Proposed SBA Rule Would Establish New Test for Social Disadvantage Under 8(a) Program (June 29, 2026)

Summary

This is a Congressional Research Service Insight, IN12698, dated June 29, 2026, by April J. Anderson and R. Corinne Blackford, on an SBA proposed rule released June 11, 2026, that would revise how individuals establish social disadvantage for the 8(a) Business Development Program. It recounts that in Ultima Servs. Corp. v. U.S. Department of Agriculture, the U.S. District Court for the Eastern District of Tennessee found SBA's race-based presumption of social disadvantage unconstitutional in July 2023. Under the proposed test, an applicant could self-certify group membership and individual harm and provide evidence of government or private entity discrimination or bias. The rule would also remove the rebuttable presumption and the individualized determination option. Comments are due July 13, 2026.

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                                                                                                   INSIGHTi



Proposed SBA Rule Would Establish New
Test for Social Disadvantage Under 8(a)
Program

June 29, 2026

The U.S. Small Business Administration (SBA) released a proposed rule on June 11, 2026, that would
revise the criteria for individuals to establish social disadvantage for purposes of participation in the
SBA’s 8(a) Business Development Program. The notice discusses a 2023 federal district court ruling that
forced changes to SBA’s 8(a) program and states that the proposed rule aims to remedy the effects of
“unlawful diversity, equity, and inclusion programs or policies” and “unlawful affirmative action
programs or policies.” According to the notice, these policies and programs consist of “any government or
private entity policies or programs that favored some groups over others on the basis of race,” including
race-based procedures previously available in the 8(a) program. Comments on the proposed rule are due
July 13, 2026.


8(a) Business Development Program Origins
In 1978, Congress amended Section 8(a) of the Small Business Act (15 U.S.C. §637(a)), establishing a
program that aims to help small “socially and economically disadvantaged” business owners overcome
barriers to participating in federal contracting related to racial prejudice and bias. For eligible businesses,
the 8(a) program creates federal contracting preferences, such as contract set-asides and sole-source
contracts. In addition, the program provides business development support, such as mentorship, training,
and counseling. For more information, see CRS Report R44844, SBA’s 8(a) Business Development
Program: Legislative and Program History (2024).


Definition of “Socially Disadvantaged” Individual
The 1978 amendments to the Small Business Act defined socially and economically disadvantaged
individuals, whose businesses are eligible for participation in the 8(a) program, as those who have been
“subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group
without regard to their individual qualities” (15 U.S.C. §637(a)(5)). The amendments contain
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congressional findings that such disadvantaged groups “include, but are not limited to, Black Americans,
Hispanic Americans, Native Americans, and other minorities.” Prior to July 2023, SBA assessed social
disadvantage under regulations providing that business owners of listed ethnic and racial groups possess a
rebuttable presumption of social disadvantage, while business owners who are members of other groups
needed to establish their disadvantage, and hence 8(a) eligibility, through individualized, narrative
evidence.
In a July 2023 case, Ultima Servs. Corp. v. U.S. Department of Agriculture, the U.S. District Court for the
Eastern District of Tennessee found SBA’s race-based presumption of social disadvantage for 8(a)
program applicants to be unconstitutional. In particular, the court concluded that the government had not
met the high evidentiary standard needed to support remedial, race-based decisionmaking under the Fifth
Amendment’s equal protection standard. After the ruling, SBA stopped using the regulation’s racial
presumption for 8(a) applicants. Individualized circumstances causing social disadvantage, documented
through a personal narrative to SBA, became the foundation for every business owner’s 8(a) program
eligibility, regardless of race. SBA had previously used this procedure for applicants ineligible for its
racial presumption of social disadvantage. For further information on this program change, see CRS
Insight IN12245, SBA’s 8(a) Business Development Program Responds to District Court Ruling (2023).
The SBA’s June 2026 proposed rule would create a new “test by which any individual American citizen
can establish social disadvantage,” instead of requiring program applicants to submit a narrative
describing their social disadvantage. According to the proposed rule, under the new test, an individual
would need to show that
         during the citizen’s lifetime, a governmental or private entity in the United States ... through any
         action, policy, rule, regulation, or other practice of any of its agencies, subsidiaries, or authorized
         agents, discriminated or was biased against a clearly definable racial, ethnic, or cultural group of
         which the citizen is a member, or favored in any way a racial, ethnic, or cultural group of which the
         citizen is not a member.
The applicant would also need to show that the “discrimination, bias, or favoritism conferred material
harm on the citizen.”
A program applicant could fulfill the test by self-certifying “group membership and individual harm” and
providing “evidence of government or private entity discrimination or bias.” Relevant discrimination or
bias could include “unlawful diversity, equity, and inclusion programs or policies; unlawful affirmative
action programs or policies; [or] race-based quotas, set-asides, or hiring targets.” As one example, the
agency cites a business owner’s prior ineligibility for the 8(a) program’s race-based rebuttable
presumption (deemed unconstitutional in Ultima Services) as a circumstance an applicant could use to
show discrimination. In the agency’s view, the proposed rule would allow into the 8(a) program “a
member of any racial, ethnic, or cultural group who has been targeted by any governmental or private
entity’s discrimination.”
According to the proposed rule notice, SBA’s new test for 8(a) eligibility “reduces the potential for
subjectivity involved in the certification process” and preserves SBA’s limited resources for program
application review. The agency also states that the new rule would “remedy the previous unconstitutional
implementation of the program,” including “the federal government’s unconstitutional discrimination
against members of groups who were not subject to the Rebuttable Presumption.” The notice asserts that
the presumption “rendered white Americans almost totally unable to participate in the program” and that
its benefits “for over 37 years were unconstitutionally distributed.”
In addition to creating a new test for 8(a) applicants, the proposed rule would also amend SBA’s
regulations to remove the rebuttable presumption of social disadvantage for certain racial and ethnic
groups, which currently remains despite not being in effect since the July 2023 district court decision. It
would also remove the option for applicants to establish social disadvantage via an individualized
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determination, leaving the proposed new test as the only way of showing social disadvantage. The
proposed rule would not affect entity-owned 8(a) participants, such as those owned by tribes.




Author Information

April J. Anderson                                          R. Corinne Blackford
Legislative Attorney                                       Analyst in Small Business and Economic Development
                                                           Policy




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