[House Report 115-216]
[From the U.S. Government Publishing Office]
115th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 115-216
======================================================================
INVESTING IN MAIN STREET ACT OF 2017
_______
July 12, 2017.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Chabot, from the Committee on Small Business, submitted the
following
R E P O R T
[To accompany H.R. 2364]
The Committee on Small Business, to whom was referred the
bill (H.R. 2364) to amend the Small Business Investment Act of
1958 to increase the amount that certain banks and savings
associations may invest in small business investment companies,
subject to the approval of the appropriate Federal banking
agency, and for other purposes, having considered the same,
report favorably thereon without amendment and recommend that
the bill do pass.
CONTENTS
Page
I. Purpose of the Bill and Summary................................2
II. Background and the Need for Legislation........................2
III. Hearings.......................................................2
IV. Committee Consideration........................................2
V. Committee Votes.................................................2
VI. Section-by-Section Analysis of H.R. 2364.......................4
VII. Unfunded Mandates..............................................4
VIII. New Budget Authority, Entitlement Authority and Tax Expenditure4
IX. Oversight Findings.............................................4
X. Statement of Constitutional Authority..........................4
XI. Congressional Accountability Act...............................4
XII. Federal Advisory Committee Statement...........................5
XIII. Statement of No Earmarks.......................................5
XIV. Statement of Duplication of Federal Programs...................5
XV. Disclosure of Directed Rule Makings............................5
XVI. Performance Goals and Objectives...............................5
XVII. Changes in Existing Law Made by the Bill, as Reported..........5
COST ESTIMATE OF THE CONGRESSIONAL BUDGET OFFICE
The cost estimate prepared by the Director of the
Congressional Budget Office pursuant to Sec. 402 of the
Congressional Budget Act of 1974 was not submitted timely to
the Committee.
I. Purpose and Bill Summary
With the goal of growing the amount of capital available to
small businesses within the Small Business Investment Company
(SBIC) program at the Small Business Administration (SBA), H.R.
2364, the ``Investing in Main Street Act of 2017,'' increases
the amount of capital and surplus that a financial institution
and federal savings association can invest in an SBIC from 5
percent to 15 percent.
II. Background and Need for Legislation
With an ongoing economic recovery that is starting to show
signs of improvement, small businesses around the nation
continue to face obstacles when it comes to access to capital.
To bridge the many financial challenges that exist, the SBA
offers capital access programs to assist the nation's smallest
firms. To help small businesses in obtaining venture capital
and private equity, the SBA administers the SBIC program, which
utilizes a privately-owned and SBA-licensed model.
Currently, the Small Business Investment Act of 1958 limits
the amount of capital and surplus that a financial institution
or federal savings association may invest in an SBIC to 5
percent.
To enhance the SBIC program, H.R. 2364 increases the amount
of capital and surplus that a financial institution and federal
savings association can invest in an SBIC from 5 percent to 15
percent. Further, H.R. 2364 requires financial institutions and
federal savings associations to be approved by their federal
regulator prior to investing more than 5 percent.
Beyond increasing the percentage of an investment a bank
can make into an SBIC, H.R. 2364 also brings into parity the
Small Business Investment Act with the Office of the
Comptroller of the Currency's national bank charter percentage
requirements.
III. Hearings
In the 114th Congress, issues related to SBICs were
addressed at a hearing by the Subcommittee on Economic Growth,
Tax and Capital Access of the Committee on Small Business
entitled ``Improving Capital Access Programs within the SBA''
on May 19, 2015. As a result, no hearings have been held in the
115th Congress.
IV. Committee Consideration
The Committee on Small Business met in open session, with a
quorum being present, on June 15, 2017, and ordered H.R. 2364
be favorably reported to the House by a recorded vote of 21
yeas and 0 noes at 11:29 A.M. No amendments were offered during
consideration of H.R. 2364.
V. Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the recorded
votes on the motion to report the legislation and amendments
thereto.
VI. Section-by-Section Analysis of H.R. 2364
Section 1. Short title
This section designates the bill as the ``Investing in Main
Street Act of 2017.''
Section 2. Investment in Small Business Investment Companies
Since 1958, the Small Business Investment Company (SBIC)
program has operated a private-public partnership model,
whereby a privately owned and Small Business Administration
(SBA) licensed company supplies debt and equity capital to
small businesses. The program successfully runs at a zero
subsidy rate to the American taxpayer. This section amends
Sec. 302(b) of the Small Business Investment Act by increasing
the percentage a financial institution or federal savings
association can invest in an SBIC. Currently, financial
institutions and federal savings associations are limited to
investing 5 percent of capital and surplus in an SBIC. This
section increases the percentage to 15 percent and requires the
financial institution or the federal savings association to be
approved by their federal regulator prior to investing more
than 5 percent.
VII. Unfunded Mandates
H.R. 2364 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act, Pub.
L. No. 104-4, and would impose no costs on state, local or
tribal governments.
VIII. New Budget Authority, Entitlement Authority and Tax Expenditures
The Committee has not received an estimate of new budget
authority contained in the cost estimate prepared by the
Director of the Congressional Budget Office pursuant to
Sec. 402 of the Congressional Budget Act of 1974. In compliance
with clause 3(c)(2) of rule XIII of the Rules of the House, the
Committee opines that H.R. 2364 will not establish any new
budget or entitlement authority or create any tax expenditures.
