Constitutionality of Citizenship Requirement for Participation

in Small Business Administration’s 8(a) Program

The Small Business A dm inistration’s regulation imposing a citizenship requirem ent for participation 

in its 8(a) program for disadvantaged contractors is constitutional.

March 4, 1996

M e m o r a n d u m O p in io n f o r t h e A s s o c ia t e G e n e r a l C o u n s e l

U .S . S m a l l B u s in e s s A d m in is t r a t io n

You have requested our opinion as to the constitutionality of a regulation of 

the Small Business Administration (“ SBA” ), 13 C.F.R. § 124.103, that limits eligibility for the SBA’s 8(a) program for disadvantaged contractors to businesses 

owned by U.S. citizens.1 The SBA has defended the validity of its 8(a) citizenship 

requirement on the grounds that such a requirement is consistent with congressional intent. We agree with this conclusion, although we do so based upon a 

different legal analysis than the one relied upon by the SBA.

I.

Through the Small Business Act (the “ Act” ), 15 U.S.C. §§631-656, Congress 

established the 8(a) program to “ promote the business development of small business concerns owned and controlled by socially and economically disadvantaged 

individuals.” 15 U.S.C. § 631 (f)(2). The Act defines a “ small business concern 

owned and controlled by socially and economically disadvantaged individuals” 

as “ a small business concern . . . (i) which is at least 51 per centum unconditionally owned by — (I) one or more socially and economically disadvantaged individuals.” Id. § 637(a)(4)(A). Included among the groups specifically identified as 

“ socially disadvantaged” are “ Black Americans, Hispanic Americans, Native 

Americans, Indian tribes, Asian Pacific Americans, Native Hawaiian Organizations, and other minorities.” Id. §631(f)(1)(C).

The Act mandates the creation of the SBA “ to carry out the policies of this 

chapter,” id. §633(a), and it authorizes the Administrator of the SBA to “ make 

such rules and regulations as he deems necessary to carry out the authority vested 

in him by or pursuant to this chapter.” Id. § 634(b)(6). Pursuant to this authority, 

in 1979, the SBA promulgated regulations establishing ownership requirements 

for 8(a) applicants:

1 Letter for Walter E. Dellinger, Assistant Attorney General, Office of Legal Counsel, from Eric S. Benderson, 

Associate General Counsel, U.S. Small Business Administration (July 19, 1995). It is our understanding that your 

request seeks advice with respect to a challenge to §124.103 originally raised by Mr. Eugene Foley, whose correspondence to the SBA is attached to your request. Because Mr. Foley appears to challenge the constitutionality 

of § 124.103, our analysis is limited to the validity of the regulation under the Constitution.

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[I]n order to be eligible to participate in the 8(a) program, an applicant concern must be one which is at least 51 percent unconditionally owned by an individual(s) who is a citizen of the United States 

(specifically excluding permanent resident alien(s)) and who is determined by SBA to be socially and economically disadvantaged.

13 C.F.R. §124.103.

In its preamble to the interim rule, the SBA justified the citizenship requirement 

as follows:

[T]he individual’s social disadvantage must be rooted in treatment 

which he or she has experienced in American society. Each of the 

statutorily designated groups has historically been abused in this 

country (e.g., the enslavement and subsequent disfranchisement of 

Blacks; the near-extermination of Native Americans). The 8(a) program is in large part designed to overcome the effects of such past 

injustices. It is not designed to assist newcomers to America who 

have been oppressed in foreign lands.

45 Fed. Reg. 79,413, 79,414 (1980).

II.

The Supreme Court has made clear that, while states are strictly limited by 

the Equal Protection Clause of the Fourteenth Amendment in their ability to make 

distinctions between citizens and aliens,2 the federal government enjoys far broader authority to classify on the basis of alienage. “ For reasons long recognized 

as valid, the responsibility for regulating the relationship between the United States 

and our alien visitors has been committed to the political branches of the Federal 

Government.” M athews v. Diaz, 426 U.S. 67, 81 (1976). As an aspect of its plenary power over naturalization and immigration, Congress “ enjoys rights to distinguish among aliens that are not shared by the States.” Nyquist v. Mauclet, 432 

U.S. 1, 7 n.8 (1977).

However, the federal power over aliens is not “ so plenary that any agent of 

the National Government may arbitrarily subject all resident aliens to different 

substantive rules from those applied to citizens.” Hampton v. Mow Sun Wong,

426 U.S. 88, 101 (1976). While federal alienage classifications imposed by Con2 In Graham v. Richardson, 403 U.S. 365 (19 7 1), the Supreme Court held that Arizona and Pennsylvania statutes 

that imposed durational residency requirements on aliens seeking welfare benefits violated the Equal Protection Clause 

of the Fourteenth Amendment. State classifications based on alienage, the Court concluded, are “ subject to close 

judicial scrutiny.” 403 U.S. at 372. In reaching this conclusion, the Court identified aliens as a “ suspect class,” 

a “ prime example o f a ‘discrete and insular’ minority [citing United States v. Carotene Products, 304 U.S. 144, 

152-53 n.4 (1?38)] for whom such heightened judicial solicitude is appropriate.” Id.

