Why It Matters

A Congressional Research Service report released earlier this summer examines the SBA's June 11 proposed rule, which would eliminate a decades-old system allowing members of certain racial and ethnic groups to qualify for the program based on a rebuttable presumption of social disadvantage.

Instead, all individually owned applicants, regardless of race, would need to prove social disadvantage under a new evidence-based standard. The rule is explicitly framed as opening the 8(a) program to a member of any racial, ethnic or cultural group who can show that they were materially harmed by discriminatory policies or practices, including white Americans who were previously ineligible for the race-based presumption.

Congress specifically found that disadvantaged groups include, but are not limited to, Black Americans, Hispanic Americans, Native Americans and other minorities.

The Big Picture

The proposed rule emerged from an executive branch response to legal pressure. In November 2025, the Department of Justice notified Congress that it would no longer defend the constitutionality of the racial presumption, further undercutting the SBA's legal foundation for retaining it. The proposed rule underwent 19 days of regulatory review before publication on June 11, with no meetings with outside parties during that review.

Under the old system, business owners from listed racial and ethnic groups received a presumption of social disadvantage that could be rebutted. Those not covered by the presumption could establish disadvantage through an individualized process. After a July 2023 district court decision in Ultima Services Corp. v. U.S. Department of Agriculture, the SBA stopped using the racial presumption altogether and required applicants to establish individual social disadvantage. The rebuttable presumption remained in the regulations but was no longer used.

The proposed rule would eliminate the rebuttable presumption entirely and replace the prior individualized narrative process with a new evidentiary standard. Under the final rule, an applicant must demonstrate that a government or private entity discriminated or was biased against a clearly definable racial, ethnic or cultural group of which the applicant is a member, or favored a group of which the applicant is not a member, and that the discrimination, bias or harm materially harmed the applicant. The rule identifies potential evidence including unlawful diversity, equity and inclusion programs, unlawful affirmative action policies, race-based quotas, set-asides, hiring targets and policies that favored some groups over others based on race.

The rule contemplates an applicant citing a barrier to accessing a federal program or contract that other designated groups did not face as evidence of social disadvantage. It also references Students for Fair Admissions v. Harvard as an example of discrimination in college admissions that could support a claim under the new test. The SBA published the final rule Aug. 11 after receiving 114 comments during the public comment period. The rule takes effect Sept. 10 and will apply to individually owned applicants with applications pending as of that date.

The Bottom Line

The 8(a) program's shift from group-based presumptions and individualized narratives to an evidence-based individual determination marks a broader executive retreat from race-conscious remedies without waiting for Congress to amend the underlying statute.

While the statutory findings naming specific minority groups as disadvantaged remain unchanged in federal law, the regulatory mechanism for establishing social disadvantage for individually owned applicants will fundamentally change when the final rule takes effect Sept. 10.

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