SBA Publishes Final Rule Removing Presumption of Social Disadvantage for 8(a) Program

The U.S. Small Business Administration (SBA) on August 11, 2026, published its final rule removing from the 8(a) Business Development Program the "presumption" of social disadvantage for certain enumerated groups. The final rule is substantially the same as the proposed rule discussed in a previous Holland & Knight blog post, with a few key differences – including expressly expanding the new "social disadvantage" test to include prejudice or bias based on sex and disability.

There are two notable limitations to the rule change, both of which were highlighted in the proposed rule. First, the rule change applies only to individually owned firms, not entity-owned firms, i.e., those owned by Alaska Native Corporations, Community Development Corporations, Indian Tribes or Native Hawaiian Organizations. SBA has been explicit about this point from the beginning of the rulemaking process.

Second, SBA confirmed that the new social disadvantage requirements will not apply to firms that are currently in the 8(a) program but rather to new applicants and those who have pending applications to the 8(a) program when the rule takes effect September 10, 2026. The proposed rule stated that "at this time," the SBA's intention was to apply the new requirements to applicants only and has confirmed that in the final rule.

Background on Proposed Rule

On June 11, 2026, SBA published a proposed rule amending its 8(a) business development regulations to remove the Rebuttable Presumption of social disadvantage for individuals in the 8(a) business development program. In doing so, SBA sought to realign the regulatory definition of "socially disadvantaged individuals" in 13 C.F.R. § 124.103 with the statutory definition in 15 U.S.C. § 637(a)(5).

The proposed rule established a new test under 13 C.F.R. § 124.103(b) to establish social disadvantage. Under this test, any individual U.S. citizen could establish social disadvantage by demonstrating that 1) the government – including state and local governments, universities and corporations – discriminated against the individual's own racial, ethnic or cultural group, and 2) the individual suffered material harm as a result of that discrimination.

Notably, SBA intended to allow individuals to self-certify both their membership in the relevant racial, ethnic or cultural group at the time of the government's action and that the government's action materially harmed them. SBA also indicated that an individual could self-certify that their lack of access to a particular government program – such as ineligibility under the prior rebuttable presumption standard – constitutes actionable discrimination.

In addition, SBA proposed removing the process for group inclusion on the Rebuttable Presumption list under 13 C.F.R. § 124.103(d), reasoning that this process would be rendered moot once SBA removes the rebuttable presumption altogether. SBA declined to extend the standard 30-day comment period and received 114 comments on the proposed rule in total.

Notable Differences Between the Proposed and Final Rule

The final rule includes two significant changes from the proposed rule. First, SBA clarified that the new "social disadvantage" test is not limited to race-based discrimination – it also encompasses evidence-based cases of prejudice or cultural bias based on sex and disability. Second, SBA expanded the categories of "sufficient evidence" by adding "specific Congressional findings" as documentation that can establish discrimination against an identifiable group and provided a new fallback for applicants who lack traditional documentary sources.¹ Each change is discussed below.

Expansion to Sex and Disability

In its analysis of Section 124.103, SBA acknowledged receiving a significant number of comments questioning whether the proposed rule applied only to race-based programs, to the exclusion of sex or disability, given the nature of the examples used in the proposed rule. SBA confirmed that individuals subjected to discrimination based on sex or disability may also qualify. In support, SBA cited Section 8(a)(5) of the Small Business Act, 15 U.S.C. § 637(a)(5), which defines "socially disadvantaged" individuals 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." Accordingly, any individual who can establish that a specific identifiable group suffered racial prejudice or cultural bias may establish social disadvantage, provided the other requirements are met.

SBA provided illustrative examples for both categories. For sex-based discrimination, SBA noted that prior to the enactment of the Equal Credit Opportunity Act of 1974, many banks prohibited women from applying for or obtaining credit cards in their own names. Under SBA's new test, any woman who can certify that she was materially harmed by this policy would be considered socially disadvantaged. For disability-based discrimination, SBA explained that any individual who can properly certify that 1) he or she has a disability covered under the Americans with Disabilities Act (ADA), 2) he or she was alive prior to the passage of the ADA, and 3) he or she experienced material harm as a result of discrimination against people with disabilities would qualify as socially disadvantaged.

