Monday, April 23, 2012


On April 18, 2012, the SBA's Office of Hearings and Appeals (OHA) denied an appeal and affirmed a size determination that a business was not small based on its tax returns, the most recent of which had not been filed at the time the business self-certified its size. 

The issue was whether the SBA Area Office erred in considering a 2010 federal tax return which had not yet been filed as of the date of self-certification on May 26, 2011, but which had been filed when the SBA size determination was made as a result of a protest.

The rule, of course, requires that annual receipts be calculated by adding the last three completed fiscal years and dividing by three.  Since the self-certification was on May 26, 2011, that meant 2008, 2009 and 2010 should be used.  In response to the protest, the contractor argued that since its 2010 return was not available on the date of self-certification the years 2007 through 2009 should be used.  Not so, says OHA.

The OHA pointed out that the SBA regulations provide that if the tax return is not available, calculations of the contractors receipts will be made from the contractor's regular books of account, audited financial statements or other information contained in an affidavit by a person with personal knowledge of the facts. 

Moreover, OHA observed that the 2010 tax return was available at the time of the size determination by SBA in January 2012 (as a result of the protest).  For these, reasons, it was proper to use the 2010 tax return to make the size determination.  In any event, the tax return was "other available information" SBA could use under the regulation.

The Administrative Judge also ruled that the contractor need not be given an opportunity to submit other evidence of its 2010 receipts.  Tax returns are recognized as an inherently reliable source of information due to the severe penalties for filing false tax returns.  This, even if other information were permitted, it probably could not be used to contradict the tax return.

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