[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2848 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 2848

   To amend the Small Business Investment Act of 1958 and the Small 
  Business Act to establish a New Markets Venture Capital Program, to 
establish an America's Private Investment Company Program, to amend the 
 Internal Revenue Code of 1986 to establish a New Markets Tax Credit, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 13, 1999

  Mr. Watts of Oklahoma (for himself, Mr. Talent, Mr. Leach, and Mr. 
   Baker) (all by request) introduced the following bill; which was 
  referred to the Committee on Banking and Financial Services, and in 
addition to the Committees on Ways and Means, and Small Business, for a 
 period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiciton of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
   To amend the Small Business Investment Act of 1958 and the Small 
  Business Act to establish a New Markets Venture Capital Program, to 
establish an America's Private Investment Company Program, to amend the 
 Internal Revenue Code of 1986 to establish a New Markets Tax Credit, 
                        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 ``New Markets Initiative Act of 
1999''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
              TITLE I--NEW MARKETS VENTURE CAPITAL PROGRAM

Sec. 101. New Markets Venture Capital Program.
Sec. 102. Conforming amendments.
Sec. 103. Bankruptcy exemption for New Markets Venture Capital 
                            companies.
Sec. 104. Federal Savings Associations.
                     TITLE II--SMALL BUSINESS LOANS

Sec. 201. Participation rate.
Sec. 202. Guarantee fee.
Sec. 203. Guarantee reduction.
           TITLE III--AMERICA'S PRIVATE INVESTMENT COMPANIES

Sec. 301. Congressional findings and purposes.
Sec. 302. Definitions.
Sec. 303. Authorization.
Sec. 304. Selection of APICs.
Sec. 305. Operations of APICs.
Sec. 306. Credit enhancement by the Federal Government.
Sec. 307. APIC requests for guarantee actions.
Sec. 308. Examination and monitoring of APICs.
Sec. 309. Incentives and penalties.
                      TITLE IV--NEW MARKETS CREDIT

Sec. 401. New markets tax credit.

              TITLE I--NEW MARKETS VENTURE CAPITAL PROGRAM

SEC. 101. NEW MARKETS VENTURE CAPITAL PROGRAM.

    Title III of the Small Business Investment Act of 1958 is amended--
            (1) in the heading, by striking ``SMALL BUSINESS INVESTMENT 
        COMPANIES'' and inserting ``INVESTMENT DIVISION PROGRAMS'';
            (2) by inserting before the heading for section 301 the 
        following:

            ``Part A--Small Business Investment Companies'';

        and
            (3) by adding at the end the following:

             ``Part B--New Markets Venture Capital Program

``SEC. 350. DEFINITIONS.

    ``In this part--
            ``(1) the term `New Markets Venture Capital company' means 
        a company that--
                    ``(A) has been approved by the Administration under 
                section 353(e) to operate under the New Markets Venture 
                Capital Program; and
                    ``(B) has entered into a participation agreement 
                with the Administration; and
            ``(2) the term `low- or moderate-income geographic area' 
        means--
                    ``(A) a census tract, or the equivalent county 
                division as defined by the Bureau of the Census for 
                purposes of defining poverty areas, in which--
                            ``(i) the poverty rate is not less than 20 
                        percent; or
                            ``(ii) in the case of a census tract or 
                        division located within a metropolitan area, 
                        the median family income for such tract or 
                        division does not exceed the greater of 80 
                        percent of the statewide median family income 
                        or 80 percent of the metropolitan-area median 
                        family income: or
                            ``(iii) in the case of a census tract or 
                        division not located within a metropolitan 
                        area, the median family income for such tract 
                        or division does not exceed 80 percent of the 
                        statewide median family income; and
                    ``(B) any area located within--
                            ``(i) a HUBZone (as defined in section 
                        126.103 of title 13, Code of Federal 
                        Regulations);
                            ``(ii) an Urban Empowerment Zone or an 
                        Urban Enterprise Community, as designated by 
                        the Secretary of the Department of Housing and 
                        Urban Development; or
                            ``(iii) a rural Empowerment Zone or a Rural 
                        Enterprise Community, as designated by the 
                        Secretary of the Department of Agriculture; and
            ``(3) the term `participation agreement' means an agreement 
        between the Administration and a New Markets Venture Capital 
        company--
                    ``(A) detailing the company's operating plan and 
                investment criteria; and
                    ``(B) requiring that investments be made in smaller 
                enterprises at least 60 percent of which are located in 
                low- or moderate-income geographic areas.

``SEC. 351. PURPOSES.

    ``The purposes of the New Markets Venture Capital Program are--
            ``(1) to encourage venture capital investment in smaller 
        enterprises located in urban and rural areas; and
            ``(2) to establish a venture capital program to be 
        administered by the Small Business Administration--
                    ``(A) to enter into a participation agreement with 
                New Markets Venture Capital companies;
                    ``(B) to guarantee debentures of New Markets 
                Venture Capital companies to enable each such company 
                to make venture capital investments in smaller 
                enterprises in urban and rural areas; and
                    ``(C) to make grants to New Markets Venture Capital 
                companies for the purpose of providing marketing, 
                management, and technical assistance to smaller 
                enterprises financed, or expected to be financed, by 
                such company.

``SEC. 352. ESTABLISHMENT OF PROGRAM.

    ``The Administration shall establish a New Markets Venture Capital 
Program, under which the Administration may--
            ``(1) enter into a participation agreement with each New 
        Markets Venture Capital company for the purposes set forth in 
        section 351;
            ``(2) guarantee debentures issued by each New Markets 
        Venture Capital company as provided in section 354; and
            ``(3) make grants to each New Markets Venture Capital 
        company as provided in section 355.

``SEC. 353. SELECTION OF NEW MARKETS VENTURE CAPITAL COMPANIES.

