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TITLE 2.
DEPARTMENT OF GENERAL SERVICES
__________
PROPOSED TEXT OF REGULATIONS
The DGS proposes to amend California Code of Regulations, title 2,
sections 1896.4, subdivision (q), and 1896.12, subdivisions (a)(5)(A), (b),
and (d) as follows:
§1896.4. Definitions
The terms defined in this article do not change except for
(q) Microbusiness means a small business that, together with affiliates, has
average annual gross receipts of two million, five hundred thousand dollars
($2,500,000) two million, seven hundred and fifty thousand dollars ($2,750,000)
or less over the previous three years, as adjusted by the Department pursuant to
Government Code § 14837(d)(2), or is an manufacturer, as defined in
Government Code § 14837, with 25 or fewer employees.
Note:
Authority cited: § 14837 and 14843, Government Code.
Reference: § 927, 927.2, 11370.2, 11502 and 14837, Government Code; § 999,
Military and Veterans Code; Title 13 Code of Federal Regulations (CFR),
Chapter I, Part 121, § 121.104.
§1896.12. Eligibility for Certification as a Small Business
(a) To be eligible for certification as a small business, a business must meet all of
the following qualifying criteria:
(1) It is independently owned and operated; and
(2) The principal office is located in California; and
(3) The officers of the business in the case of a corporation; officers and/or
managers, or in the absence of officers and/or managers, all members in the
case of a limited liability company; or the owner(s) in all other cases, are
domiciled in California; and
(4) It is not dominant in its field of operation(s), and
(5) It is either:
(A) A business that, together with all affiliates, has 100 or fewer employees,
and annual gross receipts of ten million dollars ($10,000,000) twelve million
dollars ($12,000,000) or less as averaged for the previous three tax years, as
adjusted by the Department pursuant to Government Code §14837(d)(3); or
(B) A manufacturer as defined herein that, together with all affiliates, has 100
or fewer employees.
(b) To be eligible for designation as a microbusiness, a business must meet all
the qualifying criteria in subparagraph (a), and in addition, must be either:
(1) A business that, together with all affiliates, has annual gross receipts of two
million five hundred thousand dollars ($2,500,000) two million, seven hundred
and fifty thousand dollars ($2,750,000) or less as averaged for the previous three
tax years, as adjusted by the Department pursuant to Government Code §
14837(d)(3); or
(2) A manufacturer as defined herein that, together with all affiliates, has 25 or
fewer employees.
(c) Joint ventures must be certified on a bid-by-bid basis. The joint venture shall
not be subject to the average annual gross receipts and employee limits imposed
by this subchapter. However, each individual business participating in the joint
venture must be certified as a small business.
(d) Certification Determination
(1) In determining if a business is eligible for certification, the Department may
consider the applicant's or small business' organizational structure, operations
and business relationships during the previous three tax years (or years the
business has been in existence if fewer than three tax years), and may request
the applicant provide copies of income tax returns as filed with the California
Franchise Tax Board in addition to the required federal income tax returns and
schedules, as filed with the federal Internal Revenue Service, or other
documentation deemed necessary for the Department to make a final
certification determination.
(2) In determining if a business is eligible for small business certification, the
applicant business, together with all affiliates, has been in existence less than
three years shall have 100 or fewer employees, and an average annual gross
receipts of $10 million$12 million or less as averaged by the number of years in
existence, as adjusted by the Department pursuant to Government Code, §
14837(d)(3).
(3) In determining if a business is eligible for microbusiness certification, the
applicant business, together with all affiliates, has been in existence less than
three years shall have an average annual gross receipts of $2.5 million $2.75
million or less as averaged by the number of years in existence, as adjusted by
the Department pursuant to Government Code, § 14837(d)(3).
