[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2764 Reported in House (RH)]






                                                 Union Calendar No. 351
106th CONGRESS
  2d Session
                                H. R. 2764

                          [Report No. 106-638]

To license America's Private Investment Companies and provide enhanced 
 credit to stimulate private investment in low-income communities, and 
                          for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             August 5, 1999

  Mr. LaFalce (for himself, Mr. Kanjorski, Mr. Vento, Ms. Waters, Mr. 
   Watt of North Carolina, Ms. Hooley of Oregon, Mr. Gutierrez, Ms. 
Carson, Mr. Sandlin, Mr. Meeks of New York, Mr. Mascara, Mr. Gonzalez, 
  Mr. Brady of Pennsylvania, Mr. Jefferson, Mr. Klink, Mr. Owens, Mr. 
 Andrews, Mr. Frost, Mrs. Mink of Hawaii, Ms. Slaughter, and Mr. Rush) 
 introduced the following bill; which was referred to the Committee on 
                     Banking and Financial Services

                              May 23, 2000

 Additional sponsors: Mr. Pastor, Ms. Eddie Bernice Johnson of Texas, 
 Mr. Udall of Colorado, Mr. Snyder, Mr. Becerra, Mr. Ortiz, Mr. Reyes, 
   Mr. Rodriguez, Ms. Roybal-Allard, Mr. Serrano, Ms. Velazquez, Mr. 
Larson, Mr. Rahall, Ms. Pelosi, Ms. DeGette, Mr. Martinez, Mr. Thompson 
           of Mississippi, Mr. Engel, Ms. Lee, and Mr. Fattah

                              May 23, 2000

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
[For text of introduced bill, see copy of bill as introduced on August 
                                5, 1999]

_______________________________________________________________________

                                 A BILL


 
To license America's Private Investment Companies and provide enhanced 
 credit to stimulate private investment in low-income communities, and 
                          for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION. 1. SHORT TITLE.

    This Act may be cited as the ``America's Private Investment 
Companies Act''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that--
            (1) people living in distressed areas, both urban and 
        rural, that are characterized by high levels of joblessness, 
        poverty, and low incomes have not benefited adequately from the 
        economic expansion experienced by the Nation as a whole;
            (2) unequal access to economic opportunities continues to 
        make the social costs of joblessness and poverty to our Nation 
        very high; and
            (3) there are significant untapped markets in our Nation, 
        and many of these are in areas that are underserved by 
        institutions that can make equity and credit investments.
    (b) Purposes.--The purposes of this Act are to--
            (1) license private for profit community development 
        entities that will focus on making equity and credit 
        investments for large-scale business developments that benefit 
        low-income communities;
            (2) provide credit enhancement for those entities for use 
        in low-income communities; and
            (3) provide a vehicle under which the economic and social 
        returns on financial investments made pursuant to this Act may 
        be available both to the investors in these entities and to the 
        residents of the low-income communities.

SEC. 3. DEFINITIONS.

    As used in this Act:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Small Business Administration.
            (2) Agency.--The term ``agency'' has the meaning given such 
        term in section 551(1) of title 5, United States Code.
            (3) APIC.--The term ``APIC'' means a business entity that 
        has been licensed under the terms of this Act as an America's 
        Private Investment Company, and the license of which has not 
        been revoked.
            (4) Community development entity.--The term ``community 
        development entity'' means an entity the primary mission of 
        which is serving or providing investment capital for low-income 
        communities or low-income persons and which maintains 
        accountability to residents of low-income communities.
            (5) HUD.--The term ``HUD'' means the Secretary of Housing 
        and Urban Development or the Department of Housing and Urban 
        Development, as the context requires.
            (6) License.--The term ``license'' means a license issued 
        by HUD as provided in section 4.
            (7) Low-income community.--The term ``low-income 
        community'' means--
                    (A) a census tract or tracts that have--
                            (i) a poverty rate of 20 percent or 
                        greater, based on the most recent census data; 
                        or
                            (ii) a median family income that does not 
                        exceed 80 percent of the greater of (I) the 
                        median family income for the metropolitan area 
                        in which such census tract or tracts are 
                        located, or (II) the median family income for 
                        the State in which such census tract or tracts 
                        are located; or
                    (B) a property that was located on a military 
                installation that was closed or realigned pursuant to 
                title II of the Defense Authorization Amendments and 
                Base Closure and Realignment Act (Public Law 100-526; 
                10 U.S.C. 2687 note), the Defense Base Closure and 
                Realignment Act of 1990 (part A of title XXIX of Public 
                Law 101-510; 10 U.S.C. 2687 note), section 2687 of 
                title 10, United States Code, or any other similar law 
                enacted after the date of the enactment of this Act 
                that provides for closure or realignment of military 
                installations.
            (8) Low-income person.--The term ``low-income person'' 
        means a person who is a member of a low-income family, as such 
        term is defined in section 104 of the Cranston-Gonzalez 
        National Affordable Housing Act (42 U.S.C. 12704).
            (9) Private equity capital.--
                    (A) In general.--The term ``private equity 
                capital''--
                            (i) in the case of a corporate entity, the 
                        paid-in capital and paid-in surplus of the 
                        corporate entity;
                            (ii) in the case of a partnership entity, 
                        the contributed capital of the partners of the 
                        partnership entity;
                            (iii) in the case of a limited liability 
                        company entity, the equity investment of the 
                        members of the limited liability company 
                        entity; and
                            (iv) earnings from investments of the 
                        entity that are not distributed to investors 
                        and are available for reinvestment by the 
                        entity.
                    (B) Exclusions.--Such term does not include any--
                            (i) funds borrowed by an entity from any 
                        source or obtained through the issuance of 
                        leverage; except that this clause may not be 
                        construed to exclude amounts evidenced by a 
                        legally binding and irrevocable investment 
                        commitment in the entity, or the use by an 
                        entity of a pledge of such investment 
                        commitment to obtain bridge financing from a 
                        private lender to fund the entity's activities 
                        on an interim basis; or
                            (ii) funds obtained directly or indirectly 
                        from any Federal, State, or local government or 
                        any government agency, except for--
                                    (I) funds invested by an employee 
                                welfare benefit plan or pension plan; 
                                and
                                    (II) credits against any Federal, 
                                State, or local taxes.
            (10) Qualified active business.--The term ``qualified 
        active business'' means a business or trade--
                    (A) that, at the time that an investment is made in 
                the business or trade, is deriving at least 50 percent 
                of its gross income from the conduct of trade or 
                business activities in low-income communities;
                    (B) a substantial portion of the use of the 
                tangible property of which is used within low-income 
                communities;
                    (C) a substantial portion of the services that the 
                employees of which perform are performed in low-income 
                communities; and
                    (D) less than 5 percent of the aggregate unadjusted 
                bases of the property of which is attributable to 
                certain financial property, as the Secretary shall set 
                forth in regulations, or in collectibles, other than 
                collectibles held primarily for sale to customers.
            (11) Qualified debenture.--The term ``qualified debenture'' 
        means a debt instrument having terms that meet the requirements 
        established pursuant to section 6(c)(1).
            (12) Qualified low-income community investment.--The term 
        ``qualified low-income community investment'' mean an equity 
        investment in, or a loan to, a qualified active business.
            (13) Secretary.--The term ``Secretary'' means the Secretary 
        of Housing and Urban Development, unless otherwise specified in 
        this Act.