    ``(a) Eligibility.--A company shall be eligible for participation 
in the New Markets Venture Capital Program if--
            ``(1) it is a newly formed for-profit entity or a newly 
        formed for-profit subsidiary of an existing entity; and
            ``(2) it has a management team with experience in community 
        development financing or venture capital financing.
    ``(b) Application.--To participate in the New Markets Venture 
Capital Program, an eligible company shall submit an application to the 
Administration that includes--
            ``(1) a business plan describing how the company intends to 
        make successful venture capital investments in low- or 
        moderate-income geographic areas;
            ``(2) information regarding the qualifications of the 
        company's management;
            ``(3) a description of how the company intends to work with 
        community organizations;
            ``(4) a description of how the company will use the grant 
        funds provided under this part to provide marketing, 
        management, and technical assistance to smaller enterprises;
            ``(5) a description of the criteria the company will use to 
        evaluate whether and to what extent it meets the objectives of 
        the program established under this part;
            ``(6) information regarding the management and financial 
        strength of any parent firm, affiliated firm, or any other firm 
        essential to the success of the company's business plan; and
            ``(7) such other information as the Administration may 
        require.
    ``(c) Conditional Approval.--
            ``(1) In general.--From among companies submitting 
        applications under subsection (b), the Administration shall in 
        accordance with this subsection conditionally approve companies 
        to participate in the New Markets Venture Capital Program.
            ``(2) Selection criteria.--In selecting companies under 
        paragraph (1), the Administration shall consider the following:
                    ``(A) The likelihood that the applicant will meet 
                the goals of its business plan.
                    ``(B) The experience and background of the 
                company's management team.
                    ``(C) The need for equity investments in the areas 
                in which the company intends to invest.
                    ``(D) The extent to which the company will 
                concentrate its activities on serving the areas in 
                which it intends to invest.
                    ``(E) The likelihood that the company will be able 
                to satisfy the conditions under subsection (d).
                    ``(F) The extent to which the activities proposed 
                by the company will expand economic opportunities in 
                the areas in which the company intends to invest.
                    ``(G) Any other factors deemed appropriate by the 
                Administration.
            ``(3) Nationwide distribution.--In selecting companies 
        under paragraph (1), the Administration shall ensure that 
        companies are chosen in such a way that investments under the 
        New Markets Venture Capital Program will be made nationwide.
    ``(d) Conditions To Be Met for Final Approval.--The Administration 
shall give each conditionally approved company a period of time, not to 
exceed 24 months, to satisfy the following conditions:
            ``(1) Capital requirement.--Each conditionally approved 
        company must raise not less than $5,000,000 of contributed 
        capital or binding capital commitments from 1 or more investors 
        (other than an agency of the Federal Government) who meet 
        criteria established by the Administration; and
            ``(2) Non-Administration resources for technical 
        assistance.--
                    ``(A) In general.--In order to provide marketing, 
                management, and technical assistance, each 
                conditionally approved company must--
                            ``(i) have binding commitments (in cash or 
                        in-kind)--
                                    ``(I) from any sources other than 
                                the Administration that meet criteria 
                                established by the Administration:
                                    ``(II) payable or available over a 
                                multiyear period acceptable to the 
                                Administration (not to exceed 10 
                                years): and
                                    ``(III) in an amount equal to 30 
                                percent of the capital and commitments 
                                raised under subsection (d)(1); or
                            ``(ii) must have purchased an annuity--
                                    ``(I) from an insurance company 
                                acceptable to the Administration;
                                    ``(II) using funds (other than the 
                                funds raised to satisfy subsection 
                                (d)(1)) from any source other than the 
                                Administration; and
                                    ``(III) that yields cash payments 
                                over a multiyear period acceptable to 
                                the Administration (not to exceed 10 
                                years) in an amount equal to 30 percent 
                                of the capital and commitments raised 
                                under subsection (d)(1); or
                            ``(iii) must have binding commitments (in 
                        cash or in-kind) of the type described in 
                        subsection (d)(2)(A)(i) and must have purchased 
                        an annuity of the type described in subsection 
                        (d)(2)(A)(ii), which in the aggregate make 
                        available, over a multiyear period acceptable 
                        to the Administration (not to exceed 10 years), 
                        an amount equal to 30 percent of the capital 
                        and commitments raised under subsection (d)(1).
                    ``(B) Special rule.-- On a showing of special 
                circumstances and good cause, the Administrator may 
                with respect to a particular company waive the 
                requirements of subsection (d)(2) if the Administrator 
                considers the company to have a viable business plan 
                that reasonably projects the company's capacity to 
                raise the amount (in cash or in-kind) required under 
                subsection (d)(2)(A).
    ``(e) Final Approval.--The Administration shall grant to a 
conditionally approved company final approval to participate in the New 
Markets Venture Capital Program as a New Markets Venture Capital 
company after the company--
            ``(1) has satisfied the conditions under subsection (d); 
        and
            ``(2) has entered into a participation agreement with the 
        Administration.

``SEC. 354. DEBENTURES.

    ``(a) In General.--The Administration may, to the extent authorized 
in advance in appropriations Acts, guarantee the timely payment of 
principal and interest as scheduled on debentures issued by New Markets 
Venture Capital companies.
    ``(b) Terms and Conditions.--The Administration may make guarantees 
under this section on such terms and conditions as it deems 
appropriate, except that the term of any debenture guaranteed under 
this section shall not exceed 15 years.
    ``(c) Full Faith and Credit of the United States.--The full faith 
and credit of the United States shall be pledged to the payment of all 
amounts which may be required to be paid under any guarantee under this 
part.
    ``(d) Maximum Guarantee.--The Administration may provide guarantees 
under this section for the debentures issued by any New Markets Venture 
Capital company only to the extent that such guarantees do not exceed 
150 percent of the contributed capital of the company, as determined by 
the Administration. Contributed capital shall include capital that is 
deemed to be Federal funds contributed by an investor other than an 
agency of the Federal Government.

``SEC. 355. TECHNICAL ASSISTANCE GRANTS.

    ``(a) In General.--
            ``(1) Authority.--In accordance with this section, the 
        Administration may make grants to each New Markets Venture 
        Capital company to provide marketing, management, and technical 
        assistance for the benefit of smaller enterprises financed, or 
        expected to be financed, by the company.
            ``(2) Terms.--Grants made under this subsection shall be 
        made over a multiyear period not to exceed 10 years, under such 
        other terms as the Administration may require.
            ``(2) Grant amount.--
                    ``(A) In general.--The amount of a grant made under 
                this subsection to each New Markets Venture Capital 
                company shall be equal to the amount resources raised 
                by the company (in cash or in-kind) under section 
                353(d)(2).
                    ``(B) Special rule.--Notwithstanding subparagraph 
                (A), the Administration may make a grant under this 
                section in an amount other than that set forth in 
                subparagraph (A), if the Administration considers the 
                grant to be in the best interests of the New Markets 
                Venture Capital Program.
            ``(3) Pro rata reductions.--If the amount made available to 
        carry out this section is insufficient for the Administration 
        to provide grants in the amounts provided for in subsection 
        (a)(2), the Administration shall make pro rata reductions in 
        the amounts otherwise payable to each New Markets Venture 
        Capital company under such subsection.
    ``(b) Supplemental Grants.--
            ``(1) In general.--The Administration may make supplemental 
        grants to any New Markets Venture Capital company, containing 
        such terms as the Administration may require, to provide 
        additional marketing, management, and technical assistance for 
        the benefit of smaller enterprises financed, or expected to be 
        financed, by the New Markets Venture Capital company.
            ``(2) Matching requirement.--The Administration may 
        require, as a condition of any supplemental grant made under 
        this subsection, that the New Markets Venture Capital company 
        provide from resources (in cash or in-kind) other than those 
        provided by the Administration an amount equal to the amount of 
        the supplemental grant.

``SEC. 356. ISSUANCE AND GUARANTEE OF TRUST CERTIFICATES.

