TITLE 34. PUBLIC FINANCE

DIVISION 1. PRACTICE AND PROCEDURES

34 TAC §1.12

The Comptroller of Public Accounts adopts amendments to §1.12, concerning position letter, without changes to the proposed text as published in the February 6, 2026, issue of the Texas Register (51 TexReg 700). The rule will not be republished. The amendments implement Senate Bill 266, 89th Legislature, 2025 and House Bill 1937, 89th Legislature, 2025, effective May 24, 2025.

Senate Bill 226 repealed Tax Code, §111.105(e) (Tax Refund: Hearing), which authorized the comptroller to issue a "notice of demand" that all evidence to support a refund claim be produced by a specific date in the notice, and that any evidence produced after the specified date could not be considered in an administrative hearing. Section 1.12(c), which largely mirrors the statutory language in authorizing the notice of demand for documentation, is deleted to conform with the repeal of Tax Code, §111.105(e). The last sentence of §1.12(e), which refers to calculating the date to respond to the notice of demand in subsection (c), is also deleted to conform with the repeal of Tax Code, §111.105(e).

Subsequent subsections are renumbered accordingly.

The comptroller did not receive any comments regarding adoption of the amendment.

The amendments are adopted under Tax Code, §111.002 (Comptroller's Rules, Compliance, Forfeiture), which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2 (State Taxation).

This section implements Tax Code, §111.105(e) (Tax Refund: Hearing).

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on April 21, 2026.

TRD-202601718

Jenny Burleson

Director, Tax Policy

Comptroller of Public Accounts

Effective date: May 11, 2026

Proposal publication date: February 6, 2026

For further information, please call: (512) 475-2220

---

34 TAC §1.22

The Comptroller of Public Accounts adopts amendment to §1.22, concerning discovery, without changes to the proposed text as published in the February 6, 2026, issue of the Texas Register (51 TexReg 701). The rule will not be republished. The amendment implements Senate Bill 266, 89th Legislature, 2025 and House Bill 1937, 89th Legislature, 2025, effective May 24, 2025.

Prior to amendment by Senate Bill 266, Tax Code, §111.0041(c) (Records; Burden to Produce and Substantiate Claims), required taxpayers to produce "contemporaneous" records and supporting documentation to substantiate and enable verification of the taxpayer's claim related to the amount of tax, penalty, or interest to be assessed, collected, or refunded in an administrative or judicial proceeding. Senate Bill 266 substituted the word "sufficient" for "contemporaneous" in that section. The amendment to §1.22 likewise substitutes "sufficient" for "contemporaneous" in order to conform the rule to the statute.

The comptroller did not receive any comments regarding adoption of the amendment.

The amendments are adopted under Tax Code, §111.002 (Comptroller's Rules, Compliance, Forfeiture), which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2 (State Taxation).

The amendments implement Tax Code, 111.0041(c)(Records; Burden to Produce and Substantiate Claims).

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on April 21, 2026.

TRD-202601719

Jenny Burleson

Director, Tax Policy

Comptroller of Public Accounts

Effective date: May 11, 2026

Proposal publication date: February 6, 2026

For further information, please call: (512) 475-2220

---

34 TAC §1.26

The Comptroller of Public Accounts adopts amendment to §1.26, concerning burden and standard of proof in contested cases, without changes to the proposed text as published in the February 6, 2026, issue of the Texas Register (51 TexReg 702). The rule will not be republished. The amendment implements Senate Bill 266, 89th Legislature, 2025 and House Bill 1937, 89th Legislature, 2025, effective May 24, 2025.

Prior to amendment by Senate Bill 266, Tax Code, §111.0041(c) (Records; Burden to Produce and Substantiate Claims), required taxpayers to produce "contemporaneous" records and supporting documentation to substantiate and enable verification of the taxpayer's claim related to the amount of tax, penalty, or interest to be assessed, collected, or refunded in an administrative or judicial proceeding. Senate Bill 266 substituted the word "sufficient" for "contemporaneous" in that section. The amendment to §1.26 likewise substitutes "sufficient" for "contemporaneous" in order to conform the rule to the statute.

The comptroller did not receive any comments regarding adoption of the amendment.

The amendments are adopted under Tax Code, §111.002 (Comptroller's Rules, Compliance, Forfeiture), which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2 (State Taxation).

The amendments implement Tax Code, 111.0041(c)(Records; Burden to Produce and Substantiate Claims).

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on April 21, 2026.

TRD-202601720

Jenny Burleson

Director, Tax Policy

Comptroller of Public Accounts

Effective date: May 11, 2026

Proposal publication date: February 6, 2026

For further information, please call: (512) 475-2220

---

DIVISION 1. HISTORICALLY UNDERUTILIZED BUSINESSES

34 TAC §§20.281, 20.282, 20.284, 20.285, 20.288, 20.294 - 20.296, 20.298

The Comptroller of Public Accounts adopts amendments to §20.281, concerning policy and purpose; §20.282, concerning definitions; §20.284, concerning statewide annual HUB utilization goals; §20.285, concerning subcontracts; §20.288, concerning certification process; §20.294, concerning graduation procedures; §20.295, concerning program review; §20.296, concerning HUB coordinator responsibilities; and §20.298, concerning mentor-protégé program, without changes to the proposed text as published in the March 13, 2026, issue of the Texas Register (51 TexReg 1563). The rules will not be republished.

ADDRESSING UNCONSTITUTIONAL CLASSIFICATIONS

The term "sex" replaces "gender" throughout the amended rules. This aligns the terminology of the rules with court decisions that have interpreted the Texas and United States Constitutions.