Addition of Congressional Findings as Sufficient Evidence

In the proposed rule, SBA provided a non-exhaustive list of "sufficient evidence" that individuals may use to demonstrate that an identifiable racial, ethnic or cultural group suffered discrimination or bias. This list included materials on government, university and corporate websites; government, university and corporate policies, regulations, guidance, procedures or documents; statements by government, university or corporate officials; government, university and corporate reports, audits or findings; court decisions; and administrative rulings.

The final rule makes two additions to this list. First, SBA added "specific Congressional findings" as an enumerated category of sufficient evidence. Second, SBA provided that where evidence of group discrimination or bias by a specific government, university or private entity is not readily available, an individual may present "other adequate evidence" demonstrating such discrimination or bias – providing additional flexibility for applicants who may lack access to traditional documentary sources.

Though SBA's analysis does not define the full scope of "specific Congressional findings," the agency's discussion of disability discrimination is instructive. SBA noted that in passing the ADA, the U.S. Congress recognized that discrimination against people with disabilities was a serious and pervasive social problem requiring statutory redress. According to SBA, this congressional finding – that discrimination against people with disabilities was a pervasive social problem – would constitute sufficient evidence to demonstrate that people with disabilities were subject to discrimination in a manner that diminished their opportunity for economic advancement. This example suggests that congressional findings in other major legislation may similarly serve as sufficient evidence for applicants from those protected groups.

Other Implications

The Backlog of 8(a) Applications

Many commenters expressed frustration about the backlog of 8(a) program applications. As highlighted in a recent U.S. House of Representatives Committee on Oversight hearing with SBA Administrator Kelly Loeffler, SBA has not approved an 8(a) application since August 15, 2025. SBA officials have cited to the need to resolve the legal issues surrounding the social disadvantage presumption as a basis to place a hold on 8(a) applications and promised to resume application processing "within the next couple of months" following publication of the final rule. The final rule's preamble states that the new test will allow SBA to approve applications "more rapidly," but SBA declined to respond to the approximately 10 percent of commenters who expressed concern about the 8(a) application backlog for both individually owned and entity-owned firms. The publication of this final rule may allow new and pending applications from entity-owned firms to move forward, but individually owned firms will likely need to provide updated evidence of social disadvantage consistent with the final rule.

Declining 8(a) Participant Numbers

Looking at the bigger picture, the number of 8(a) firms has fallen substantially over the past several years. The program once included more than 9,000 participants, but by late 2025, that number had declined to approximately 4,300. In addition to the halt in application processing, much of this decline reflects a wave of new enforcement actions by SBA. In December 2025, SBA ordered all 4,300 firms to produce three years of financial documents as part of a program-wide audit. After many firms were unable to submit this documentation on time, SBA suspended them in January 2026. Soon after, SBA initiated termination proceedings against other firms who allegedly failed to meet the program's economic disadvantage eligibility requirements. In total, termination proceedings have been initiated against nearly 800 firms, accounting for roughly 20 percent of the program's total participants.

Impact on Pending Litigation

SBA's publication of the final rule should nullify pending litigation challenging the presumption of social disadvantage. In July 2023, the U.S. District Court for the Eastern District of Tennessee held in Ultima Services Corp. v. U.S. Department of Agriculture, 683 F. Supp. 3d 745, 774 (E.D. Tenn. 2023), that the rebuttable presumption of social disadvantage violated the Fifth Amendment's equal protection clause and enjoined SBA from using it. The Ultima case is still pending a final decision, but SBA's final rule will likely warrant dismissal of the case entirely. Relatedly, in November 2025, Revier Technologies Inc. and Young America's Foundation filed Revier Technologies Inc. v. U.S. Small Business Administration, No. 2:25-cv-02328 (E.D. La.), challenging the same rebuttable presumption and its use in other programs that incorporate SBA's definition of social disadvantage, including the State Small Business Credit Initiative program and the U.S. Department of Homeland Security's cybersecurity fellowship. Now that SBA is formally removing the presumption from its regulations through this final rule, Revier could be dismissed because the challenged regulatory provision will soon no longer exist.

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Notes

¹ SBA also restructured the regulatory text, reordering the requirements so that the objective evidence of group discrimination comes first (now at Section 124.103(c)(1)), followed by the self-certification of group membership and material harm (at Section 124.103(c)(2)).