(4) The Department's determination of whether a business is a manufacturer may
be based on, but not limited to:
(A) Whether the business, with its own facilities, performs the primary activities
in transforming inorganic or organic substances into the end item being acquired,
and is not a packager or, in the case of kits, a final assembler. The end item
must possess characteristics that, as a result of mechanical, chemical, or human
action, it did not possess before the original substances, parts, or components
were assembled or transformed. The end item may be finished and ready for
utilization or consumption, or it may be semi-finished as a raw material to be
used in further manufacturing.
(B) The factors considered by the federal Small Business Administration
pursuant to Title 13, Code of Federal Regulations (CFR), Chapter I, Part 121, §
121.406(b)(2).
(C) Whether more than fifty percent (50%) of annual gross receipts, as
determined by the Department, result from the manufacture and sale of
products manufactured by the business.
(5) The Department's determination of whether the officers, owners or members
of a business, as applicable, are domiciled in California may be based on, but not
be limited to, a review of:
(A) Voter registration records;
(B) Homeowner's property tax exemption filings;
(C) Driver's licenses;
(D) Utility billings; and
(E) Other documents, acts, occurrences, or events that indicate presence in
California is more than temporary or transient.
(6) The Department's determination of whether the Principal Office of a
business is located in California shall be based on:
(A) In the case of a corporation, the location where the corporate officers
manage, direct and control the operations must be located within California;
(B) In the case of Limited Liability Companies, the location where the
Manager(s) and/or Officer(s) or Members manage, direct and control the
operations must be located within California;
(C) In all other cases, the location where the owner(s) manage, direct and
control the operations must be located within California.
(7) The Department's determination of whether a business is affiliated with
another business may be based on, but not limited to, historical and current
factors including ownership, management, financial and/or business relationships
or ties with another business, familial relationships, contractual relationships,
assignments, passage of title to goods or merchandise, and other related
matters.
(A) The Department may additionally consider the following in determining
affiliation:
1. The applicant business assigns a contract, in whole or in part, to another
business.
2. There exists common management with the applicant business and
another business.
3. The applicant business and another business share facilities, equipment,
systems, or employees.
4. There is a familial relationship with the applicant business and another
business and both businesses are in the same industry.
5. A person or business has assisted the applicant business with activity to
meet bond/security requirements.
(B) The following types of business relationships shall not be considered
affiliations:
1. A franchise and/or license agreement provided that the franchisee or
licensee has the right to profit from its efforts and bears the risk of loss
commensurate with ownership.
2. A manufacturer's or service provider's representative provided that a
written agreement exists between the manufacturer(s) or service provider(s) and
the representative that substantiates the independent nature of the individual
businesses.
(8) The Department shall presume an applicant business not to be
independently owned and operated if any of the following exists:
(A) An outside person or business concern owns or controls, or has the power
to control, fifty percent (50%) or more of the voting stock of the applicant
business, or
(B) One or more business owners, general partners, directors, officers or
members of an outside business concern controls or has the power to control or
influence the day-to-day operations of the applicant business, board of directors
and/or owner(s) of the applicant business.
(9) An applicant business concern that exercises or has the ability to exercise a
controlling or major influence, on a statewide basis, in a kind of business activity
or field of operation in which a number of business concerns are primarily
engaged, shall be determined to be dominant in its field of operation. The
following criteria, among others, may be considered by the Department in
determining if the applicant business is dominant in its field of operation:
(A) Volume of business;
(B) Financial resources;
(C) Competitive status or position;
(D) Ownership or control of materials, processes, licenses agreements and
facilities;
(E) Sales territory and nature of business activity.
(e) In order to determine the eligibility of a business for certification as a small
business, the Department may consider whatever information is provided to it
from records gathered or held by any California state or local agency, any
governmental agency of another state, or the federal government.
(f) Businesses that have been certified by or on behalf of other governmental
organizations may be eligible for certification as a small business if the
organization uses substantially the same or more stringent definitions as those
set forth in Government Code § 14837, and substantially the same or more
stringent certification analysis process than used by the Department.
Note:
Authority cited: § 14837 and 14843, Government Code.
Reference: § 14837, Government Code; Title 13 CFR, Chapter I, Part 121, §§
121.103 and 121.406. |
