Proposed Rule Could Keep Some Businesses “Small” SBA is proposing to change the way small businesses count their employees, possibly allowing some companies to remain officially “small” longer. At the same time, the agency said it has dropped its controversial 2004 proposal to measure all size standards bv employment rather than receipts. The original proposal was withdrawn, but the agency asked for an additional round of comments on the issue nearly three years ago. For size standards based on employment, the proposed rule would count employees using the average of the past three complete calendar years. Currently companies are required to re-calculate their employment using a rolling average of the previous 12 months. By relying on a three-year history, a fast-growing company could retain small-business status longer. “SBA believes a change in the method of calculating the number of employees will simplify size standards and lessen the burden on small businesses in calculating their size status,” the agency said in a July 27 notice in the Federal Register. The change would put employee-based size standards on the same basis as revenue-based standards, which are calculated using a three-year average. SBA said it does not intend to count employees on a full-time equivalent basis, as it had once suggested. The proposed rule would allow companies to verify their employment by submitting their IRS Form W-3, the “Transmittal of Wage and Tax Statement,” which is filed annually. Additional payroll records would not be required in case of a challenge to a company’s size status. “Besides reducing the burden on businesses, this proposed rule would reduce the burden on SBA officials performing size determinations,” the notice said. SBA estimated the proposed rule would affect no more than 2,000 of the 300,000 small businesses listed in the Central Contractor Registration. Those companies are at or near the limit of their size standard. SBA previously announced it has begun a review of all size standards and will make “appropriate changes” over the next 18 to 24 months. (SAA, 7/27) The proposed rule is RIN 3245-AF60. Comments are due Sept. 25.