[Congressional Record (Bound Edition), Volume 145 (1999), Part 4]
[House]
[Pages 5254-5256]
[From the U.S. Government Publishing Office, www.gpo.gov]




           SMALL BUSINESS INVESTMENT IMPROVEMENT ACT OF 1999

  Mr. TALENT. Mr. Speaker, I move to suspend the rules and concur in 
the Senate amendment to the bill (H.R. 68) to amend section 20 of the 
Small Business Act and make technical corrections in title III of the 
Small Business Investment Act.
  The Clerk read as follows:
       Senate amendment:
       Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Investment 
     Improvement Act of 1999''.

     SEC. 2. SBIC PROGRAM.

       (a) In General.--Section 308(i)(2) of the Small Business 
     Investment Act of 1958 (15 U.S.C. 687(i)(2)) is amended by 
     adding at the end the following: ``In this paragraph, the 
     term `interest' includes only the maximum mandatory sum, 
     expressed in dollars or as a percentage rate, that is payable 
     with respect to the business loan amount received by the 
     small business concern, and does not include the value, if 
     any, of contingent obligations, including warrants, royalty, 
     or conversion rights, granting the small business investment 
     company an ownership interest in the equity or increased 
     future revenue of the small business concern receiving the 
     business loan.''.
       (b) Funding Levels.--Section 20 of the Small Business Act 
     (15 U.S.C. 631 note) is amended--
       (1) in subsection (d)(1)(C)(i), by striking 
     ``$800,000,000'' and inserting ``$1,200,000,000''; and
       (2) in subsection (e)(1)(C)(i), by striking 
     ``$900,000,000'' and inserting ``$1,500,000,000''.
       (c) Definitions.--
       (1) Small business concern.--Section 103(5) of the Small 
     Business Investment Act of 1958 (15 U.S.C. 662(5)) is 
     amended--

[[Page 5255]]

       (A) by redesignating subparagraphs (A) through (C) as 
     clauses (i) through (iii), and indenting appropriately;
       (B) in clause (iii), as redesignated, by adding ``and'' at 
     the end;
       (C) by striking ``purposes of this Act, an investment'' and 
     inserting the following: ``purposes of this Act--
       ``(A) an investment''; and
       (D) by adding at the end the following:
       ``(B) in determining whether a business concern satisfies 
     net income standards established pursuant to section 3(a)(2) 
     of the Small Business Act, if the business concern is not 
     required by law to pay Federal income taxes at the enterprise 
     level, but is required to pass income through to the 
     shareholders, partners, beneficiaries, or other equitable 
     owners of the business concern, the net income of the 
     business concern shall be determined by allowing a deduction 
     in an amount equal to the sum of--
       ``(i) if the business concern is not required by law to pay 
     State (and local, if any) income taxes at the enterprise 
     level, the net income (determined without regard to this 
     subparagraph), multiplied by the marginal State income tax 
     rate (or by the combined State and local income tax rates, as 
     applicable) that would have applied if the business concern 
     were a corporation; and
       ``(ii) the net income (so determined) less any deduction 
     for State (and local) income taxes calculated under clause 
     (i), multiplied by the marginal Federal income tax rate that 
     would have applied if the business concern were a 
     corporation;''.
       (2) Smaller enterprise.--Section 103(12)(A)(ii) of the 
     Small Business Investment Act of 1958 (15 U.S.C. 
     662(12)(A)(ii)) is amended by inserting before the semicolon 
     at the end the following: ``except that, for purposes of this 
     clause, if the business concern is not required by law to pay 
     Federal income taxes at the enterprise level, but is required 
     to pass income through to the shareholders, partners, 
     beneficiaries, or other equitable owners of the business 
     concern, the net income of the business concern shall be 
     determined by allowing a deduction in an amount equal to the 
     sum of--

       ``(I) if the business concern is not required by law to pay 
     State (and local, if any) income taxes at the enterprise 
     level, the net income (determined without regard to this 
     clause), multiplied by the marginal State income tax rate (or 
     by the combined State and local income tax rates, as 
     applicable) that would have applied if the business concern 
     were a corporation; and
       ``(II) the net income (so determined) less any deduction 
     for State (and local) income taxes calculated under subclause 
     (I), multiplied by the marginal Federal income tax rate that 
     would have applied if the business concern were a 
     corporation''.

       (d) Technical Corrections.--
       (1) Repeal.--Section 303(g) of the Small Business 
     Investment Act of 1958 (15 U.S.C. 683(g)) is amended by 
     striking paragraph (13).
       (2) Issuance of guarantees and trust certificates.--Section 
     320 of the Small Business Investment Act of 1958 (15 U.S.C. 
     687m) is amended by striking ``6'' and inserting ``12''.
       (3) Elimination of table of contents.--Section 101 of the 
     Small Business Investment Act of 1958 (15 U.S.C. 661 note) is 
     amended to read as follows:

     ``SEC. 101. SHORT TITLE.

       ``This Act may be cited as the `Small Business Investment 
     Act of 1958'.''.