Amended §20.281 restates the purpose of the comptroller's HUB program, which is to promote full and equal opportunities for all businesses in accordance with the equal protection provisions of the Texas and United States Constitutions. Language that referred to remediation of disparities is removed.

Amended §20.282 removes the definition of "disparity study." That term is not used in the amended rules.

Amended §20.282 clarifies that the definition of "economically disadvantaged person" in Government Code, Chapter 2161 must be interpreted in light of the prohibition against race- and sex-based discrimination imposed by Texas Constitution, Article I, Section 3a, and United States Constitution, Amendment XIV.

Amended §20.282 clarifies the definition of "historically underutilized business" so that the term no longer appears within its own definition.

Amended §20.282 revises the definition of "qualifying owner" to eliminate classifications based on race, ethnicity, and gender. Although those classifications appear in Government Code, Chapter 2161, courts have found their use in equivalent contexts to be unconstitutional. See the foregoing "Constitutional Analysis" section of this proposal; see also Texas Attorney General Op. KP-0505 (2026), pp. 26-35 ("Texas's HUB framework erects a pervasive, discriminatory regime that violates the U.S. Constitution's Equal Protection Clause as well as the Texas Constitution's Equal Rights Amendment through indefensible fixation on sex and race.").

Amended §20.284 eliminates statewide quantitative HUB utilization goals. These goals were based on a disparity study that focused on race, ethnicity, and sex-based analysis. Under the revised eligibility criteria, those goals are neither well-supported nor viable. In place of the percentage utilization goals, the amended rule sets a goal of increasing participation, which accords with Government Code, §2161.181. Agencies shall set their own goals for increasing the utilization of HUB businesses based on relevant factors. However, instructions for state agencies to consider the disparity study are removed, in order to avoid the constitutional issues inherent in race, ethnicity, and sex-based classifications. Agencies are instructed to consider businesses that are owned by "qualified owners," because the definition of "qualified owners" in §20.282 no longer includes classifications based on race, ethnicity, and sex.

Amended §20.288 eliminates references to minority business enterprises and women's business enterprises, which are classifications outside the scope of the amended rules. It specifies that the definition of "historically underutilized business" in Government Code, Chapter 2161 must be interpreted in light of the prohibition against race- and sex-based discrimination imposed by Texas Constitution, Article I, Section 3a, and United States Constitution, Amendment XIV.

Amended §20.294 removes a reference to overcoming the effects of discrimination. This reference was unnecessary, and its removal will not affect program implementation. The comptroller will continue to enforce the same size standards in determining eligibility for certification.

Amended §20.295 removes references to the disparity study. It states that the comptroller may determine the need to reassess the HUB rules.

Amended §20.296 specifies that an agency HUB coordinator shall carry out their duties on a race-neutral, ethnicity-neutral, and sex-neutral basis, mindful that the Texas and U.S. Constitutions prohibit discrimination and require equal protection under the law. Because the state and federal constitutions have always applied to state agency employees including HUB coordinators, the added language is merely a reminder.

Amended §20.298 eliminates a reference to the disparity study. Agencies shall implement the Mentor-Protégé program without reference to the disparity study.

STREAMLINING SUBCONTRACTING PLANS

The comptroller revises the term "HUB subcontracting plan" to "subcontracting plan" throughout these amended rules. The definition of "subcontracting plan" is relocated within §20.282 to maintain alphabetical order, and the numbering is adjusted accordingly. "Subcontracting plan" is more appropriate, because there is not a requirement for a vendor to subcontract to a HUB to complete the plan. Vendors are permitted to use any subcontractor, regardless of HUB status, provided that the selection was made in demonstrated good faith in accordance with the rules.

Amended §20.285(b)(1) reiterates that an agency shall require subcontracting plans as part of a solicitation response whenever subcontracting opportunities with HUBs are probable. The HUB rules require agencies to check the comptroller's HUB directory as part of the process of determining whether subcontracting is probable. See §20.285(a). In the HUB directory, HUBs indicate which types of work they perform and which parts of the state they serve. If the directory shows that no HUBs are available for contemplated subcontracts, there is not a probable HUB subcontracting opportunity. The intent of §20.285(b) is for agencies to check that HUBs are available before determining that subcontracting opportunities are probable. The added language provides additional clarity.

Amended §20.285(b)(1) also removes the requirement to include a historically underutilized business utilization goal in a solicitation which requires the respondent to submit a subcontracting plan. The utilization goal was used by respondents to complete the "meeting-or-exceeding-HUB-goal method," which is deleted from the amended rule. Because the percentage utilization goal is no longer useful in completing the subcontracting plan, and because including the goal may mislead a vendor to believe that a minimum amount of subcontracting is required, the amended rule allows an agency to omit such a goal from the solicitation.

Amended §20.285(b)(3) aligns the language of the rule with Government Code, §2161.252(b). Both the amended section and the statute now state that when a state agency requires a subcontracting plan, a bid, proposal, offer, or other applicable expression of interest for the contract must contain a plan to be considered responsive.

Amended §20.285(b)(4) leaves untouched the ability of a state agency to allow respondents to cure minor deficiencies in subcontracting plans. Also untouched is the principle that a state agency may not allow a respondent to cure material deficiencies. However, the amendments revise the description of material deficiencies because respondents are no longer required to contact minority trade organizations, or to provide a statement of how it will self-perform work in the subcontracting plan. That is consistent with other changes in §20.285.