IX. Oversight Findings
In accordance with clause 2(b)(1) of rule X of the Rules of
the House, the oversight findings and recommendations of the
Committee on Small Business with respect to the subject matter
contained in H.R. 2364 are incorporated into the descriptive
portions of this report.
X. Statement of Constitutional Authority
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
authority for this legislation in Art. I, Sec. 8 of the
Constitution of the United States.
XI. Congressional Accountability Act
H.R. 2364 does not relate to the terms and conditions of
employment or access to public services or accommodations
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.
XII. Federal Advisory Committee Act Statement
H.R. 2364 does not establish or authorize the establishment
of any new advisory committees as that term is defined in the
Federal Advisory Committee Act, 5 U.S.C. App. 2.
XIII. Statement of No Earmarks
Pursuant to clause 9 of rule XXI, H.R. 2364 does not
contain any congressional earmarks, limited tax benefits or
limited tariff benefits as defined in subsections (d), (e) or
(f) of clause 9 of rule XXI of the Rules of the House.
XIV. Statement of Duplication of Federal Programs
Pursuant to clause 3(c) of the rule XIII of the Rules of
the House, no provision of H.R. 2364 establishes or
reauthorizes a program of the federal government known to be
duplicative of another federal program, a program that was
included in any report from the United States Government
Accountability Office pursuant to Sec. 21 of Pub. L. No. 111-
139, or a program related to a program identified in the most
recent catalog of federal domestic assistance.
XV. Disclosure of Directed Rule Makings
Pursuant to clause 3(c) of rule XIII of the Rules of the
House, H.R. 2364 does not direct any rulemaking.
XVI. Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House, the Committee establishes the following performance-
related goals and objectives in this legislation:
H.R. 2364 amends the Small Business Investment Act of
1958 to increase the amount of capital and surplus
financial institutions and savings associations may
invest in an SBIC.
XVII. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
SMALL BUSINESS INVESTMENT ACT OF 1958
* * * * * * *
TITLE III--INVESTMENT DIVISION PROGRAMS
Part A--Small Business Investment Companies
* * * * * * *
capital requirements
Sec. 302.
(a) Amount.--
(1) In general.--Except as provided in paragraph (2),
the private capital of each licensee shall be not less
than--
(A) $5,000,000; or
(B) $10,000,000, with respect to each
licensee authorized or seeking authority to
issue participating securities to be purchased
or guaranteed by the Administration under this
Act.
(2) Exception.--The Administrator may, in the
discretion of the Administrator and based on a showing
of special circumstances and good cause, permit the
private capital of a licensee authorized or seeking
authorization to issue participating securities to be
purchased or guaranteed by the Administration to be
less than $10,000,000, but not less than $5,000,000, if
the Administrator determines that such action would not
create or otherwise contribute to an unreasonable risk
of default or loss to the Federal Government.
(3) Adequacy.--In addition to the requirements of
paragraph (1), the Administrator shall--
(A) determine whether the private capital of
each licensee is adequate to assure a
reasonable prospect that the licensee will be
operated soundly and profitably, and managed
actively and prudently in accordance with its
articles; and
(B) determine that the licensee will be able
both prior to licensing and prior to approving
any request for financing, to make periodic
payments on any debt of the company which is
interest bearing and shall take into
consideration the income which the company
anticipates on its contemplated investments,
the experience of the company's owners and
managers, the history of the company as an
entity, if any, and the company's financial
resources.
(4) Exemption from capital requirements.--The
Administrator may, in the discretion of the
Administrator, approve leverage for any licensee
licensed under subsection (c) or (d) of section 301
before the date of enactment of the Small Business
Program Improvement Act of 1996 that does not meet the
capital requirements of paragraph (1), if--
(A) the licensee certifies in writing that
not less 50 percent of the aggregate dollar
amount of its financings after the date of
enactment of the Small Business Program
Improvement Act of 1996 will be provided to
smaller enterprises; and
(B) the Administrator determines that such
action would not create or otherwise contribute
to an unreasonable risk of default or loss to
the United States Government.
(b) Financial Institution Investments.--
(1) Certain banks.--Notwithstanding the provisions of
section 6(a)(1) of the Bank Holding Company Act of
1956, any national bank, or any member bank of the
Federal Reserve System or nonmember insured bank to the
extent permitted under applicable State law, may invest
in any 1 or more small business investment companies,
or in any entity established to invest solely in small
business investment companies, except that in no event
shall the total amount of such investments of any such
bank exceed 5 percent of the capital and surplus of the
bank or, subject to the approval of the appropriate
Federal banking agency, 15 percent of such capital and
surplus.
(2) Certain savings associations.--Notwithstanding
any other provision of law, any Federal savings
association may invest in any one or more small
business investment companies, or in any entity
established to invest solely in small business
investment companies, except that in no event may the
total amount of such investments by any such Federal
savings association exceed 5 percent of the capital and
surplus of the Federal savings association or, subject
to the approval of the appropriate Federal banking
agency, 15 percent of such capital and surplus.
(3) Appropriate federal banking agency defined.--For
purposes of this subsection, the term ``appropriate
Federal banking agency'' has the meaning given that
term under section 3 of the Federal Deposit Insurance
Act.
(c) Diversification of Ownership.--The Administrator shall
ensure that the management of each licensee licensed after the
date of enactment of the Small Business Program Improvement Act
of 1996 is sufficiently diversified from and unaffiliated with
the ownership of the licensee in a manner that ensures
independence and objectivity in the financial management and
oversight of the investments and operations of the licensee.
* * * * * * *