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Constitutionality o f Citizenship Requirement fo r Participation in Small Business Administration’s 8(a)

Program

gress or the President are subject to “ relaxed scrutiny,” Nyquist, 432 U.S. at 

7 n.8, and violate the Fifth Amendment only if they are “ wholly irrational,” M athews, 426 U.S. at 83, similar restrictions established by executive agencies without 

clear statutory or presidential authorization may be entitled to less deference. See

Hampton, 426 U.S. at 103.

Our examination of the citizenship requirement of § 124.103, whether evaluated 

under Hampton v. Mow Sun Wong or more standard equal protection or due process analyses, leads us to conclude that the regulation survives constitutional scrutiny.

A. Hampton v. M ow Sun Wong

In Hampton v. Mow Sun Wong, 426 U.S. 88 (1976), the Supreme Court addressed the question whether discriminatory restrictions imposed by executive 

agencies should be subjected to more careful scrutiny than those imposed by Congress or the President. At issue in Hampton was a Civil Service Commission regulation that excluded aliens from the federal competitive civil service. Respondents 

challenged the regulation under both the Equal Protection and Due Process components of the Fifth Amendment.

The Court framed the issue before it in both equal protection and due process 

terms:

The rule enforced by the Commission has its impact on an identifiable class of persons who, entirely apart from the rule itself, are 

already subject to disadvantages not shared by the remainder of 

the community. . . . The added disadvantage resulting from enforcement of the rule — ineligibility for employment in a major sector of the economy — is of sufficient significance to be characterized as a deprivation of an interest in liberty.

Hampton, 426 U.S. at 102. Rather than relying upon a standard equal protection 

or due process analysis, however, the Court instead crafted an alternative analytical approach, based upon due process:3

3The Court specifically rejected respondents' suggestion that it apply an equal protection analysis:

Respondents argue that this scrutiny requires invalidation of the Commission rule under traditional equal 

protection analysis. It is true that our cases establish that the Due Process Clause of the Fifth Amendment 

authorizes that type of analysis of federal rules and therefore that the Clause has a substantive as well 

as a procedural aspect. However, it is not necessary to resolve respondents' substantive claim, if a narrower 

inquiry discloses that essential procedures have not been followed.

426 U.S. at 103. The dissent took issue with this “ novel conception o f the procedural due process guaranteed by 

the Fifth Amendment," 426 U.S. at 117 (Rehnquist, J., dissenting), chastising the majority for “ inexplicably 

meld[ing] together the concepts of equal protection and procedural and substantive due process." Id. at 119.

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[W]e deal with a rule which deprives a discrete class of persons 

of an interest in liberty on a wholesale basis. By reason of the Fifth 

Amendment, such a deprivation must be accompanied by due process. . . . When the Federal Government asserts an overriding national interest as justification for a discriminatory rule which would 

violate the Equal Protection Clause if adopted by a State, due process requires that there be a legitimate basis for presuming that the 

rule was actually intended to serve that interest. If the agency which 

promulgates the rule has direct responsibility for fostering or protecting that interest, it may reasonably be presumed that the asserted 

interest was the actual predicate for the rule.

Id. at 102-03. Applying this analysis, the Court dismissed various justifications 

put forth by the Commission— those related to foreign affairs, treaty negotiations, 

and immigration and naturalization— as being outside the agency’s legitimate area 

of responsibility. Id. at 115. The only proper concern of the agency — the promotion of an efficient federal service — was, the Court concluded, not a legitimate 

basis for such a broad exclusionary rule. Id.

As noted above, the test outlined in Hampton falls somewhere between a classic 

equal protection and due process analysis. Pursuant to the Hampton approach, 

where an agency adopts an alienage rule that has a serious impact on interests 

entitled to due process protection, and does so without clear statutory or presidential authorization, the agency must make some showing of statutory responsibility for the national interests it asserts as its goals. In our judgment, the SBA 

meets this requirement: the rule it wishes to adopt is directly related to its statutory 

task of administering the 8(a) program and is a reasonable means of doing so.

B. E qual Protection

The SBA’s regulation also passes muster under a more conventional equal protection analysis. Notwithstanding the fact that “ all persons, aliens and citizens 

alike,” are protected by the Equal Protection component of the Fifth Amendment, 

Congress may nevertheless enact rules for aliens “ that would be unacceptable 

if applied to citizens.” Mathews, 426 U.S. at 80. Under Mathews, congressional 

statutes that discriminate against aliens are subject only to minimal review, the 

“ wholly irrational” standard noted above.

