Regulation

ELECTRONIC CODE OF FEDERAL REGULATIONS
e-CFR data is current as of January 25, 2018
Title 13 → Chapter I → Part 127 → Subpart B → §127.203
Title 13: Business Credit and Assistance
PART 127—WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT PROGRAM
Subpart B—Eligibility Requirements To Qualify as an EDWOSB or WOSB
§127.203 What are the rules governing the requirement that economically disadvantaged women must own
EDWOSBs?
(a) General. To qualify as an EDWOSB, the concern must be at least 51 percent owned by one or more women who are
economically disadvantaged. A woman is economically disadvantaged if she can demonstrate that her ability to compete in the
free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same
or similar line of business. SBA does not take into consideration community property laws when determining economic
disadvantage when the woman has no direct, individual or separate ownership interest in the property.
(b) Limitation on personal net worth. (1) In order to be considered economically disadvantaged, the woman's personal net
worth must be less than $750,000, excluding her ownership interest in the concern and her equity interest in her primary
personal residence.
(2) Income received from an EDWOSB that is an S corporation, LLC or partnership will be excluded from net worth where
the EDWOSB provides documentary evidence demonstrating that the income was reinvested in the business concern or the
distribution was solely for the purposes of paying taxes arising in the normal course of operations of the business concern.
Losses from the S corporation, LLC or partnership, however, are losses to the EDWOSB only, not losses to the individual, and
cannot be used to reduce an individual's net worth.
(3) Funds invested in an Individual Retirement Account (IRA) or other official retirement account that are unavailable until
retirement age without a significant penalty will not be considered in determining a woman's net worth. In order to properly
assess whether funds invested in a retirement account may be excluded from a woman's net worth, she must provide
information about the terms and restrictions of the account to SBA and certify that the retirement account is legitimate.
(c) Factors to be considered. (1) General. The personal financial condition of the woman claiming economic disadvantage,
including her personal income for the past three years (including bonuses, and the value of company stock given in lieu of
cash), her personal net worth and the fair market value of all of her assets, whether encumbered or not, will be considered in
determining whether she is economically disadvantaged.
(2) Spouse's financial situation. SBA may consider a spouse's financial situation in determining a woman's access to credit
and capital. When married, an individual claiming economic disadvantage must submit separate financial information for her
spouse, unless the individual and the spouse are legally separated. SBA will consider a spouse's financial situation in
determining an individual's access to credit and capital where the spouse has a role in the business (e.g., an officer, employee
or director) or has lent money to, provided credit or financial support to, or guaranteed a loan of the business. SBA may also
consider the spouse's financial condition if the spouse's business is in the same or similar line of business as the EDWOSB or
WOSB and the spouse's business and WOSB share similar names, Web sites, equipment or employees. In addition, all
transfers to a spouse within two years of a certification will be attributed to a woman claiming economic disadvantage as set
forth in paragraph (d) of this section.
(3) Income.
(i) When considering a woman's personal income, if the adjusted gross yearly income averaged over the three years
preceding the certification exceeds $350,000, SBA will presume that she is not economically disadvantaged. The presumption
may be rebutted by a showing that this income level was unusual and not likely to occur in the future, that losses
commensurate with and directly related to the earnings were suffered, or by evidence that the income is not indicative of lack of
economic disadvantage.
(ii) Income received by an EDWOSB that is an S corporation, LLC, or partnership will be excluded from an individual's
income where the EDWOSB provides documentary evidence demonstrating that the income was reinvested in the EDWOSB or
the distribution was solely for the purposes of paying taxes arising in the normal course of operations of the business concern.

Losses from the S corporation, LLC or partnership, however, are losses to the EDWOSB only, not losses to the individual, and
cannot be used to reduce a woman's personal income.
(4) Fair market value of all assets. A woman will generally not be considered economically disadvantaged if the fair market
value of all her assets (including her primary residence and the value of the business concern) exceeds $6 million. The only
assets excluded from this determination are funds excluded under paragraph (b)(3) of this section as being invested in a
qualified IRA account or other official retirement account.
(d) Transfers within two years. Assets that a woman claiming economic disadvantage transferred within two years of the
date of the concern's certification will be attributed to the woman claiming economic disadvantage if the assets were transferred
to an immediate family member, or to a trust that has as a beneficiary an immediate family member. The transferred assets
within the two-year period will not be attributed to the woman if the transfer was:
(1) To or on behalf of an immediate family member for that individual's education, medical expenses, or some other form of
essential support; or
(2) To an immediate family member in recognition of a special occasion, such as a birthday, graduation, anniversary, or
retirement.
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