The News: The Wisconsin Institute for Law & Liberty (WILL) and the Center for Individual Rights (CIR) secured a major victory after the U.S. Small Business Administration (SBA) removed a racial preference after it was challenged in a lawsuit. The SBA revised the Section 8(a) regulation which ends the presumption that individuals of certain races are automatically “socially disadvantaged” and eligible for preferential treatment.
The lawsuit was filed on behalf of Revier Technologies, whose owner was denied investment capital because he is white, and Young America’s Foundation (YAF), whose members were barred from a Department of Homeland Security fellowship based upon race. Both programs relied on the SBA’s previous regulation.
The Quotes: WILL Managing Vice President and Deputy Counsel, Dan Lennington, stated, “For decades, the federal government used this racial preference to decide who got opportunities and who got shut out. Those preferences spread across federal programs affecting business owners, college students, and countless others. Our clients fought back, and the government dropped its defense and changed the rule. This victory strikes at the core of federal DEI programs and advances equal treatment for all for Americans.”
Former Wisconsin Governor and President of the Young American’s Foundation, Scott Walker, stated, “When applying for grants and contracts decisions should never be based on race. They should be based solely on an applicant’s character, qualifications, and merit. Through this lawsuit, we have helped reaffirm a fundamental principle: opportunities should be earned through merit and excellence, not determined by race.”
Additional Background: Under the previous regulations, qualifying as “socially disadvantaged” was big business. Hundreds of billions in federal tax dollars used the SBA’s Section 8(a) presumption to award a significant amount of government grants and contracts to select businesses based on race.
The SBA’s racial presumption had been incorporated into numerous other programs administered by federal agencies toimpose racial discrimination on small business owners, college students, and countless Americans when dealing with various federal programs.
Our Clients: WILL represented YAF, a national organization of college students. YAF members, who are highly qualified college students, were being locked out of a competitive Department of Homeland Security fellowship that relies on the Section 8(a) “socially disadvantaged” regulations as part of its requirements.
CIR served as co-counsel in this case, and also represented Revier Technologies, an innovative Louisiana technology start-up developing AI for the construction industry. Revier was rejected from a critical small business grant under the Department of the Treasury’s State Small Business Credit Initiative because the company’s owner is white and therefore did not qualify for the grant.
What Changed: The SBA’s new rule eliminates the race-based presumption. No applicant qualifies as “socially disadvantaged” simply by checking a racial box.
The rule also replaces the “social disadvantage narrative,” a personal essay requirement, with a test requiring evidence of a discriminatory policy. Applicants of any race may rely on discriminatory policies, including affirmative action programs, to establish disadvantage.
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