Effective January 6, 2020, the U.S. Small Business Administration (SBA) will change the period of measurement for receipts-based size calculations from three years to five years. This change is the result of the Small Business Runway Extension Act of 2018 and SBA’s final rule making (link below) on December 5, 2019. This is a long-awaited change and will have far-reaching impact on government contractors.

SBA is adopting a two-year transition period, until January 6, 2022, during which firms may choose to use either the current three-year calculation or the new five-year calculation. After January 6, 2022, all companies must use the five-year period of measurement in determining their size under a receipts-based calculation. Information for receipts-based calculations are taken from tax returns as opposed to company financials.

For more information, visit: https://www.federalregister.gov/documents/2019/12/05/2019-26041/small-business-size-standards-calculation-of-annual-average-receipts.

For additional questions, please contact Frank Wu at frank.wu@rosefinancial.com or 301-527-1130, Ext 272.