Native Hawaiian Organizations soon will be able to own HUBZone companies under a new SBA direct final rule published yesterday in the Federal Register.

The new rule implements provisions of the 2016 National Defense Authorization Act, in which Congress instructed the SBA to open the HUBZone program to NHOs.

Under current law, NHOs are unable to majority-own HUBZone companies, even though Indian tribes and Alaska Native Corporations can be HUBZone owners.  The new rule, which will amend the SBA’s HUBZone regulations in 13 C.F.R. 126.103, defines a HUBZone entity to include an entity that is:

(8) Wholly owned by one or more Native Hawaiian Organizations, or by a corporation that is wholly owned by one or more Native Hawaiian Organizations; or

(9) Owned in part by one or more Native Hawaiian Organizations or by a corporation that is wholly owned by one or more Native Hawaiian Organizations, if all other owners are either United States citizens or small business concerns.

The new regulation defines a Native Hawaiian Organization as “any community service organization serving Native Hawaiians in the State of Hawaii which is a not-for-profit organization chartered by the State of Hawaii, is controlled by Native Hawaiians, and whose business activities will principally benefit such Native Hawaiians.”

In addition to adding NHOs to the HUBZone program, the new final rule treats certain “major disaster areas” as HUBZones for a period of five years, treats certain “catastrophic incident areas” as HUBZones for a period of 10 years, and extends HUBZone eligibility for Base Closure Areas and contiguous areas.

The SBA’s direct final rule will take effect on October 3, 2016 unless the SBA receives significant adverse comment from the public.  If that happens (and it’s not expected), the SBA would withdraw and republish the rule to address the adverse comments.

NHOs have long asked that they should be treated like Indian tribes and ANCs for purposes of the HUBZone program.  Soon, that’s exactly what will happen.