veteran during the to the request for information.
may be found to control the concern period of active duty. The concern must DATES: Responses to the request for
through loan arrangements with the keep records evidencing the active duty information must be received by the
concern or the service-disabled and the written designation of control, Board on or before March 19, 2018. No
veteran(s). Providing a loan or a loan and provide those documents to VA, late responses will be accepted.
guaranty on commercially reasonable and if requested to SBA. Responses are limited to 25 pages.
terms does not, by itself, give a non-
■ 5. Amend § 125.22 by revising ADDRESSES: Electronic responses may be
service-disabled veteran individual or
entity the power to control a firm, but paragraph (a) to read as follows: submitted by going to www.nlrb.gov and
when taken into consideration with following the link to submit responses
§ 125.22 When may a contracting officer
other factors may be used to find that a to this request for information. The
set-aside a procurement for SDVO SBCs?
non-service-disabled firm or individual Board encourages electronic filing. If
controls the concern. (a) The contracting officer first must you do not have the ability to submit
(k) Normal business hours. There is a review a requirement to determine your response electronically, responses
rebuttable presumption that a service- whether it is excluded from SDVO may be submitted by mail to: Roxanne
disabled veteran does not control the contracting pursuant to § 125.21. Rothschild, Deputy Executive Secretary,
firm when the service-disabled veteran * * * * * National Labor Relations Board, 1015
is not able to work for the firm during Half Street SE, Washington, DC 20570.
■ 6. Amend § 125.23 by revising
the normal working hours that paragraphs (a) and (b) to read as follows: Dated: January 24, 2018.
businesses in that industry normally Roxanne Rothschild,
work. This may include, but is not § 125.23 When may a contracting officer Deputy Executive Secretary.
limited to, other full-time or part-time award sole source contracts to SDVO
[FR Doc. 2018–01622 Filed 1–26–18; 8:45 am]
employment, being a full-time or part- SBCs?
BILLING CODE P
time student, or any other activity or * * * * *
obligation that prevents the service- (a) None of the provisions of § 125.21
disabled veteran from actively working or § 125.22 apply;
for the firm during normal business DEPARTMENT OF THE INTERIOR
operating hours. (b) The anticipated award price of the
contract (including options) will not Office of Surface Mining Reclamation
(l) Close proximity. There is rebuttable
exceed $6,500,000 in the case of a and Enforcement
presumption that a service-disabled
veteran does not control the firm if that contract assigned a NAICS code for
manufacturing, or $4,000,000 in the case 30 CFR Part 901
individual is not located within a
sradovich on DSK3GMQ082PROD with PROPOSALS
reasonable commute to firm’s of any other contract opportunity; [SATS No. AL–081–FOR; Docket ID: OSM–
headquarters and/or job-sites locations, * * * * * 2017–0006; S1D1S SS08011000 SX064A000
regardless of the firm’s industry. The 189S180110; S2D2S SS08011000
Dated: January 18, 2018. SX064A000 18XS501520]
service-disabled veteran’s ability to
Linda E. McMahon,
answer emails, communicate by Alabama Regulatory Program
telephone, or to communicate at a Administrator.
distance by other technological means, [FR Doc. 2018–01392 Filed 1–26–18; 8:45 am] AGENCY:Office of Surface Mining
while delegating the responsibility of BILLING CODE 8025–01–P Reclamation and Enforcement, Interior.
VerDate Sep<11>2014 16:59 Jan 26, 2018 Jkt 244001 PO 00000 Frm 00016 Fmt 4702 Sfmt 4702 E:\FR\FM\29JAP1.SGM 29JAP1](https://thefederalregister.org/doc/83_FR_4024/page/7.svg)
Document Created: 2018-01-27 00:57:59
Document Modified: 2018-01-27 00:57:59
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Proposed Rules | |
| Action | Proposed rule. | |
| Dates | Comments must be received on or before March 30, 2018. | |
| Contact | Brenda Fernandez, Office of Policy, Planning and Liaison, 409 Third Street SW, Washington, DC 20416; (202) 205-7337; [email protected] | |
| FR Citation | 83 FR 4005 | |
| RIN Number | 3245-AG85 | |
| CFR Associated | Government Contracts; Government Procurement; Reporting and Recordkeeping Requirements; Small Businesses; Technical Assistance and Veterans |
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