N.Y. Comp. Codes R. & Regs. tit. 5 § 144.2

Current through Register Vol. 46, No. 43, October 23, 2024

Section 144.2 - Certification criteria

(a) In order to be certified as a minority or women-owned business enterprise, a business enterprise must be owned, operated, and controlled by one or more minority group members or women, must be independent of other business entities, and must meet such other certification criteria as are described herein.

(b) Ownership. In order to establish real, substantial, and continuing majority ownership of a business enterprise by one or more minority group members or women, and to ensure that the benefits of certification accrue to such minority group members or women, each application to certify a business enterprise as a minority or women-owned business enterprise must meet the following criteria:

(1) Fifty-one percent ownership interest. Minority group members and women relied upon for certification must own at least fifty-one (51) percent of the business enterprise for which certification is sought. Such minority group members or women must be United States citizens or permanent resident aliens.

(2) Capital contribution. Minority group members and women relied upon for certification must demonstrate a capital contribution to the business enterprise for which certification is sought proportionate to their equity interest therein.

(i) Sources of a capital contribution. Minority group members and women may demonstrate a capital contribution by providing documentary evidence of, for example and without limitation, one or more of the following:

1. Money;

2. Property;

3. Equipment; or

4. Expertise, provided that the contribution of such expertise must be uncompensated, the expertise must be specialized and directly applicable to one or more critical aspects of the operation of the business enterprise, and a reasonable assessment of the fair market value of the expertise must be clearly documented.

(3) Risks and profits. Minority group members and women relied upon for certification must share in the risks and profits of the business enterprise for which certification is sought in proportion to their equity interest therein. In determining whether the profits of the business enterprise are shared proportionately with minority group members or women, the division may consider, for example and without limitation, means by which the proceeds of the business enterprise are conveyed to individuals or entities.

(4) Customary incidents of ownership. Minority group members and women relied upon for certification must not be encumbered in their ability to realize the benefits of ownership of the business enterprise for which certification is sought, or subject to undue restrictions against alienating such ownership interests.

(5) Pro forma ownership. Ownership interests in a business enterprise may not be allocated to minority group members or women, either through business formation or the transfer of ownership interests, solely for the purpose of securing certification of such business enterprise as a minority or women-owned business enterprise. Where a minority group member or woman relied upon for certification obtains his or her ownership interest in a business enterprise through a transfer from another person, such minority group member or woman must demonstrate that such transfer was supported by reasonable consideration, and must meet all other certification criteria described herein.

(c) Operation. Minority group members and women relied upon for certification must make day-to-day decisions concerning the operation of the business enterprise for which certification is sought. The division shall evaluate whether minority group members or women operate a business enterprise for which certification is sought based upon the following criteria:

(1) Competence in the industry. Minority group members and women relied upon for certification must possess adequate, industry-specific competence to make critical business decisions without relying upon other persons. This requirement cannot be satisfied by expertise or experience in office management or general business administration, among other things. In evaluating whether a minority group member or woman possesses adequate, industry-specific competence, the division shall consider factors including, but not limited to:

(i) Whether individuals employed by the business enterprise for which certification is sought are required to obtain licenses or certifications to provide products or services to the clients of the business enterprise;

(ii) The extent to which academic credentials exist for persons employed in the industry; and

(iii) The extent to which industry-specific expertise may be obtained via direct work experience.

(2) Operational decisions. Minority group members and women relied upon for certification must make operational decisions on a day-to-day basis with respect to the critical functions of the business enterprise for which certification is sought. The critical functions of a business enterprise shall be determined by the division based upon the following factors, but is not limited to:

(i) The products or services the business enterprise provides to clients; and

(ii) The means by which the business enterprise obtains contracts or orders.

(3) Time devoted to operation of the business enterprise. Minority group members and women relied upon for certification must devote time on an ongoing basis to the daily operation of the business enterprise for which certification is sought.

(d) Control. Minority group members and women relied upon for certification must have the power to control the business enterprise for which certification is sought. The division shall assess whether minority group members and women possess such control based upon the following criteria:

(1) Control of business management. A minority group member or woman relied upon for certification must be the highest-ranking officer of the business enterprise for which certification is sought, and, where applicable, control the board of directors or serve as a general partner. Any agreements describing the management of the business enterprise shall be consistent with the foregoing.

(2) Control of business negotiations. Minority group members and women relied upon for certification must negotiate business contracts and represent themselves to clients as the principals of business entities for which certification is sought, as demonstrated by fully executed business agreements.

(e) Independence. Business enterprises for which certification is sought must operate independently. In order to determine whether such business enterprises operate independently, the division shall consider but not be limited to the following criteria:

(1) Whether the business enterprise shares resources with another entity, including, but not limited to, personnel, equipment, office space, warehouse and other storage space, and yard space;

(2) Whether the business enterprise transacts business primarily with one other entity; and

(3) Whether the business enterprise receives tangible benefits as a result of a connection to another entity, and whether such benefits are consistent with standard industry practices.

(f) Other certification criteria. Applications to certify business enterprises as minority and women-owned business enterprises must satisfy the following additional criteria:

(1) Personal net worth. Minority group members and women relied upon for certification must demonstrate an individual personal net worth at the time of application that does not exceed fifteen million dollars, as adjusted annually on the first of January for inflation according to the consumer price index of the previous year starting in 2020; or such other amount that the director shall determine on an industry-by-industry basis, based on, for example and without limitation, factual findings by the division concerning the individuals within the industries under consideration. Regulations relating to the classification of any industry-by-industry personal net worth thresholds above the fifteen-million dollar threshold shall, to the extent practicable, be implemented within six months of the completion of the division's review needed to establish such thresholds, by the director.

(2) Small business requirement. Any business enterprise for which certification as a minority or women-owned business enterprise is sought must be a small business, as that term is defined in Part 140 of this Title.

(3) Authorization to do business. Any business enterprise for which certification as a minority or women-owned business enterprise is sought must be authorized to do business, and demonstrate that it actively conducts business, in the State of New York.

(4) Additional Requirements. The following requirements apply to all applicants seeking minority and women-owned business enterprise status and inclusion in the directory or certified businesses:

(i) documentation may be required to substantiate the claim of membership in a minority group. This documentation may include, but is not limited to: birth certificates; naturalization papers, registration on Indian tribal rolls of federally recognized tribes by the United States Department of the Interior or of tribes set forth in Section 2 of the Indian Law, and nonresident visas;

(ii) sharing of tax and employer information

1. each business applying for minority or women-owned business enterprise certification pursuant to Section 144.2 of Part 144 of this Title must agree to allow:

A. the department of taxation and finance to share its tax information with the division; and

B. the department of labor to share its tax and employer information with the division.

2. such information provided pursuant to paragraph (ii) of this section shall be kept confidential by the division as such information is kept by the department of taxation and finance or the department of labor and use of such information shall be limited to the certification application process, or other uses approved by the business enterprise or applicant.

N.Y. Comp. Codes R. & Regs. Tit. 5 § 144.2

Amended, New York State Register, Volume XXXVI, Issue 22, effective 6/4/2014

Amended New York State Register December 2, 2020/Volume XLII, Issue 48, eff. 12/2/2020