Amended §20.285(d) addresses demonstration of good faith in the development of a subcontracting plan. The amended rule provides that for each part of work that the solicitation identified as a probable subcontracting opportunity and each part of the work that the respondent actually intends to subcontract, the respondent must demonstrate its good faith development of a subcontracting plan by either inviting small business to bid for subcontracts (the "solicitation method") or stating that it does not intend to subcontract (the "self-performing method"). The amended rule simplifies the preparation of a subcontracting plan, making it easier for respondents to comply, and reducing the number of bids or proposals that are nonresponsive under Government Code, §2161.252(b). The amended subsection (d) eliminates two of the four previous methods for completing a good faith effort: the "all-HUB-subcontractors method" in former paragraph (2), and the "meeting-or-exceeding-HUB-goal method" in former paragraph (3). These methods incentivized respondents to select historically underutilized businesses as subcontractors by allowing them to skip the notification steps in the solicitation method. Under the amended rule, there are no such shortcuts. Respondents that intend to subcontract must perform the same steps, regardless of which subcontractors they select. Eliminating the least-used compliance methods will also simplify the subcontracting form, reducing confusion that may result in noncompliance. The remaining paragraphs are renumbered.

Amended paragraph (1) ensures that the requirement to perform outreach to potential subcontractors under the solicitation method is race, ethnic, and sex-neutral. Additionally, outreach to trade organizations or development centers under former subparagraph (B) is no longer required. The Government Code does not require outreach to such organizations, and the comptroller has determined that the costs of such outreach outweigh the benefits. Finally, the minimum number of HUBs to be solicited is reduced from three to two. Because the eligibility requirements for HUB certification are narrower, the comptroller anticipates that the number of HUBs available to subcontract will substantially decrease. It is more reasonable to ask vendors to solicit two qualified HUBs than three.

Amended subparagraph (G) allows a respondent to submit its subcontractor selection justification upon request, rather than requiring it with the response. Under this amended rule, the agency may collect any information it needs to evaluate good faith. However, the amendment eliminates a common way subcontracting plans may be noncompliant. This amended subparagraph also makes explicit that a respondent is not required to select a small business if it determines in good faith that another subcontractor is more suitable.

The self-performing method in renumbered paragraph (2) provides expressly that a respondent is not required to subcontract any portion of any contract. While the rules have never required subcontracting, the comptroller now makes that clear. The amended rule provides that a respondent may use the self-performing method to demonstrate a good faith effort for any subcontracting opportunity by indicating that it intends to fulfill the entire contract, including each subcontracting opportunity, with its own equipment, supplies, materials, and employees. The amended rule allows a respondent to submit its self-performing justification upon request, rather than requiring it with the response. This eliminates another common way subcontracting plans may be noncompliant, while maintaining agencies' ability to assess compliance.

Renumbered paragraph (4) is amended to clarify that a business listed in the HUB directory at the time of the good faith effort is considered a HUB for purposes of evaluating a subcontracting plan, even if the business later graduates or has its HUB status revoked or expired. This is not a change in policy, but the clarification may help with interpretation.

Amended subsection (e) states that a state agency may reject a HUB subcontracting plan that was not developed in good faith or was not completed. This is consistent with Government Code, §2161.282(b), which states that a response that does not include a subcontracting plan is nonresponsive. To address the situation where a subcontracting plan identifies businesses that are no longer HUBs, the amended subsection allows the agency to request a revised subcontracting plan. While agencies have always had discretion to work with contractors to amend subcontracting plans after award (see §20.285(i)), this revision makes it clear that agencies have the same discretion to work with respondents before award.

COMMENTS

The comptroller received comments regarding adoption of the amendment. The comptroller fully considered all comments.

Many comments assert a loss of state contracting opportunities for businesses that are no longer certified as HUBs. However, the only way to obtain a state contract is by demonstrating best value. There is no authority for an agency to award a state contract because the bidder is a HUB, or because a bidder will use HUB subcontractors. Competition for state contracts is open to all businesses, with or without a certification. The contractor that provides the best value should be selected for award, with or without a certification. Businesses should register for the Centralized Master Bidder List and monitor the Electronic State Business Daily to find state contracting opportunities.

A number of comments assert other benefits that are being lost, such as training, assistance, networking, and marketing advantages that HUBs enjoyed. The basis on which benefits were extended to some small businesses while excluding others are unconstitutional.

Similarly, multiple comments requested a disparity study to analyze the continuing need for a HUB program. A disparity study would not negate the constitutional imperative behind these rule changes.

Several comments recommended expanding the program as a way to address these constitutional issues. That suggestion is outside the scope of the proposed rulemaking.

Multiple comments addressed the authority of the comptroller to determine the constitutionality of a statute. Courts have already ruled on similar programs in higher education and the federal government. Narrow tailoring is required to support such a program, and the HUB program does not have it. The comptroller has a duty to uphold the constitution by applying those rulings to the HUB program.

The main points the comptroller identified in individual comments are summarized below. The complete comments may be requested from the comptroller's Open Records Section. The Comptroller's response to the collective comments are outlined at the end of the description of all the comments.

Adam Schumann of New York, New York, asserted that several of his clients oppose the proposed amendments.

Ann Johnson asserted that the rule changes will take contracts from women of color and give them to others.

Anna Olvera, owner of Alpha Tango LLC in Temple, asserted her business is being directly harmed by the changes, and that prime contractors may not consider small businesses like hers for subcontracting on DIR cooperative contracts in the future, affecting ability to grow revenue and plan for long term stability. She requested that the comptroller consider a path to preserve participation for small businesses already operating in good faith.

