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On February 7, 2022, the Small Business Administration’s (SBA) changes to the “surviving spouse” provision in its regulations on Service Disabled Veteran Owned Small Business (SDVOSB) status became effective.  SBA had issued a direct final rule covering this change, 86 FR 61670, on November 8, 2021.

In brief, SBA’s now provides for a 3-year window for a surviving spouse to maintain ownership and control of a SDVOSB in cases where the deceased veteran’s service-connected disability was rated as less than 100 percent disabling.  Prior to the change, the veteran must have died as a result of their disability or been 100 percent service disabled in order for the entity to continue to qualify as owned and controlled by a service-disabled veteran following the death of the service-disabled veteran.

The surviving spouse provision in 13 C.F.R. § 125.12(i) applies in instances where the death or disability of a service-disabled veteran causes the concern to be less than 51 percent owned by one or more service-disabled veterans.  The intent is to allow a concern to continue to qualify for SDVOSB status for a limited timeframe through the veteran’s surviving spouse so long as the surviving spouse acquires the veteran’s ownership interest.

The SBA’s regulations now provide the following two time periods dependent on the veteran’s death and service-connected disability rating:

10 Years after the death of the veteran where the veteran had a Service-connected disability rated as 100 percent disabling or who died as a result of a service-connected disability.

3 Years after the death of the veteran where the veteran had a Service-connected disability rated less than 100 percent disabling.

The change implements Section 876 of National Defense Authorization Act for Fiscal Year 2020, which amended treatment of surviving spouses with regard to the program’s ownership requirements – specifically through the creation of two eligibility time periods for the surviving spouse of a veteran.  The change prevents unfortunate and unforeseen problems in instances where a less-than 100 percent disabled veteran dies from circumstances unrelated to their disability.