  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.
  Mr. Speaker, I want to begin by thanking my colleague, the ranking 
member of the Committee on Small Business, the gentlewoman from New 
York (Ms. Velazquez) for her assistance in moving this bill, and her 
help in fashioning it.
  The bill before us is almost identical to the measure which was 
passed by this House at the beginning of last month as the first bill 
passed through the 106th Congress. The other body acted on this 
legislation yesterday, and I am pleased to bring it before the House 
today for purposes of further action, and I hope and trust final 
passage.
  The purpose of H.R. 68 is to make technical corrections to Title III 
of the Small Business Investment Act. That title authorizes the Small 
Business Investment Company program. Small Business Investment 
Companies, or SBICs, are venture capital firms licensed by the Small 
Business Administration. They use SBA guarantees to leverage private 
capital for small businesses. The technical corrections proposed by 
H.R. 68 will improve the flexibility of the SBIC program and allow 
increased access to this program by small businesses.
  I just want to hit today, Mr. Speaker, the major changes of the 
underlying SBIC Act by H.R. 68.
  First, H.R. 68 would change policies which currently reserve leverage 
for smaller SBICs. We thought at the time the bill was passed this 
would be necessary to give them a fair shake, but as a matter of fact, 
we are finding that the SBA's own policies are more than adequate in 
that regard, and that in fact this has the effect of hurting certain 
small businesses because it reserves too much of the leverage until the 
end of the year, so we need to repeal that.
  H.R. 68 has a small authorization level for the participating 
securities segment of the SBIC program. The level would rise from $800 
million to $1.2 billion in fiscal year 1999, and from $900 million to 
$1.5 billion in fiscal year 2000. That is necessary to meet rising 
demand.
  H.R. 68 modifies a test for determining the eligibility of small 
businesses for SBIC financing, and basically puts S corporations on the 
same footing as other corporations, and allows them to participate 
equally in the program.
  Finally, H.R. 68 will allow the SBA greater flexibility in issuing 
trust certificates to finance the SBIC program's investment in small 
businesses. Current law allows fundings 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, so H.R. 68 allows more time between fundings. That 
will permit the SBA and the industry to form larger pools for sale in 
the market.
  The Senate's changes to H.R. 68 involve the further fine tuning of 
the legislation which originated here at the beginning of this 
Congress. The other body added a technical correction, eliminating the 
table of contents in the Small Business Investment Act. They reworded 
the language regarding the small business standard for SBIC 
investments, and they clarified the formula for addressing taxes so 
that it is clear that State taxes could not be deducted twice.
  Those changes are all acceptable to the committee, to the ranking 
member and myself. I think they were good changes, if not really 
significant ones. I would urge the House to accept them.
  Again, I want to thank the gentlewoman from New York (Ms. Velazquez) 
and her staff for their assistance in moving the measure before us. I 
also want to thank the chairman and ranking member of the Committee on 
Small Business in the other body, Senators Kit Bond and John Kerry and 
their staffs, for their expeditious action on this important 
legislation.
  I urge my colleagues to adopt the Senate amendments and support H.R. 
68.
  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 want to take this opportunity to thank the chairman 
for moving expeditiously this legislation. I rise in strong support of 
H.R. 68, the Small Business Investment Company Technical Corrections 
Act. Last month H.R. 68 was the first piece of legislation to pass the 
106th Congress. Today, after the Senate has made some technical 
corrections which clarified the assumed tax provisions, we will once 
again pass this bipartisan legislation and send it to the President.
  As a cosponsor of last year's bill and an original cosponsor of this 
legislation, I strongly support the improvements we are making to the 
Small Business Investment Act and the Small Business Investment Company 
program to date. These changes will only serve to make the SBIC program 
more efficient and responsive to the needs of small entrepreneurs.
  There is no question that the value of the SBIC 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 
American Airlines the push they needed to succeed. And because of 
SBICs, millions of jobs have

[[Page 5256]]

been created and billions of dollars have been added into our economy.
  Even as America experiences the longest period of economic growth in 
decades, there are still many disadvantaged urban and rural communities 
that are being left behind. One way of bringing economic development 
and prosperity to more Americans is through the SBIC program.
  In fact, SBICs are such a powerful tool that the President's new 
economic initiatives for the distressed communities which he announced 
in his State of the Union Address is based on the solid framework of 
the SBIC program. Today's legislation answers the President's challenge 
and makes it easier for small businesses, especially in those targeted 
urban and rural areas, to access the capital that they need.
  H.R. 68 ensures that the next Fedexes and AOLs of this country 
continue to have a fighting chance. The proposal is simple. By 
streamlining the process and increasing flexibility, SBICs will be able 
to creatively finance more businesses.
  Recently we have also seen the SBIC program expand into new areas. 
Last year we witnessed the creation of two women-owned SBICs and the 
establishment of the first Hispanic-owned firm. The changes we are 
making today are part of an ongoing process that will enable us to 
provide creative financing to more small businesses more efficiently.
  I am pleased once again to join the distinguished chairman in support 
of the proposed corrections, and I urge the adoption of this 
legislation.
  Mr. Speaker, I have no further requests for time, and I yield back 
the balance of my time.
  Mr. TALENT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I simply would again encourage the House to concur in 
the Senate amendments to H.R. 68.
  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 concur in the Senate amendment to the bill, H.R. 68.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the Senate amendment was 
concurred in.
  A motion to reconsider was laid on the table.

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