    ``(a) Issuance.--The Administration may issue trust certificates 
representing ownership of all or a fractional part of debentures issued 
by New Markets Venture Capital companies and guaranteed by the 
Administration under this Act, if such certificates are based on 
and backed by a trust or pool approved by the Administration and 
composed solely of guaranteed debentures.
    ``(b) Guarantee.--
            ``(1) In general.--The Administration may, under such terms 
        and conditions as the Administration deems appropriate, 
        guarantee the timely payment of the principal of and interest 
        on trust certificates issued by the Administration or its agent 
        for purposes of this section.
            ``(2) Limitation.--Guarantees under this subsection shall 
        be limited to the extent of principal and interest on the 
        guaranteed debentures which compose the trust or pool.
            ``(3) Prepayment or default.--In the event that a debenture 
        in a trust or pool is prepaid, or in the event of default of 
        such a debenture, the guarantee of timely payment of principal 
        and interest on the trust certificates shall be reduced in 
        proportion to the amount of principal and interest such prepaid 
        debenture represents in the trust or pool. Interest on prepaid 
        or defaulted debentures shall accrue and be guaranteed by the 
        Administration only through the date of payment of the 
        guarantee. At any time during its term, a trust certificate may 
        be called for redemption due to prepayment or default of all 
        debentures.
    ``(c) Full Faith and Credit of the United States.--The full faith 
and credit of the United States shall be pledged to the payment of all 
amounts which may be required to be paid under any guarantee of such 
trust certificates issued by the Administration or its agent under this 
section.
    ``(d) Fees.--The Administration shall not collect a fee for any 
guarantee under this section, but any agent of the Administration may 
collect a fee approved by the Administration for the functions 
described in subsection (f)(2) of this section.
    ``(e) Subrogation and Ownership Rights.--
            ``(1) Subrogation.--In the event the Administration pays a 
        claim under a guarantee issued under this section, it shall be 
        subrogated fully to the rights satisfied by such payment.
            ``(2) Ownership rights.--No Federal, State, or local law 
        shall preclude or limit the exercise by the Administration of 
        its ownership rights in the debentures residing in a trust or 
        pool against which trust certificates are issued under this 
        section.
    ``(f) Management and Administration.--
            ``(1) Registration.--
                    ``(A) In general.--The Administration may provide 
                for a central registration of all trust certificates 
                issued under this section.
                    ``(B) Forms of registration.--Nothing in this 
                subsection shall prohibit the use of a book entry or 
                other electronic form of registration for trust 
                certificates.
            ``(2) Contracting of functions.--
                    ``(A) In general.--The Administrator may contract 
                with an agent or agents to carry out on behalf of the 
                Administration the pooling and the central registration 
                functions provided for in this section including, 
                notwithstanding any other provision of law--
                            ``(i) maintenance on behalf of and under 
                        the direction of the Administration, such 
                        commercial bank accounts or investments in 
                        obligations of the United States as may be 
                        necessary to facilitate the creation of trusts 
                        or pools backed by debentures guaranteed under 
                        this Act; and
                            ``(ii) the issuance of trust certificates 
                        to facilitate the creation of such trusts or 
                        pools.
                    ``(B) Protection of the interests of the united 
                states.--Any agent performing functions on behalf of 
                the Administration under this paragraph shall provide a 
                fidelity bond or insurance in such amounts as the 
                Administration determines to be necessary to fully 
                protect the interests of the United States.
            ``(3) Regulation of brokers and dealers.--The Administrator 
        may regulate brokers and dealers in trust certificates sold 
        under this section.

``SEC. 357. FEES.

    ``Except as provided in section 356(d), the Administration may 
charge such fees as it deems appropriate with respect to any guarantee 
or grant issued under this part.

``SEC. 358. BANK PARTICIPATION.

    ``(a) In General.--To the extent provided for in subsection (b), 
any national bank, any member bank of the Federal Reserve System, and 
any bank that is not a member of such system but which is insured to 
the extent permitted under applicable State law, may invest in any New 
Markets Venture Capital company, or in any entity established to invest 
solely in New Markets Venture Capital companies.
    ``(b) Limitation.--No bank described in subsection (a) may make 
investments described in such subsection that are greater than 5 
percent of the capital and surplus of the bank.

``SEC. 359. FEDERAL FINANCING BANK.

    ``Section 318 shall not apply to any debenture issued by a New 
Markets Venture Capital company under this part.

``SEC. 360. REPORTING REQUIREMENTS.

    ``Each New Markets Venture Capital company shall provide to the 
Administration such information as the Administration may require, 
including information on the measurement criteria that the New Markets 
Venture Capital company proposed in its program application.

``SEC. 361. EXAMINATIONS.

    ``(a) In General.--Each New Markets Venture Capital company shall 
be subject to examinations made at the direction of the Investment 
Division of the Administration in accordance with this section.
    ``(b) Assistance of Private Sector Entities.--Examinations under 
this section may be conducted with the assistance of a private sector 
entity that has both the qualifications to conduct and expertise in 
conducting such examinations.
    ``(c) Costs.--
                    ``(A) In general.--The Administrator may assess the 
                cost of examinations under this section, including 
compensation of the examiners, against the company examined.
                    ``(B) Deposit of funds.--Funds collected under this 
                section shall be deposited in the account for salaries 
                and expenses of the Administration.
                    ``(C) Authorization of appropriations.--Funds 
                deposited under subparagraph (B) are authorized to be 
                appropriated solely to cover the costs of examinations 
                and other program oversight activities.

``SEC. 362. INJUNCTIONS AND OTHER ORDERS.

    ``(a) In General.-- Whenever, in the Administrator considers that a 
New Markets Venture Capital company, or any other person, has engaged 
or is about to engage in any acts or practices which constitute, or 
will constitute, a violation of any provision of this Act, of any rule 
or regulation under this Act, or of any order issued under this Act, 
the Administration may make application to the proper district court of 
the United States or to a United States court of any place subject to 
the jurisdiction of the United States for an order enjoining such acts 
or practices, or for an order enforcing compliance with such provision, 
rule, regulation, or order, and such courts shall have jurisdiction of 
such actions and, upon a showing by the Administration that such New 
Markets Venture Capital company or other person has engaged or is about 
to engage in any such acts or practices, a permanent or temporary 
injunction, restraining order, or other order, shall be granted without 
bond.
    ``(b) Seizing of Assets.--In any such proceeding the court, as a 
court of equity may, to the extent it deems necessary, take exclusive 
jurisdiction of the New Markets Venture Capital company and the assets 
thereof, wherever located. The court shall have jurisdiction in any 
such proceeding to appoint a trustee or receiver to hold or administer 
under the direction of the court the assets so possessed.
    ``(c) Administration as Trustee or Receiver.--
            ``(1) In general.--The Administration may act as trustee or 
        receiver under subsection (b) of a New Markets Venture Capital 
        company.
            ``(2) Appointment.--At the request by the Administration, 
        the court may appoint the Administration to act as a trustee or 
        receiver of a New Markets Venture Capital company unless the 
        court deems such appointment inequitable or otherwise 
        inappropriate.