Representative Barbara Gervin-Hawkins asserted that HUB certification benefits businesses through education, training, networking, mentorship, and increased visibility in the statewide directory. She asserted that the proposed amendments would worsen existing disparities in state procurement, reduce the number of participants and limit overall competition for bids, impacting the livelihood of employers, employees, and their families across the state.

Beatriz Fernandez of El Paso asserted that the HUB program's subcontracting provisions provide business opportunities for DataXPort.net, LLC; that the company helps lift its employees out of poverty; the company must go to significant effort and expense to market itself without the HUB program; and that loss of HUB status has other impacts on the company.

Betty Manetta asserted that loss of HUB certification affects eligibility for state contract opportunities. All businesses are eligible for state contract opportunities, regardless of HUB status. She asserted that the rules impact the ability of small businesses to compete with larger businesses, and recommended alternatives.

Blake Chavis asserted that Bid Source Technology was impacted by the loss of HUB certification, which helped it win contracts.

Breezi Soward, in oral comments, said her company Ecoimprint has grown to 14 employees and her business was shocked by the decision to change the HUB program. She said her company did things the right way and showed they could deliver quality work and earn the opportunities made possible through participating in the HUB program.

Carol Ford, representing Karen Box, president of the Southwest Minority Supplier Development Council, said in the public hearing that her entity had certified 703 minority and small businesses. She noted the HUB program was established during Governor George W. Bush's term to increase opportunities for business owners. She also noted the program does not guarantee contracts, but that historically underutilized businesses are to be included in the good faith effort when establishing subcontracting plans, and to include them in contract opportunities below certain thresholds.

Cathy Doughtery, sole owner of Dallas-Fort Worth environmental engineering firm Dougherty-Sprague Enterprises, stated her company was very involved in the HUB program under its work for TxDOT and universities. She stated that she loved veteran-owned business and was the daughter of a veteran, and her company had mentored a veteran-owned business; she questioned whether the reduced vendor pool of HUBs has sufficient businesses that can offer the skills from her company's 28 years of experience. She referenced the opportunities provided to her small business because of the extra push to consider HUBs. She suggested that large businesses will be awarded state business which will impact small businesses like hers.

Charyse Rose of Dallas asserted that Computerized Estimating Services is severely impacted by losing HUB certification, which caused it to lose customers. She asserted that the company and others like it contribute significantly through jobs, community involvement, and economic activity. She asserted that excluding such businesses from HUB certification threatens their existence.

Cynthia Ginyard asserted that small business owners will be hurt by the loss of HUB certification.

Cynthia White asserted that the HUB program is about access and opportunity.

David Duncan asserted that the comptroller lacks authority to revise its own rules to administer a program in a constitutional manner. The comptroller's authority for rulemaking is explicitly granted by the legislature in Government Code, §2161.002. Mr. Duncan asserted that a federal judge in Aerospace Solutions v. Abbott upheld the constitutionality of the HUB statute in 2025.The statement is incorrect in that the decision in that case did not reach the merits of any constitutional claim. The court dismissed the case on other grounds.

David Hubbard of Houston asserted that DM Electrical and Construction LLC is significantly impacted by the loss of HUB certification, including potential loss of contracts, subcontracts, revenue, and business opportunities, and that the company experienced operational strain that threatens its operations.

David Negrete of Austin asserted that the HUB program has helped talented and qualified minority business enterprises to not be overlooked or excluded by the state and its prime contractors, that making the pool of HUBs smaller will lead primes to rely on existing networks of subcontractors, and that competition will be reduced as a result.

Deidre Norville, owner of Human Potential Consultants, in oral comments, said the removal of HUB certification immediately resulted in removal from active bids exceeding $3 million, disrupting the current business opportunities of the 45-employee Cedar Park business. She said the changes have limited access to opportunities and created uncertainty for her business and employees.

Demetria Bivens asserted that expanding the eligibility of the HUB program would result in opportunities going to businesses other than those for which they were intended.

Donna Hanson of Texas City asserted that without a HUB certification, EVCO Partners LP cannot compete with larger businesses that offer lower prices to the state; she said her company's business structure has had to be refocused and she may need to reduce its 20-person workforce.

Ebbah Realzola, president of MEXZIM Corporation, a Dallas commercial construction business stated the changes materially altered access to public construction markets for small formerly HUB-certified businesses like hers. She said HUB did not guarantee contract awards, but functioned as an access mechanism that allowed small and emerging contractors to build past performance, an essential prerequisite for competing in public construction. Since the changes, she asserted, small contractors report fewer bid invitations, reduced subcontracting opportunities, and higher barriers to entry, while awards increasingly concentrate among larger incumbents with greater scale and pricing power. Ms. Realzola said market concentration over time reduces competition, weakens local contractor capacity, and can increase long‑term costs to taxpayers. She urges the legislature to support race‑neutral access strategies, such as smaller project packaging, task‑order contracting, qualification pools, and mentor‑protégé programs, to preserve competition, workforce development, and a resilient construction market.

Edmund Carter Frost asked why the HUB program is being removed.

Franck P. Cushner asserted that without a HUB certification, DBK Health, Inc., cannot compete effectively for contracts with municipalities against much larger, national companies.

Fritz Gartner asserted that the HUB program was a critical pathway to visibility and opportunity for small businesses that employ local residents and reinvest in their communities. He asserted that the rulemaking raises serious legal and constitutional questions, and that such policy changes should occur through legislative action or judicial review.