SEC. 4. AUTHORIZATION.

    (a) Licenses.--The Secretary is authorized to license community 
development entities as America's Private Investment Companies, in 
accordance with the terms of this Act.
    (b) Regulations.--The Secretary shall regulate APICs for compliance 
with sound financial management practices, and the program and 
procedural goals of this and other related Acts, and other purposes as 
required or authorized by this Act, or determined by the Secretary. The 
Secretary shall issue such regulations as are necessary to carry out 
the licensing and regulatory and other duties under this Act, and may 
issue notices and other guidance or directives as the Secretary 
determines are appropriate to carry out such duties.
    (c) Use of Credit Subsidy for Licenses.--
            (1) Number of licenses.--The number of APICs licensed at 
        any one time may not exceed--
                    (A) the number that may be supported by the amount 
                of budget authority appropriated in accordance with 
                section 504(b) of the Federal Credit Reform Act of 1990 
                (2 U.S.C. 661c) for the cost (as such term is defined 
                in section 502 of such Act) of the subsidy and the 
                investment strategies of such APICs; or
                    (B) to the extent the limitation under section 
                5(e)(1) applies, the number authorized under such 
                section.
            (2) Use of additional credit subsidy.--Subject to the 
        limitation under paragraph (1), the Secretary may use any 
        budget authority available after credit subsidy has been 
        allocated for the APICs initially licensed pursuant to section 
        5 as follows:
                    (A) Additional licenses.--To license additional 
                APICs.
                    (B) Credit subsidy increases.--To increase the 
                credit subsidy allocated to an APIC as an award for 
                high performance under this Act, except that such 
                increases may be made only in accordance with the 
                following requirements and limitations:
                            (i) Timing.--An increase may only be 
                        provided for an APIC that has been licensed for 
                        a period of not less than 2 years.
                            (ii) Competition.--An increase may only be 
                        provided for a fiscal year pursuant to a 
                        competition for such fiscal year among APICs 
                        eligible for, and requesting, such an increase. 
                        The competition shall be based upon criteria 
                        that the Secretary shall establish, which shall 
                        include the financial soundness and performance 
                        of the APICs, as measured by achievement of the 
                        public performance goals included in the APICs 
                        statements required under section 5(a)(6) and 
                        audits conducted under section 9(b)(2). Among 
                        the criteria established by the Secretary to 
                        determine priority for selection under this 
                        section, the Secretary shall include making 
                        investments in and loans to qualified active 
                        businesses in urban or rural areas that have 
                        been designated under subchapter U of Chapter 1 
                        of the Internal Revenue Code of 1986 as 
                        empowerment zones or enterprise communities.
    (d) Cooperation and Coordination.--
            (1) Program policies.--The Secretary is authorized to 
        coordinate and cooperate, through memoranda of understanding, 
        an APIC liaison committee, or otherwise, with the 
        Administrator, the Secretary of the Treasury, and other 
        agencies in the discretion of the Secretary, on implementation 
        of this Act, including regulation, examination, and monitoring 
        of APICs under this Act.
            (2) Financial soundness requirements.--The Secretary shall 
        consult with the Administrator and the Secretary of the 
        Treasury, and may consult with such other heads of agencies as 
        the Secretary may consider appropriate, in establishing any 
        regulations, requirements, guidelines, or standards for 
        financial soundness or management practices of APICs or 
        entities applying for licensing as APICs. In implementing and 
        monitoring compliance with any such regulations, requirements, 
        guidelines, and standards, the Secretary shall enter into such 
        agreements and memoranda of understanding with the 
        Administrator and the Secretary of the Treasury as may be 
        appropriate to provide for such officials to provide any 
        assistance that may be agreed to.
            (3) Operations.--The Secretary may carry out this Act--
                    (A) directly, through agreements with other Federal 
                entities under section 1535 of title 31, United States 
                Code, or otherwise, or
                    (B) indirectly, under contracts or agreements, as 
                the Secretary shall determine.
    (e) Fees and Charges for Administrative Costs.--To the extent 
provided in appropriations Acts, the Secretary is authorized to impose 
fees and charges for application, review, licensing, and regulation, or 
other actions under this Act, and to pay for the costs of such 
activities from the fees and charges collected.
    (f) Guarantee Fees.--The Secretary is authorized to set and collect 
fees for loan guarantee commitments and loan guarantees that the 
Secretary makes under this Act.
    (g) Funding.--
            (1) Authorization of appropriations for loan guarantee 
        commitments.--For each of fiscal years 2000, 2001, 2002, 2003, 
        and 2004, there is authorized to be appropriated up to 
        $36,000,000 for the cost (as such term is defined in section 
        502(5) of the Federal Credit Reform Act of 1990) of annual loan 
        guarantee commitments under this Act. Amounts appropriated 
        under this paragraph shall remain available until expended.
            (2) Aggregate loan guarantee commitment limitation.--The 
        Secretary may make commitments to guarantee loans only to the 
        extent that the total loan principal, any part of which is 
        guaranteed, will not exceed $1,000,000,000, unless another such 
        amount is specified in appropriation Acts for any fiscal year.
            (3) Authorization of appropriations for administrative 
        expenses.--For each of the fiscal years 2000, 2001, 2002, 2003, 
        and 2004, there is authorized to be appropriated $1,000,000 for 
        administrative expenses for carrying out this Act. The 
        Secretary may transfer amounts appropriated under this 
        paragraph to any appropriation account of HUD or another 
        agency, to carry out the program under this Act. Any agency to 
        which the Secretary may transfer amounts under this Act is 
        authorized to accept such transferred amounts in any 
        appropriation account of such agency.