``SEC. 363. UNLAWFUL ACTS AND OMISSIONS BY OFFICERS, DIRECTORS, 
              EMPLOYEES, OR AGENTS; BREACH OF FIDUCIARY DUTY.

    ``(a) Parties Deemed To Commit a Violation.--Whenever an New 
Markets Venture Capital company violates any provision of this Act, or 
any regulation issued thereunder, by reason of its failure to comply 
with its terms or by reason of its engaging in any act or practice 
which constitutes or will constitute a violation thereof, such 
violation shall also be deemed to be a violation and an unlawful act 
committed by any person who, directly or indirectly, authorizes, 
orders, participates in, causes, brings about, counsels, aids, or abets 
in the commission of any acts, practices, or transactions which 
constitute or will constitute, in whole or in part, such violation.
    ``(b) Fiduciary Duties.--It shall be unlawful for any officer, 
director, employee, agent, or other participant in the management or 
conduct or the affairs of an New Markets Venture Capital company to 
engage in any act or practice, or to omit any act, in breach of his 
fiduciary duty as such officer, director, employee, agent, or 
participant if, as a result thereof, the New Markets Venture Capital 
company has suffered or is in imminent danger or suffering financial 
loss or other damage.
    ``(c) Unlawful Acts.--Except with the written consent of the 
Administration, it shall be unlawful--
            ``(1) for any person to take office as an officer, 
        director, or employee of an New Markets Venture Capital 
        company, or to become an agent or participant in the conduct of 
        the affairs or management of an New Markets Venture Capital 
        company, if the person--
                    ``(A) has been convicted of a felony, or any other 
                criminal offense involving dishonesty or breach of 
                trust, or
                    ``(B) the person has been found civilly liable in 
                damages, or has been permanently or temporarily 
                enjoined by order, judgment, or decree of a court of 
                competent jurisdiction, by reason of any act or 
                practice involving fraud, or breach of trust; and
            ``(2) for any person continue to serve in any of the 
        capacities described in paragraph (1), if--
                    ``(A) the person is convicted of a felony, or any 
                other criminal offense involving dishonesty or breach 
                of trust, or
                    ``(B) the person found civilly liable in damages, 
                or is permanently or temporarily enjoined by an order, 
                judgment, or decree of a court of competent 
                jurisdiction, by reason of any act or practice 
                involving fraud or breach of trust.
    ``(d) Removal or Suspension.--
            ``(1) In general.--As provided in section 313, the 
        Administration may remove or suspend any person upon whom the 
        Administration has served a notice under this subsection.
            ``(2) Notice.--The Administration may serve upon any person 
        who is an officer, director, or employee of a New Markets 
        Venture Capital company, or an agent or participant in the 
        conduct of the affairs or management of the company, a written 
        notice of the Administration's intention to remove or suspend 
        such person from the person's office or position, if in the 
        opinion of the Administration, such person--
                    ``(A) has willfully and knowingly committed any 
                substantial violation of--
                            ``(i) this Act,
                            ``(ii) any regulation issued under this 
                        Act, or
                            ``(iii) a cease-and-desist order which has 
                        become final, or
                    ``(B) has willfully and knowingly committed or 
                engaged in any act, omission, or practice which 
                constitutes a substantial breach of his fiduciary duty, 
                and that such violation or such breach of fiduciary 
duty is one involving personal dishonesty on the part of such person.

``SEC. 364. REGULATIONS.

    ``The Administration is authorized to issue such regulations as it 
deems necessary to carry out the provisions of this part in accordance 
with its purposes.

``SEC. 365. AUTHORIZATION OF APPROPRIATIONS.

    ``For fiscal years 2000 through 2005, the Administration is 
authorized to be appointed such subsidy budget authority as may be 
necessary to guarantee up to $100,000,000 of debentures, and up to 
$30,000,000 to make technical assistance grants, for the purposes of 
this part, to remain available until expended. This authority shall be 
in effect for the period commencing with fiscal year 2000 through 
fiscal year 2005.''.

SEC. 102. CONFORMING AMENDMENTS.

    The table of contents in section 101 of the Small Business 
Investment Act of 1958 (15 U.S.C. 661 note) is amended--
            (1) by striking ``TITLE III--SMALL BUSINESS INVESTMENT 
        COMPANIES'' and inserting the following:

               ``TITLE III--INVESTMENT DIVISION PROGRAMS

            ``Part A--Small Business Investment Companies'';

        and
            (2) by inserting after the item relating to section 322 the 
        following:

             ``Part B--New Markets Venture Capital Program

``Sec. 350. Definitions.
``Sec. 351. Purposes.
``Sec. 352. Program establishment.
``Sec. 353. Selection of new markets venture capital companies.
``Sec. 354. Debentures.
``Sec. 355. Technical assistance.
``Sec. 356. Issuance and guarantee of trust certificates.
``Sec. 357. Fees.
``Sec. 358. Bank participation.
``Sec. 359. Federal financing bank.
``Sec. 360. Reporting requirements.
``Sec. 361. Examinations.
``Sec. 362. Injunctions and other orders.
``Sec. 363. Unlawful acts and omissions by officers, directors, 
                            employees, or agents; breach of fiduciary 
                            duty.
``Sec. 364. Regulations.
``Sec. 365. Authorization of appropriations.''.

SEC. 103. BANKRUPTCY EXEMPTION FOR NEW MARKETS VENTURE CAPITAL 
              COMPANIES.

    Section 109(b)(2) of title 11, United States Code, is amended by 
inserting ``a New Markets Venture Capital company as defined in section 
350 of the Small Business Investment Act of 1958,'' after ``homestead 
association,''.

SEC. 104. FEDERAL SAVINGS ASSOCIATIONS.

    Section 5(c)(4) of the Home Owners' Loan Act (12 U.S.C. 1464(c)(4)) 
is amended by adding at the end the following:
                    ``(F) New markets venture capital companies.--A 
                Federal savings association may invest in stock, 
                obligations, or other securities of any New Markets 
                Venture Capital company as defined in section 350 of 
                the Small Business investment Act of 1958, except that 
                a Federal savings association may not make any 
                investment under this subparagraph if its aggregate 
                outstanding investment under this subparagraph would 
                exceed 5 percent of the capital and surplus of such 
                savings association.''.

                     TITLE II--SMALL BUSINESS LOANS

SEC. 201. PARTICIPATION RATE.

    Section 7(a)(2)(A) of the Small Business Act (15 U.S.C. 
636(a)(2)(A)) is amended by striking ``$100,000'' each place it appears 
and inserting ``$150,000''.

SEC. 202. GUARANTEE FEE.

    Section 7(a)(18)(B) of the Small Business Act (15 U.S.C. 
636(a)(18)(B)) is amended by striking ``$80,000'' and inserting 
``$120,000''.

SEC. 203. GUARANTEE REDUCTION.