Recently, the Supreme Court confirmed that this minimal standard applies also 

to equal protection challenges to restrictions imposed by executive agencies. In 

Reno v. Flores, 507 U.S. 292 (1993), the Court reviewed an Immigration and 

Naturalization Service regulation requiring unaccompanied alien juveniles to be 

placed in detention, pending deportation proceedings. Rejecting the alien juveniles’ equal protection claim that they were being treated differently from juvenile

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U.S. citizens awaiting federal juvenile delinquency proceedings, the Court summarily affirmed the rationality of the policy, stating simply: “ [T]he difference 

between citizens and aliens is adequate to support the [disparate treatment].” 507 

U.S. at 306.

Flores suggests that federal alienage classifications imposed by an executive 

agency are subject to the same minimal scrutiny under the Equal Protection component of the Fifth Amendment as is applied to congressional statutes. The SBA’s 

asserted interest in its citizenship requirement— to ensure that the 8(a) program 

benefits members of groups that have historically been abused in the United States 

and not those who only have been oppressed in foreign lands— is sufficient to 

satisfy this minimal standard.

C. Due Process

Finally, we conclude that the regulation raises no issue under a standard procedural due process analysis because the Supreme Court’s decisions establish that 

no constitutionally protected liberty or property interest is infringed by §124.103. 

The Supreme Court has interpreted the “ liberty” protected by procedural due 

process to include “ ‘not merely freedom from bodily restraint but also the right 

of the individual to contract, to engage in any of the common occupations of 

life,. . . and generally to enjoy those privileges long recognized . . . as essential 

to the orderly pursuit of happiness by free men.’ ” Board o f Regents v. Roth,

408 U.S. 564, 572 (1972) (quoting Meyer v. Nebraska, 262 U.S. 390, 399 (1923)). 

Generally, liberty interests include those “ human abilities that do not depend on 

the government.” Scott v. Village o f Kewaskum, 786 F.2d 338, 340 (7th Cir. 

1986). The 8(a) program, however, is a creature of government: it upends the 

concept of “ liberty” to claim that there is a liberty interest in a statutory program 

conferring preferential treatment for government contracts. Cf. id. (“ The due process clauses are designed to establish regular procedures for governmental intervention in private affairs, and so the claim to process is at its strongest when a person 

simply wishes to go about life— be it personal or economic life — without encountering the prohibition of the state.” ); LRL Properties v. Portage Metro Housing Auth., 55 F.3d 1097 (6th Cir. 1995) (holding that property owners have no 

liberty interest in continued participation in Section 8 housing rental assistance 

program).

In Hampton, the Supreme Court found that aliens’ “ ineligibility for employment 

in a major sector of the economy” — the federal government— was a disadvantage “ of sufficient significance to be characterized as a deprivation of an interest 

in liberty.” 426 U.S. at 102. No comparably broad interest is implicated by an 

applicant’s participation in the SBA’s 8(a) program. By excluding aliens from 

the 8(a) program, the SBA is not imposing on them “ a stigma or other disability”

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that forecloses their freedom to take advantage of other business opportunities. 

Roth, 408 U.S. at 573.

Nor does exclusion from the 8(a) program impair any property interests. To 

hold a property interest in a government benefit, an applicant must “ have a legitimate claim of entitlement to it.” Roth, 408 U.S. at 577. The Supreme Court has 

never held that an applicant for a government benefit has a constitutionally protected property interest in receiving it. See, e.g., Walters v. National A ss’n o f Radiation Survivors, 473 U.S. 305, 320 n.8 (1985). Thus, to the extent that participation in the 8(a) program can be considered a government “ benefit,” applicants 

have no property right to that benefit. See Software Systems Assocs., Inc. v. Saiki,

1993 WL 294782 (D.D.C. 1993) (finding that an applicant has no property interest 

in participation in SBA 8(a) program); see also Blackburn v. City o f Marshall,

42 F.3d 925, 941 (5th Cir. 1995) (“ [T]he mere existence of a governmental program or authority empowered to grant a particular type of benefit to one such 

as the plaintiff does not give the plaintiff a property right, protected by the due 

process clause, to receive the benefit, absent some legitimate claim of entitlem ent— arising from statute, regulation, contract, or the like — to the benefit.” ).

III.

We conclude that the citizenship requirement of 13 C.F.R. § 124.103 is constitutional. The SBA’s asserted interest in its citizenship requirement satisfies both 

the criteria set forth in Hampton and the more conventional minimal rationality 

standard under the Equal Protection guarantee of the Fifth Amendment. The regulation is equally valid under Supreme Court decisions interpreting the Due Process 

guarantee of the Fifth Amendment.

WALTER DELLINGER 

Assistant Attorney General

Office o f Legal Counsel

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