SEC. 5. SELECTION OF APICS.

    (a) Eligible Applicants.--An entity shall be eligible to be 
selected for licensing under section 4 as an APIC only if the entity 
submits an application in compliance with the requirements established 
pursuant to subsection (b) and the entity meets or complies with the 
following requirements:
            (1) Organization.--The entity shall be a private, for-
        profit entity that qualifies as a community development entity 
        for the purposes of the New Markets Tax Credits, to the extent 
        such credits are established under Federal law.
            (2) Minimum private equity capital.--The amount of private 
        equity capital reasonably available to the entity, as 
        determined by the Secretary, at the time that a license is 
        approved may not be less than $25,000,000.
            (3) Qualified management.--The management of the entity 
        shall, in the determination of the Secretary, meet such 
        standards as the Secretary shall establish to ensure that the 
        management of the APIC is qualified, and has the financial 
        expertise, knowledge, experience, and capability necessary, to 
        make investments for community and economic development in low-
        income communities.
            (4) Conflict of interest.--The entity shall demonstrate 
        that, in accordance with sound financial management practices, 
        the entity is structured to preclude financial conflict of 
        interest between the APIC and a manager or investor.
            (5) Investment strategy.--The entity shall prepare and 
        submit to the Secretary an investment strategy that includes 
        benchmarks for evaluation of its progress, that includes an 
        analysis of existing locally owned businesses in the 
        communities in which the investments under the strategy will be 
        made, that prioritizes such businesses for investment 
        opportunities, and that fulfills the specific public purpose 
        goals of the entity.
            (6) Statement of public purpose goals.--The entity shall 
        prepare and submit to the Secretary a statement of the public 
        purpose goals of the entity, which shall--
                    (A) set forth goals that shall promote community 
                and economic development, which shall include--
                            (i) making investments in low-income 
                        communities that further economic development 
                        objectives by targeting such investments in 
                        businesses or trades that comply with the 
                        requirements under subparagraphs (A) through 
                        (C) of section 3(10) relating to low-income 
                        communities in a manner that benefits low-
                        income persons;
                            (ii) creating jobs in low-income 
                        communities for residents of such communities;
                            (iii) involving community-based 
                        organizations and residents in community 
                        development activities;
                            (iv) such other goals as the Secretary 
                        shall specify; and
                            (v) such elements as the entity may set 
                        forth to achieve specific public purpose goals;
                    (B) include such other elements as the Secretary 
                shall specify; and
                    (C) include proposed measurements and strategies 
                for meeting the goals.
            (7) Compliance with laws.--The entity shall agree to comply 
        with applicable laws, including Federal executive orders, 
        Office of Management and Budget circulars, and requirements of 
        the Department of the Treasury, and such operating and 
        regulatory requirements as the Secretary may impose from time 
        to time.
            (8) Other.--The entity shall satisfy any other application 
        requirements that the Secretary may impose by regulation or 
        Federal Register notice.
    (b) Competitions.--The Secretary shall select eligible entities 
under subsection (a) to be licensed under section 4 as APICs on the 
basis of competitions. The Secretary shall announce each such 
competition by causing a notice to be published in the Federal Register 
that invites applications for licenses and sets forth the requirements 
for application and such other terms of the competition not otherwise 
provided for, as determined by the Secretary.
    (c) Selection.--In competitions under subsection (b), the Secretary 
shall select eligible entities under subsection (a) for licensing as 
APICs on the basis of--
            (1) the extent to which the entity is expected to achieve 
        the goals of this Act by meeting or exceeding criteria 
        established under subsection (d); and
            (2) to the extent practicable and subject to the existence 
        of approvable applications, ensuring geographical diversity 
        among the applicants selected and diversity of APICs investment 
        strategies, so that urban and rural communities are both 
        served, in the determination of the Secretary, by the program 
        under this Act.
    (d) Selection Criteria.--The Secretary shall establish selection 
criteria for competitions under subsection (b), which shall include the 
following criteria:
            (1) Capacity.--
                    (A) Management.--The extent to which the entity's 
                management has the quality, experience, and expertise 
                to make and manage successful investments for community 
                and economic development in low-income communities.
                    (B) State and local cooperation.--The extent to 
                which the entity demonstrates a capacity to cooperate 
                with States or units of general local government and 
                with community-based organizations and residents of 
                low-income communities.
            (2) Investment strategy.--The quality of the entity's 
        investment strategy submitted in accordance with subsection 
        (a)(5) and the extent to which the investment strategy furthers 
        the goals of this Act pursuant to paragraph (3) of this 
        subsection.
            (3) Public purpose goals.--With respect to the statement of 
        public purpose goals of the entity submitted in accordance with 
        subsection (a)(6), and the strategy and measurements included 
        therein--
                    (A) the extent to which such goals promote 
                community and economic development;
                    (B) the extent to which such goals provide for 
                making qualified investments in low-income communities 
                that further economic development objectives, such as--
                            (i) creating, within 2 years of the 
                        completion of the initial such investment, job 
                        opportunities, opportunities for ownership, and 
                        other economic opportunities within a low-
                        income community, both short-term and of a 
                        longer duration;
                            (ii) improving the economic vitality of a 
                        low-income community, including stimulating 
                        other business development;
                            (iii) bringing new income into a low-income 
                        community and assisting in the revitalization 
                        of such community;
                            (iv) converting real property for the 
                        purpose of creating a site for business 
                        incubation and location, or business district 
                        revitalization;
                            (v) enhancing economic competition, 
                        including the advancement of technology;
                            (vi) rural development;
                            (vii) mitigating, rehabilitating, and 
                        reusing real property considered subject to the 
                        Solid Waste Disposal Act (42 U.S.C. 6901 et 
                        seq.; commonly referred to as the Resource 
                        Conservation and Recovery Act) or restoring 
                        coal mine-scarred land;
                            (viii) creation of local wealth through 
                        investments in employee stock ownership 
                        companies or resident-owned ventures; and
                            (ix) any other objective that the Secretary 
                        may establish to further the purposes of this 
                        Act;
                    (C) the quality of jobs to be created for residents 
                of low-income communities, taking into consideration 
                such factors as the payment of higher wages, job 
                security, employment benefits, opportunity for 
                advancement, and personal asset building;
                    (D) the extent to which achievement of such goals 
                will involve community-based organizations and 
                residents in community development activities; and
                    (E) the extent to which the investments referred to 
                in subparagraph (B) are likely to benefit existing 
                small business in low-income communities or will 
                encourage the growth of small business in such 
                communities.
            (4) Other.--Any other criteria that the Secretary may 
        establish to carry out the purposes of this Act.
    (e) First Year Requirements.--
            (1) Numerical limitation.--The number of APICs may not, at 
        any time during the 1-year period that begins upon the 
        Secretary awarding the first license for an APIC under this 
        Act, exceed 15.
            (2) Limitation on allocation of available credit subsidy.--
        Of the amount of budget authority initially made available for 
        allocation under this Act for APICs, the amount allocated for 
        any single APIC may not exceed 20 percent.
            (3) Native american private investment company.--Subject 
        only to the absence of an approvable application from an 
        entity, during the 1-year period referred to in paragraph (1), 
        of the entities selected and licensed by the Secretary as 
        APICs, at least one shall be an entity that has as its primary 
        purpose the making of qualified low-income community 
        investments in areas that are within Indian country (as such 
        term is defined in section 1151 of title 18, United States 
        Code) or within lands that have status as Hawaiian home land 
        under section 204 of the Hawaiian Homes Commission Act, 1920 
        (42 Stat. 108) or are acquired pursuant to such Act. The 
        Secretary may establish specific selection criteria for 
        applicants under this paragraph.
    (f) Communications Between HUD and Applicants.--
            (1) In general.--The Secretary shall set forth in 
        regulations the procedures under which HUD and applicants for 
        APIC licenses, and others, may communicate. Such regulations 
        shall--
                    (A) specify by position the HUD officers and 
                employees who may communicate with such applicants and 
                others;
                    (B) permit HUD officers and employees to request 
                and discuss with the applicant and others (such as 
                banks or other credit or business references, or 
                potential investors, that the applicant specifies in 
                writing) any more detailed information that may be 
                desirable to facilitate HUD's review of the applicant's 
                application;
                    (C) restrict HUD officers and employees from 
                revealing to any applicant--
                            (i) the fact or chances of award of a 
                        license to such applicant, unless there has 
                        been a public announcement of the results of 
                        the competition; and
                            (ii) any information with respect to any 
                        other applicant; and
                    (D) set forth requirements for making and keeping 
                records of any communications conducted under this 
                subsection, including requirements for making such 
                records available to the public after the award of 
                licenses under an initial or subsequent notice, as 
                appropriate, under subsection (a).
            (2) Timing.--Regulations under this subsection may be 
        issued as interim rules for effect on or before the date of 
        publication of the first notice under subsection (a), and shall 
        apply only with respect to applications under such notice. 
        Regulations to implement this subsection with respect to any 
        notice after the first such notice shall be subject to notice 
        and comment rulemaking.
            (3) Inapplicability of department of hud act provision.--
        Section 12(e)(2) of the Department of Housing and Urban 
        Development Act (42 U.S.C. 3537a(e)(2)) is amended by inserting 
        before the period at the end the following: ``or any license 
        provided under the America's Private Investment Companies 
        Act''.

