Putative Small Business Refused to Provide Its Tax Returns for a Size Determination. Was the SBA Justified in Drawing an Adverse Inference?

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The agency awarded a small business set-aside, but then asked the SBA to determine whether the awardee was small. The SBA asked the awardee for a copy of its 2020 tax returns. The awardee refused to submit the returns, arguing that the returns had not been completed by the certification date, so the SBA didn’t need them. The SBA applied an adverse inference, finding that the 2020 tax returns would have shown the awardee was not small. OHA sided with the SBA. The fact that the returns were not completed by the certification date was irrelevant. The returns could have been submitted as additional information for the size determination. The SBA appropriately drew in adverse inference from the awardee’s refusal to provide the returns.

Size Appeal of: The Onyx-Urban Collaborative Joint Venture, SBA No. SIZ-6157

The Navy awarded a small business set-aside contract to The Onyx-Urban Joint Venture. After award, the contracting officer noted Onyx-Urban had received its first award as a joint venture in 2016. Under SBA regulations, two years after an initial award, joint venture partners are considered affiliated and their receipts are aggregated when determining size. The contracting officer requested a size determination from the SBA Area Office.

As part of the size determination, the Area Office asked Onyx-Urban for a copy of its 2020 tax returns. Onyx-Urban declined to submit the returns. Onyx-Urban reasoned that its 2020- returns had not been completed at the time it self-certified in 2021. Thus, the venture argued, the Area Office should simply assess its size from the 2015-2019 tax returns, which represented the available returns for the five previous years.

In light of Onyx-Urban’s refusal to supply the 2020 returns, the Area Office applied an adverse inference that the missing returns would have shown that the venture was not small. The Area Office issued a determination finding that Onyx-Urban was not small

Onyx-Urban appealed to the SBA’s Office of Hearing and Appeals, arguing that because its 2020  tax returns were not completed by the 2021 certification date, it was not required to submit them. 

OHA found Onyx-Urban’s argument unavailing. The proper period for measuring receipts is the most recently completed five fiscal years preceding self-certification. Onyx-Urban self-certified in 2021, so the relevant years were 2016-2020. The joint venture therefore was required to submit its 2020 tax returns. The fact that the returns were not completed before the certification date was irrelevant. The returns were available by the time of the size review and could have been considered and “other available information” as part of the size determination.

Onyx-Urban is represented by Mark L. Gillen, its Program Manager.

SBA - Onyx-Urban Collaborative Joint