[Congressional Record Volume 146, Number 28 (Tuesday, March 14, 2000)]
[House]
[Pages H940-H942]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           SMALL BUSINESS INVESTMENT CORRECTIONS ACT OF 2000

  Mrs. KELLY. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 3845) to make corrections to the Small Business Investment 
Act of 1958, and for other purposes, as amended.
  The Clerk read as follows:

                               H.R. 3845

       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 
     Corrections Act of 2000''.

     SEC. 2. DEFINITIONS.

       (a) Small Business Concern.--Section 103(5)(A)(i) of the 
     Small Business Investment Act of 1958 (15 U.S.C. 
     662(5)(A)(i)) is amended by inserting ``regardless of the 
     allocation of control during the investment period under any 
     investment agreement between the business concern and the 
     entity making the investment'' before the semicolon at the 
     end.
       (b) Long Term.--Section 103 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 662) is amended--

[[Page H941]]

       (1) in paragraph (15), by striking ``and'' at the end;
       (2) in paragraph (16), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following new paragraph:
       ``(17) the term `long term', when used in connection with 
     equity capital or loan funds invested in any small business 
     concern or smaller enterprise, means any period of time not 
     less than 1 year.''.

     SEC. 3. SUBSIDY FEES.

       (a) Debentures.--Section 303(b) of the Small Business 
     Investment Act of 1958 (15 U.S.C. 683(b)) is amended by 
     striking ``plus an additional charge of 1 percent per annum 
     which shall be paid to and retained by the Administration'' 
     and inserting ``plus, for debentures issued after September 
     30, 2000, an additional charge, in an amount established 
     annually by the Administration, of not more than 1 percent 
     per year as necessary to reduce to zero the cost (as defined 
     in section 502 of the Federal Credit Reform Act of 1990 (2 
     U.S.C. 661a)) to the Administration of purchasing and 
     guaranteeing debentures under this Act, which shall be paid 
     to and retained by the Administration''.
       (b) Participating Securities.--Section 303(g)(2) of the 
     Small Business Investment Act of 1958 (15 U.S.C. 683(g)(2)) 
     is amended by striking ``plus an additional charge of 1 
     percent per annum which shall be paid to and retained by the 
     Administration'' and inserting ``plus, for participating 
     securities issued after September 30, 2000, an additional 
     charge, in an amount established annually by the 
     Administration, of not more than 1 percent per year as 
     necessary to reduce to zero the cost (as defined in section 
     502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) 
     to the Administration of purchasing and guaranteeing 
     participating securities under this Act, which shall be paid 
     to and retained by the Administration''.

     SEC. 4. DISTRIBUTIONS.

       Section 303(g)(8) of the Small Business Investment Act of 
     1958 (15 U.S.C. 683(g)(8)) is amended--
       (1) by striking ``subchapter s corporation'' and inserting 
     ``subchapter S corporation'';
       (2) by striking ``the end of any calendar quarter based on 
     a quarterly'' and inserting ``any time during any calendar 
     quarter based on an''; and
       (3) by striking ``quarterly distributions for a calendar 
     year,'' and inserting ``interim distributions for a calendar 
     year,''.

     SEC. 5. CONFORMING AMENDMENT.