SEC. 6. OPERATIONS OF APICS.

    (a) Powers and Authorities.--
            (1) In general.--An APIC shall have any powers or 
        authorities that--
                    (A) the APIC derives from the jurisdiction in which 
                it is organized, or that the APIC otherwise has;
                    (B) may be conferred by a license under this Act; 
                and
                    (C) the Secretary may prescribe by regulation.
            (2) New market assistance.--Nothing in this Act shall 
        preclude an APIC or its investors from receiving an allocation 
        of New Market Tax Credits (to the extent such credits are 
        established under Federal law) if the APIC satisfies any 
        applicable terms and conditions under the Internal Revenue Code 
        of 1986.
    (b) Investment Limitations.--
            (1) Qualified low-income community investments.--
        Substantially all investments that an APIC makes shall be 
        qualified low-income community investments if the investments 
        are financed with--
                    (A) amounts available from the proceeds of the 
                issuance of an APIC's qualified debenture guaranteed 
                under this Act;
                    (B) proceeds of the sale of obligations described 
                under subsection (c)(3)(C)(iii); or
                    (C) the use of private equity capital, as 
                determined by the Secretary, in an amount specified in 
                the APIC's license.
            (2) Single business investments.--An APIC shall not, as a 
        matter of sound financial practice, invest in any one business 
        an amount that exceeds an amount equal to 35 percent of the sum 
        of--
                    (A) the APIC's private equity capital; plus
                    (B) an amount equal to the percentage limit that 
                the Secretary determines that an APIC may have 
                outstanding at any one time, under subsection 
                (c)(2)(A).
    (c) Borrowing Powers; Qualified Debentures.--
            (1) Issuance.--An APIC may issue qualified debentures. The 
        Secretary shall, by regulation, specify the terms and 
        requirements for debentures to be considered qualified 
        debentures for purposes of this Act, except that the term to 
        maturity of any qualified debenture may not exceed 21 years and 
        each qualified debenture shall bear interest during all or any 
        part of that time period at a rate or rates approved by the 
        Secretary.
            (2) Leverage limits.--In general, as a matter of sound 
        financial management practices--
                    (A) the total amount of qualified debentures that 
                an APIC issues under this Act that an APIC may have 
                outstanding at any one time shall not exceed an amount 
                equal to 200 percent of the private equity capital of 
                the APIC, as determined by the Secretary; and
                    (B) an APIC shall not have more than $300,000,000 
                in face value of qualified debentures issued under this 
                Act outstanding at any one time.
            (3) Repayment.--
                    (A) Condition of business wind-up.--An APIC shall 
                have repaid, or have otherwise been relieved of 
                indebtedness, with respect to any interest or principal 
                amounts of borrowings under this subsection no less 
                than 2 years before the APIC may dissolve or otherwise 
                complete the wind-up of its business.
                    (B) Timing.--An APIC may repay any interest or 
                principal amounts of borrowings under this subsection 
                at any time: Provided, That the repayment of such 
                amounts shall not relieve an APIC of any duty otherwise 
                applicable to the APIC under this Act, unless the 
                Secretary orders such relief.
                    (C) Use of investment proceeds before repayment.--
                Until an APIC has repaid all interest and principal 
                amounts on APIC borrowings under this subsection, an 
                APIC may use the proceeds of investments, in accordance 
                with regulations issued by the Secretary, only to--
                            (i) pay for proper costs and expenses the 
                        APIC incurs in connection with such 
                        investments;
                            (ii) pay for the reasonable administrative 
                        expenses of the APIC;
                            (iii) purchase Treasury securities;
                            (iv) repay interest and principal amounts 
                        on APIC borrowings under this subsection;
                            (v) make interest, dividend, or other 
                        distributions to or on behalf of an investor; 
                        or
                            (vi) undertake such other purposes as the 
                        Secretary may approve.
                    (D) Use of investment proceeds after repayment.--
                After an APIC has repaid all interest and principal 
                amounts on APIC borrowings under this subsection, and 
                subject to continuing compliance with subsection (a), 
                the APIC may use the proceeds from investments to make 
                interest, dividend, or other distributions to or on 
                behalf of investors in the nature of returns on 
                capital, or the withdrawal of private equity capital, 
                without regard to subparagraph (C) but in conformity 
                with the APIC's investment strategy and statement of 
                public purpose goals.
    (d) Reuse of Qualified Debenture Proceeds.--An APIC may use the 
proceeds of sale of Treasury securities purchased under subsection 
(c)(3)(C)(iii) to make qualified low-income community investments, 
subject to the Secretary's approval. In making the request for the 
Secretary's approval, the APIC shall follow the procedures applicable 
to an APIC's request for HUD guarantee action, as the Secretary may 
modify such procedures for implementation of this subsection. Such 
procedures shall include the description and certifications that an 
APIC must include in all requests for guarantee action, and the 
environmental certification applicable to initial expenditures for a 
project or activity.
    (e) Antipirating.--Notwithstanding any other provision of law, an 