Gail Joiner asserted that the 20% minimum disability threshold arbitrarily harms the disabled community and a significant part of the veteran population. That threshold is set in Government Code, §2161.001. They asserted that without HUB or VetHUB certification, Joiner Consulting, LLC is now invisible in the state's procurement databases.

Gary Shearod, in oral comments, urged reconsideration of the proposed rules limiting eligibility to service-disabled veteran owned businesses. He asserted that percentage of HUB expenditures of under 12% of total state contracting expenditures shows that success in addressing persistent systematic disparity has not been achieved.

Gloria English asserted that the decertification of businesses that do not meet the VetHUB eligibility criteria is catastrophic, racist, and discriminatory, threatening the progress that was made by the HUB program to correct past injustice.

Grace Taupo of Houston asserted that the HUB program has played a critical role in promoting fairness, expanding access, and addressing longstanding disparities in state contracting. She asserted that the proposed amendments risk reversing that progress.

Heather Jefferson, owner of Heritage Insurance Brokerage in the North Texas area, a minority-owned and women-owned company, asserted the deactivation of her business's HUB certification was unfair and unjust. She asked that the former rules be reinstated.

Hong Zhang Durandal asserted that because Energy Hunters, Inc. lost its HUB certification, marketing opportunities and the credibility associated with it, the company has a diminished ability to compete. He projected that the company will lose revenue in Texas, and asserted that the company will look for growth opportunities in other states.

Igalious Mills of Port Arthur asserted that white women take more advantage of the HUB program, and that certain businesses refuse to take the HUB program into consideration. He requests that quotas for HUB contracts and subcontracts be added to the program, along with other modifications. These recommendations are outside the scope of the proposed amendments.

Ingrid Robinson, president and CEO of the Houston Minority Supplier Diversity Council, said that her organization certified businesses on behalf of the Statewide HUB Program for two decades. She asserted that businesses that lost their HUB certifications are at risk of losing contracts and contract opportunities, and that those impacts affect their subcontractors, employees, and communities. She stated that the HUB program changes should be reverted.

Irma Orozco asserted that because Bilingual Communication Strategies lost its HUB certification, it will be impossible to obtain state contracts in the future. She asserted the HUB program was a support system for minority businesses and that it opened doors with prime contractors.

Jane Parsons, owner of 20-year HUB AA Parsons Pest management, cited the HUB program as allowing her and others to progress in their communities. She asserted the program change has negatively affected her businesses, and that this type of program is needed to energize employment and revenue.

Communicating through an American Sign Language interpreter in the public hearing, Jason Shaw, president of the Texas Deaf Chamber of Commerce, cited a court case (Mid-America Milling Co. v. U.S. Department of Transportation) that he said struck down race-based and gender-based presumptions as unconstitutional. This, he asserted, means it is important to use individualized narratives and supporting documentation to show both social and economic disadvantage. Mr. Shaw said evidence is needed to document need and called for the program to be made more generalized to impact more people than the limited group of veterans with disabilities.

Jeff Postell, CEO of Postell Group Drywall in North Texas, in oral comments, stated that in the ten years he has operated his HUB-certified company, his business was built to service the public sector. He stated his focus was being able to work where he was born and raised his family and create economic stimulus in his home state. He asserted that his revenue forecast fell by 23% from the $15 million they were on track to achieve. He stated his company's drywall staff had decreased from 110 people in the second half of 2025 to 42 because of the emergency order. He asserted the emergency rule changes should be reverted.

Jennifer Jacobs of Fort Bend asserted that the HUB program should refund fees that businesses paid to be in the HUB directory. The comptroller has never collected a fee for HUB certification or HUB directory listing. Unfortunately, unscrupulous private parties sometimes pose as a government entity and collect a fee for something that is freely available from the comptroller. If you suspect that you have been targeted by this kind of scam, please contact the comptroller at stop.spoofing@cpa.texas.gov. Ms. Jacobs asserted that contractors found through the Texas SmartBuy system have provided excellent service at affordable rates, and have been properly vetted. No contractor will be removed from Texas SmartBuy as a result of this rule change. The comptroller intends that Texas SmartBuy will continue to provide qualified contractors at affordable rates. Ms. Jacobs asserted that businesses that no longer qualify for HUB certification may continue to be underutilized as a result.

Jessica Scanlon asserted that the HUB program helped small businesses in Texas through subcontracting opportunities, networking, and education.

Karen Gross asserted that prime contractors will not subcontract to businesses that are no longer HUBs, which will threaten their existence. She asserted that the prior Texas disparity study shows a need for the HUB program and that a new disparity study should be conducted. Ms. Gross asserted that state agencies do not use HUB status as a basis to award contracts.

Keith Britton of Dallas asserted that there are continuing challenges for African American owned businesses in state contracting, and that the loss of HUB certification reduces their visibility and opportunities to build valuable business relationships.

Kenecia Oliver of Missouri City asserted that thousands of Texans depend on the HUB program to earn a living, and will be severely impacted if they are no longer eligible.

Kerry Lacsamana of Houston asserted that the proposed rules harm women, people with disabilities, and Texans in general by limiting programs that promote economic independence.

Kimberly Williams asserted that policy changes that restrict the HUB program will undermine decades of progress in levelling the playing field for businesses that contribute to the economy, create jobs, drive innovation, and reflect the diversity that makes Texas strong.

