President Trump Signs Law Changing Small Business Size Determination Period from Three Years to Five Years

By Lynn Patton Thompson

On December 17, 2018, the Small Business Runway Extension Act was signed into law by President Trump and became P.L. 115-324. The new law amends the Small Business Act at 15 USC§632(a)(2)(C)(ii)(11) by enlarging the period in which small business size status must be determined for those concerns whose size is determined on the basis of gross receipts. Prior to the new law, that period was required to be “not less than 3 years”. Now, that period has been increased to a period of “not less than 5 years.” This legislative change was introduced in H.R. 6330, which you can find here. Providing for a “longer view” of revenues was thought necessary to prevent businesses from prematurely out-sizing their small business status due to recent periods of rapid growth.

Pursuant to the Small Business Administration’s (“SBA”) regulations at 13 CFR Part 121, the size of a concern must be “small” as of the date it submits its initial offer that includes price. The SBA’s regulation at 13 CFR §121.104(c) defined the “period of measurement” for size as a concern’s 3 most recently completed fiscal years. On the basis of the newly amended Small Business Act, the “period of measurement” would be a concern’s 5 most recently completed fiscal years.