APIC may not use any private equity capital required to be contributed 
under this Act, or the proceeds from the sale of any qualified 
debenture under this Act, to make an investment, as determined by the 
Secretary, to assist directly in the relocation of any industrial or 
commercial plant, facility, or operation, from 1 area to another area, 
if the relocation is likely to result in a significant loss of 
employment in the labor market area from which the relocation occurs.
    (f) Exclusion of APIC From Definition of Debtor Under Bankruptcy 
Provisions.--Section 109(b)(2) of title 11, United States Code, is 
amended by inserting before ``credit union'' the following: ``America's 
Private Investment Company licensed under the America's Private 
Investment Companies Act,''.

SEC. 7. CREDIT ENHANCEMENT BY THE FEDERAL GOVERNMENT.

    (a) Issuance and Guarantee of Qualified Debentures.--
            (1) Authority.--To the extent consistent with the Federal 
        Credit Reform Act of 1990, the Secretary is authorized to make 
        commitments to guarantee and guarantee the timely payment of 
        all principal and interest as scheduled on qualified debentures 
        issued by APICs. Such commitments and guarantees may only be 
        made in accordance with the terms and conditions established 
        under paragraph (2).
            (2) Terms and conditions.--The Secretary shall establish 
        such terms and conditions as the Secretary determines to be 
        appropriate for commitments and guarantees under this 
        subsection, including terms and conditions relating to amounts, 
        expiration, number, priorities of repayment, security, 
        collateral, amortization, payment of interest (including the 
        timing thereof), and fees and charges. The terms and conditions 
        applicable to any particular commitment or guarantee may be 
        established in documents that the Secretary approves for such 
        commitment or guarantee.
            (3) Seniority.--Notwithstanding any other provision of 
        Federal law or any law or the constitution of any State, 
        qualified debentures guaranteed under this subsection by the 
        Secretary shall be senior to any other debt obligation, equity 
        contribution or earnings, or the distribution of dividends, 
        interest, or other amounts, of an APIC.
    (b) Issuance of Trust Certificates.--The Secretary, or an agent or 
entity selected by the Secretary, is authorized to issue trust 
certificates representing ownership of all or a fractional part of 
guaranteed qualified debentures issued by APICs and held in trust.
    (c) Guarantee of Trust Certificates.--
            (1) In general.--The Secretary is authorized, upon such 
        terms and conditions as the Secretary determines to be 
        appropriate, to guarantee the timely payment of the principal 
        of and interest on trust certificates issued by the Secretary, 
        or an agent or other entity, for purposes of this section. Such 
        guarantee shall be limited to the extent of principal and 
        interest on the guaranteed qualified debentures which compose 
        the trust.
            (2) Substitution option.--The Secretary shall have the 
        option to replace in the corpus of the trust any prepaid or 
        defaulted qualified debenture with a debenture, another full 
        faith and credit instrument, or any obligations of the United 
        States, that may reasonably substitute for such prepaid or 
        defaulted qualified debenture.
            (3) Proportionate reduction option.--In the event that the 
        Secretary elects not to exercise the option under paragraph 
        (2), and a qualified debenture in such trust is prepaid, or in 
        the event of default of a qualified debenture, the guarantee of 
        timely payment of principal and interest on the trust 
        certificate shall be reduced in proportion to the amount of 
        principal and interest that such prepaid qualified debenture 
        represents in the trust. Interest on prepaid or defaulted 
        qualified debentures shall accrue and be guaranteed by the 
        Secretary only through the date of payment of the guarantee. 
        During the term of a trust certificate, it may be called for 
        redemption due to prepayment or default of all qualified 
        debentures that are in the corpus of the trust.
    (d) Full Faith and Credit Backing of Guarantees.--The full faith 
and credit of the United States is pledged to the timely payment of all 
amounts which may be required to be paid under any guarantee by the 
Secretary pursuant to this section.
    (e) Subrogation and Liens.--
            (1) Subrogation.--In the event the Secretary pays a claim 
        under a guarantee issued under this section, the Secretary 
        shall be subrogated fully to the rights satisfied by such 
        payment.
            (2) Priority of liens.--No State or local law, and no 
        Federal law, shall preclude or limit the exercise by the 
        Secretary of its ownership rights in the debentures in the 
        corpus of a trust under this section.
    (f) Registration.--
            (1) In general.--The Secretary shall provide for a central 
        registration of all trust certificates issued pursuant to this 
        section.
            (2) Agents.--The Secretary may contract with an agent or 
        agents to carry out on behalf of the Secretary the pooling and 
        the central registration functions of this section 
        notwithstanding any other provision of law, including 
        maintenance on behalf of and under the direction of the 
        Secretary, such commercial bank accounts or investments in 
        obligations of the United States as may be necessary to 
        facilitate trusts backed by qualified debentures guaranteed 
        under this Act and the issuance of trust certificates to 
        facilitate formation of the corpus of the trusts. The Secretary 
        may require such agent or agents to provide a fidelity bond or 
        insurance in such amounts as the Secretary determines to be 
        necessary to protect the interests of the Government.
            (3) Form.--Book-entry or other electronic forms of 
        registration for trust certificates under this Act are 
        authorized.
    (g) Timing of Issuance of Guarantees of Qualified Debentures and 
Trust Certificates.--The Secretary may, from time to time in the 
Secretary's discretion, exercise the authority to issue guarantees of 
qualified debentures under this Act or trust certificates under this 
Act.