Kristina Williams asserted that restructuring the HUB program into the VetHUB program eliminates a critical mechanism that enabled S&K Ventures, LLC to compete with larger entities. She asserted that the company is among many that invested in structuring their business with an expectation and reliance that the HUB program would continue to provide opportunities. Ms. Williams asserted that the proposed amendments will adversely impact revenue streams, workforce stability, and long-term viability for companies that lose their HUB certification.

La Juana Chambers asserted that the rule amendments impact small business opportunities, access to contracting opportunities, and the small business ecosystem. She asserted that eliminating or weakening the HUB Program removes a pathway that made equitable participation in state contracts possible.

Lamar Davis of Houston asserted that replacing the HUB program with VetHUB would be catastrophic and contradict the value of competition in public procurement.

LULAC Council #22365, represented by Carlos Balderas, asserted that an alternate way to maintain the constitutional integrity of the HUB program would be to extend it to apply to all small businesses meeting certain criteria.

Magdalena Shoemake asserted that the HUB certification allowed small businesses to gain experience that would allow them to qualify for government contracts, and that welcoming in new businesses helps to avoid corruption and favoritism in the award of contracts.

On behalf of the Mexican American Legislative Caucus, Representative Ramon Romero, Jr., Representative Erin E. Gamez, Representative Armando Martinez, Representative Armando Walle, Representative Mary Ann Perez, Representative Raphael Anchia, Representative Diego M. Bernal, Representative Elizabeth Campos, Representative Terry Canales, Representative Lulu Flores, Representative Josie Garcia, Representative Linda Garcia, Representative Cassandra Garcia Hernandez, Representative Jessica Gonzales, Representative Mary E. Gonzales, Representative R.D. Guerra, Representative Ana Hernandez, Representative Venton Jones, Representative Oscar Longoria, Representative Ray Lopez, Representative Trey Martinez Fischer, Representative Terry Meza, Representative Joe Moody, Representative Christina Morales, Representative Eddie Morales, Representative Penny Morales Shaw, Representative Sergion Munoz Jr., Representative Claudia Ordaz, Representative Richard Pena Raymond, Representative Victor Perez, Representative Ana-Maria Rodriguez Ramos, and Representative Gene Wu asserted that the proposed changes exceed the authority of the office of the comptroller and undermine the legislature's intent in enacting the HUB statute. They asserted that the rule changes violate the separation of powers in the Texas Constitution. They asserted that the proposed changes undermine competitiveness, transparency, and the economic health of communities across Texas.

Margo Posey, president and CEO of the Dallas-Fort Worth Business Council (formerly the Dallas Fort Worth Minority Supplier Development Council), provided oral comments. She said the council had certified more than 1,000 minority business entities annually for free since 2002 on behalf of the comptroller's office, and that the emergency rule changes came without warning. She asserted the companies supported by the council have seen existing and prospective revenue put at risk, and considered layoffs or are already downsizing. She said the HUB program has always been a good faith mechanism to provide access and awareness to state contracting opportunities, and was never a handout. She said gutting the pipeline so abruptly has consequences far beyond individual firms and the economic impact of these changes will weaken the small business ecosystem.

Marina Angelica Coryat asserted that the loss of certification has a direct and detrimental impact on Refined Communications, LLC, and thousands of other businesses. She asserted that the HUB program was an essential pathway to visibility and opportunity for small businesses that employ local residents and reinvest in their communities. Ms. Coryat asserted that the rulemaking raises serious legal and constitutional questions, and that such policy changes should instead occur through legislative action or judicial review.

Marj Atkinson asserted HUBs are not taking jobs away from anyone, but are qualified, just small and thus it is difficult for them to compete.

Marissa McKinney of Austin asserted that due to loss of HUB certification, Coleman & Associates has lost work. She asserted that general contractors are shifting work in-house and to larger subcontractors, who may be out of state. Ms. McKinney asserted that without the HUB goals, general contractors have no incentive to use small Texas businesses to complete state contracts.

Melissa Klingbeil Sylvester asserted that because Double First Medical, LLC is no longer certified as a HUB, it has lost contracts with state agencies, is no longer "certified to compete" for contracts with another state agency and has been disqualified from a procurement by a third state agency. She asserted that they have restructured and reduced company operations and may go out of business. She asserted that other states provide better opportunities for similarly situated businesses.

Michael Klein asserted that the loss of HUB certification harms his business and other small businesses by causing them to lose contracts. He asserted that this creates financial strain, jeopardizes jobs, and reduces community investment.

Michael Weinstein asserted that the HUB program prevented his business, which was not eligible for HUB certification, from obtaining state contracts. He encouraged the comptroller to consider a small business program that would not discriminate by race or gender.

Michelle Ray asserted that the HUB program helped her small business gain an opportunity from a state agency at a time when it was struggling. She asserted it benefits HUBs through subcontracting opportunities, networking, and education.

Mindy Sue asserted that the HUB program supports vendors learning how to do business with the state and helps them find opportunities offered by larger vendors seeking subcontractors. Citing her experience as an 18-year HUB coordinator, she stated that the HUB program should only be changed by the legislature and that current data is needed to replace the disparity study last conducted in 2009 to establish how the HUB program should look in the future.

Nate Bobbett of Hewitt asserted that general contractors that set goals for the utilization of HUB firms will find it difficult to meet those goals due to the narrowing of eligibility criteria. He asserted that VetHUB businesses will charge higher prices because of high demand for their participation. Unlike some jurisdictions, Texas has no minimum requirement for subcontracting. Instead of subcontracting with certified VetHUBs at high prices, prime contractors may choose to self-perform or subcontract to other firms. Vendors are selected for contracts based on the best value to the state.