       Section 310(c)(4) of the Small Business Investment Act of 
     1958 (15 U.S.C. 687b(c)(4)) is amended by striking ``five 
     years'' and inserting ``1 year''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
New York (Mrs. Kelly) and the gentlewoman from New York (Ms. Velazquez) 
each will control 20 minutes.
  The Chair recognizes the gentlewoman from New York (Mrs. Kelly).
  Mrs. KELLY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, first, I would like to thank the gentlewoman from New 
York (Ms. Velazquez), the ranking member of the Committee on Small 
Business, for her efforts in moving this noncontroversial, yet crucial 
legislation through the committee process on the floor today.
  H.R. 3845, the SBIC Corrections Act, is a specific, clear-cut bill 
offered in an efficient and timely fashion. The purpose of H.R. 3845 is 
to amend the Small Business Investment Act to make changes in the Small 
Business Investment Company program at the Small Business 
Administration, commonly known as SBIC program.
  Created by Congress in 1958, SBICs are licensed by the Small Business 
Administration. They are privately organized and privately managed 
firms. SBICs serve as profit-motivated businesses that have a chance to 
invest in small businesses and a chance to share in the success of the 
small businesses they expand and thrive.
  SBICs serve as partners with the government and the private sector by 
using both their own capital and funds borrowed through the Federal 
Government to provide venture capital to small, independent businesses, 
both start-ups and established businesses.
  H.R. 3845 contains four technical changes to improve the program and 
correct problems brought to the committee's attention through the 
oversight process. We heard testimony regarding these changes at a 
hearing held on March 9. SBA has examined this legislation and is in 
agreement with the changes the Committee on Small Business has made.
  The bill makes four minor changes in the SBIC program. First, H.R. 
3845 modifies the definition of control for SBIC investment in small 
businesses, eliminating a cumbersome five-prong test and setting a 
clear statutory standard.
  Second, the legislation modifies the definition of long-term 
investment to harmonize that definition with accepted business practice 
and the tax and banking laws, changing it from 5 years to 1 year.
  Third, the bill allows the administration to adjust the subsidy fee 
for the SBIC program to maintain the subsidy rate of the program at 
zero. It is an unfortunate side effect of the success of the program 
that the current fixed 1 percent fee is actually taking in more money 
than the cost of the program, resulting in an unnecessary cost to 
borrowers.
  I would also point out that this section has been amended to be 
effective after the end of the year; therefore, the bill has no impact 
on direct spending in the current fiscal year.
  Finally, the bill changes the language in the investment act 
concerning distributions by SBICs. H.R. 3845 will allow SBICs more 
flexibility in making distributions to their investors and will 
simplify the accounting and tax procedures for SBICs by permitting 
distributions according to the quarterly needs of SBICs.
  Mr. Speaker, while these changes are minor, they are essential to the 
continued success of this valuable program. I urge my colleagues to 
support H.R. 3845 and the thousands of small businesses who could not 
flourish without the capital provided by the SBIC program.
  Mr. Speaker, I reserve the balance of my time.
  Ms. VELAZQUEZ. Mr. Speaker, I yield myself as much time as I may 
consume.
  Mr. Speaker, as an original cosponsor of H.R. 3845, I rise in strong 
support of this legislation that continues to build on a program that 
has been critical to the success of this Nation's small businesses.
  Mr. Speaker, as many Members of this body are aware, the Small 
Business Investment Company program created in the 1950s has been one 
of the most successful tools in helping this Nation's entrepreneurs 
succeed. This private-public partnership has provided access to 
capital, resulting in more than $15 billion worth of investment in 
90,000 small businesses. Of that, $600 million has gone to businesses 
located in low- and moderate-income communities. SBICs have helped such 
household names as Apple Computers, Federal Express, and Callaway Golf 
get off the ground.
  With today's passage of H.R. 3845, we will build on work already 
undertaken by this body last year that passed, and the President 
signed, legislation that streamlined the SBIC program. These changes 
increased flexibility, allowing more businesses to receive the vital 
financing that they need.
  But given last year's passage of sweeping financial modernization 
legislation that allowed banks, insurance companies, and investment 
firms to compete in all sectors of financial services, it is critical 
that we update the SBIC program.
  The Gramm-Leach-Bliley legislation, while providing an important new 
service to small business, has had a rippling effect throughout the 
entire financial community, including the SBIC program. Banks are no 
longer required to use the SBIC program for venture capital 
investments, and the new realities of venture capital are that we must, 
too, make some adjustment that will ensure this program continues a 
strong record of service.
  Let me give my colleagues an example of the types of changes we must 
make. Since the program was created in the 1950s, it was established 
that, in order to be deemed a long-term investment, the investment must 
be held for 5 years. However, when we passed financial modernization, 
the definition of long-term investment was set at 1 year. If the SBIC 
program is to continue as an attractive investment option, rules like 
what is considered a long-term investment must be consistent with the 
rest of this Nation's financial laws.
  The legislation also addresses the critical issues of control. When 
the SBIC program was originally created, it was clear that SBICs would 
not serve as holding companies. Over the life of the program in 
recognition of the changes in venture capital investment, several 
exceptions have been put in place that will allow for limited control. 
Unfortunately, rather than updating the program, this has created a 
complicated and burdensome system for both the SBIC and SBA that, in 
the end, limits assistance to small businesses.

[[Page H942]]

  This legislation recognizes that today's SBICs act as incubators of 
business ideas. It is still the intent that SBICs do not become holding 
companies; but in many cases, SBICs may need to create, capitalize, and 
operate small business concerns in the early years.
  The other changes under consideration ensure that the fees are not 
overburdensome and that the SBICs will be given the maximum flexibility 
with tax distribution to help with the cash flow.
  I want to also commend the gentleman from Missouri (Mr. Talent), the 
chairman, and the gentlewoman from New York (Mrs. Kelly) for their hard 
work on this legislation.
  These changes will continue to make the SBIC program the current 
flagship program that it is. I believe it is important to act quickly 
to ensure that the SBIC program continues its mission of creating 
future companies that, in turn, become common household names.
  Mr. Speaker, I yield back the balance of my time.
  Mrs. KELLY. Mr. Speaker, I yield myself such time as I may consume.
  In closing, Mr. Speaker, I would like to state that this technical 
corrections act is entirely that, technical in nature. However, it will 
save time and expense for both SBA and SBICs by eliminating duplicative 
filings and inefficient use of the SBA resources.
  Mrs. KELLY. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentlewoman from New York (Mrs. Kelly) that the House suspend the rules 
and pass the bill, H.R. 3845, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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