SEC. 8. APIC REQUESTS FOR GUARANTEE ACTIONS.

    (a) In General.--The Secretary may issue a guarantee under this Act 
for a qualified debenture that an APIC intends to issue only pursuant 
to a request to the Secretary by the APIC for such guarantee that is 
made in accordance with regulations governing the content and 
procedures for such requests, that the Secretary shall prescribe. Such 
regulations shall provide that each such request shall include--
            (1) a description of the manner in which the APIC intends 
        to use the proceeds from the qualified debenture;
            (2) a certification by the APIC that the APIC is in 
        substantial compliance with--
                    (A) this Act and other applicable laws, including 
                any requirements established under this Act by the 
                Secretary;
                    (B) all terms and conditions of its license, any 
                cease-and-desist order issued under section 10, and of 
                any penalty or condition that may have arisen from 
                examination or monitoring by the Secretary or 
                otherwise, including the satisfaction of any financial 
                audit exception that may have been outstanding; and
                    (C) all requirements relating to the allocation and 
                use of New Markets Tax Credits, to the extent such 
                credits are established under Federal law; and
            (3) any other information or certification that the 
        Secretary considers appropriate.
    (b) Requests for Guarantee of Qualified Debentures That Include 
Funding for Initial Expenditure for a Project or Activity.--In addition 
to the description and certification that an APIC is required to supply 
in all requests for guarantee action under subsection (a), in the case 
of an APIC's request for a guarantee that includes a qualified 
debenture, the proceeds of which the APIC expects to be used as its 
initial expenditure for a project or activity in which the APIC intends 
to invest, and the expenditure for which would require an environmental 
assessment under the National Environmental Policy Act of 1969 and 
other related laws that further the purposes of such Act, such request 
for guarantee action shall include evidence satisfactory to the 
Secretary of the certification of the completion of environmental 
review of the project or activity required of the cognizant State or 
local government under subsection (c). If the environmental review 
responsibility for the project or activity has not been assumed by a 
State or local government under subsection (c), then the Secretary 
shall be responsible for carrying out the applicable responsibilities 
under the National Environmental Policy Act of 1969 and other 
provisions of law that further the purposes of such Act that relate to 
the project or activity, and the Secretary shall execute such 
responsibilities before acting on the APIC's request for the guarantee 
that is covered by this subsection.
    (c) Responsibility for Environmental Reviews.--
            (1) Execution of responsibility by the secretary.--This 
        subsection shall apply to guarantees by the Secretary of 
        qualified debentures under this Act, the proceeds of which 
        would be used in connection with qualified low-income community 
        investments of APICs under this Act.
            (2) Assumption of responsibility by cognizant unit of 
        general government.--
                    (A) Guarantee of qualified debentures.--In order to 
                assure that the policies of the National Environmental 
                Policy Act of 1969 and other provisions of law that 
                further the purposes of such Act (as specified in 
                regulations issued by the Secretary) are most 
                effectively implemented in connection with the 
                expenditure of funds under this Act, and to assure to 
                the public undiminished protection of the environment, 
                the Secretary may, under such regulations, in lieu of 
                the environmental protection procedures otherwise 
                applicable, provide for the guarantee of qualified 
                debentures, any part of the proceeds of which are to 
                fund particular qualified low-income community 
                investments of APICs under this Act, if a State or unit 
                of general local government, as designated by the 
                Secretary in accordance with regulations issued by the 
                Secretary, assumes all of the responsibilities for 
                environmental review,  decisionmaking, and action 
pursuant to the National Environmental Policy Act of 1969 and such 
other provisions of law that further such Act as the regulations of the 
Secretary specify, that would otherwise apply to the Secretary were the 
Secretary to undertake the funding of such investments as a Federal 
action.
                    (B) Implementation.--The Secretary shall issue 
                regulations to carry out this subsection only after 
                consultation with the Council on Environmental Quality. 
                Such regulations shall--
                            (i) specify any other provisions of law 
                        which further the purposes of the National 
                        Environmental Policy Act of 1969 and to which 
                        the assumption of responsibility as provided in 
                        this subsection applies;
                            (ii) provide eligibility criteria and 
                        procedures for the designation of a State or 
                        unit of general local government to assume all 
                        of the responsibilities in this subsection;
                            (iii) specify the purposes for which funds 
                        may be committed without regard to the 
                        procedure established under paragraph (3);
                            (iv) provide for monitoring of the 
                        performance of environmental reviews under this 
                        subsection;
                            (v) in the discretion of the Secretary, 
                        provide for the provision or facilitation of 
                        training for such performance; and
                            (vi) subject to the discretion of the 
                        Secretary, provide for suspension or 
                        termination by the Secretary of the assumption 
                        under subparagraph (A).
                    (C) Responsibilities of states and units of general 
                local government.--The Secretary's duty under 
                subparagraph (B) shall not be construed to limit any 
                responsibility assumed by a State or unit of general 
                local government with respect to any particular request 
                for guarantee under subparagraph (A), or the use of 
                funds for a qualified investment.
            (3) Procedure.--Subject to compliance by the APIC with the 
        requirements of this title, the Secretary shall approve the 
        request for guarantee of a qualified debenture, any part of the 
        proceeds of which is to fund particular qualified low-income 
        community investments of an APIC under this Act, that is 
        subject to the procedures authorized by this subsection only 
        if, not less than 15 days prior to such approval and prior to 
        any commitment of funds to such investment (except for such 
        purposes specified in the regulations issued under paragraph 
        (2)(B)), the APIC submits to the Secretary a request for 
        guarantee of a qualified debenture that is accompanied by 
        evidence of a certification of the State or unit of general 
        local government which meets the requirements of paragraph (4). 
        The approval by the Secretary of any such certification shall 
        be deemed to satisfy the Secretary's responsibilities pursuant 
        to paragraph (1) under the National Environmental Policy Act of 
        1969 and such other provisions of law as the regulations of the 
        Secretary specify insofar as those responsibilities relate to 
        the guarantees of qualified debentures, any parts of the 
        proceeds of which are to fund such investments, which are 
        covered by such certification.
            (4) Certification.--A certification under the procedures 
        authorized by this subsection shall--
                    (A) be in a form acceptable to the Secretary;
                    (B) be executed by the chief executive officer or 
                other officer of the State or unit of general local 
                government who qualifies under regulations of the 
                Secretary;
                    (C) specify that the State or unit of general local 
                government under this subsection has fully carried out 
                its responsibilities as described under paragraph (2); 
                and
                    (D) specify that the certifying officer--
                            (i) consents to assume the status of a 
                        responsible Federal official under the National 
                        Environmental Policy Act of 1969 and each 
                        provision of law specified in regulations 
                        issued by the Secretary insofar as the 
                        provisions of such Act or other such provision 
                        of law apply pursuant to paragraph (2); and
                            (ii) is authorized and consents on behalf 
                        of the State or unit of general local 
                        government and himself or herself to accept the 
                        jurisdiction of the Federal courts for the 
                        purpose of enforcement of the responsibilities 
                        as such an official.