Nathali Parker asserted that the HUB program helps state contract dollars stay in Texas by prompting prime contractors to consider Texas subcontractors. She recommended expanding the program to allow all small, family-owned businesses to participate.

Nydra Ossei-Kissi of Dallas asserted that Turner Consulting & Therapy Services has lost eligibility to pursue certain contracting opportunities because it is no longer HUB certified. Competition for state contracting opportunities is open to all, whether or not they have a VetHUB certification.

Obinna Emukah of Houston asserted that the HUB program creates awareness, open doors, outreach and a fair opportunity to compete. He asserted that excluding businesses from HUB certification makes it harder for them to grow, hire, and participate in the state economy.

Pam Nelson, CEO of Bracane Company in Plano, which was decertified from HUB under the emergency rules, said many small businesses have been cut out of meaningful access to state contracting. She asserted that reducing the qualifying businesses to service-disabled veterans only removes opportunities to compete from other small businesses. She asserted that the reduced pool of eligible businesses appears contrary to the idea that Texas is open for business, and these changes do not support small businesses.

Paula Mendoza, CEO of Possible Missions Inc., a Houston-based company that has been in business for 25 years, stated the removal of HUB certification has jeopardized her current business because current customers are looking for HUB businesses eligible under the changed rules. She stated that as her current contracts expire, she may not be able to continue her business, and asserted that the HUB program had helped level the playing field for firms like hers who hire and retain qualified team members and support community endeavors. She asked the HUB program be kept as it was prior to the rule changes.

Paula Soileau of Houston asserted that the HUB program ensures that the state does not return to "a good old boy system" for state contracts. In Texas, state contract opportunities worth $25,000 or more must be posted on the Electronic State Business Daily. Any company may respond. The award is made to the company that offers best value to the state. Procurement records are public records. Fraud, waste, or abuse in state procurement may be reported to the State Auditor's Office for investigation and potential prosecution.

Priscilla Luna, president of Houston-based Today's Business Solutions, said in the public hearing her minority and women-owned company has partnered with leading manufacturers and wholesalers for over 23 years to support multiple agencies and universities. She said the purchasing power built over time has resulted in competitive pricing, but that history and data show that work ethic, perseverance and passion, are not enough to earn a seat at the table. She said that the HUB program fostered greater competition and increased the likelihood Texas-based businesses would get awards. Ms. Luna asserted the HUB program changes removed critical opportunities for minority and women-owned businesses impacting their ability to compete, contribute to their communities and support families who depend on those businesses. She stated that the changes risk reducing competition and increasing costs for taxpayers and asked for the program changes to be reverted.

Regina Taplow, a business owner, asserted in oral comments the changes were illegal, intentional and malicious and are affecting business owners who are taxpayers and voters. She asked for the rule changes to be reverted.

Ricardo Diaz stated the HUB program was established to provide equal opportunity, which he said is the ability to be considered disregarding race, ethnicity and religion. He said he applauds the government in getting rid of unqualified firms, but he disputes that the Texas HUB program is a diversity, equity and inclusion (DEI) program; it is, he said, and affirmative action program. Mr. Diaz asserted the biggest impact will be the reduction of minority firms being considered for state work, and a reduction of opportunities these firms, which he suggests will reduce the number of minority workers hired. He suggested a full economic impact study be conducted.

Roxanne Perez, owner of DD Services, an electrical contracting company in San Antonio, said in oral comments she has lost approximately $3 million in contracts resulting from the HUB program rule changes. She said the prior program framework created opportunities to partner with schools and universities. She asked for the rule changes to be reconsidered.

Ruth Garcia asserted that state agencies benefit from the HUB program because HUBs cater to their needs by coordinating difficult purchases, reducing administrative burdens, and expediting the delivery of needed goods and services. She asserted that the drastic reduction in HUB eligibility will have significant impacts on state agency procurement.

Collectively, Senators Carol Alvarado, Judith Zaffirini, Juan "Chuy" Hinojosa, Jose Menendez, Borris Miles, Nathan Johnson, Sarah Eckhardt, Roland Gutierrez, Cesar Blanco, and Molly Cook, asserted that the comptroller has a statutory obligation to certify HUBs, that executive orders do not supersede statutes, and that the comptroller may not interpret the constitution. Senator Royce West submitted similar comments independently. The comptroller has a solemn obligation to uphold the Texas Constitution. The suggestion that the comptroller may not consult the constitution and apply it to the situation at hand lacks merit. Moreover, the courts have spoken: race-based programs that lack narrow tailoring are unconstitutional. These rules implement Government Code, Chapter 2161 to the greatest extent permitted by those decisions.

Sheena Thomas asserted that the comptroller lacks legal authority to revise its own rules. She asserted that former HUBs are harmed by their loss of HUB eligibility.

Sherry Williams of Bay City asserted that the HUB program has played a key role in supporting minority- and women-owned businesses, and she would like to see the program continue.

Stacy Savage asserted that the HUB program should be expanded to include the LGBTQIA+ community, and that the state economic systems need diversity, equity, and inclusion.

Staci Beane, of service-disabled veteran-owned business Tekgration LLC, said the HUB program created opportunity and access. She said the program provided a pathway to compete and grow, and helped maintain competition. She stated a diverse and distributed vendor base is critical for supply chain resilience, and that the HUB program is not just about inclusion, it is about smart business, strong competition and responsible stewardship of taxpayer dollars. She suggested that reducing competition will negatively impact the Texas economy by reducing small business participation. Ms. Beane asked that the comptroller give thoughtful consideration of the broader impacts before making any changes to the program.

Susan Franzen, a former HUB owner now working as a prime contractor, said the good faith effort provided pathways to hire talented HUB subcontractors. She said she has watched more than 40 HUB-eligible small businesses get certified, grow and flourish because of the mentor-protege resources. She said the HUB certification did not provide a competitive advantage, it provided access to opportunities, and her company could not have grown without that access.

Susan Raithel asserted that Products Unlimited relies on "HUB-designated contracts or subcontracting opportunities" to maintain its business, which exclusively serves public entities. Government Code, Chapter 2161 does not permit state agencies to designate contracts or subcontracts for HUBs only. State contracts must be awarded to the vendor that provides the best value to the state.

Susan Repka asserted that her clients, small and medium-sized businesses that contract with the government, are reporting layoffs and decreased revenue since the comptroller's emergency rules took effect on December 2nd. She asserted that HUBs go above and beyond what larger businesses are willing to do to serve their government customers. She recommends that the comptroller perform a disparity study to determine the need for a HUB program.

Terry Nifong of Jefferson County asserted that various Texas local government entities and one state agency will not allow her company to subcontract on disaster recovery work because it is no longer a certified HUB. The HUB program set goals, not requirements for subcontracting a percentage of work to HUBs. The VetHUB program does not require subcontracting any percentage of work to VetHUBs. State agencies must award contracts that provide best value to the state. If an agency is instead discriminating based on certification status, an affected vendor may protest the award.

The Texas Association of Mexican American Chambers of Commerce (TAMACC), represented by J.R. Gonzales, submitted oral comments questioning the constitutional authority of the comptroller to change the rules. He referenced the two disparity studies conducted previously under the HUB program and said TAMACC wants to know if any economic impact study was performed by the state prior to changing the program. Mr. Gonzales asserted that these changes require affected businesses to change their way of doing business and suggested that people would be put out of business. He asked if something could be done that was true to the original purpose of addressing disparity to make sure businesses that are well-qualified are not discriminated against.

Tiana Watson asserted that the HUB program provides opportunity, visibility, and the opportunity to build wealth for historically excluded communities.

Tiffany Rattler, founder of Rattler Management Consulting Group, asserted that the HUB program creates a pathway into state procurement for small businesses, which keeps the dollars spent circulating in the state economy. She asserted that HUB opportunities keep small vendors competing for state business, which drives down costs and increases quality of service. Ms. Rattler said Texas has built its reputation on being open for business, not just attracting out-of-state corporations, but sustaining a strong in-state vendor base. She suggested that any changes should prioritize strengthening business readiness and capacity, and that program oversight should determine whether participation translates into long-term business growth. She stated that narrowing the structure risks higher costs, fewer bidders, and reduced economic return to the state.

Trisha Kana, owner of staffing and consulting company 3 PDS, provided oral comments opposing the emergency and proposed rules. She said her business's HUB certification opened the door to work with Texas A&M College of Dentistry, where she sources local talent to support the communities being served free and reduced healthcare by the program through Parkland Hospital. She said the HUB program is not just a contracting vehicle, but a proven economic engine that fosters business growth. She acknowledged veteran-owned businesses deserve recognitions and stated the strength of the HUB program lies in the inclusive framework supporting minority women and other historically underutilized businesses. She asked that the comptroller preserve the scope and original intent of the HUB program.

Virgie Copeland asserted that converting the HUB program to the VetHUB program discriminates against women.

Dr. Zacharias Johnson of Austin expressed support for the VetHUB program and recommended, among other detailed policy proposals, a mandatory 5.0% VetHUB utilization goal across state agencies. A quota of the kind proposed is outside the scope of this rule proposal. The comptroller will provide a copy of Dr. Johnson's proposal to anyone who requests it.

In response to all of these comments, the comptroller declines to make any changes to the rules. The comptroller emphasizes that Texas law requires all contracts to be awarded based on best value. The proposed vendor that provides the best value to the state should be selected for a contract award, irrespective of a HUB or VetHUB certification. These rules amendments do not change that. Businesses should register for the Centralized Master Bidder List and monitor the Electronic State Business Daily to find state contracting opportunities. The goal of the rules amendments is to ensure that all businesses in Texas have an opportunity to compete and demonstrate best value to the state. Ultimately, the comptroller's duty is to uphold the Texas Constitution and the United States Constitution. TEX. CONST. Art. XVI, §1. These rules implement Government Code, Chapter 2261 to the greatest extent that is consistent with that oath.

AUTHORITY

These amendments are adopted under Government Code, §2161.0012, which authorizes the comptroller to adopt rules to efficiently and effectively administer Government Code, Chapter 2161, and Government Code, §2161.002, which authorizes the comptroller to adopt rules to administer Governments Code, Chapter 2161, Subchapters B and C. These amendments implement Government Code, Chapter 2161, in light of the prohibition against race- and sex-based discrimination imposed by Texas Constitution, Article I, Section 3a, and United States Constitution, Amendment XIV.

These amendments implement Government Code, Chapter 2161.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on April 22, 2026.

TRD-202601741

Don Neal

General Counsel, Operations and Support Legal Services

Comptroller of Public Accounts

Effective date: May 12, 2026

Proposal publication date: March 13, 2026

For further information, please call: (512) 475-2220

---