    Section 7(a)(23)(A) of the Small Business Act (15 U.S.C. 
636(a)(23)(A)) is amended by striking the period at the end and adding 
the following: ``, except that with respect to each loan of less than 
$150,000 guaranteed under this subsection, the Administration shall 
assess and collect an annual fee in an amount equal to 0.3 percent of 
the outstanding balance of the deferred participation share of the 
loan.''

           TITLE III--AMERICA'S PRIVATE INVESTMENT COMPANIES

SEC. 301. CONGRESSIONAL FINDINGS AND PURPOSES.

    (a) Congressional Findings.--
            (1) People living in distressed areas, both urban and 
        rural, characterized by high levels of joblessness, poverty, 
        and low incomes continue to miss out on 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.
            (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. 302. DEFINITIONS.

    As used in this Act:
            (1) The term ``Agency'' has the meaning given such term in 
        section 551(1) of title 5, United States Code.
            (2) 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.
            (3) The term ``Administrator'' means the Administrator of 
        the Small Business Administration.
            (4) The term ``community development entity'' means an 
        entity whose primary mission must be serving or providing 
        investment capital for low-income communities or low-income 
        persons, which maintains accountability to residents of low-
        income communities, and which has 60 percent of its aggregate 
gross assets invested in low-income community investments or 
residential property located in low-income communities.
            (5) The term ``cost'' has the meaning set forth in section 
        502(5) of the Federal Credit Reform Act of 1990.
            (6) The term ``debentures'' means debt instruments the 
        terms of any of which may be specified by the Secretary.
            (7) The term ``HUD'' means the Secretary of Housing and 
        Urban Development or the Department of Housing and Urban 
        Development, as the context requires.
            (8) The term ``low-income communities'' means census tracts 
        with (A) poverty rates of at least 20 percent, based on the 
        most recent census data; or (B) median family income that does 
        not exceed 80 percent of the greater of (i) metropolitan area 
        median family income, or (ii) statewide median family income.
            (9) The term ``qualified low-income community investments'' 
        means equity investments in, or loans to, qualified active 
        businesses located in low-income communities.
            (10) The term ``qualified active business'' means a 
        business or trade--
                    (A) at least 50 percent of the gross income of 
                which is derived from 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) The term ``Secretary'' means the Secretary of Housing 
        and Urban Development, unless otherwise specified in this Act.

SEC. 303. AUTHORIZATION.

    (a) Licenses.--The Secretary is authorized to license America's 
Private Investment Companies, in accordance with the terms of this Act.
    (b) Regulations.--The Secretary is authorized to 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 may issue regulations, Federal Register notices, and 
other guidance or directives to carry out licensing and regulatory and 
other duties under this Act.
    (c) Use of Credit Subsidy for Licenses.--
            (1) Number of licenses.--The Secretary is authorized to 
        have outstanding at any one time the number of licenses for 
        APICs that may be supported by the amount of the budget 
        authority appropriated in accordance with the Federal Credit 
        Reform Act of 1990 for the subsidy cost and the investment 
        strategies of such APICs.
            (2) Use of credit subsidy after initial appropriation to 
        hud.--With respect to any appropriation of budget authority for 
        the credit costs after the initial appropriation, the Secretary 
        may license additional APICs, or as hereinafter provided, 
        increase the credit subsidy allocated to an APIC as an award 
        for high performance under this Act.
    (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) 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 for appropriation of cost of annual loan 
        guarantee commitment.--For each of fiscal years 2000, 2001, 
        2002, and 2003, there is authorized to be appropriated up to 
        $36,000,000 for the cost of annual loan guarantee commitments 
        under this Act. 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, or 
        the amount specified in appropriations Acts in each such fiscal 
        year. Amounts appropriated under this paragraph shall remain 
        available for 5 years.
            (2) Authorization for appropriation of administrative 
        expenses.--For each of the fiscal years 2000, 2001, 2002, and 
        2003, 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. 304. SELECTION OF APICS.

    (a) Notice of Competitions.--The Secretary shall select APICs for 
licensing on the basis of competitions. Such competitions shall be 
announced by a Federal Register notice that invites applications for 
APIC licenses. Each such notice shall set forth application 
requirements, and such other terms of the competition not otherwise 
provided for, as determined by the Secretary.
    (b) Licensee Selection Criteria.--The Secretary shall select among 
applicants for licenses on the basis of the extent to which an 
applicant may be expected to achieve the goals of the Act by satisfying 
the requirements set forth in this subsection.
            (1) The applicant 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) The entity must, as of the time that the license is 
        approved, have reasonably available to it, as determined by the 
        Secretary, a minimum of $25,000,000 in equity capital, as 
        determined by the Secretary.
            (3) The entity must demonstrate that its managers are 
        qualified, and have the knowledge, experience, and capability 
        necessary to raise large amounts of capital and make 
        investments for community economic development in distressed 
        areas.
            (4) The entity must demonstrate that, as a matter of sound 
        financial management practices, it is structured to preclude 
        financial conflict of interest between the APIC and a manager 
        or investor.
            (5) The entity must prepare and submit an investment 
        strategy that includes benchmarks for evaluation of its 
        progress.
            (6) The entity must prepare and submit a statement of 
        public purpose goals. The statement shall include elements 
        specified by the Secretary, including proposed measurements and 
        strategies for meeting the goals. The goals shall promote 
        community and economic development, and include at least--
                    (A) making investments that are qualified 
                investments in low-income communities;
                    (B) creation of jobs that pay decent wages in low-
                income communities and for residents of such areas; and
                    (C) involvement of community-based organizations 
                and residents in community development activities.
            (7) The entity must demonstrate a capacity to cooperate 
        with States or units of general local government and with 
        community-based organizations and residents of low-income 
        communities.
            (8) The entity must agree to comply with applicable laws, 
        including Federal executive orders, Office of Management and 
        Budget circulars, and Treasury requirements, and such operating 
        and regulatory requirements as the Secretary may impose from 
        time to time.
            (9) The entity must satisfy other application requirements 
        that the Secretary may impose by regulation or Federal Register 
        notice.
    (c) Communications Between HUD and Applicants During Selection 
Process.--
            (1) The Secretary shall set forth in regulations the 
        procedures under which HUD, on the one hand, and applicants for 
        APIC licenses, and others, on the other hand, may communicate. 
        Such regulations shall--
                    (A) specify by position the HUD officers and 
                employees who may communicate with such applicants and 
                others;
                    (B) permit such 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 such 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) 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) 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. 305. OPERATIONS OF APICS.

    (a) In General.--
            (1) An APIC shall have any powers or authorities--
                    (A) that the APIC derives from the jurisdiction in 
                which it is organized, or that the APIC otherwise has;
                    (B) as may be conferred by a license under this 
                Act; and
                    (C) as the Secretary may prescribe by regulation.
            (2) 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 must be 
        qualified low-income community investments if the investments 
        are financed with--
                    (A) amounts available from the proceeds of the 
                issuance of an APICs debenture guaranteed under this 
                Act;
                    (B) proceeds of the sale of obligations described 
                under subsection (c)(3)(C)(iii); or
                    (C) the use of equity capital, as determined by the 
                Secretary, in an amount specified in the APICs license.
            (2) Investment limit.--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 APICs equity capital; plus
                    (B) an amount equal to the percentage limit that 
                the Secretary determines that APIC may have outstanding 
                at any one time, under subsection (c)(2)(A).
    (c) Borrowing Powers; Debentures.--
            (1) Issuing.--An APIC may issue debentures that the 
        Secretary may guarantee under the terms of this Act.
            (2) Leverage limits.--In general, as a matter of sound 
        financial management practices--
                    (A) the total amount of 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 equity capital of the APIC, as 
                determined by the Secretary: Provided, That the 
                Secretary may by regulation increase the foregoing 
                percentage to up to 300 percent for all APICs, or any 
                reasonable class of APICs; and
                    (B) an APIC must not have more than $300,000,000 in 
                face value of debentures issued under this Act 
                outstanding at any one time.
            (3) Repayment.--
                    (A) An APIC must 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) 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) 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) 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 
                equity capital, without regard to subparagraph (C) but 
                in conformity with the APICs investment strategy and 
                statement of public purpose goals.
    (d) Reuse of 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 APICs 
request for HUD guarantee action, as the Secretary may modify such 
procedures for implementation of this subsection. Such procedures shall 
nevertheless 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 equity capital required to be contributed under 
this Act, or the proceeds from the sale of any 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 of the United States Code is 
amended by inserting before ``credit union'' the following: ``America's 
Private Investment Companies licensed by the Department of Housing and 
Urban Development under the America's Private Investment Companies 
Act,''.

SEC. 306. CREDIT ENHANCEMENT BY THE FEDERAL GOVERNMENT.

    (a) Issuance and Guarantee of Debentures.--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, debentures issued by APICs. 
Such commitments or guarantees may be made by the Secretary on such 
terms and conditions, including but not limited to amounts, 
expirations, number, priorities of repayment, security, collateral, 
amortization, payment of interest (including the timing thereof), and 
fees and charges, as the Secretary determines to be appropriate, in 
documents that the Secretary approves for any commitment or guarantee, 
or pursuant to regulations issued by the Secretary. Debentures 
guaranteed by the Secretary under this subsection shall be senior to 
any debt obligation, equity contribution or earnings, or the 
distribution of dividends, interest, or other amounts of an APIC, 
notwithstanding any Federal or other law. Debentures may be issued for 
a term of not to exceed 21 years and shall bear interest during all or 
any part of that time period at a rate or rates approved by the 
Secretary. The debentures shall also contain such other terms as the 
Secretary may fix.
    (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 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 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 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 
        debenture.
            (3) Proportionate reduction option.--In the event that the 
        Secretary elects not to exercise the option under paragraph 
        (2), and a debenture in such trust is prepaid, or in the event 
        of default of a 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 debenture represents in the trust. Interest 
        on prepaid or defaulted 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 
        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) 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) 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) The Secretary shall provide for a central registration 
        of all trust certificates issued pursuant to this section.
            (2) 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 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) Book-entry or other electronic forms of registration 
        for trust certificates under this Act are authorized.
    (g) Timing of Issuance of Guarantees of Debentures and Trust 
Certificates.--The Secretary may, from time to time in the Secretary's 
discretion, exercise the authority to issue guarantees of debentures 
under this Act or trust certificates under this Act.

SEC. 307. APIC REQUESTS FOR GUARANTEE ACTIONS.

    (a) All APIC Requests for HUD Guarantee Action.--An APIC may 
request that the Secretary guarantee a debenture that the APIC intends 
to issue, in accordance with the Secretary's regulations. All such 
requests shall include a description of the manner in which the APIC 
intends to use the proceeds from such debenture. All such requests 
shall also include certification by the APIC that the APIC is in 
substantial compliance with--
            (1) this Act and other applicable laws;
            (2) all terms and conditions of its license, 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;
            (3) all requirements relating to the allocation and use of 
        New Markets Tax Credits, to the extent such credits are 
        established under Federal law; and
            (4) any other requirements that the Secretary may specify 
        under regulations.
    (b) Requests for Guarantee of Debentures That Would 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 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 must 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 is 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 must 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 
        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 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 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.--The Secretary shall approve the request for 
        guarantee of a debenture, any part of the proceeds of which is 
        to fund particular qualified low-income community investments 
        of APICs 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 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 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. 308. 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 may establish 
        such annual or more frequent reporting requirements for APICs, 
        and such requirements for independent audits, and 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) 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.
            (3) 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 set any 
                additional sound financial management practices 
                standards by regulation, including standards that 
                address solvency and financial exposure.
                    (B) Performance and other examinations.--The 
                Secretary shall monitor each APICs progress in meeting 
                the goals in the APICs statement of public purpose 
                goals, executing the APICs investment strategy, and 
                other matters.

SEC. 309. INCENTIVES AND PENALTIES.

    (a) Incentives.--From amounts of budget authority appropriated 
after the initial appropriation for the cost of annual loan guarantee 
commitments under this Act, the Secretary may increase the credit 
subsidy allocated to an APIC, in the Secretary's discretion, as an 
award for high performance of the APIC in carrying out its investment 
strategy and statement of public purpose goals.
    (b) Penalties.--
            (1) In general.--The Secretary may penalize any APIC, or 
        any manager of an APIC, in the event such APIC or a manager of 
        the APIC commits an act of fraud, mismanagement, or 
        noncompliance with this Act or regulations thereunder or a 
        condition of the APICs license under this Act. The Secretary in 
        regulations shall identify, by generic description of a role or 
        responsibilities, any manager of an APIC that is subject to 
        this subsection.
            (2) Penalties requiring notice and hearing.--With respect 
        to an act of commission or omission under paragraph (1) for 
        which the Secretary may penalize an APIC or a manager, the 
        Secretary may, following notice in writing to the APIC or the 
        manager, and opportunity for administrative hearing--
                    (A) assess a civil money penalty against an APIC, 
                or a manager of an APIC, the amount of which may exceed 
                $10,000;
                    (B) require an APIC to divest any interest in an 
                investment, on such terms and conditions as the 
                Secretary imposes; or
                    (C) revoke the APICs license.
            (3) Penalties requiring notice and an opportunity to 
        respond.--With respect to any act of commission or omission 
        under paragraph (1) for which the Secretary may penalize an 
        APIC or a manager, following notice in writing and an 
        opportunity for the APIC or manager to respond, impose any 
        reasonable penalty. Such a penalty may, in addition to any 
        others, be--
                    (A) a civil money penalty of $10,000 or less;
                    (B) the suspension of an APICs license, or the 
                conditioning of the use of an APICs license, for up to 
                90 days, including the deferral for the period of the 
                suspension of a commitment to guarantee any new 
                debenture of the APIC; or
                    (C) any other penalty that the Secretary determines 
                to be less burdensome to the APIC than a penalty that 
                requires notice and an administrative hearing under 
                this Act.
    (c) Procedures.--
            (1) No award under this section shall be made until notice 
        thereof is published in the Federal Register.
            (2) No civil money penalty, or other penalty under 
        subsection (b), except suspension or conditioning of an APICs 
        license under subsection (b)(3)(B), shall be due and payable, 
        or otherwise take effect, or be subject to enforcement by an 
        order of a court, until notice thereof is published in the 
        Federal Register.
            (3)(A) The Secretary may suspend or condition an APICs 
        license for up to 45 days without prior notice in the Federal 
        Register, but such suspension or conditioning shall take effect 
        only after the Secretary has issued a written notice (including 
        a writing in electronic form) of such action to the APIC. Such 
        written notice shall be effective without regard to whether the 
        APIC has been accorded the opportunity to respond. Such 
        suspension or conditioning shall be subject to enforcement by 
        an order of a court when the Secretary has issued such written 
        notice.
            (B) After such suspension or conditioning takes effect, the 
        Secretary shall promptly cause a notice of suspension or 
        conditioning of such license for a period of up to 90 days to 
        be published in the Federal Register. The APIC shall be 
        entitled to respond to such notice. In counting the time period 
        of the suspension or conditioning, the first day shall be the 
        day that written notice under this paragraph is issued.
            (C) During the time period of such suspension or 
        conditioning, the Secretary may proceed under subsection 
        (b)(2), and in accordance with the procedures applicable to 
        such subsection, to revoke the APICs license. Only if the 
        Secretary so proceeds, notwithstanding any other provision of 
        this section, the Secretary may extend the suspension or 
        conditioning of the APICs license by publishing a notice of 
        such action in the Federal Register--
                    (i) for the first such extension, before the period 
                under subparagraph (B) expires; and
                    (ii) for any subsequent extensions of up to 90 
                days, before the preceding period of up to 90 days 
                expires.
            (D) The suspension or conditioning of an APICs license by 
        the Secretary under this paragraph shall remain in effect in 
        accordance with its terms until final adjudication in any 
        litigation undertaken to challenge such suspension or 
        conditioning, or revocation, of an APICs license.

                      TITLE IV--NEW MARKETS CREDIT

SEC. 401. NEW MARKETS TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by adding at the end the following new section:

``SEC. 45D. NEW MARKETS TAX CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--For purposes of section 38, in the case 
        of a taxpayer who holds a qualified equity investment on a 
        credit allowance date of such investment which occurs during 
        the taxable year, the new markets tax credit determined under 
        this section for such taxable year is an amount equal to 6 
        percent of the amount paid to the qualified community 
        development entity for such investment at its original issue.
            ``(2) Credit allowance date.--The term `credit allowance 
        date' means, with respect to any qualified equity investment--
                    ``(A) the date on which such investment is 
                initially made, and
                    ``(B) each of the 4 anniversary dates of such date 
                thereafter.
    ``(b) Qualified Equity Investment.--For purposes of this section--
            ``(1) In general.--The term `qualified equity investment' 
        means any equity investment in a qualified community 
        development entity if--
                    ``(A) such investment is acquired by the taxpayer 
                at its original issue (directly or through an 
                underwriter) solely in exchange for cash,
                    ``(B) substantially all of such cash is used by the 
                qualified community development entity to make 
                qualified low-income community investments, and
                    ``(C) such investment is designated for purposes of 
                this section by the qualified community development 
                entity.
        Such term shall not include any equity investment issued by a 
        qualified community development entity more than 5 years after 
        the date that such entity receives an allocation under 
        subsection (f). Any allocation not used within such 5-year 
        period may be reallocated by the Secretary under subsection 
        (f).
            ``(2) Limitation.--The maximum amount of equity investments 
        issued by a qualified community development entity which may be 
        designated under paragraph (1)(C) by such entity shall not 
        exceed the portion of the limitation amount allocated under 
        subsection (f) to such entity.
            ``(3) Safe harbor for determining use of cash.--The 
        requirement of paragraph (1)(B) shall be treated as met if at 
        least 85 percent of the aggregate gross assets of the qualified 
        community development entity are invested in qualified low-
        income community investments.
            ``(4) Treatment of subsequent purchasers.--The term 
        `qualified equity investment' includes any equity investment 
        which would (but for paragraph (1)(A)) be a qualified equity 
        investment in the hands of the taxpayer if such investment was 
        a qualified equity investment in the hands of a prior holder.
            ``(5) Redemptions.--A rule similar to the rule of section 
        1202(c)(3) shall apply for purposes of this subsection.
            ``(6) Equity investment.--The term `equity investment' 
        means--
                    ``(A) any stock in a qualified community 
                development entity which is a corporation, and
                    ``(B) any capital interest in a qualified community 
                development entity which is a partnership.
    ``(c) Qualified Community Development Entity.--For purposes of this 
section--
            ``(1) In general.--The term `qualified community 
        development entity' means any domestic corporation or 
        partnership if--
                    ``(A) the primary mission of the entity is serving, 
                or providing investment capital for, low-income 
                communities or low-income persons,
                    ``(B) the entity maintains accountability to 
                residents of low-income communities through 
                representation on governing or advisory boards or 
                otherwise, and
                    ``(C) the entity is certified by the Secretary for 
                purposes of this section as being a qualified community 
                development entity.
            ``(2) Special rules for certain organizations.--The 
        requirements of paragraph (1) shall be treated as met by--
                    ``(A) any specialized small business investment 
                company (as defined in section 1044(c)(3)), and
                    ``(B) any community development financial 
                institution (as defined in section 103 of the Community 
                Development Banking and Financial Institutions Act of 
                1994 (12 U.S.C. 4702)).
    ``(d) Qualified Low-Income Community Investments.--For purposes of 
this section--
            ``(1) In general.--The term `qualified low-income community 
        investment' means--
                    ``(A) any equity investment in, or loan to, any 
                qualified active low-income community business,
                    ``(B) the purchase from another community 
                development entity of any loan made by such entity 
                which is a qualified low-income community investment if 
                the amount received by such other entity from such 
                purchase is used by such other entity to make qualified 
                low-income community investments,
                    ``(C) financial counseling and other services 
                specified in regulations prescribed by the Secretary to 
                businesses located in, and residents of, low-income 
                communities, and
                    ``(D) any equity investment in, or loan to, any 
                qualified community development entity if substantially 
                all of the investment or loan is used by such entity to 
                make qualified low-income community investments 
                described in subparagraphs (A), (B), and (C).
            ``(2) Qualified active low-income community business.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `qualified active low-income community 
                business' means, with respect to any taxable year, any 
                corporation or partnership if for such year--
                            ``(i) at least 50 percent of the total 
                        gross income of such entity is derived from the 
                        active conduct of a qualified business within 
                        any low-income community,
                            ``(ii) a substantial portion of the use of 
                        the tangible property of such entity (whether 
                        owned or leased) is within any low-income 
                        community,
                            ``(iii) a substantial portion of the 
                        services performed for such entity by its 
                        employees are performed in any low-income 
                        community,
                            ``(iv) less than 5 percent of the average 
                        of the aggregate unadjusted bases of the 
                        property of such entity is attributable to 
collectibles (as defined in section 408(m)(2)) other than collectibles 
that are held primarily for sale to customers in the ordinary course of 
such business, and
                            ``(v) less than 5 percent of the average of 
                        the aggregate unadjusted bases of the property 
                        of such entity is attributable to nonqualified 
                        financial property (as defined in section 
                        1397B(e)).
                    ``(B) Proprietorship.--Such term shall include any 
                business carried on by an individual as a proprietor if 
                such business would meet the requirements of 
                subparagraph (A) were it incorporated.
                    ``(C) Portions of business may be qualified active 
                low-income community business.--The term `qualified 
                active low-income community business' includes any 
                trades or businesses which would qualify as a qualified 
                active low-income community business if such trades or 
                businesses were separately incorporated.
            ``(3) Qualified business.--For purposes of this subsection, 
        the term `qualified business' has the meaning given to such 
        term by section 1397B(d); except that--
                    ``(A) in lieu of applying paragraph (2)(B) thereof, 
                the rental to others of real property located in any 
                low-income community shall be treated as a qualified 
                business if there are substantial improvements located 
                on such property,
                    ``(B) paragraph (3) thereof shall not apply, and
                    ``(C) such term shall not include any business if a 
                significant portion of the equity interests in such 
                business are held by any person who holds a significant 
                portion of the equity investments in the community 
                development entity.
    ``(e) Low-Income Community.--For purposes of this section--
            ``(1) In general.--The term `low-income community' means 
        any population census tract if--
                    ``(A) the poverty rate for such tract is at least 
                20 percent, or
                    ``(B)(i) in the case of a tract not located within 
                a metropolitan area, the median family income for such 
                tract does not exceed 80 percent of statewide median 
                family income, or
                    ``(ii) in the case of a tract located within a 
                metropolitan area, the median family income for such 
                tract does not exceed 80 percent of the greater of 
                statewide median family income or the metropolitan area 
                median family income.
            ``(2) Areas not within census tracts.--In the case of an 
        area which is not tracted for population census tracts, the 
        equivalent county divisions (as defined by the Bureau of the 
        Census for purposes of defining poverty areas) shall be used 
        for purposes of determining poverty rates and median family 
        income.
    ``(f) National Limitation on Amount of Investments Designated.--
            ``(1) In general.--There is a new markets tax credit 
        limitation of $1,200,000,000 for each of calendar years 2000 
        through 2004.
            ``(2) Allocation of limitation.--The limitation under 
        paragraph (1) shall be allocated by the Secretary among 
        qualified community development entities selected by the 
        Secretary. In making allocations under the preceding sentence, 
        the Secretary shall give priority to entities with records of 
        having successfully provided capital or technical assistance to 
        disadvantaged businesses or communities.
            ``(3) Carryover of unused limitation.--If the new markets 
        tax credit limitation for any calendar year exceeds the 
        aggregate amount allocated under paragraph (2) for such year, 
        such limitation for the succeeding calendar year shall be 
        increased by the amount of such excess.
    ``(g) Recapture of Credit In Certain Cases.--
            ``(1) In general.--If, at any time during the 5-year period 
        beginning on the date of the original issue of a qualified 
        equity investment in a qualified community development entity, 
        there is a recapture event with respect to such investment, 
        then the tax imposed by this chapter for the taxable year in 
        which such event occurs shall be increased by the credit 
        recapture amount.
            ``(2) Credit recapture amount.--For purposes of paragraph 
        (1), the credit recapture amount is an amount equal to the sum 
        of--
                    ``(A) the aggregate decrease in the credits allowed 
                to the taxpayer under section 38 for all prior taxable 
                years which would have resulted if no credit had been 
                determined under this section with respect to such 
                investment, plus
                    ``(B) interest at the overpayment rate established 
                under section 6621 on the amount determined under 
                subparagraph (A) for each prior taxable year for the 
                period beginning on the due date for filing the return 
                for the prior taxable year involved.
        No deduction shall be allowed under this chapter for interest 
        described in subparagraph (B).
            ``(3) Recapture event.--For purposes of paragraph (1), 
        there is a recapture event with respect to an equity investment 
        in a qualified community development entity if--
                    ``(A) such entity ceases to be a qualified 
                community development entity,
                    ``(B) the proceeds of the investment cease to be 
                used as required of subsection (b)(1)(B), or
                    ``(C) such investment is redeemed by such entity.
            ``(4) Special rules.--
                    ``(A) Tax benefit rule.--The tax for the taxable 
                year shall be increased under paragraph (1) only with 
                respect to credits allowed by reason of this section 
                which were used to reduce tax liability. In the case of 
                credits not so used to reduce tax liability, the 
                carryforwards and carrybacks under section 39 shall be 
appropriately adjusted.
                    ``(B) No credits against tax.--Any increase in tax 
                under this subsection shall not be treated as a tax 
                imposed by this chapter for purposes of determining the 
                amount of any credit under this chapter or for purposes 
                of section 55.
    ``(h) Basis Reduction.--The basis of any qualified equity 
investment shall be reduced by the amount of any credit determined 
under this section with respect to such investment.
    ``(i) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out this section, including 
regulations--
            ``(1) which limit the credit for investments which are 
        directly or indirectly subsidized by other Federal benefits 
        (including the credit under section 42 and the exclusion from 
        gross income under section 103),
            ``(2) which prevent the abuse of the provisions of this 
        section through the use of related parties,
            ``(3) which impose appropriate reporting requirements, and
            ``(4) which apply the provisions of this section to newly 
        formed entities.''
    (b) Credit Made Part of General Business Credit.--
            (1) In general.--Subsection (b) of section 38 of such Code 
        is amended by striking ``plus'' at the end of paragraph (11), 
        by striking the period at the end of paragraph (12) and 
        inserting ``, plus'', and by adding at the end the following 
        new paragraph:
            ``(13) the new markets tax credit determined under section 
        45D(a).''
            (2) Limitation on carryback.--Subsection (d) of section 39 
        of such Code is amended by adding at the end the following new 
        paragraph:
            ``(9) No carryback of new markets tax credit before january 
        1, 2000.--No portion of the unused business credit for any 
        taxable year which is attributable to the credit under section 
        45D may be carried back to a taxable year ending before January 
        1, 2000.''
    (c) Deduction for Unused Credit.--Subsection (c) of section 196 of 
such Code is amended by striking ``and'' at the end of paragraph (7), 
by striking the period at the end of paragraph (8) and inserting ``, 
and'', and by adding at the end the following new paragraph:
            ``(9) the new markets tax credit determined under section 
        45D(a).''
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

                              ``Sec. 45D. New markets tax credit.''
    (e) Effective Date.--The amendments made by this section shall 
apply to investments made after December 31, 1999.
                                 <all>