SEC. 9. EXAMINATION AND MONITORING OF APICS.

    (a) In General.--The Secretary shall, under regulations, through 
audits, performance agreements, license conditions, or otherwise, 
examine and monitor the operations and activities of APICs for 
compliance with sound financial management practices, and for 
satisfaction of the program and procedural goals of this Act and other 
related Acts. The Secretary may undertake any responsibility under this 
section in cooperation with an APIC liaison committee, or any agency 
that is a member of such a committee, or other agency.
    (b) Monitoring, Updating, and Program Review.--
            (1) Reporting and updating.--The Secretary shall establish 
        such annual or more frequent reporting requirements for APICs, 
        and such requirements for the updating of the statement of 
        public purpose goals, investment strategy (including the 
        benchmarks in such strategy), and other documents that may have 
        been used in the license application process under this Act, as 
        the Secretary determines necessary to assist the Secretary in 
        monitoring the compliance and performance of APICs.
            (2) Annual audits.--The Secretary shall require each APIC 
        to have an independent audit conducted annually of the 
        operations of the APIC. The Secretary, in consultation with the 
        Administrator and the Secretary of the Treasury, shall 
        establish requirements and standards for such audits, including 
        requirements that such audits be conducted in accordance with 
        generally accepted accounting principles, that the APIC submit 
        the results of the audit to Secretary, and that specify the 
        information to be submitted.
            (3) Examinations.--The Secretary shall, no less often than 
        once every 2 years, examine the operations and portfolio of 
        each APIC licensed under this Act for compliance with sound 
        financial management practices, and for compliance with this 
        Act.
            (4) Examination standards.--
                    (A) Sound financial management practices.--The 
                Secretary shall examine each APIC to ensure, as a 
                matter of sound financial management practices, 
                substantial compliance with this and other applicable 
                laws, including Federal executive orders, Department of 
                Treasury and Office of Management and Budget guidance, 
                circulars, and application and licensing requirements 
                on a continuing basis. The Secretary may, by 
                regulation, establish any additional standards for 
                sound financial management practices, including 
                standards that address solvency and financial exposure.
                    (B) Performance and other examinations.--The 
                Secretary shall monitor each APIC's progress in meeting 
                the goals in the APIC's statement of public purpose 
                goals, executing the APIC's investment strategy, and 
                other matters.
    (c) Inspector General Responsibility.--In carrying out monitoring 
of HUD's responsibilities under this Act and for purposes of ensuring 
that the program under this Act is operated in accordance with sound 
financial management practices, the Inspector General of the Department 
of Housing and Urban Development shall consult with the Inspector 
General of the Department of the Treasury and the Inspector General of 
the Small Business Administration, as appropriate, and may enter into 
such agreements and memoranda of understanding as may be necessary to 
obtain the cooperation of the Inspectors General of the Department of 
the Treasury and the Small Business Administration in carrying out such 
function.
    (d) Annual Report By Secretary.--The Secretary shall submit a 
report to the Congress annually regarding the operations, activities, 
financial health, and achievements of the APIC program under this Act. 
The report shall list each investment made by an APIC and include a 
summary of the examinations conducted under subsection (b)(3), the 
guarantee actions of HUD, and any regulatory or policy actions taken by 
HUD. The report shall distinguish recently licensed APICs from APICs 
that have held licenses for a longer period for purposes of indicating 
program activities and performance.
    (e) GAO Report.--
            (1) Requirement.--Not later than 2 years after the date of 
        the enactment of this Act, the Comptroller General of the 
        United States shall submit a report to the Congress regarding 
        the operation of the program under this Act for licensing and 
        guarantees for APICs.
            (2) Contents.--The report shall include--
                    (A) an analysis of the operations and monitoring by 
                HUD of the APIC program under this Act;
                    (B) the administrative and capacity needs of HUD 
                required to ensure the integrity of the program;
                    (C) the extent and adequacy of any credit subsidy 
                appropriated for the program; and
                    (D) the management of financial risk and liability 
                of the Federal Government under the program.

SEC. 10. PENALTIES.

