Ending Race-Based Discrimination Across Federal Benefits Programs

Revier Technologies and Young America’s Foundation v. Loeffler 

Matthew Schultheis is building something innovative. He’s developing cutting-edge artificial intelligence tools for the construction industry through his Louisiana startup, Revier Technologies. When he applied for investment capital through a federal small business program, he had everything going for him: a promising business, economic need, and stellar qualifications. The government rejected him anyway. The reason? He’s white.

Students in many of the one thousand Young America’s Foundation college chapters want to compete for a paid cybersecurity fellowship at the Department of Homeland Security to gain valuable tuition assistance, hands-on experience, and even a job offer after graduation. They are studying in the relevant fields and have strong grades. Despite being qualified, they can’t compete on equal terms. Why? Because of the color of their skin. 

For nearly 40 years, the federal government has used a racial presumption to determine who gets billions of dollars annually in contracts, loans, grants and other opportunities. Under the original section 8(a) program that other agencies copied, the Small Business Administration presumed that people of certain races are “socially disadvantaged”— and automatically qualified them for preferential treatment in those programs. Everyone else is either shut out or forced to jump through hoops to prove they are disadvantaged.

The Constitution forbids this kind of racial sorting, as the Supreme Court has repeatedly ruled. The government cannot use race as a shortcut, cannot treat it as a negative, and cannot rely on racial stereotypes. Yet, the SBA’s section 8(a) regulation violates every one of these rules — and its been replicated across the federal government, from the Treasury Department, to NASA, to the EPA and to Homeland Security.

That’s why CIR and the Wisconsin Institute for Law & Liberty are teaming up to challenge this unconstitutional system. It’s time for the government to treat people as individuals, not as members of racial categories.

Background 

The original SBA’s Section 8(a) program was created to help small businesses owned by people who are “socially and economically disadvantaged.” Instead of requiring actual proof of social disadvantage, the SBA created a shortcut: It automatically presumed that everyone from certain racial and ethnic groups qualifies as “socially disadvantaged.”  

The regulation lists specific racial categories. If you’re on the list, you qualify. No questions asked. No proof required. You’re presumed socially disadvantaged. If you’re not on the list, you are either completely excluded (in some programs) or you can still try to qualify—but you face a time-consuming, expensive process where you must prove disadvantage by a preponderance of the evidence. Most people don’t even try.  

The racial categories are completely arbitrary. People with Spanish ancestry are presumed disadvantaged, but not people with other European backgrounds. Pakistanis qualify; Afghans do not. Chinese Americans are in; people from Kyrgyzstan are out.   

There’s no evidence justifying these racial preferences. The government has never identified specific instances of discrimination by federal agencies that would warrant a race-based remedy. The SBA just assumes race equals disadvantage. 

The racial preferences are permanent. There’s no sunset provision. No benchmarks for success. No process for removing groups from the list. The SBA has not seriously reviewed these categories since the 1980s—almost 40 years ago. The racial presumption just continues indefinitely.  

The problem has spread. Other federal agencies have incorporated the SBA’s regulation into their own programs. NASA uses it to set aside 8% of contracting dollars. The EPA uses it for 10% of Clean Air Act research funding. The Treasury Department uses it for small business investment. The list goes on. 

The Constitution does not permit the government to use race as a proxy for need or disadvantage. As the Supreme Court made clear in Students for Fair Admissions v. Harvard, race-based programs cannot rely on stereotypes, cannot treat race as a negative, and must have real limits and endpoints. The SBA’s Section 8(a) regulation that many agencies adopt violates all of these principles. 

Why This Case Matters 

This case is about whether America will judge people as individuals or continue sorting them by race. The Constitution promises equality under the law, not racial favoritism masquerading as help. The SBA’s regulation tells millions of Americans that their race determines their opportunities. It says that people of certain races are automatically disadvantaged and people of other races are automatically not. That’s a racial stereotype, plain and simple. And it’s unconstitutional. 

This isn’t a problem with just one program. The Section 8(a) framework has become a template. Federal agencies across the government have copied its race-based shortcuts into their own programs. Each of these agencies now hands out contracts, grants, and other benefits based on race—without requiring any proof of actual disadvantage.  

Every one of these programs is unconstitutional. Stopping the Section 8(a) program means stopping this bureaucratic race-sorting at its source. 

The harms are real. Matthew Schultheis was denied investment capital to grow his innovative business because of his race. YAF students are blocked from competing fairly for cybersecurity roles in the government because of their race. 

But the principle at stake is even bigger. If the government can use race to decide who gets opportunities—without evidence, without limits, without end—then equal protection means nothing. The Constitution becomes a suggestion instead of a command. 

Our clients are not asking for special treatment. They are asking for what the Constitution guarantees—to be judged on their individual merits, not their skin color.