[Congressional Record Volume 144, Number 34 (Tuesday, March 24, 1998)]
[House]
[Pages H1399-H1400]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  SMALL BUSINESS INVESTMENT COMPANY TECHNICAL CORRECTIONS ACT OF 1998

  Mr. TALENT. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 3412) to amend and make technical corrections in title III 
of the Small Business Investment Act, as amended.
  The Clerk read as follows:

                               H.R. 3412

       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 ``Small Business Investment 
     Company Technical Corrections Act of 1998''.

     SEC. 2. TECHNICAL CORRECTIONS.

       Title III of the Small Business Investment Act of 1958 (15 
     U.S.C. 661) is amended--
       (1) in section 303(g) (15 U.S.C. 683(g)), by striking 
     subparagraph (13);
       (2) in section 308 (15 U.S.C. 687) by adding at the end the 
     following:
       ``(j) For the purposes of sections 304 and 305, in a case 
     in which an incorporated or unincorporated business is not 
     required by law to pay Federal income taxes at the enterprise 
     level but is required to pass income through to its 
     shareholders or partners, an eligible small business or 
     smaller enterprise may be determined by computing the after-
     tax income of such business by deducting from the net income 
     an amount equal to the net income multiplied by the combined 
     marginal Federal and State income tax rate for 
     corporations.''; and
       (3) in section 320 (15 U.S.C. 687m), by striking ``6'' and 
     inserting ``12''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Missouri (Mr. Talent) and the gentlewoman from New York (Ms. Velazquez) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Missouri (Mr. Talent).
  Mr. TALENT. Mr. Speaker, I yield myself such time as I may consume. 
Let me start by thanking the gentlewoman from New York (Ms. Velaz- 
quez), the ranking member of the Committee on Small Business. I 
appreciate

[[Page H1400]]

her assistance in moving the bill and her help in fashioning it.
  Mr. Speaker, I will not take too long. This is a technical 
corrections bill. While it is important work, there is no reason to 
spend a great deal of time on it. The purpose of H.R. 3412 is to make 
certain technical amendments to title III of the Small Business 
Investment Act of 1958. Title III authorizes the Small Business 
Investment Company program. The small business investment companies are 
venture capital firms licensed by the Small Business Administration 
that use SBA guarantees to leverage private capital for investment in 
small businesses. The technical corrections proposed by H.R. 3412, as 
amended, will improve the flexibility of the SBIC program and allow 
increased access to this program by small businesses.
  Congress revamped the SBIC program during the 103rd Congress to 
provide for a new form of leverage geared specifically toward equity 
investment in small businesses. Over the past few years as the new 
program has become established, certain deficiencies have come to 
light. In addition, certain statutory provisions have become obsolete. 
Moreover, the nature of the SBIC industry has changed. The result is a 
participating securities program that is made up primarily of smaller 
SBICs. The fact that these smaller SBICs are dominating the program 
points to shifting dynamics in the SBIC program. Smaller, start-up 
investments are more typical, and therefore the demand for SBA leverage 
has shifted to smaller individual placements.
  H.R. 3412 seeks to correct these deficiencies and remove provisions 
that may produce confusion due to changes in law and the character of 
the SBIC program. Under H.R. 3412, a provision in the Small Business 
Investment Act that reserves leverage for smaller SBICs will be 
repealed. Changes in SBA policy regarding applications for leverage, 
statutory changes in the availability of commitments for SBICs and the 
makeup of the industry present the possibility that that provision may, 
unless repealed, create conflicts and confusion.
  H.R. 3412 also modifies the test for determining the eligibility of 
small businesses for SBIC financing. Current statutory language does 
not account for small businesses organized in pass-through tax 
structures such as S corporations, limited liability companies, and 
certain partnerships. These small businesses do not pay taxes at the 
enterprise level, but instead pass through income and the ensuing tax 
liabilities to their partners and shareholders. Consequently, many of 
these small businesses face difficulties when the income test is 
applied to them, and are often declared ineligible for financing they 
should receive.
  Finally, H.R. 3412 will allow the SBA greater flexibility in issuing 
trust certificates to finance the SBIC program's investments in small 
businesses. Current law allows funding pools to be issued every 6 
months or more frequently. This inhibits the ability of the SBICs and 
the SBA to form pools of certificates that are large enough to generate 
serious investor interest. Allowing more time between fundings will 
permit SBA and the industry to form larger pools for sale in the 
market, thereby increasing investor interest and improving the interest 
rates for the small businesses financed.
  Mr. Speaker, I reserve the balance of my time.
  Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise today in strong support of H.R. 3412. I would 
like to thank the distinguished chairman of the Committee on Small 
Business for bringing this legislation to the floor. I urge my 
colleagues to support this bill, which makes corrections to the Small 
Business Investment Act and the Small Business Investment Company 
Program.
  There is no question that the value of small business investment 
companies has been felt across this Nation. SBICs have invested nearly 
$15 billion in long-term debt and equity capital to over 90,000 small 
businesses. Over the years, SBICs have given companies like Intel 
Corporation, Federal Express and America Online the push they needed to 
succeed. The result has been the creation of millions of jobs and 
billions of dollars in tax revenue. The bill before us today expands on 
that legacy by taking a good program and making it better.
  The passage of H.R. 3412 will make the SBIC program even more 
efficient and responsive to the needs of small entrepreneurs. The 
changes made by this legislation will serve a number of important 
purposes. By giving the SBIC program greater flexibility in issuing 
investment guarantees, small businesses will be assured lower interest 
rates.
  Second, H.R. 3412 clarifies SBA's role in ensuring equitable 
distribution and management of its participating securities to SBICs of 
all sizes. Finally, the bill confirms that small businesses, regardless 
of their chosen business form, are eligible for SBIC financing.
  These changes are part of an ongoing process that will enable us to 
provide creative financing to more small businesses more efficiently. 
Last year alone SBICs invested over $2.4 billion in over 2,500 small 
businesses. This bill will allow us to expand the scope of the SBIC 
program even further, allowing us to create more jobs and provide even 
greater economic opportunity to our Nation's small entrepreneurs.
  I am pleased to join the distinguished chairman in support of the 
proposed corrections, and I am happy to be a cosponsor of this 
legislation. I urge my colleagues to join me in supporting H.R. 3412.
  Mr. Speaker, I yield back the balance of my time.
  Mr. TALENT. Mr. Speaker, I yield myself such time as I may consume. 
This bill will have a real impact on the businesses in this country 
seeking start-up financing. At the end of the day, that is the most 
important part of our job. Let me again thank the gentlewoman from New 
York (Ms. Velazquez) and her staff, Michael Day and Salomon Torres, for 
their assistance in moving this measure before us. Let me also extend 
my appreciation to my staff, particularly Emily Murphy, Harry Katrichis 
and Tee Rowe. Mr. Speaker, I urge my colleagues to support H.R. 3412.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Missouri (Mr. Talent) that the House suspend the rules 
and pass the bill, H.R. 3412, as amended.
  The question was taken.
  Mr. TALENT. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 5 of rule I and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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