    (a) Violations Subject to Penalty.--The Secretary may impose a 
penalty under this subsection on any APIC or manager of an APIC that, 
by any act, practice, or failure to act, engages in fraud, 
mismanagement, or noncompliance with this Act, the regulations under 
this Act, or a condition of the APIC's license under this Act. The 
Secretary shall, by regulation, identify, by generic description of a 
role or responsibilities, any manager of an APIC that is subject to a 
penalty under this section.
    (b) Penalties Requiring Notice and an Opportunity To Respond.--If, 
after notice in writing to an APIC or the manager of an APIC that the 
APIC or manager has engaged in any action, practice, or failure to act 
that, under subsection (a), is subject to a penalty, and after an 
opportunity for the APIC or manager to respond to the notice, the 
Secretary determines that the APIC or manager engaged in such action or 
failure to act, the Secretary may, in addition to other penalties 
imposed--
            (1) assess a civil money penalty, except than any civil 
        money penalty under this subsection shall be in an amount not 
        exceeding $10,000;
            (2) issue an order to cease and desist with respect to such 
        action, practice, or failure to act of the APIC or manager;
            (3) suspend, or condition the use of, the APIC's license, 
        including deferring, for the period of the suspension, any 
        commitment to guarantee any new qualified debenture of the 
        APIC, except that any suspension or condition under this 
        paragraph may not exceed 90 days; and
            (4) impose any other penalty that the Secretary determines 
        to be less burdensome to the APIC than a penalty under 
        subsection (c).
    (c) Penalties Requiring Notice and Hearing.--If, after notice in 
writing to an APIC or the manager of an APIC that an APIC or manager 
has engaged in any action, practice, or failure to act that, under 
subsection (a), is subject to a penalty, and after an opportunity for 
administrative hearing, the Secretary determines that the APIC or 
manager engaged in such action or failure to act, the Secretary may--
            (1) assess a civil money penalty against the APIC or a 
        manager in any amount;
            (2) require the APIC to divest any interest in an 
        investment, on such terms and conditions as the Secretary may 
        impose; or
            (3) revoke the APIC's license.
    (d) Effective date of penalties.--
            (1) Prior notice requirement.--Except as provided in 
        paragraph (2) of this subsection, a penalty under subsection 
        (b) or (c) shall not be due and payable and shall not otherwise 
        take effect or be subject to enforcement by an order of a 
        court, before notice of the penalty is published in the Federal 
        Register.
            (2) Cease-and-desist orders and suspension or conditioning 
        of license.--In the case of a cease-and-desist order under 
        subsection (b)(2) or the suspension or conditioning of an 
        APIC's license under subsection (b)(3), the following 
        procedures shall apply:
                    (A) Action without published notice.--The Secretary 
                may order an APIC or manager to cease and desist from 
                an action, practice, or failure to act or may suspend 
                or condition an APIC's license, for not more than 45 
                days without prior publication of notice in the Federal 
                Register, but such cease-and-desist order or suspension 
                or conditioning shall take effect only after the 
                Secretary has issued a written notice (which may 
                include a writing in electronic form) of such action to 
                the APIC. Notwithstanding subsection (b), such written 
                notice shall be effective without regard to whether the 
                APIC has been accorded an opportunity to respond. Upon 
                such notice, such cease-and-desist order or suspension 
                or conditioning shall be subject to enforcement by an 
                order of a court.
                    (B) Publication of notice of suspension or 
                conditioning of license.--Upon a suspension or 
                conditioning of a license taking effect pursuant to 
                subparagraph (A), the Secretary shall promptly cause a 
                notice of suspension or conditioning of such license 
                for a period of not more than 90 days to be published 
                in the Federal Register. The Secretary shall provide 
                the APIC an opportunity to respond to such notice. For 
                purposes of the determining the duration of the period 
                of any suspension or conditioning under this 
                subparagraph, the first day of such period shall be the 
                day of issuance of the written notice under this 
                paragraph of the suspension or conditioning.
                    (C) Revocation of license.--During the period of 
                the suspension or conditioning of an APIC's license, 
                the Secretary may take action under subsection (c)(3) 
                to revoke the license of the APIC, in accordance with 
                the procedures applicable to such subsection. 
                Notwithstanding any other provision of this section, if 
                the Secretary takes such action, the Secretary may 
                extend the suspension or conditioning of the APIC's 
                license, for one or more periods of not more than 90 
                days each, by causing notice of such action to be 
                published in the Federal Register--
                            (i) for the first such extension, before 
                        the expiration of the period under subparagraph 
                        (B); and
                            (ii) for any subsequent extension, before 
                        the expiration of the preceding extension 
                        period under this subparagraph.
            (D) Term of effectiveness.--A cease-and-desist order or the 
        suspension or conditioning of an APIC's license by the 
        Secretary under this paragraph shall remain in effect in 
        accordance with the terms of the order, suspension, or 
        conditioning until final adjudication in any action undertaken 
        to challenge the order, or the suspension or conditioning, or 
        the revocation, of an APIC's license.

SEC. 11. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), this Act 
shall take effect upon the expiration of the 6-month period beginning 
on the date of the enactment of this Act.
    (b) Issuance of Regulations and Guidelines.--Any authority under 
this Act of the Secretary, the Administrator, and the Secretary of the 
Treasury to issue regulations, standards, guidelines, or licensing 
requirements, and any authority of such officials to consult or enter 
into agreements or memoranda of understanding regarding such issuance, 
shall take effect on the date of the enactment of this Act.

SEC. 12. SUNSET.

    After the expiration of the 5-year period beginning upon the date 
that the Secretary awards the first license for an APIC under this 
Act--
            (1) the Secretary may not license any APIC; and
            (2) no amount may be appropriated for the costs (as such 
        term is defined in section 502 of the Federal Credit Reform Act 
        of 1990 (2 U.S.C. 661c)) of any guarantee under this Act for 
        any debenture issued by an APIC.
This section may not be construed to prohibit, limit, or affect the 
award, allocation, or use of any budget authority for the costs of such 
guarantees that is appropriated before the expiration of such period.
                                                 Union Calendar No. 351

106th CONGRESS

  2d Session

                               H. R. 2764

                          [Report No. 106-638]

_______________________________________________________________________

                                 A BILL

To license America's Private Investment Companies and provide enhanced 
 credit to stimulate private investment in low-income communities, and 
                          for other purposes.

_______________________________________________________________________

                              May 23, 2000

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed