[House Report 109-740]
[From the U.S. Government Publishing Office]



109th Congress 
 2d Session             HOUSE OF REPRESENTATIVES                 Report
                                                                109-740
_______________________________________________________________________

                                     

                                                 Union Calendar No. 442


                         SUMMARY OF ACTIVITIES

                               __________

                                A REPORT

                                 of the

                      COMMITTEE ON SMALL BUSINESS

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS




January 2, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
                         LETTER OF TRANSMITTAL

                              ----------                              

                          House of Representatives,
                               Committee on Small Business,
                                   Washington, DC, January 2, 2007.
Hon. Karen Haas,
Clerk, House of Representatives,
Washington, DC.
    Dear Ms. Haas: On behalf of the Committee on Small Business 
of the U.S. House of Representatives, I am pleased to transmit 
the attached Summary of Activities of the Committee on Small 
Business for the 109th Congress.
    This report is submitted in compliance with the 
requirements of Rule XI, clause 1(d), of the Rules of the House 
of Representatives with respect to the activities of the 
Committee, and in carrying out its duties as stated in the 
Rules of the House of Representatives.
    The purpose of this report is to provide a reference 
document for Members of the Committee, the Congress and the 
public which can serve as a research tool and historic 
reference outlining the Committee's legislative and oversight 
activities conducted pursuant to Rule X, clause 1(o), 2(b)(1) 
and 3(g), of the Rules of the House of Representatives. This 
document is intended to serve as a general reference tool, and 
not as a substitute for the hearing records, reports and other 
Committee files.
            Sincerely,
                                        Donald A. Manzullo,
                                                          Chairman.


                            C O N T E N T S

                              ----------                              
                                                                   Page
Chapter I--Introduction..........................................     1
    1.1  Historical Background...................................     1
    1.2  Extracts from the Rules of the House of Representatives.     2
    1.3  Number and Jurisdiction of Subcommittees................     3
    1.4  Disposition of Legislation Referred to the Committee....     4
Chapter II--The Small Business Administration....................     7
    2.1  SBA Programs in General.................................     7
    2.2  SBA Business Loans......................................     8
    2.3  Disaster Assistance Loans...............................     9
    2.4  Small Business Investment Companies.....................    10
    2.5  Procurement Assistance..................................    10
    2.6  Entrepreneurial Development.............................    11
    2.7  Surety Bond Guarantees..................................    13
    2.8  Technology and Innovation...............................    13
    2.9  Export Assistance.......................................    15
    2.10  Office of Advocacy.....................................    16
Chapter III--Hearings and Meetings Held By the Committee on Small 
  Business and its Subcommittees, 109th Congress.................    19
    3.1  Full Committee..........................................    19
    3.2  Subcommittee on Workforce, Empowerment and Government 
      Programs...................................................    19
    3.3  Subcommittee on Regulatory Reform and Oversight.........    20
    3.4  Subcommittee on Tax, Finance and Exports................    20
    3.5  Subcommittee on Rural Enterprises, Agriculture and 
      Technology.................................................    20
Chapter IV--Publications of the Committee on Small Business and 
  its Subcommittees, 109th Congress..............................    21
    4.1  Reports.................................................    21
    4.2  Hearings Records........................................    21
Chapter V--Summary of Legislative Activities of the Committee on 
  Small Business, 109th Congress.................................    25
    5.1  H. RES. 22--EXPRESSING THE SENSE OF THE HOUSE OF 
      REPRESENTATIVES THAT AMERICAN SMALL BUSINESSES ARE ENTITLED 
      TO A SMALL BUSINESS BILL OF RIGHTS.........................    25
    5.2  H. RES. 130--RECOGNIZING THE CONTRIBUTIONS OF 
      ENVIRONMENTAL SYSTEMS AND THE TECHNICIANS WHO INSTALL AND 
      MAINTAIN THEM TO THE QUALITY OF LIFE OF ALL AMERICANS AND 
      SUPPORTING THE GOALS AND IDEALS OF NATIONAL INDOOR COMFORT 
      WEEK.......................................................    26
    5.3  H.R. 230--NATIONAL SMALL BUSINESS REGULATORY ASSISTANCE 
      ACT OF 2005................................................    27
    5.4  H.R. 527--VOCATIONAL AND TECHNICAL ENTREPRENEURSHIP 
      DEVELOPMENT ACT OF 2005....................................    35
    5.5  H.R. 682--THE REGULATORY FLEXIBILITY IMPROVEMENTS ACT...    38
    5.6  H.R. 1148--INSULAR AREAS SMALL BUSINESS DEVELOPMENT 
      ACT--KEY ELEMENTS WERE INCORPORATED INTO PUBLIC LAW 109-59.    40
    5.7  H.R. 2981--TO EXPAND AND IMPROVE THE ASSISTANCE PROVIDED 
      BY SMALL BUSINESS DEVELOPMENT CENTERS TO INDIAN TRIBE 
      MEMBERS, NATIVE ALASKANS, AND NATIVE HAWAIIANS.............    41
    5.8  H.R. 3207--SECOND-STAGE SMALL BUSINESS DEVELOPMENT ACT 
      OF 2005....................................................    45
    5.9  H.R. 6159--TO EXTEND TEMPORARILY CERTAIN AUTHORITIES OF 
      THE SMALL BUSINESS ADMINISTRATION, PUBLIC LAW 109-316......    51
Chapter VI--Summary of Other Legislative Activities of the 
  Committee on Small Business....................................    53
    6.1  Committee Meetings......................................    53
        6.1.1  Organizational Meetings...........................    53
        6.1.2  Oversight Plan for the 109th Congress.............    53
    6.2  Budget Views and Estimates..............................    59
        6.2.1  Fiscal Year 2006 Budget...........................    59
        6.2.2  Fiscal Year 2007 Budget...........................    62
Chapter VII--Summary of Oversight, Investigations, and Other 
  Activities of the Committee on Small Business and its 
  Subcommittees..................................................    65
    7.1  Summary of Committee Oversight Plan and Implementation..    65
    7.2  Summaries of the Hearings held by the Full Committee on 
      Small Business.............................................    65
        7.2.1  THE PRESIDENT'S FISCAL YEAR 2006 BUDGET...........    65
        7.2.2  MEDICAL LIABILITY REFORM: STOPPING THE 
          SKYROCKETING PRICE OF HEALTHCARE.......................    67
        7.2.3  PRESCRIPTIONS FOR HEALTH CARE: SOLUTIONS TO THE 
          PROBLEM................................................    68
        7.2.4  SMALL BUSINESS PRIORITIES FOR THE 109TH CONGRESS--
          H. RES. 22.............................................    70
        7.2.5  THE RFA AT 25: NEEDED IMPROVEMENTS FOR SMALL 
          BUSINESS REGULATORY RELIEF.............................    71
        7.2.6  WHAT HAS EX-IM BANK DONE FOR SMALL BUSINESS 
          LATELY?................................................    72
        7.2.7  PRIVATE EQUITY FOR SMALL FIRMS: THE IMPORTANCE OF 
          THE PARTICIPATING SECURITIES PROGRAM...................    74
        7.2.8  CLOSING THE TAX GAP AND THE IMPACT ON SMALL 
          BUSINESS...............................................    76
        7.2.9  ANTICOMPETITIVE THREATS FROM PUBLIC UTILITIES: ARE 
          SMALL BUSINESSES LOSING OUT?...........................    77
        7.2.10  SMALL BUSINESS ACCESS TO HEALTH INSURANCE: 
          LESSONS FROM NEBRASKA?.................................    79
        7.2.11  ARE SKYROCKETING MEDICAL LIABILITY PREMIUMS 
          DRIVING DOCTORS AWAY FROM UNDERSERVED AREAS?...........    80
        7.2.12  SMALL BUSINESS DEVELOPMENT CENTERS: NEW OFFERINGS 
          FOR A NEW ECONOMY......................................    82
        7.2.13  FREEDOM OF CONSCIENCE FOR SMALL PHARMACIES.......    84
        7.2.14  PROPOSED LEGISLATIVE REMEDY FOR THE PARTICIPATING 
          SECURITIES PROGRAM.....................................    86
        7.2.15  REFORMING THE TAX CODE TO ASSIST SMALL BUSINESSES    87
        7.2.16  SMALL BUSINESS AND HURRICANE KATRINA: REBUILDING 
          THE ECONOMY............................................    89
        7.2.17  PROMOTING PRIVATE SECTOR EMERGENCY PREPAREDNESS..    90
        7.2.18  BUILDING A WALL BETWEEN FRIENDS: PASSPORTS TO AND 
          FROM CANADA?...........................................    92
        7.2.19  FISCAL YEAR '07 BUDGET AND REAUTHORIZATION 
          PROPOSAL OF THE SBA....................................    94
        7.2.20  HEARING ON IRS LATEST ENFORCEMENT: IS THE BULLS-
          EYE ON SMALL BUSINESSES?...............................    95
        7.2.21  CUTTING OUR TRADE DEFICIT: CAN THE U.S. MUSTER 
          ITS DIVERSE TRADE PROMOTION OPERATIONS TO MAKE AN 
          IMPACT?................................................    97
        7.2.22  SARBANES-OXLEY SECTION 404: WHAT IS THE PROPER 
          BALANCE BETWEEN INVESTOR PROTECTION AND CAPITAL 
          FORMATION FOR SMALLER PUBLIC COMPANIES.................    98
        7.2.23  BRIDGING THE EQUITY GAP: EXAMINING THE ACCESS TO 
          CAPITAL FOR ENTREPRENEURS ACT OF 2006..................    99
        7.2.24  CONTRACTING THE INTERNET: DOES ICANN CREATE A 
          BARRIER TO SMALL BUSINESS?.............................   100
        7.2.25  THE AWARD OF CONTRACTS BY FEDERAL AGENCIES TO 
          ALASKA NATIVE CORPORATIONS.............................   101
        7.2.26  FAILURE TO COMPLY WITH THE REGULATORY FLEXIBILITY 
          ACT: IRS ENDANGERING SMALL BUSINESSES YET AGAIN........   103
        7.2.27  ADVANCING SECURITY AND COMMERCE AT OUR NATION'S 
          PORTS: THE GOALS ARE NOT MUTUALLY EXCLUSIVE............   104
        7.2.28  FEMA'S RESPONSE TO THE ROCKFORD FLOOD............   105
    7.3  Summaries of the Hearings held by the Subcommittee on 
      Workforce, Empowerment and Government Programs.............   107
        7.3.1  REMOVING OBSTACLES TO JOB CREATION: HOW CAN THE 
          FEDERAL GOVERNMENT HELP SMALL BUSINESSES REVITALIZE THE 
          ECONOMY?...............................................   107
        7.3.2  HOW ARE VETERAN-OWNED SMALL BUSINESS OWNERS BEING 
          SERVED?................................................   109
        7.3.3  UNION SALTING--ORGANIZING AGAINST SMALL BUSINESS..   110
        7.3.4  HOW THE CLEAN AIR ACT AFFECTS AUTO REPAIR.........   112
        7.3.5  SMALL BUSINESS EXPENSING--JOB GROWTH THROUGH THE 
          TAX CODE...............................................   114
        7.3.6  FREEDOM IN THE WORKPLACE--AN EXAMINATION OF A 
          NATIONAL RIGHT TO WORK LAW.............................   116
        7.3.7  THE SMALL BUSINESS INNOVATION RESEARCH PROGRAM--
          OPENING DOORS TO NEW TECHNOLOGY........................   117
        7.3.8  ENTREPRENEURIAL DEVELOPMENT PROGRAMS OF THE SBA...   119
        7.3.9  HEALTH CARE PROPOSALS TO HELP LOWER THE COST TO 
          SMALL BUSINESS.........................................   120
        7.3.10  IMMIGRANT EMPLOYMENT VERIFICATION AND SMALL 
          BUSINESS...............................................   122
        7.3.11  HEALTH CARE AND SMALL BUSINESS: REAL OPTIONS FOR 
          COLORADO BUSINESSES....................................   124
    7.4  Summaries of the Hearings held by the Subcommittee on 
      Regulatory Reform and Oversight............................   125
        7.4.1  THE ADMINISTRATION'S PROGRAM TO REDUCE UNNECESSARY 
          REGULATORY BURDEN ON MANUFACTURERS--A PROMISE TO BE 
          KEPT...................................................   125
        7.4.2  ANWR'S BENEFITS FOR SMALL BUSINESS................   127
        7.4.3  VETERAN'S ACCESS TO CAPITAL.......................   127
        7.4.4  ENTREPRENEUR SOLDIERS EMPOWERMENT ACT.............   128
        7.4.5  THE INTERNET SALES TAX: HEADACHES AHEAD FOR SMALL 
          BUSINESS?..............................................   130
        7.4.6  THE STATE OF SMALL BUSINESS SECURITY IN A CYBER 
          ECONOMY................................................   131
        7.4.7  THE SMALL BUSINESS ADMINISTRATION'S PROCUREMENT 
          PROGRAMS...............................................   133
        7.4.8  ELECTRONIC MEDICAL RECORDS........................   134
        7.4.9  DATA PROTECTION REGULATIONS AND SMALL BUSINESS....   136
        7.4.10  S CORPORATIONS--THEIR HISTORY AND CHALLENGES.....   137
        7.4.11  AN UPDATE ON ADMINISTRATION ACTION TO REDUCE 
          UNNECESSARY REGULATORY BURDENS ON AMERICA'S SMALL 
          MANUFACTURERS..........................................   138
    7.5  Summaries of the Hearings held by the Subcommittee on 
      Tax, Finance and Exports...................................   140
        7.5.1  THE ESTATE TAX AND THE ALTERNATIVE MINIMUM TAX--
          INEQUITY FOR AMERICA'S SMALL BUSINESSES................   140
        7.5.2  DOES CHINA ENACT BARRIERS TO FREE TRADE?..........   141
        7.5.3  EXAMINING THE PRESIDENT'S TAX REFORM PANEL 
          RECOMMENDATIONS........................................   143
        7.5.4  SMALL BUSINESS ADMINISTRATION FINANCE PROGRAMS....   144
        7.5.5  THE EFFECTS OF THE HIGH COST OF NATURAL GAS ON 
          SMALL BUSINESS AND FUTURE ENERGY TECHNOLOGIES..........   145
        7.5.6  CHINESE BARRIERS TO TRADE.........................   146
    7.6  Summaries of the Hearings held by the Subcommittee on 
      Rural Enterprises, Agriculture and Technology..............   147
        7.6.1  THE HIGH PRICE OF NATURAL GAS AND ITS IMPACT ON 
          SMALL BUSINESSES: ISSUES AND SHORT TERM SOLUTIONS......   147
        7.6.2  DOES CHINA ENACT BARRIERS TO FREE TRADE?..........   149
        7.6.3  DIFFERENT APPLICATIONS FOR GENETICALLY MODIFIED 
          CROPS..................................................   149
        7.6.4  THE IMPORTANCE OF THE BIOTECHNOLOGY INDUSTRY AND 
          VENTURE CAPITAL SUPPORT IN INNOVATION..................   151
        7.6.5  THE NEED FOR IMPROVEMENTS AND MORE INCENTIVES IN 
          THE ENDANGERED SPECIES ACT.............................   152
        7.6.6  EXAMINING THE PRESIDENT'S TAX REFORM PANEL 
          RECOMMENDATIONS........................................   154
        7.6.7  THE MISSOURI RIVER AND ITS SPRING RISE: SCIENCE OR 
          SCIENCE FICTION........................................   154
        7.6.8  THE FUTURE OF RURAL TELECOMMUNICATIONS: IS 
          UNIVERSAL SERVICE REFORM NEEDED?.......................   155
        7.6.9  UNLOCKING CHARITABLE GIVING.......................   156
        7.6.10  CHINESE BARRIERS TO TRADE........................   157


                                                 Union Calendar No. 442
109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     109-740

======================================================================



 
                         SUMMARY OF ACTIVITIES

                                _______
                                

January 2, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Manzullo of Illinois, from the Committee on Small Business, 
                        submitted the following

                              R E P O R T

                         SUMMARY OF ACTIVITIES

                              CHAPTER ONE


                              INTRODUCTION

    This is the sixteenth summary report of the standing 
Committee on Small Business. The action by the House of 
Representatives in adopting the House Resolution 988 on October 
8, 1974, provided that the committee be established as a 
standing committee, and upgraded the Permanent Select Committee 
on Small Business by giving the Committee legislative 
jurisdiction over small business matters in addition to the 
oversight jurisdiction it had historically exercised.
    The adoption of the House rules in the 94th through 109th 
Congress confirmed this action and continued the process begun 
on August 12, 1941, when, by virtue of House Resolution 294 
(77th Congress, 1st session), the Select Committee on Small 
Business was created. In January 1971, the House designated the 
Select Committee as a permanent Select Committee; and, on 
October 8, 1974, the 93rd Congress, recognizing the importance 
of the work performed on behalf of this nation's small 
businesses, provided that the Committee should thereafter be 
established as a standing committee.

1.1  Historical Background

    The history of the Select Committee on Small Business from 
its inception in 1941 during the 77th Congress through 1972, 
the end of the 92nd Congress, may be found in House Document 
93-197 (93rd Congress, 2nd session), entitled ``A History and 
Accomplishments of the Permanent Select Committee on Small 
Business.''
    The Committee is bipartisan in recognition that the 
nation's small business people represent a major segment of our 
business population and our nation's economic strength. This 
committee, continuing its vital oversight responsibilities, 
serves as the advocate and voice for small business as well as 
the focal point for small business legislation.
    In recognition of the importance of the Committee, the 
House of Representatives has established the Committee's 
membership at 33 Members. The following Members were named to 
constitute the Committee in the 109th Congress:
    Republicans included:
          Donald A. Manzullo (IL), Chairman; Roscoe G. Bartlett 
        (MD) Vice Chairman; Sue W. Kelly (NY); Steve Chabot 
        (OH); Sam Graves (MO); W. Todd Akin (MO); Bill Shuster 
        (PA); Marilyn N. Musgrave (CO); Jeb Bradley (NH); Steve 
        King (IA); Thaddeus G. McCotter (MI); Ric Keller (FL); 
        Ted Poe (TX); Michael E. Sodrel (IN); Jeff Fortenberry 
        (NE); Michael G. Fitzpatrick (PA); Lynn A. Westmoreland 
        (GA); Louie Gohmert (TX).
    Democrats included:
          Nydia M. Velazquez (NY), Ranking Minority Member; 
        Juanita Millender-McDonald (CA); Tom Udall (NM); Daniel 
        Lipinski (IL); Eni F. H. Faleomavaega (AS); Donna M. 
        Christensen (VI); Danny K. Davis (IL); Ed Case (HI); 
        Madeleine Z. Bordallo (GU); Raul M. Grijalva (AZ); 
        Michael H. Michaud (GA); Linda T. Sanchez (CA); John 
        Barrow (GA); Melissa L. Bean (IL); Gwen Moore (WI).

1.2  Extracts From the Rules of the House of Representatives

                              ----------                              


                                 RULE X

                       ORGANIZATION OF COMMITTEES

             COMMITTEES AND THEIR LEGISLATIVE JURISDICTIONS

    1. There shall be in the House the following standing 
committees, each of which shall have the jurisdiction and 
related functions assigned by this clause and clauses 2, 3, and 
4. All bills, resolutions, and other matters relating to 
subjects within the jurisdiction of the standing committees 
listed in this clause shall be referred to those committees, in 
accordance with clause 2 of rule XII, as follows:

           *       *       *       *       *       *       *

(o) Committee on Small Business.
    (1) Assistance to and protection of small business, 
including financial aid, regulatory flexibility, and paperwork 
reduction.
    (2) Participation of small-business enterprises in Federal 
procurement and Government contracts.

                   GENERAL OVERSIGHT RESPONSIBILITIES

    2. (b)(1) In order to determine whether laws and programs 
addressing subjects within the jurisdiction of a committee are 
being implemented and carried out in accordance with the intent 
of Congress and whether they should be continued, curtailed, or 
eliminated, each standing committee (other than the Committee 
on Appropriations) shall review and study on a continuing 
basis--
          (A) The application, administration, execution, and 
        effectiveness of laws and programs addressing subjects 
        within its jurisdiction;
          (B) The organization and operation of Federal 
        agencies and entities having responsibilities for the 
        administration and execution of laws and programs 
        addressing subjects within its jurisdiction;
          (C) any conditions or circumstances that may indicate 
        the necessity or desirability of enacting new or 
        additional legislation addressing subjects within its 
        jurisdiction (whether or not a bill or resolution has 
        been introduced with respect thereto); and
          (D) future research and forecasting on subjects 
        within its jurisdiction.
    (2) Each committee to which subparagraph (1) applies having 
more than 20 members shall establish an oversight subcommittee, 
or require its subcommittees to conduct oversight in their 
respective jurisdictions, to assist in carrying out its 
responsibilities under this clause. The establishment of an 
oversight subcommittee does not limit the responsibility of a 
subcommittee with legislative jurisdiction in carrying out its 
oversight responsibilities.
    (c) Each standing committee shall review and study on a 
continuing basis the impact or probable impact of tax policies 
affecting subjects within its jurisdiction as described in 
clauses 1 and 3.

SPECIAL OVERSIGHT FUNCTIONS

           *       *       *       *       *       *       *


    3. (k) The Committee on Small Business shall study and 
investigate on a continuing basis the problems of all types of 
small business.

1.3  Number and Jurisdiction of Subcommittees

    There will be four subcommittees as follows:
          --Workforce, Empowerment and Government Programs 
        (seven Republicans and six Democrats)
          --Regulatory Reform and Oversight (seven Republicans 
        and six Democrats)
          --Tax, Finance and Exports (eight Republicans and 
        seven Democrats)
          --Rural Enterprises, Agriculture and Technology (six 
        Republicans and five Democrats)
    During the 109th Congress, the Chairman and ranking 
minority member shall be ex officio members of all 
subcommittees, without vote, and the full committee shall have 
the authority to conduct oversight of all areas of the 
committee's jurisdiction.
    In addition to conducting oversight in the area of their 
respective jurisdiction, each subcommittee shall have the 
following jurisdiction:

             WORKFORCE, EMPOWERMENT AND GOVERNMENT PROGRAMS

    Oversight and investigative authority over problems faced 
by small businesses in attracting and retaining a high quality 
workforce, including but not limited to wages and benefits such 
as health care.
    Promotion of business growth and opportunities in 
economically depressed areas.
    Oversight and investigative authority over regulations and 
other government policies that impact small businesses located 
in high risk communities.
    Opportunities for minority, women, veteran and disabled-
owned small businesses, including the SBA's 8(a) program.
    General oversight of programs targeted toward urban relief.
    Small Business Act, Small Business Investment Act, and 
related legislation.
    Federal Government programs that are designed to assist 
small business generally.
    Participation of small business in Federal procurement and 
Government contracts.

                    REGULATORY REFORM AND OVERSIGHT

    Oversight and investigative authority over the regulatory 
and paperwork policies of all Federal departments and agencies.
    Regulatory Flexibility Act.
    Paperwork Reduction Act.
    Competition policy generally.
    Oversight and investigative authority generally, including 
novel issues of special concern to small business.

                        TAX, FINANCE AND EXPORTS

    Tax policy and its impact on small business.
    Access to capital and finance issues generally.
    Export opportunities and oversight over Federal trade 
policy and promotion programs.

             RURAL ENTERPRISES, AGRICULTURE AND TECHNOLOGY

    Promotion of business growth and opportunities in rural 
areas.
    Oversight and investigative authority over agricultural 
issues that impact small businesses.
    General oversight of programs targeted toward farm relief.
    Oversight and investigative authority for small business 
technology issues.

1.4  Disposition of Legislation Referred to the Committee

    A total of 65 House bills and 1 Senate bill were referred 
to the Committee on Small Business during the 109th Congress. 
The Committee acted on 15 bills in some fashion, of which 5 
reports were filed. Two bills on which the Committee acted upon 
were signed into law either individually or as part of broader 
legislation. The House of Representatives passed two Committee-
drafted resolutions to express the sense of the House that 
American small businesses are entitled to a Small Business Bill 
of Rights (H. Res. 22) and to honor those who work in the 
heating, ventilation, and air conditioning (HVAC) industry, 
celebrating National Indoor Comfort Week (H. Res. 130). These 
resolutions did not require Senate passage or presidential 
signature. For a more detailed summary of the Committee's 
legislative activities, please refer to Chapter 5 of this 
report.
    The Committee expended most of its legislative time and 
effort in attempting to reach an accommodation to pass a 
consensus Small Business Administration (SBA) reauthorization 
bill (H.R. 5352) that had broad support with SBA industry 
groups and the Administration. Unfortunately, Democrats on the 
House Small Business Committee decided to be more partisan in 
the 109th Congress by first refusing to meet with Chairman 
Manzullo or majority staff to find out their concerns regarding 
SBA reauthorization. Then, the minority proceeded with their 
plan to offer over 45 mostly frivolous amendments during the 
proposed May 17, 2006 mark-up that would have dramatically 
increased the size and scope of the SBA. For example, Committee 
Democrats offered 10 different but similar amendments that 
basically attempted to overturn the zero loan subsidy policy in 
the 7(a) program.
    Instead of going through a contentious mark-up process, 
Chairman Manzullo extended yet another olive branch by 
attempting to meet individually with Democrat Members of the 
Committee who offered amendments to see where there were areas 
to compromise. However, after an initial few meetings, the 
Ranking Minority Member banned any more Democrat Members from 
meeting with Chairman Manzullo, thus complicating efforts to 
find common ground. Throughout the summer and fall of 2006, the 
Ranking Minority Member insisted on incorporating controversial 
provisions into SBA reauthorization and offered no real 
compromise. Thus, to prevent a major increase in spending, the 
one major Committee-sponsored bill that was signed into law was 
simply a long-term temporary extension of SBA programs (P.L. 
109-316) until February 2, 2007.
    In a more productive direction, the Committee was able to 
work with the Transportation and Infrastructure Committee to 
pass a modified version of H.R. 1148, authored by Delegate 
Madeleine Bordallo (D-GU), which designated the entire insular 
areas of Guam, the Virgin Islands, America Samoa, and the 
Northern Mariana Islands, in addition to non-metropolitan areas 
of Alaska and Hawaii, as Historically-Underutilized Business 
(HUB) Zones, as an amendment to H.R. 3, the Safe, Accountable, 
Flexible, Efficient Transportation Equity Act: A Legacy for 
Users (SAFETEA-LU). H.R. 3, with H.R. 1148 as modified as the 
new Section 10203, was signed into law on August 10, 2005 (P.L. 
109-59).
    The Committee also passed four bills--two authored by 
Republicans and two authored by Democrats--that unfortunately 
did not see timely action by the House (H.R. 230, H.R. 527, 
H.R. 2981, and H.R. 3207). However, they were incorporated into 
the Chairman's SBA reauthorization package (H.R. 5352) but that 
legislation, as mentioned above, was halted by the minority.
    The Committee also held 11 hearings on seven bills that 
were either finalized or still in development (H.R. 682, H.R. 
2943, H.R. 3429, H.R. 3939, H.R. 5196, H.R. 5352, H.R. 6204) 
but these bills saw no further action. Two Subcommittees of the 
House Judiciary Committee held hearings on two Small Business 
Committee bills where both committees shared legislative 
jurisdiction (H.R. 435 and H.R. 682) but they saw no further 
legislative action.
    The Committee was very active on other legislation that was 
not directly referred to the Committee but had a large impact 
upon small business. This included the Tax Increase Prevention 
and Reconciliation Act (P.L. 109-222), which provides for a 
two-year extension of the higher $100,000 small business 
expensing limit; the Junk Fax Prevention Act of 2005 (P.L. 109-
21), which reversed the Federal Communications Commission (FCC) 
proposed rule to require written consent prior to a business 
sending a fax to a recipient; the Energy Policy Act of 2005 
(P.L. 109-58), which aimed to provide adequate, affordable, and 
reliable energy supplies; the Transportation Equity Act: A 
Legacy for Users (P.L. 109-59), which included a provision to 
prevent public transit agencies from competing with small 
private bus tour operators; the Department of Homeland Security 
Appropriations Act, 2007 (P.L. 109-295), which provides a 18-
month extension to implement the Western Hemisphere Travel 
Initiative (WHTI); the Security and Accountability for Every 
(SAFE) Ports Act (P.L. 109-347), which eased the proposed 
burden of the proposed Maritime Transportation Worker Card 
(TWIC) on small businesses in the transportation sector; the 
Export-Import Bank Reauthorization Act of 2006 (P.L. 109-438), 
which restored a viable Small Business Division within the 
Bank; and the Tax Relief and Health Care Act of 2006 (P.L. 109-
432), which expanded the reach and scope of Health Savings 
Accounts (HSAs) to provide more health care choices for small 
business owners and their employees.
    The Committee was also very involved in trying to pass 
small business friendly legislation into law but was stymied 
because of a determined minority of Democrat Senators prevented 
a full debate on the bills. This includes three efforts to 
either abolish (H.R. 8) or reform the estate tax (H.R. 5638 and 
H.R. 5970); the Small Business Health Fairness Act, which 
creates Association Health Plans (H.R. 525/S. 1955); and the 
HEALTH Act of 2005 (H.R. 5/S. 22) to reform our medical 
liability system.
    Finally, the Committee was heavily engaged in helping to 
pass other pro-small business bills but they could not be 
completed in time for final passage into law. These include the 
Federal Prison Industries Competition in Contracting Act (H.R. 
2965), which removed the mandatory sourcing preference for FPI; 
the U.S. Patent and Trademark Fee Modernization Act (H.R. 
2791), which would continue the lower fee structure for small 
entities filing patents; and the Business Checking Freedom Act 
of 2005 (H.R. 1224), which allows interest on business checking 
accounts.
                              CHAPTER TWO

                   THE SMALL BUSINESS ADMINISTRATION

    The Committee has both legislative and oversight 
jurisdiction over the Small Business Administration (SBA), 
which was created in 1953, inter alia, to provide opportunities 
for entrepreneurship, inventiveness, and the creation and 
growth of small businesses; to provide procurement assistance 
to small businesses seeking to contract with the federal 
government; to help assure the availability of capital to small 
businesses; and to provide assistance to victims of disasters.
    During the 109th Congress, the Committee held a number of 
hearings and passed several bills that focused on the mission 
and performance of the SBA. Much of the Committee's effort 
focused on disaster recovery associated with the SBA's mission 
to provide disaster loans to homeowners and small businesses. 
In particular, 2005 was a very active hurricane season that 
included the devastation wrought by Hurricanes Katrina, Rita, 
and Wilma. A review of the legislative activities of the 
Committee appears in Chapter Five and a synopsis of the 
hearings held by the Committee may be found in Chapter Seven of 
this report.
    The major programs of the SBA are briefly described below.
2.1  SBA Programs in General
    SBA was has approximately 5,896 employees in the field 
(including 3,772 temporary disaster employees) with 692 at the 
headquarters in Washington, DC. There are currently 10 regional 
offices, 68 district and 13 staffed branch offices, two 
commercial loan servicing centers, two liquidation centers, one 
liquidation and guaranty purchase center, two disaster home 
loan servicing centers, a disaster processing and disbursement 
center, a disaster call center, two disaster field operation 
centers, a headquarters disaster operations center (located in 
Herndon, VA), 26 field disaster operation centers, six 
Government Contracting Area Offices, and two commercial loan 
servicing centers. The SBA provides small business loan 
guarantees, direct loans for physical damage and economic 
injury to disaster victims, assistance to small businesses who 
are seeking to compete in the federal procurement arena and to 
obtain contracts, as a well as management, marketing and 
technical assistance provided by Small Business Development 
Centers (SBDCs) and the Senior Corps of Retired Executives 
(SCORE). The SBA also administers a surety bond program for 
small businesses that are not able to obtain bonding elsewhere.
    An independent entity within SBA, the Office of Advocacy, 
headed by the Chief Counsel for Advocacy appointed by the 
President and confirmed with the advice and consent of the 
Senate, serves as an advocate for small businesses both in the 
Legislative and Executive branches of government primarily in 
the area of insuring that proposed rules and regulations do not 
unduly harm small business. The SBA also oversees the 
implementation of the Small Business Innovation Research (SBIR) 
and Small Business Technology Transfer (STTR) programs that 
provide research and development opportunities for small 
businesses.
2.2  SBA Business Loans
    One of the major purposes for SBA is to help assure that 
capital is available to small businesses who cannot obtain 
credit elsewhere and that demonstrate the ability to repay. 
Subject to appropriations, loans are made for a wide variety of 
purposes, e.g., plant acquisition, construction, conversion or 
expansion, including acquisition of land, material, supplies, 
equipment, and working capital. SBA administers three major 
loan programs known as the 7(a), 504, and Microloan programs.
    SBA's largest business loan guarantee program is the 7(a) 
program. In Fiscal Year (FY 2005), 88,845 7(a) loans were made 
in the amount of approximately $14 billion and in FY 2006 there 
were 90,483 such loans made in the amount of $13.8 billion. 
Banks and other lending institutions make loans and the SBA 
guarantees up to $1,500,000 of a private sector loan of up to 
$2,000,000. Generally, the SBA guarantees up to 85 percent of 
loans of $150,000 or less and 75 percent of loans greater than 
$150,000.
    The Small Business Reauthorization and Manufacturing 
Assistance Act of 2004 (H.R. 5108/S. 2821), most of which was 
added to the Consolidated Appropriations Act, 2005 (Division K 
of P.L. 108-447) and signed into law on December 8, 2004, 
stabilized and strengthened the popular 7(a) loan guarantee 
program by maintaining current fee structure, thus eliminating 
the need for federal subsidies, saving taxpayers between $70 
million and $80 million. In addition, Public Law 108-447 raised 
the maximum 7(a) loan guarantee level from $1 million to $1.5 
million (with an accompanying 0.25 percent upfront front 
borrower fee surcharge on the amount of the guarantee above $1 
million) and raises the maximum loan amount from $250,000 to 
$350,000 for paperwork-friendly SBA Express loans.
    The 504 loan program was established to encourage economic 
development, create and preserve job opportunities, and foster 
growth and modernization of small businesses. A small business 
may apply to a Certified Development Company (CDC), licensed by 
SBA, to finance part of a proposed 504 project. The SBA 
guarantees debentures of up to $1,000,000 ($1,300,000 where 
certain economic redevelopment objectives are met). The 
guarantees are for 100 percent of the debenture that represents 
40 percent of the total project costs. The balance of the costs 
is provided by a 10 percent or more contribution by the 
borrower, and a private sector loan to finance the remaining 50 
percent. There are currently 273 licensed CDCs. In FY 2005, 
CDCs made 8,974 504 loans totaling $4.94 billion and in FY 
2006, CDCs made 9,720 504 loans totaling $5.7 billion.
    The Small Business Reauthorization and Manufacturing 
Assistance Act of 2004--(H.R. 5108/S. 2821), that was added to 
the Consolidated Appropriations Act, 2005 (Division K of P.L. 
108-447) also expanded the 504 loan program at no additional 
expense to the taxpayer. Public Law 108-447 increased the 
maximum loan debenture size in the 504 program to $1.5 million; 
$2 million for projects where certain economic redevelopment 
objectives are met; and $4 million for small manufacturers. It 
also increased the job requirement test to $50,000 of guarantee 
for every one job created or retains (up from $35,000); 
$100,000 in the case of a project of a small manufacturer; and 
$75,000 for areas generally considered to need greater economic 
development.
    The Microloan program is designed to provide capital to 
very small enterprises that cannot be served even by the other 
access to capital programs of the SBA. The program has two 
types of loans: (1) direct and (2) guaranteed. SBA directly 
provides loans to 169 intermediaries who in turn make loans of 
up to $35,000 to small businesses. Also, SBA guarantees 100 
percent of loans to the intermediaries by banks. SBA funds 
grants to intermediaries and other qualified organizations to 
provide marketing, management, and technical assistance to 
borrowers. In FY 2005, intermediary lenders made 2,436 loans in 
the amount of $20,000,000. In FY 2006, intermediary lenders 
made 2,395 loans in the amount of $19,000,000.
2.3  Disaster Assistance Loans
    Under the Disaster Assistance Program, SBA makes direct 
loans rather than loan guarantees. There are three kinds of 
disaster loans: (1) home disaster loans, (2) physical disaster 
business loans, and (3) economic injury business loans. The 
owner of a home may apply for a home disaster loan to cover 
physical damage to his or her primary residence and personal 
property, and those not owning their primary residence may 
apply for a loan with respect to physical loss of their 
personal property. Almost any business, non-profit entity, or 
charity (big or small) whose real or personal property was 
damaged in a declared disaster may apply for a physical 
disaster business loan.
    A small business located in a declared disaster area may 
apply for an economic injury disaster loan, if the small 
business has suffered a substantial economic loss as a direct 
result of the disaster that has caused it to be unable to meet 
its obligations as they mature or to pay its ordinary and 
necessary operating expenses. A small business whose owner or 
an essential employee is a Military Reservist or a member of 
the National Guard may apply for an economic injury disaster 
loan, if the small business has suffered or is likely to suffer 
substantial economic injury as a result of the individual's 
absence while on active duty during a period of a military 
conflict.
    After a series of devastating hurricanes struck Florida and 
other states east of the Mississippi in the summer of 2004, the 
108th Congress passed two emergency supplemental appropriations 
statutes that provide a total of $16.475 billion to areas 
stricken by the hurricanes and other natural disasters. As part 
of the recovery effort, SBA received $929 million to cover the 
cost and administration of SBA disaster loans.
    In FY 2005, SBA approved 41,651 disaster loans totaling 
$1.27 billion. In FY 2006, SBA approved 137,803 disaster loans 
totaling $8.79 billion. The increase in the disaster loan 
program arises from the very active hurricane season in the 
summer of 2005, including Hurricanes Katrina, Rita, and Wilma.
2.4  Small Business Investment Companies
    SBA licenses and regulates venture capital companies that 
specialize in investing in small businesses. These Small 
Business Investment Companies (SBICs) provide equity capital or 
long-term financing and may assist those small companies 
invested in with technical and managerial advice.
    Capital for investment has been raised traditionally by 
investors in a SBIC and by debentures guaranteed as to both 
principal and interest by SBA (which usually are equal to two 
or three times the SBICs private capital). SBICs relying upon 
debenture leverage primarily invest in debt securities of small 
businesses that have cash flows sufficient to service the 
outstanding debentures. For FY 2005, SBA made 1,753 financings 
totaling $1.084 billion for the debenture SBIC program. In FY 
2006, the number of debenture financings dropped (as a result 
in the reduction in one industry that typically uses debenture 
SBIC financing--taxicabs) to 1,614 financings with a total 
dollar value of $1.207 billion.
    In 1992, legislation was enacted creating a new SBIC 
participating securities program. SBA guarantees the principal 
and pays the purchasers of participating securities the 
interest as it comes due on behalf of a SBIC. When the SBIC 
becomes profitable, the SBIC repays SBA the interest advanced 
and a share of the profits. The participating securities 
program permits investment in new enterprises that do not have 
established records of profitability. Under the participating 
security SBIC program, the SBA provided 1,930 financings in FY 
2005 for a total dollar value of $1.568 billion. For FY 2006, 
the SBA had 1,831 financings for a total dollar value of $1.487 
billion.
    The New Markets Venture Capital (NMVC) program, enacted 
into law in 2000, provides capital to small enterprises located 
in low-income areas. SBA can enter into participation 
agreements with newly formed venture capital companies and 
guarantees securities to allow them to make equity investments 
in small businesses located in low-income areas. In addition, 
SBA can make grants to NMVC SBICs so that they can provide 
managerial assistance to small businesses in which they have 
invested. In FY 2005, the SBA provided 20 financings to NMVCCs 
and in FY2006, that number grew to 34 financings.
2.5  Procurement Assistance
    SBA is tasked with the responsibility of helping small 
businesses get their fair share of the total prime contract and 
subcontracting dollars spent by federal agencies for goods, 
services, property, and construction. By statute, small 
business are required to receive at least 23 percent of the 
total value of all prime contracts awarded for each fiscal 
year. Other Government-wide minimum goals are established by 
statute for small business concerns owned and controlled by 
service-disabled veterans, three percent; qualified HUBZone 
small business concerns, three percent; small business concerns 
owned and controlled by socially and economically disadvantaged 
(SDB) individuals, five percent; and, small business concerns 
owned and controlled by women, five percent.
    The Small Business Act establishes a goal of providing 23 
percent of federal government procurement dollars to small 
businesses and the following subset of small businesses: small 
disadvantaged businesses, including those operating pursuant to 
section 8(a) of the Small Business Act (SDBs); business located 
in historically underutilized business zones (HUBZones); small 
businesses owned by women; and small businesses owned by 
service disabled veterans. According to the FY 2005 data from 
the Federal Procurement Data System (the latest available), 
small businesses were awarded 2,302,698 contract actions 
totaling $79.625 billion dollars or about 25.36 percent of 
total federal contracting dollars. The dollar amounts for the 
subset of small businesses were: SDBs, $21.715 billion; 
HUBZones businesses, $6.103 billion; women-owned businesses, 
$10.494 billion; and service-disabled veteran businesses, 
$1.899 billion.
    SBA Procurement Center Representatives (PCRs), generally 
located at federal agencies that have major procurement 
activities, are tasked with the responsibilities of identifying 
contacting opportunities for small businesses, attempting to 
break up large requirements so that small businesses can 
participate as prime contractors, and assisting small 
businesses in competing for government contracts. SBA 
Commercial Market Representatives (CMRs) are responsible for 
assisting small businesses obtain subcontracts with prime 
contractors who have signed subcontracting plans with federal 
agencies. SBA certifies small businesses as eligible for the 
8(a), SDB, and HUBZone programs. Also, SBA is authorized to 
certify to a contracting officer that a small business is 
competent to perform a particular government procurement (or 
sale) contract.
    In January 2004, the Procurement Marketing and Access 
Network (PRONET) was integrated with the Department of 
Defense's Central Contractor Registration (CCR) database. CCR 
permits small businesses to list their capabilities on the 
Internet and is the official database of firms certified under 
the 8(a), SDB, and HUBZone programs. However, CCR does not 
provide contracting opportunities directly to small businesses 
listed. SBA sets size standards that define whether a business 
entity is small and eligible under federal programs and 
preferences reserved for small businesses. Size standards are 
established for types of business activities, generally, under 
the North American Industry Classification System (NAICS). 
Business development assistance is provided under 7(j) of the 
Small Business Act to small businesses owned and controlled by 
economically and socially disadvantaged individuals.
2.6  Entrepreneurial Development
    The SBA's economic assistance programs support those 
seeking to start a business and those desiring to grow and 
expand an existing small business by providing individual 
counseling, management training, procurement and marketing 
assistance with guidance materials and workshops. Assistance is 
provided at service locations throughout the United States, 
Puerto Rico, and the U.S. Virgin Islands, and electronically by 
means of various Internet sites. The facilities that deliver 
entrepreneurial development assistance include: approximately 
1,100 SBDCs, 10,844 SCORE volunteers, 86 Business Information 
Centers (BICs), nine Tribal Business Information Centers 
(TBICs), four Veterans Business Outreach Centers, and 86 
Women's Business Centers (WBCs).
    SBDCs are funded by both federal and state appropriations. 
SBA administers the program through grants generally to state 
governments and agencies. Most SBDCs are affiliated with state 
college and university systems. They assist small businesses 
and aspiring entrepreneurs with business problems concerning 
personnel, administration, marketing, sales, merchandizing, 
finance, accounting, business management, and participation in 
international markets. SBDCs may not charge a fee for 
counseling services. Modest fees are charged for workshops and 
business related training and courses. In FY 2005, SBDCs served 
706,000 clients. In FY2006, SBDCs served an estimated 703,000 
clients.
    SCORE has 380 chapter locations (at least one in every 
state) where volunteer counselors provide practical business 
advice and training services to about 383,000 clients annually. 
All counseling is provided free of charge to clients. Annual 
congressional appropriations are used to reimburse counselors 
for mileage and incidental expenses. E-mail counseling is 
provided over the Internet.
    WBCs provide assistance and one-on-one counseling to women 
entrepreneurs with respect to technology, financial and 
management planning, problem-solving, access to capital, 
marketing, business administration, and selling to the federal 
government. The on-line Women's Business Center provides 
around-the-clock Internet access to business information to 
help start a business, resolve business problems, or grow an 
existing enterprise through federal contracting or exporting 
opportunities. In FY 2005, WBCs served about 144,000 clients. 
WBCs counseled and trained 126,305 clients in FY 2006.
    The National Women's Business Council is a source of 
independent advice to the President, federal agencies, and 
Congress with regard to entrepreneurship and the impact of 
federal polices and programs upon women who want to start and 
grow business enterprises. The council has focused on issues 
involving the award of federal prime contracts and subcontracts 
to women-owned small businesses and barriers to women 
entrepreneurs obtaining access to credit and investment 
capital.
    Veterans Business Outreach Centers counseled 5,796 veterans 
and trained 5,312 veterans in the five Veterans Business 
Outreach Centers in FY 2006. These veterans were provided with 
assistance in gaining access to capital, resolving business and 
management problems, and starting and growing small businesses. 
In addition, SBA has entered into agreements with the 
Association of Small Business Development Centers, the 
Department of Labor, and works with the Department of Veterans 
Affairs to provide outreach and needed business administration 
and entrepreneurial services to veterans and service-disabled 
veterans.
    The current Native American Initiative is not a replacement 
for other entrepreneurial development programs. Rather, it is 
an initiative developed because of Congressional 
appropriations. The SBA's Office of Native American Affairs 
works closely with American Indian tribal governments, tribal 
colleges, Indian organizations, other federal agencies and the 
private sector to supplement and support the Indian nations' 
plan for economic stimulus in Indian country. In, FY 2005, the 
SBA's resource partners assisted 12,037 Native American 
entrepreneurs and 10,507 Native American entrepreneurs in FY 
2006.

2.7  Surety Bond Guarantees

    Small business contractors and subcontractors who seek 
public and private construction contracts are often required to 
furnish surety bonds guaranteeing the completion of the 
contracted work. The SBA provides assistance to such 
contractors by extending guarantees of up to 90 percent to 
surety insurance companies. These guarantees enable small 
contractors to obtain bonding more easily. The SBA's bonding 
assistance is accomplished through the Prior Approval Program 
or the Preferred Surety Bond Program. Bid bonds as well as 
performance and/or payment bonds may be guaranteed on contracts 
up to $2,000,000.
    The SBA will pay a surety participating in the Prior 
Approval Program 90 percent guarantee for SDBs and HUBZones 
regardless of contract size up to $2 million, and 90 percent 
guarantee for all contractors with contracts $100,000 or less. 
Otherwise, SBA will pay a surety in an amount not to exceed ad 
administrative ceiling of 80 percent guarantee for all 
contracts over $100,000 for small businesses other than SDBs 
and HUBZones. Under the Preferred Surety Bond program, the 
SBA's guarantee is limited to 70 percent of the bond for all 
small businesses for all contracts and contractors regardless 
of contract size. In FY 2005, SBA provided 1,680 final bond 
guarantees. In FY 2006, SBA provided 1,706 final bond 
guarantees. In both fiscal years, the total dollar value of 
contracts exceeded $500,000,000.
    The Small Business Reauthorization and Manufacturing 
Assistance Act of 2004 (H.R. 5108/S. 2821), most of which was 
added to the Consolidated Appropriations Act, 2005 (Division K 
of P.L. 108-447) and signed into law on December 8, 2004, also 
amended the SBA's surety bond program. First, Public Law 108-
447 clarifies that the $2 million limit on surety bonds applies 
to the bond guarantee and not to the contract size. It also 
made the Preferred Surety Bond program permanent.

2.8  Technology and Innovation

    It is the free enterprise system, and not government 
programs, that make the United States the world leader in 
innovation and technology. Small businesses are at the 
forefront of research and development and have been more 
prolific in creating new jobs through innovation and 
technology.
    However, there are two government programs, the Small 
Business Innovation Research (SBIR) and the Small Business 
Technology Transfer (STTR) programs, which have successfully 
provided innovative research and developed products for 
government and commercial use.
    SBA's Office of Technology provides oversight, monitoring, 
evaluation, and reporting for these programs. No new 
cooperative agreements have been issued under the Federal and 
State Technology Partnership program because the authority for 
the program ended on September 30, 2005. The grants are to 
provide technical assistance to high-tech small businesses to 
enhance their market competitiveness. The SBA, due to an 
absence of appropriations for the program has not made any 
cooperative agreements for rural states that receive few awards 
under the SBIR and STTR programs.
    The SBIR program has been in existence since 1982. Unlike 
the STTR program, the SBIR program does not require, but 
permits, a cooperative venture between a for-profit small 
business and a researcher from a university, federal laboratory 
or a nonprofit research institution for the purpose of 
developing commercially viable products. However, the project's 
principal investigator must be employed by the small business.
    A small business to be eligible must be: (1) independently 
owned and operated and other than the dominant firm in the 
field which it is proposing to carry out SBIR projects, (2) 
organized and operated for profit, with 500 employees or less, 
(3) the primary source of employment for the project's 
principal investigator at the time of award and during the 
period when the research is conducted, and (4) at least 51-
percent owned by U.S. citizens or lawfully admitted permanent 
resident aliens.
    Agencies that spend more than $100 million for external 
research, and research and development must set aside 2.5 
percent of their R&D budget for awards under SBIR. There are no 
additional moneys appropriated to support this program. At 
present, there are ten agencies that qualify for the program. 
The agencies are: Department of Defense, Department of Energy, 
National Aeronautics and Space Administration, National Science 
Foundation, Department of Agriculture, Department of Commerce, 
Department of Education, Environmental Protection Agency, 
Department of Health and Human Services, and Department of 
Transportation.
    The ten agencies listed above designate research and 
development topics for which small businesses may submit 
proposals for project funding. The proposals are evaluated by 
the agency based on (1) the qualifications of the small 
business, (2) the value of the project to the agency and the 
degree of innovation, and (3) the market potential of the 
product to be developed. Once funded, a project goes through 
three phases. Each phase is funded separately.
    Phase I is the start-up portion of the project and may be 
funded up to $100,000. This phase lasts approximately six 
months and is for the purpose of exploring the scientific, and 
technical aspects of the project. Phase II may last up to two 
years and may be funded in an amount up to $750,000. During 
this period, research and development continues and the 
commercial potential explored. Only projects that successfully 
complete Phase I can be considered for funding in Phase II. 
Phase III is the point in the project that the idea moves from 
the laboratory to the production facility to the market place. 
No SBIR funds may be used to pay for Phase III. The funding 
must come from the private sector or non-SBIR federal funding. 
In FY2005, 4,144 Phase I funding agreements were awarded 
totaling $449,582,491 and 1,869 Phase II funding agreements 
were awarded totaling $1,410,014,373.
    The STTR program is independent of the SBIR program with 
which it is frequently confused. The STTR program requires a 
cooperative venture between a for-profit small business and a 
researcher from a university, federal laboratory, or a non-
profit research institution for the purpose of developing 
commercially viable products from ideas spawned in a laboratory 
environment. For a federal agency to participate in the 
program, it must have an extramural budget for research or 
research and development that exceeds $1 billion for any fiscal 
year. Presently, there are five federal agencies that meet the 
funding requirement. They are: Department of Defense, 
Department of Energy, Department of Health and Human Services, 
National Aeronautics and Space Administration, and National 
Science Foundation.
    To be eligible for an STTR award a small business must have 
no more than 500 employees, and be independently owned and 
operated with its principal place of business in the United 
States. In addition, the small business may not be the dominant 
entity in the field in which the project is contained and must 
be primarily owned by U.S. citizens. To be eligible to 
participate in the program, a research entity must be a non-
profit institution as defined by the Stevenson-Wyler Act of 
1980 or a federally funded research and development center as 
determined by the National Science Foundation under the 
provisions of section 35(c)(1) of the Office of Federal 
Procurement Policy Act.
    The program requires that the research and development 
project be conducted jointly by a small business and a research 
institution in which not less than 40 percent of the work is 
performed by the small business, and that not less than 30 
percent of the work is performed by the research institution. 
Though the venture is cooperative in nature, the small business 
is responsible for the overall management and control of each 
project.
    The statute mandates that each award go though three 
phases. Phase I is the start-up part of a particular project 
and entails, as may be possible, a determination of the 
scientific, technical, and commercial merits of the concepts 
underlying a particular award. Phase II provides an opportunity 
to further develop the concepts to meet the objectives of the 
particular award. Only projects that successfully complete 
Phase I can be considered for funding under Phase II. Phase III 
is the point at which the project moves from the laboratory to 
commercial application or further cooperative research and 
development. No STTR funds may be used to pay for Phase III. 
The funding must come from the private sector or non-STTR 
federal funding. For the latest data available, FY 2005, 379 
Phase I funding agreements were awarded in the amount of 
$41,135,227 and 111 Phase II funding agreements were awarded 
totaling $50,676,227.

2.9  Export Assistance

    SBA is authorized to promote increased participation of 
small businesses in international trade. To assist small 
businesses in exporting abroad, SBA works with the Department 
of Commerce and other federal agencies to identify business 
opportunities and to assist in financing the sale of U.S. made 
products to foreign buyers. SBA works with the Department of 
Commerce, the Export-Import Bank, Department of Agriculture, as 
well as SBDCs and SCORE, in maintaining a network of 16 U.S. 
Export Assistance Centers (USEACs) that provide information and 
counseling with respect to export marketing and financing. 
USEACs are SBA's primary outlet for delivering export services 
to small businesses. Small businesses may obtain free 
consultation through the Export Legal Assistance Network (ELAN) 
program, which enables those interested in starting export 
operations to consult with international trade attorneys from 
the Federal Bar Association, and access to publications on 
international trade and export marketing.
    The SBA's financial assistance has several loan programs, 
depending upon the purpose for which the funds are to be used. 
Exporters can obtain funds for fixed asset acquisitions during 
startup or expansion and for general working capital needs 
through the 7(a) loan program. Export Trading Companies can 
qualify for SBA's business loan guarantee program, provided 
that they are for profit entities and have no bank equity 
participation. The Export Working Capital program authorizes 
SBA to guarantee 90 percent of a private sector loan of up to 
$750,000 for working capital. Loans made under this program 
generally have a 12-month maturity but two one-year extensions 
may be obtained.
    The loans can be for single or multiple export sales and 
can be expended for pre-shipment working capital and post-
shipment exposure coverage, but the proceeds cannot be used to 
obtain fixed assets. Through the 7(a) loan program, the SBA can 
provide export assistance by guaranteeing international trade 
loans, that provide long-term financing to small businesses 
engaged in international trade, as well as those businesses 
adversely impacted by import competition. In FY 2005, SBA 
guaranteed 2,638 export loans worth an estimated $750,000,000. 
In FY 2006, SBA guaranteed 3,082 export loans in the total 
amount of approximately $900,000,000.
    The Small Business Reauthorization and Manufacturing 
Assistance Act of 2004 (H.R. 5108/S. 2821), most of which was 
added to the Consolidated Appropriations Act, 2005 (Division K 
of P.L 108-447) and signed into law on December 8, 2004, also 
expanded the scope of the international trade loan programs at 
the SBA. Public Law 108-447 authorizes the use of International 
Trade (IT) Loans to refinance existing debt to make it 
consistent with all other 7(a) loans. The provisions also allow 
the findings by the International Trade Commission (ITC) or a 
Trade Adjustment Assistance Center (TAAC) as proof that a small 
business has been adversely affected by foreign imports. 
Finally, Public Law 108-447 raises IT loan guarantee limit from 
$1,250,000 to $1,750,000 and the Export Working Capital 
guarantee limit from $750,000 to $1,250,000.

2.10  Office of Advocacy

    The Office of Advocacy was created in 1976, pursuant to 
Title II of Public Law 94-305, with various stated ``primary 
functions'' and other ``continuing'' duties. The law provides 
for the President to appoint a Chief Counsel of Advocacy, 
subject to the advice and consent of the Senate. The mandated 
mission of the Office of Advocacy is to represent and advance 
small business interests before the Congress and federal 
agencies for the purpose of enhancing small business 
competitiveness.
    The statutorily prescribed ``primary functions'' of the 
Office of Advocacy include: (1) examining the role of small 
business in the American economy; (2) assessing the 
effectiveness of all federal subsidy and assistance programs 
available to small business; (3) measuring the cost and impact 
of government regulations on small business and making 
legislative and non-legislative recommendations for the 
elimination of unnecessary or excessive regulations; (4) 
determining the impact of the tax structure on small business 
and making legislative and other proposals for reform of the 
tax system; (5) studying the ability of the financial markets 
to meet the credit needs of small business; (6) determining 
availability and delivery methods of financial and other 
assistance to minority enterprises; (7) evaluating the efforts 
of federal departments and agencies, business and industry to 
assist minority enterprises; (8) recommending ways to assist 
the development and strengthening of minority and other small 
businesses; (9) recommending ways for small business to compete 
effectively and to expand, while identifying common causes for 
small business failures; (10) developing criteria to define 
small business; and, (11) evaluating federal and private 
industry efforts to assist veterans and service-disabled 
veterans.
    In addition, there are a number of ``continuing'' duties of 
the Office of Advocacy, which include: (1) serving as a focal 
point for receiving complaints and suggestions regarding 
federal agency policies and activities that affect small 
business; (2) counseling small businesses on problems in their 
relationships with the federal government; (3) proposing 
changes in policies and activities of all federal departments 
and agencies to better fulfill the purposes of the Small 
Business Act; (4) representing small business before other 
federal departments and agencies whose policies and activities 
may affect small business; and (5) enlisting the cooperation of 
others in the dissemination of information about federal 
programs that benefit small business.
    In 1980, the Regulatory Flexibility Act (Public Law 96-354) 
enlarged the responsibilities of the Office of Advocacy to 
include the monitoring of federal agencies' compliance with the 
Act's requirements, performing regulatory impact analyses, and 
making annual reports to Congress. Also in 1980, Public Law 96-
302 required the SBA Administrator to establish and maintain a 
small business economic database to provide Congress and the 
Executive with information on the economic condition of the 
small business sector.
    The statute prescribed 12 categories of data and required 
an annual report on trends. Although none of these database 
functions were expressly delegated to the Office of Advocacy by 
statute, the SBA Administrator has historically assigned these 
functions to the Office of Advocacy. The Office of Advocacy 
also has regional advocates who monitor small business and 
regulatory activities at the State level and disseminate 
relevant information about small small business; and, (11) 
evaluating federal and private industry efforts to assist 
veterans and service-disabled veterans.
    In addition, there are a number of ``continuing'' duties of 
the Office of Advocacy, which include: (1) serving as a focal 
point for receiving complaints and suggestions regarding 
federal agency policies and activities that affect small 
business; (2) counseling small businesses on problems in their 
relationships with the federal government; (3) proposing 
changes in policies and activities of all federal departments 
and agencies to better fulfill the purposes of the Small 
Business Act; (4) representing small business before other 
federal departments and agencies whose policies and activities 
may affect small business; and (5) enlisting the cooperation of 
others in the dissemination of information about federal 
programs that benefit small business.
    In 1980, the Regulatory Flexibility Act (Public Law 96-354) 
enlarged the responsibilities of the Office of Advocacy to 
include the monitoring of federal agencies' compliance with the 
Act's requirements, performing regulatory impact analyses, and 
making annual reports to Congress. Also in 1980, Public Law 96-
302 required the SBA Administrator to establish and maintain a 
small business economic database to provide Congress and the 
Executive with information on the economic condition of the 
small business sector.
    The statute prescribed 12 categories of data and required 
an annual report on trends. Although none of these database 
functions were expressly delegated to the Office of Advocacy by 
statute, the SBA Administrator has historically assigned these 
functions to the Office of Advocacy. The Office of Advocacy 
also has regional advocates who monitor small business and 
regulatory activities at the State level and disseminate 
relevant information about small business issues.
    The Office of Advocacy estimates that in 2005 (the latest 
date for this information), their efforts saved small 
businesses $6.6 billion in compliance costs by stopping or 
changing potentially damaging regulations.
                             CHAPTER THREE

 HEARINGS AND MEETINGS HELD BY THE COMMITTEE ON SMALL BUSINESS AND ITS 
                     SUBCOMMITTEES, 109TH CONGRESS

3.1  Full Committee

------------------------------------------------------------------------
                   Date                                Subject
------------------------------------------------------------------------
February 10, 2005.........................  The President's FY '06
                                             Budget Request: What Does
                                             it Mean for Small Business?
February 17, 2005.........................  Medical Liability Reform:
                                             Stopping the Skyrocketing
                                             Price of Health Care
March 2, 2005.............................  Prescriptions for Health
                                             Care: Solutions to the
                                             Problem
March 8, 2005.............................  Small Business Priorities of
                                             the 109th Congress
March 16, 2005............................  The RFA at 25: Needed
                                             Improvements for Small
                                             Business Regulatory Relief
April 6, 2005.............................  What has Ex-Im Bank Done for
                                             Small Business Lately?
April 13, 2005............................  Private Equity for Small
                                             Firms: The Importance of
                                             the Participating
                                             Securities Program
April 27, 2005............................  Closing the Tax Gap and the
                                             Impact on Small Businesses
May 4, 2005...............................  Anticompetitive Threats from
                                             Public Utilities: Are Small
                                             Businesses Losing Out?
June 6, 2005..............................  Small Business Access to
                                             Health Insurance: Lessons
                                             from Nebraska?
June 14, 2005.............................  Are Skyrocketing Medical
                                             Liability Premiums Driving
                                             Doctors Away from
                                             Underserved Areas?
July 13, 2005.............................  Small Business Development
                                             Centers: New Offerings for
                                             a New Economy
July 25, 2005.............................  Freedom of Conscience for
                                             Small Pharmacies
July 27, 2005.............................  Proposed Legislative Remedy
                                             for the Participating
                                             Securities Program
September 21, 2005........................  Reforming the Tax Code to
                                             Assist Small Businesses
October 7, 2005...........................  Small Businesses and
                                             Hurricane Katrina:
                                             Rebuilding the Economy
November 1, 2005..........................  Promoting Private Sector
                                             Emergency Preparedness
November 17, 2005.........................  Building a Wall Between
                                             Friends: Passports to and
                                             from Canada?
March 15, 2006............................  FY '07 Budget and
                                             Reauthorization Proposals
                                             of the SBA
April 5, 2006.............................  Hearing on the IRS Latest
                                             Enforcement: Is the Bulls-
                                             eye on Small Business?
April 26, 2006............................  Cutting Our Trade Deficit:
                                             Can the U.S. Muster Its
                                             Diverse Trade Promotion
                                             Operations to Make an
                                             Impact?
May 3, 2006...............................  Sarbanes-Oxley Section 404:
                                             What is the Proper Balance
                                             Between Investor Protection
                                             and Capital Formation for
                                             Smaller Public Companies?
May 10, 2006..............................  Bridging the Equity Gap:
                                             Examining the Access to
                                             Capital for Entrepreneurs
                                             Act of 2006
June 7, 2006..............................  Contracting the Internet:
                                             Does ICANN Create a Barrier
                                             to Small Business?
June 21, 2006.............................  Joint hearing with the
                                             Government Reform
                                             Committee, Northern Lights
                                             and Procurement Plights:
                                             The Effect of the ANC
                                             Program on Federal
                                             Procurement and Alaska
                                             Native Corporation
July 25, 2006.............................  Failure to Comply with the
                                             Regulatory Flexibility Act:
                                             IRS Endangering Small
                                             Businesses Yet Again
September 27, 2006........................  Advancing Security and
                                             Commerce at Our Nation's
                                             Ports: The Goals are not
                                             Mutually Exclusive
November 28, 2006.........................  FEMA's Response to the
                                             Rockford Flood
------------------------------------------------------------------------

3.2  Subcommittee on Workforce, Empowerment and Government Programs

------------------------------------------------------------------------
                   Date                                Subject
------------------------------------------------------------------------
April 21, 2005............................  Removing Obstacles to Job
                                             Creation: How Can the
                                             Federal Government Help
                                             Small Businesses Revitalize
                                             the Economy?
May 24, 2005..............................  Joint Subcommittee hearing
                                             with the Veteran's Affairs
                                             Committee Subcommittee on
                                             Economic Opportunities, How
                                             Are Our Veteran-Owned Small
                                             Business Owners Being
                                             Served?
June 21, 2005.............................  Union Salting--Organizing
                                             Against Small Business
June 28, 2005.............................  How the Clean Air Act
                                             Affects Auto Repair
August 9, 2005............................   Small Business Expensing--
                                             Job Growth Through the Tax
                                             Code
September 8, 2005.........................  Freedom in the Workplace--an
                                             Examination of a National
                                             Right to Work Law
November 8, 2005..........................  The Small Business
                                             Innovation Research
                                             Program--Opening Doors to
                                             New Technology
March 2, 2006.............................  Oversight of the Small
                                             Business Administration's
                                             Entrepreneurial Development
                                             Programs
April 27, 2006............................  Healthcare and Small
                                             Business: Proposals That
                                             Will Help Lower Costs and
                                             Cover the Uninsured
June 27, 2006.............................  Immigrant Employment
                                             Verification and Small
                                             Business
August 10, 2006...........................  Healthcare and Small
                                             Business--Real Options for
                                             Colorado Businesses
------------------------------------------------------------------------

3.3  Subcommittee on Regulatory Reform And Oversight

------------------------------------------------------------------------
                   Date                                Subject
------------------------------------------------------------------------
March 17, 2005............................  Roundtable on Regulatory
                                             Reform
April 28, 2005............................  The Administration's Program
                                             to Reduce Unnecessary
                                             Regulatory Burden on
                                             Manufacturers--A Promise to
                                             be Kept?
May 19, 2005..............................  ANWR's Benefits for Small
                                             Business
June 21, 2005.............................  Veteran's Access to Capital
September 29, 2005........................  Entrepreneur Soldiers
                                             Empowerment Act
February 8, 2006..........................  The Internet Sales Tax:
                                             Headaches Ahead for Small
                                             Business?
March 16, 2006............................  The State of Small Business
                                             Security in a Cyber Economy
March 30, 2006............................  SBA's Procurement Assistance
                                             Programs
April 6, 2006.............................  Can Small Healthcare Groups
                                             Feasibly Adopt Electronic
                                             Medical Records Technology?
May 23, 2006..............................  Data Protection and the
                                             Consumer: Who Loses When
                                             Your Data Takes a Hike?
June 27, 2006.............................  S Corporations--Their
                                             History and Challenges
July 13, 2006.............................  An Update on Administration
                                             Action to Reduce
                                             Unnecessary Regulatory
                                             Burdens on America's Small
                                             Manufacturers
------------------------------------------------------------------------

3.4  Subcommittee on Tax, Finance and Exports

------------------------------------------------------------------------
                   Date                                Subject
------------------------------------------------------------------------
April 7, 2005.............................  Joint Subcommittee
                                             roundtable on service-
                                             disabled veteran-owned
                                             small business issues with
                                             the Tax, Finance and
                                             Exports Subcommittee and
                                             the Subcommittee on
                                             Economic Opportunity of the
                                             House Veterans' Affairs
                                             Committee
April 14, 2005............................  The Estate Tax and the
                                             Alternative Minimum Tax--
                                             Inequity for America's
                                             Small Businesses
May 26, 2005..............................  Joint Subcommittee hearing
                                             with the Rural Enterprises,
                                             Agriculture and Technology
                                             Subcommittee, Does China
                                             Enact Barriers to Fair
                                             Trade?
February 1, 2006..........................  Joint Subcommittee hearing
                                             with the Rural Enterprises,
                                             Agriculture and Technology
                                             Subcommittee, Transforming
                                             the Tax Code: An
                                             Examination of the
                                             President's Tax Reform
                                             Panel Recommendations
March 9, 2006.............................  Oversight of the Small
                                             Business Administration's
                                             Finance Programs
June 28, 2006.............................  The Effects of the High Cost
                                             of Natural Gas on Small
                                             Businesses and Future
                                             Energy Technologies
July 20, 2006.............................  Joint Subcommittee hearing
                                             with the Rural Enterprises,
                                             Agriculture and Technology
                                             Subcommittee, Chinese
                                             Barriers to Trade: Does
                                             China Play Fair?
------------------------------------------------------------------------

3.5  Subcommittee on Rural Enterprises, Agriculture and Technology

------------------------------------------------------------------------
                   Date                                Subject
------------------------------------------------------------------------
March 17, 2005............................  The High Price of Natural
                                             Gas and its Impact on Small
                                             Businesses: Issues and
                                             Short Term Solutions
May 26, 2005..............................  Joint Subcommittee hearing
                                             with the Tax, Finance and
                                             Exports Subcommittee, Does
                                             China Enact Barriers to
                                             Fair Trade?
June 29, 2005.............................  Different Applications for
                                             Genetically Modified Crops
July 27, 2005.............................  The Importance of the
                                             Biotechnology Industry and
                                             Venture Capital Support in
                                             Innovation
September 15, 2005........................  The Need for Improvements
                                             and More Incentives in the
                                             Endangered Species Act
February 1, 2006..........................  Joint Subcommittee hearing
                                             with the Tax, Finance and
                                             Exports Subcommittee,
                                             Transforming the Tax Code:
                                             An Examination of the
                                             President's Tax Reform
                                             Panel Recommendations
March 15, 2006............................  The Missouri River and its
                                             Spring Rise: Science or
                                             Science Fiction?
May 3, 2006...............................  The Future of Rural
                                             Telecommunications: Is
                                             Universal Service Reform
                                             Needed?
May 25, 2006..............................  Unlocking Charitable Giving
July 20, 2006.............................  Joint Subcommittee hearing
                                             with the Tax, Finance and
                                             Exports Subcommittee,
                                             Chinese Barriers to Trade:
                                             Does China Play Fair?
------------------------------------------------------------------------

                              CHAPTER FOUR

PUBLICATIONS OF THE COMMITTEE ON SMALL BUSINESS AND ITS SUBCOMMITTEES, 
                             109th CONGRESS

4.1  Reports

------------------------------------------------------------------------
             House Report No.                      Title and date
------------------------------------------------------------------------
109-208...................................  Report to accompany H.R.
                                             230, To amend the Small
                                             Business Act to direct the
                                             Administrator of the Small
                                             Business Administration to
                                             establish a program to
                                             provide regulatory
                                             compliance assistance to
                                             small business concerns,
                                             and for other purposes;
                                             July 28, 2005.
109-207...................................  Report to accompany H.R.
                                             527, To amend the Small
                                             Business Act to direct the
                                             Administrator of the Small
                                             Business Administration to
                                             establish a vocational and
                                             technical entrepreneurship
                                             development program; July
                                             28, 2005.
109-206...................................  Report to accompany H.R.
                                             2981, To amend the Small
                                             Business Act to expand and
                                             improve the assistance
                                             provided by Small Business
                                             Development Centers to
                                             Indian tribe members,
                                             Native Alaskans, and Native
                                             Hawaiians; July 28, 2005.
109-205...................................  Report to accompany H.R.
                                             3207, To direct the
                                             Administrator of the Small
                                             Business Administration to
                                             establish a pilot program
                                             to make grants to eligible
                                             entities for the
                                             development of peer
                                             learning opportunities for
                                             second-stage small business
                                             concerns; July 28, 2005.
------------------------------------------------------------------------

4.2  Hearing Records

------------------------------------------------------------------------
                Serial No.                    Date, title and committee
------------------------------------------------------------------------
109-1.....................................  February 10, 2005, The
                                             President's FY '06 Budget
                                             Request: What Does it Mean
                                             for Small Business?, Full
                                             Committee
109-2.....................................  February 17, 2005, Medical
                                             Liability Reform: Stopping
                                             the Skyrocketing Price of
                                             Health Care, Full Committee
109-3.....................................  March 2, 2005, Prescriptions
                                             for Health Care: Solutions
                                             to the Problem, Full
                                             Committee
109-4.....................................  March 8, 2005, Small
                                             Business Priorities of the
                                             109th Congress, Full
                                             Committee
109-5.....................................  March 16, 2005, The RFA at
                                             25: Needed Improvements for
                                             Small Business Regulatory
                                             Relief, Full Committee
109-6.....................................  March 17, 2005, The High
                                             Price of Natural Gas and
                                             its Impact on Small
                                             Businesses: Issues and
                                             Short Term Solutions,
                                             Subcommittee on Rural
                                             Enterprises, Agriculture,
                                             and Technology
109-7.....................................  March 17, 2005, Roundtable
                                             on Regulatory Issues,
                                             Subcommittee on Regulatory
                                             Reform and Oversight
109-8.....................................  April 6, 2005, What has Ex-
                                             Im Bank Done for Small
                                             Business Lately?, Full
                                             Committee
109-9.....................................  Note: Errata submitted, No
                                             hearing took place.
109-10....................................  April 13, 2005, Private
                                             Equity for Small Firms: the
                                             Importance of the
                                             Participating Securities
                                             Program, Full Committee
109-11....................................  April 14, 2005, The Estate
                                             Tax and the Alternative
                                             Minimum Tax--Inequity for
                                             America's Small Businesses,
                                             Subcommittee on Tax,
                                             Finance and Exports
109-12....................................  April 21, 2005, Removing
                                             Obstacles to Job Creation:
                                             How Can the Federal
                                             Government Help Small
                                             Businesses Revitalize the
                                             Economy?, Subcommittee on
                                             Workforce, Empowerment and
                                             Government Programs
109-13....................................  April 27, 2005, Closing the
                                             Tax Gap and the Impact on
                                             Small Businesses, Full
                                             Committee
109-14....................................  April 28, 2005, The
                                             Administration's Program to
                                             Reduce Unnecessary
                                             Regulatory Burden on
                                             Manufacturers--A Promise To
                                             Be Kept?, Subcommittee on
                                             Regulatory Reform and
                                             Oversight
109-15....................................  May 4, 2005, Anticompetitive
                                             Threats from Public
                                             Utilities: Are Small
                                             Businesses Losing Out?,
                                             Full Committee
109-16....................................  May 19, 2005, ANWR's
                                             Benefits for Small
                                             Business, Subcommittee on
                                             Regulatory Reform and
                                             Oversight
109-17....................................  May 24, 2005, How are Our
                                             Veteran-Owned Small
                                             Business Owners Being
                                             Served?, Joint hearing of
                                             the Subcommittee on
                                             Workforce, Empowerment and
                                             Government Programs and
                                             Veteran's Affairs
                                             Subcommittee on Economic
                                             Opportunities
109-18....................................  May 26, 2005, Does China
                                             Enact Barriers to Fair
                                             Trade?, Joint Hearing of
                                             the Subcommittee on Rural
                                             Enterprises, Agriculture,
                                             and Technology and the
                                             Subcommittee on Tax,
                                             Finance and Exports
109-19....................................  June 6, 2005, Field Hearing,
                                             Small Businesses Access to
                                             Health Insurance: Lessons
                                             From Nebraska?, Full
                                             Committee
109-20....................................  June 14, 2005, Are
                                             Skyrocketing Medical
                                             Liability Premiums Driving
                                             Doctors Away from
                                             Underserved Areas?, Full
                                             Committee
109-21....................................  June 21, 2005, Union
                                             Salting--Organizing Against
                                             Small Business,
                                             Subcommittee on Workforce,
                                             Empowerment and Government
                                             Programs
109-22....................................  June 21, 2005, Veteran's
                                             Access to Capital,
                                             Subcommittee on Regulatory
                                             Reform and Oversight
109-23....................................  June 28, 2005, How the Clean
                                             Air Act Affects Auto
                                             Repair, Subcommittee on
                                             Workforce, Empowerment and
                                             Government Programs
109-24....................................  June 29, 2005, Different
                                             Applications for
                                             Genetically Modified Crops,
                                             Subcommittee on Rural
                                             Enterprises, Agriculture,
                                             and Technology
109-25....................................  July 13, 2005, Small
                                             Business Development
                                             Centers: New Offerings for
                                             a New Economy, Full
                                             Committee
109-26....................................  July 25, 2005, Freedom of
                                             Conscience for Small
                                             Pharmacies, Full Committee
109-27....................................  July 27, 2005, Proposed
                                             Legislative Remedy for the
                                             Participating Securities
                                             Program, Full Committee
109-28....................................  July 27, 2005, The
                                             Importance of the
                                             Biotechnology Industry and
                                             Venture Capital Support in
                                             Innovation, Subcommittee on
                                             Rural Enterprises,
                                             Agriculture, and Technology
109-29....................................  August 9, 2005, Small
                                             Business Expensing: Job
                                             Growth through the Tax
                                             Code, Subcommittee on
                                             Workforce, Empowerment &
                                             Government Programs
109-30....................................  September 8, 2005, Freedom
                                             in the Workplace--An
                                             Examination of the National
                                             Right to Work Law,
                                             Subcommittee on Workforce,
                                             Empowerment and Government
                                             Programs
109-31....................................  September 15, 2005, The Need
                                             for Improvements and More
                                             Incentives in the
                                             Endangered Species Act,
                                             Subcommittee on Rural
                                             Enterprises, Agriculture,
                                             and Technology
109-32....................................  September 21, 2005,
                                             Reforming the Tax Code to
                                             Assist Small Businesses,
                                             Full Committee
109-33....................................  September 29, 2005,
                                             Entrepreneur Soldiers
                                             Empowerment Act,
                                             Subcommittee on Regulatory
                                             Reform and Oversight
109-34....................................  October 7, 2005, Small
                                             Business and Hurricane
                                             Katrina: Rebuilding the
                                             Economy, Full Committee
109-35....................................  November 1, 2005, Promoting
                                             Private Sector Emergency
                                             Preparedness, Full
                                             Committee
109-36....................................  November 8, 2005, The Small
                                             Business Innovation
                                             Research Program--Opening
                                             Doors to New Technology,
                                             Subcommittee on Workforce,
                                             Empowerment and Government
                                             Programs
109-37....................................  November 17, 2005, Building
                                             a Wall Between Friends:
                                             Passports to and From
                                             Canada?, Full Committee
109-38....................................  February 1, 2006,
                                             Transforming the Tax Code:
                                             An Examination of the
                                             President's Tax Reform
                                             Panel Recommendations,
                                             Joint Subcommittee Hearing
                                             with the Subcommittee on
                                             Rural Enterprises,
                                             Agriculture, and Technology
                                             and the Subcommittee on
                                             Tax, Finance and Exports
109-39....................................  February 8, 2006, The
                                             Internet Sales Tax:
                                             Headaches Ahead for Small
                                             Business? Subcommittee on
                                             Regulatory Reform and
                                             Oversight
109-40....................................  March 2, 2006, Oversight of
                                             the Small Business
                                             Administration's
                                             Entrepreneurial Development
                                             Programs, Subcommittee on
                                             Workforce, Empowerment and
                                             Government Programs
109-41....................................  March 9, 2006, Oversight of
                                             the Small Business
                                             Administration's Finance
                                             Programs, Subcommittee on
                                             Tax, Finance and Exports
109-42....................................  March 15, 2006, The Missouri
                                             River and its Spring Rise:
                                             Science or Science Fiction?
                                             Subcommittee on Rural
                                             Enterprises, Agriculture,
                                             and Technology
109-43....................................  March 15, 2006, FY `07
                                             Budget and Reauthorization
                                             Proposals of the SBA, Full
                                             Committee
109-44....................................  March 16, 2006, The State of
                                             Small Business Security in
                                             a Cyber Economy,
                                             Subcommittee on Regulatory
                                             Reform and Oversight
109-45....................................  March 30, 2006, SBA's
                                             Procurement Assistance
                                             Programs, Subcommittee on
                                             Regulatory Reform and
                                             Oversight
109-46....................................  April 5, 2006, Hearing on
                                             the IRS Latest Enforcement:
                                             Is the Bulls-eye on Small
                                             Businesses?, Full Committee
109-47....................................  April 6, 2006, Can Small
                                             Healthcare Groups Feasibly
                                             Adopt Electronic Medical
                                             Records Technology?,
                                             Subcommittee on Regulatory
                                             Reform and Oversight
109-48....................................  April 26, 2006, Cutting Our
                                             Trade Deficit: Can the U.S.
                                             Muster its Diverse Trade
                                             Promotion Operations to
                                             Make an Impact?, Full
                                             Committee
109-49....................................  April 27, 2006, Healthcare
                                             and Small Business:
                                             Proposals that Will Help
                                             Lower Costs and Cover the
                                             Uninsured, Subcommittee on
                                             Workforce, Empowerment and
                                             Government Programs
109-50....................................  May 3, 2006, The Future of
                                             Rural Telecommunications:
                                             Is Universal Service Reform
                                             Needed? Subcommittee on
                                             Rural Enterprises,
                                             Agriculture and Technology
109-51....................................  May 3, 2006, Sarbanes Oxley
                                             Section 404: What is the
                                             Proper Balance Between
                                             Investor Protection and
                                             Capital Formation for
                                             Smaller Public Companies?
                                             Full Committee
109-52....................................  May 10, 2006, Bridging the
                                             Equity Gap: Examining the
                                             Access to Capital for
                                             Entrepreneurs Act of 2006,
                                             Full Committee
109-53....................................  May 23, 2006, Data
                                             Protection and the
                                             Consumer: Who Loses When
                                             Your Data Takes a Hike,
                                             Subcommittee on Regulatory
                                             Reform and Oversight
109-54....................................  May 25, 2006, Unlocking
                                             Charitable Giving,
                                             Subcommittee on Rural
                                             Enterprises, Agriculture,
                                             and Technology
109-55....................................  June 7, 2006, Contracting
                                             the Internet: Does ICANN
                                             Create a Barrier to Small
                                             Business?, Full Committee
109-56....................................  June 21, 2006, Northern
                                             Lights and Procurement
                                             Plights: The Effect of the
                                             ANC Program on Federal
                                             Procurement and Alaska
                                             Native Corporation, Full
                                             Committee--Joint hearing
                                             with Government Reform
                                             Committee
109-57....................................  June 27, 2006, S
                                             Corporations--Their History
                                             and Challenges,
                                             Subcommittee on Regulatory
                                             Reform and Oversight
109-58....................................  June 27, 2006, Immigrant
                                             Employment Verification and
                                             Small Business,
                                             Subcommittee on Workforce,
                                             Empowerment and Government
                                             Programs
109-59....................................  June 28, 2006, The Effects
                                             of the High Cost of Natural
                                             Gas on Small Businesses and
                                             Future Energy Technologies,
                                             Subcommittee on Tax,
                                             Finance and Exports
109-60....................................  July 13, 2006, An Update on
                                             Administration Action to
                                             Reduce Unnecessary
                                             Regulatory Burdens on
                                             America's Small
                                             Manufacturers, Subcommittee
                                             on Regulatory Reform and
                                             Oversight
109-61....................................  July 20, 2006, Chinese
                                             Barriers to Trade: Does
                                             China Play Fair? Joint
                                             hearing with the
                                             Subcommittee on Tax,
                                             Finance and Exports and the
                                             Subcommittee on Rural
                                             Enterprises, Agriculture,
                                             and Technology
109-62....................................  July 25, 2006, Failure to
                                             Comply with the Regulatory
                                             Flexibility Act: IRS
                                             Endangering Small
                                             Businesses Yet Again, Full
                                             Committee
109-63....................................  August 10, 2006, Field
                                             Hearing, Healthcare and
                                             Small Business--Real
                                             Options for Colorado
                                             Businesses, Subcommittee on
                                             Workforce, Empowerment and
                                             Government Programs
109-64....................................  September 27, 2006,
                                             Advancing Security and
                                             Commerce at Our Nation's
                                             Ports: The Goals are not
                                             Mutually Exclusive, Full
                                             Committee
109-65....................................  November 28, 2006, Field
                                             Hearing, FEMA's Response to
                                             the Rockford Flood, Full
                                             Committee
------------------------------------------------------------------------

                              CHAPTER FIVE

 SUMMARY OF LEGISLATIVE ACTIVITIES OF THE COMMITTEE ON SMALL BUSINESS, 
                             109TH CONGRESS

5.1  H. Res. 22--Expressing the Sense of the House of Representatives 
        That American Small Businesses Are Entitled to a Small Business 
        Bill of Rights

                          Legislative History

1/4/2005: Referred to the House Committee on Small Business.
3/8/2005: Committee hearings held.
4/6/2005: Committee consideration and mark-up session held.
4/6/2005: Ordered to be reported (amended) by voice vote.
4/21/2005: Reported (amended) by the Committee on Small 
        Business. H. Rept. 109-52.
4/21/2005: Placed on the House Calendar, Calendar No. 23.
4/26/2005: Rules Committee Resolution H. Res. 235 reported to 
        House. Rule provides for consideration of H. Res. 22 
        with 1 hour of general debate. Previous question shall 
        be considered as ordered without intervening motions 
        except motion to recommit.
4/27/2005: Rule H. Res. 235 passed House.
4/27/2005: Considered under the provisions of rule H. Res. 235.
4/27/2005: H.AMDT.100 Amendment reported by the House Committee 
        on Rules. Amended language made in order and considered 
        as adopted pursuant to the provisions of H. Res. 235.
4/27/2005: H.AMDT.100 On agreeing to the Rules amendment 
        (A001). Agreed to without objection.
4/27/2005: The previous question was ordered pursuant to the 
        rule.
4/27/2005: Ms. Velazquez moved to recommit to Small Business.
4/27/2005: The previous question on the motion to recommit was 
        ordered without objection.
4/27/2005: On motion to recommit failed by the yeas and nays: 
        188-222 (Roll no. 140).
4/27/2005: On agreeing to the resolution agreed to by voice 
        vote.
4/27/2005: Motion to reconsider laid on the table agreed to 
        without objection.

                          Need for Legislation

    Over the years, various small businesses have approached 
Congress with issues that they believe are of great importance. 
It had been ten years since the last time small businesses 
gathered together on a nationwide basis to prioritize the top 
issues facing them as part of the 1995 White House Conference 
on Small Business. This resolution was needed to highlight the 
top tier policy issues that must be addressed by the House of 
Representatives in the 109th Congress--health care, tax relief, 
litigation reform, and regulatory/paperwork reduction. This is 
not to say that other small business issues are unimportant. 
However, this legislation is needed to help Congress prioritize 
the key issues that affect the largest number of small 
businesses in the United States.

                      Section-by-Section Analysis

    The preamble of the resolution sets forth various facts 
relating to the state of small business in America. The 
resolving clause expresses the sense of the House of 
Representatives that American small businesses are entitled to 
a ``Small Business Bill of Rights'' in the following areas: (1) 
the right to join together to purchase affordable health 
insurance for small business employees; (2) the right to 
simplified tax laws that allow family-owned small businesses to 
survive over several generations and offer them incentives to 
grow; (3) the right to be free from frivolous lawsuits; (4) the 
right to be free of unnecessary, restrictive regulations and 
paperwork; (5) the right to relief from high energy costs; (6) 
the right to equal treatment, as compared to large businesses, 
when seeking access to start-up and expansion capital and 
credit; and (7) the right to open access to the Government 
procurement marketplace. The main aim of the resolution was not 
to have specific proscribed policy recommendations but to 
outline certain key principles that have widespread agreement 
among the small business community. For example, the access to 
capital programs at the SBA certainly help in the effort to 
equalize the treatment of small business, as compared to large 
business, in their quest for loans and venture capital. But 
determining which SBA loan program deserves to receive a 
federal subsidy or not was beyond the scope of this resolution.
5.2  H. Res. 130--Recognizing the Contributions of Environmental 
        Systems and the Technicians Who Install and Maintain Them to 
        the Quality of Life of All Americans and Supporting the Goals 
        and Ideals of National Indoor Comfort Week

                          Legislative History

3/1/2005: Referred to the House Committee on Small Business.
4/6/2005: Committee consideration and mark-up session held.
4/6/2005: Ordered to be reported by voice vote.
4/20/2005: Mr. Manzullo moved to suspend the rules and agree to 
        the resolution, as amended.
4/20/2005: Considered under suspension of the rules.
4/20/2005: On motion to suspend the rules and agree to the 
        resolution, as amended. Agreed to by voice vote.
4/20/2005: Motion to reconsider laid on the table. Agreed to 
        without objection.

                          Need for Legislation

    This resolution recognizes the contributions of indoor 
environmental systems, commonly known as heating, ventilation, 
and air conditioning (HVAC), and the technicians who install 
and maintain these systems. Heating and air conditioning 
provide a high quality of life for all Americans. This 
resolution supports the goals and ideals of National Indoor 
Comfort Week, which took place on April 17-23, 2005 and was 
sponsored by the Air Conditioning Contractors Association.
    Over 98 percent of HVAC contractors are small businesses. 
This is an industry that many take for granted, until we call 
upon them for service. They are responsible for ensuring that 
in the winter our heating systems work and in the summer our 
air conditioner hums along without interruption. Refrigeration 
also takes away most of the concerns we used to have about how 
our food is preserved, protects vital medicines from 
contamination, and helps us conquer diseases that have plagued 
mankind for generations. Children and seniors have cleaner, 
safer air to breathe. The filtration systems in many HVAC units 
in our homes, office buildings and factories help purify the 
air that we breathe, helping to lower the effect of airborne 
diseases.
    This resolution simply salutes the small business men and 
women who work in the HVAC industry.

                      Section-by-Section Analysis

    The preamble of the resolution sets forth various facts 
relating to the heating, ventilation, and air conditioning 
industry in the United States. The resolving clause expresses 
the sense of the House of Representatives that (1) recognizes 
the contributions that environmental systems have made to the 
quality of life of all Americans; (2) commends the technicians 
who install and maintain environmental systems; (3) recognizes 
that these small business contractors have benefited from the 
reduced regulatory burden provided as a result of passage of 
the Regulatory Flexibility Act of 1980 and the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA); (4) 
commends small business air conditioning contractors for 
participating in the Occupational Safety and Health 
Administration (OSHA) panels required by SBREFA to better 
educate regulators on the effect of federal rules on small 
businesses; (5) recognizes that small business air conditioning 
contractors have actively supported the Section 7(a) loan 
guarantee program administered by the Small Business 
Administration (SBA); and (6) supports the goals and ideals of 
National Indoor Comfort Week, as proposed by the Air 
Conditioning Contractors of America.
5.3  H.R. 230--National Small Business Regulatory Assistance Act of 
        2005

                          Legislative History

1/4/2005: Referred to the House Committee on Small Business.
7/13/2005: Committee hearings held.
7/14/2005: Committee consideration and mark-up session held.
7/14/2005: Ordered to be reported (amended) by voice vote.
7/28/2005: Reported (amended) by the Committee on Small 
        Business. H. Rept. 109-208.
7/28/2005: Placed on the Union Calendar, Calendar No. 121.

                          Need for Legislation

    During the past 25 years, the Federal Register--the 
compendium of federal regulatory initiatives and changes--
almost doubled in size from 42,000 pages to a record 83,289 
pages in 2000. Since President Bush took office in 2001, the 
growth in regulation has slowed but the regulatory burden 
continues to be a problem. This crush of federal dictates is 
particularly troubling to small businesses that find it 
increasingly difficult to meet these burgeoning regulatory 
requirements while at the same time trying to successfully 
operate their businesses in an expanding competitive global 
environment. Often, small business owners do not learn about 
their failure to comply with a regulation or that a new 
regulatory requirement has been imposed until an inspector or 
auditor walks through the door.
    The result is neither beneficial to the small business 
owner nor the federal government. Federal regulations exist to 
achieve some statutory objective; noncompliance hinders the 
reaching of these statutory goals. Small business owners 
certainly would be more interested in complying with federal 
regulations than paying penalties and fines. However, the 
amount of information, including regulations and concomitant 
guidance, simply overwhelms small business owners.
    In 1996, Congress took action in an effort to alleviate 
this problem. The Small Business Regulatory Enforcement 
Fairness Act provided that federal agencies are required to 
produce plain-English compliance guides for any regulation that 
would have a significant economic impact on a substantial 
number of small businesses. In a December 2001 study, the 
General Accounting Office (now the General Accountability 
Office) found that agencies did not do a particularly good job 
in drafting compliance guides. Even if agencies do produce 
excellent compliance guides, they are of little utility if 
small business owners do not know about the regulatory changes. 
Some mechanism must exist to make small businesses more aware 
of their regulatory obligations.
    Even more important than making small businesses aware of 
the regulations is providing them with assistance needed to 
understand and comply with the regulations. A regulation may 
only take up fifteen pages of text, but the explanation for 
what those pages mean may require sifting through a hundred or 
more pages of dense, triple-columned, single-spaced pages in 
the Federal Register. See, e.g., Defining and Delimiting the 
Exemption for Executive, Administrative, Professional, Outside 
Sales and Computer Employees, 69 Fed. Reg. 22,122 (April 23, 
2004) (regulations are 14 pages but explanatory text is 138 
pages). Most small business owners do not have the time to go 
through this dense prolixity. And even if they did, they would 
not understand it unless they were knowledgeable in the field. 
Greater assistance must be provided to small business owners in 
helping them comply with complex regulatory issuances. 
Otherwise, a divide could develop between those businesses, 
usually large, with the resources to comply and those, usually 
small, without such resources. The small businesses will be at 
risk for penalties, fines, and audits while large businesses 
will not. Success or failure should be determined in the 
marketplace; not whether the business has the internal 
resources needed to comply with federal regulatory edicts. A 
regulatory compliance assistance program operated through the 
Small Business Development Center (SBDC) network could provide 
substantial assistance in ensuring such a divide does not 
occur.
    The Small Business Administration (SBA) oversees a number 
of mechanisms for delivering advice to small business owners. 
One of the most effective is the SBDC program. Operated in 
conjunction with colleges and universities, the SBDCs assist 
small businesses in solving problems concerning the operations, 
manufacturing, engineering, technology, exchange and 
development, personnel administration, marketing, sales, 
merchandising, finance, accounting, and business strategy 
development. The SBDCs utilize the resources and the expertise 
of colleges and universities. In addition, the SBDCs, like the 
Agricultural Extension Service, also provide a focal point for 
information retrieval, coordination of federal and state 
government services, and referral to experts. Historically, the 
SBDCs have focused on financial, management, and marketing 
activities of small businesses despite the requirement that 
they also provide regulatory compliance assistance.
    SBDCs can also provide an effective mechanism for 
dispensing regulatory compliance information and advice. 
However, regulatory compliance, unlike many of the other 
activities undertaken by the SBDCs, has significant legal 
consequences and requires resource utilization quite different 
from that usually offered at SBDCs. Therefore, a program to 
examine how the regulatory compliance assistance will operate 
in selected SBDCs is a preferred strategy to simply providing 
an authorization of additional funding so that the SBDCs can 
provide regulatory compliance assistance. By initially limiting 
the number of centers, the SBA can pick the centers that will 
provide the best regulatory compliance assistance and then 
transfer the best practices on regulatory assistance to other 
centers.

                      Section-by-Section Analysis

Section 1. Short title
    Designates the bill as the ``National Small Business 
Regulatory Assistance Act of 2005.''
Section 2. Purpose
    This section expresses the purpose of the legislation--to 
establish a dedicated set of resources within certain SBDCs to 
provide and coordinate regulatory compliance assistance to 
small businesses.
Section 3. Definitions
    The definitions of the Small Business Act shall apply to 
this program unless a different definition is utilized in the 
new Sec. 36 created by this Act. In those cases in which the 
definition is different, the definitions in new Sec. 36 shall 
apply to the program created by this Act.
Section 4. Small Business Regulatory Assistance Program
    This section establishes the program by creating a new 
Section 36 of the Small Business Act. Since H.R. 230 amends the 
Small Business Act, the Chairman's mark eliminates definitions 
of terms already in the Act. Thus, the terms Administrator, 
Association, Small Business Development Center, and State were 
deleted as being redundant.
    Section 36(a)(1) defines the term ``Selected Small Business 
Development Center'' as a SBDC selected to participate in the 
program established under this section. The Chairman's 
substituted the term ``selected'' for the term 
``participating'' because the former more accurately reflects 
the nature of the involvement of the SBDC.
    Section 36(a)(2) defines the term ``Program'' to mean the 
program established under this section for the provision of 
compliance assistance by the Small Business Administration 
through the utilization of resources of SBDCs.
    Section 36(a)(3) defines the term ``Regulatory Compliance 
Assistance'' as assistance provided by a participating SBDC to 
a small business concerning compliance with federal 
regulations.
    Section 36(b) authorizes the Administrator of the Small 
Business Administration to establish a program for selected 
SBDCs to provide small businesses with regulatory compliance 
assistance.
    Section 36(c)(1) authorizes the Administrator to enter into 
arrangements with the SBDCs selected under this section for the 
provision of regulatory compliance assistance.
    The selected SBDCs are required to provide access to 
information and resources on regulatory compliance, including 
contact information for federal and state compliance and 
technical assistance similar to those established under section 
507 of the Clean Air Act Amendments of 1990. Numerous other 
federal and state agencies have non-punitive compliance 
assistance programs (such as the federal Occupational Safety 
and Health Administration), and the Committee expects that the 
SBDCs selected under this section will maintain all necessary 
contact information with those federal and state agencies. 
Furthermore, the Committee expects that the quality of 
coordination of these assistance resources will be a 
significant factor in selecting the SBDCs for the program.
    Section 36(c)(1) also requires that the selected SBDCs 
establish various training and educational activities. The 
Committee expects that selected centers will utilize their 
contacts with federal and state agencies to obtain compliance 
pamphlets, videos, books, and any compliance guides issued 
pursuant to the Small Business Regulatory Enforcement Fairness 
Act. In addition, the Committee expects that participating 
centers will hold lectures and seminars on regulatory 
compliance including updates on compliance based on regulatory 
changes. The Committee expects that the Administrator will 
consider the quality of proposed educational programs in 
determining which centers are selected to participate in the 
program.
    Section 36(c)(1)(C) also mandates that the selected SBDCs 
provide confidential counseling on a one-on-one basis at no 
charge to small businesses seeking regulatory compliance 
assistance. The Committee recognizes that compliance with 
regulations inculcates legal rights and responsibilities of 
small business owners. Therefore, section 36(c) prohibits any 
regulatory compliance counseling that would be considered the 
practice of law in the jurisdiction in which the SBDC is 
located or in which such counseling is conducted. Furthermore, 
the Committee supports efforts in which the development centers 
establish contacts with lawyers in the community willing to 
provide seminars and other consultative service on regulatory 
compliance matters, either for a fee or on a pro bono basis.
    Section 36(c)(1) also requires the provision of technical 
assistance. Such counseling may include the arrangement of 
meetings with technical experts known to the participating 
SBDCs as long as such counseling again is done on a one-on-one 
basis at no charge to the small business.
    Section 36(c)(1)(E) makes explicit the Committee's concern 
that small businesses are directed to those individuals who 
have appropriate credentials and certifications to provide 
regulatory compliance assistance. While the Committee fully 
understands that many very successful businesses, including 
Microsoft, Apple, and Dell Computer, started in garages and 
those businessmen are quite capable of providing advice on 
starting, financing, and marketing a business, they are not 
necessarily qualified to provide guidance on compliance with 
OSHA, EPA, or IRS regulations. In fact, because of the 
potential legal consequences resulting from a small business 
owner following incorrect guidance, the Committee determined 
that it is necessary to make explicit the requirement that the 
participating centers only refer businesses to individuals with 
appropriate expertise in the regulatory compliance matter for 
which advice is sought.
    Section 36(c)(1)(F) directs the SBDCs to provide access to 
and training on the Internet including the use of the Internet 
website where SBA has collected and organized regulatory 
compliance information as described in subsection 36(d)(1)(C).
    Section 36(c)(2) requires each center selected to 
participate to file a quarterly report with the Administrator. 
The report shall provide a summary of the compliance assistance 
provided under the program. The report also must contain any 
data and information obtained by the participating SBDC from a 
federal agency concerning compliance that the federal agency 
intends to be disseminated to small business concerns. The 
Committee believes that this latter requirement will enable the 
Administrator or the Chief Counsel for Advocacy to raise issues 
of agency inconsistencies, to the extent that they exist, to 
the appropriate decisionmakers.
    Section 36(c)(2) requires that reports be filed with the 
Administrator in an electronic format. The Committee expects 
the Administrator to promulgate regulations that will provide 
for a consistent format of the report. The Committee believes 
that such consistency is necessary for the accurate compilation 
of data and proper assessment of the effectiveness of the 
program.
    Section 36(c)(2) also permits, but does not require, SBDCs 
to make interim reports if such reports are necessary or 
useful. For example, a SBDC participating in the program may 
receive inconsistent compliance information from a federal 
agency. By alerting the Administrator prior to the issuance of 
the quarterly report, the federal agency may be able to issue a 
clarification that may eliminate confusion, save compliance 
costs, and improve small business compliance.
    Section 36(d) requires the Administrator to act as a 
repository of data and information submitted by SBDCs selected 
to participate in the program. Given the oversight role and 
importance of the Associate Administrator for Small Business 
Development Centers, section 36(d) requires that the functions 
of maintaining the database be housed with the Associate 
Administrator. The Committee believes that a central repository 
is necessary in order to determine whether federal agencies are 
providing consistent compliance information on a national 
basis. However, the Committee expects that the information 
received under this subsection be made available to other 
offices within the Small Business Administration, particularly 
the Chief Counsel for Advocacy and the Small Business and 
Agriculture Regulatory Ombudsman so those offices can more 
effectively carry out their mission of representing the 
interests of small businesses before federal agencies.
    Section 36(d) also requires that the Administrator submit 
an annual report to the President and the Committees on Small 
Business of the Senate and the House of Representatives. The 
report will contain: (a) data on the types of information 
provided by the participating SBDCs; (b) the number of small 
businesses that contacted the participating SBDCs; (c) the 
number of small businesses assisted by participating SBDCs; (d) 
information on the outreach activities of the participating 
SBDCs; (e) information regarding each case known to the 
Administrator in which participating SBDCs provided conflicting 
advice regarding compliance with federal regulation to one or 
more small businesses; (f) and any recommendations for 
improving the regulatory environment of small businesses, 
including the most burdensome regulations on small businesses. 
The Committee believes that this information is necessary to 
evaluate the utility of the program. More importantly, the 
report will reveal whether similarly situated small businesses 
are receiving consistent regulatory compliance assistance. In 
preparing the report, the Committee recognizes that the 
Administrator should consult with the Chief Counsel for 
Advocacy and the Small Business and Agriculture Regulatory 
Ombudsman. The Committee supports such consultative efforts but 
notes that the Administrator may not delegate the 
responsibility of preparing the report required by this 
subsection to any office within the Small Business 
Administration except the Associate Administrator for Small 
Business Development Centers.
    Section 36(d)(1)(C) sets out that the website the 
Administrator shall set up should provide access to federal, 
state, academic and industry association Internet websites 
containing industry specific regulation compliance information 
and give him broad authority to determine which sites should be 
included. Such a site should be arranged in an industry 
specific organization so that small businesses can quickly 
locate the sites that apply to their industry.
    Subsection 36(e) requires the Administrator to give the 
Chief Counsel for Advocacy the list as reported according to 
section 36(d) for the Chief Counsel to review. The Chief 
Counsel shall determine if any of the regulations are eligible 
for review under section 610 of the Regulatory Flexibility Act 
which would generally be a matter of seeing if the regulation 
was issued more than 10 years before the date of the review and 
if a final regulatory flexibility analysis was performed. The 
Chief Counsel also can determine if the regulation has a 
significant impact on a substantial number of small businesses 
and if that impact is substantially different than was 
estimated in the final regulatory flexibility analysis. 
Finally, the Chief Counsel can determine if the regulation has 
a significant impact on a substantial number of small business 
concerns but no final regulatory flexibility analysis was ever 
performed. If any of those three situations exist, the Chief 
Counsel must contact the appropriate federal rulemaking agency 
and the Office of Information and Regulatory Authority (OIRA) 
and request a review of such regulation in accordance with 
Sec. 610 of the Regulatory Flexibility Act if applicable or for 
any impact the regulation has on small business. The Chief 
Counsel shall add to his Annual Report on Regulatory 
Flexibility Act if applicable or for any impact the regulation 
has on small business. The Chief Counsel shall add to his 
Annual Report on the Regulatory Flexibility Act the status of 
any listed regulations. The Committee believes that, in this 
way, the Chief Counsel and the agencies will receive solid, 
practical data of the regulation's impact on which to base 
consideration of better regulatory alternatives. As good as 
agency and the Chief Counsel's estimates are, they should not 
replace actual burden information reported from the field when 
it is available. That was the original intention of Sec. 610.
    Section 36(f) limits participation in the program only to 
those SBDCs certified under Sec. 21(k)(2) of the Small Business 
Act. The Committee is limiting participation in the program to 
those small business centers of the highest quality. Some SBDCs 
have not completed their certification programs. Nevertheless, 
some of these centers may be developing or already have 
exceptional regulatory compliance assistance programs. The 
Committee does not believe that such centers should be 
prohibited from participating in the program. Therefore, 
Sec. 36(f)(2) authorizes the Administrator to waive the 
requirement for certification if the center is making a good 
faith effort to obtain such certification.
    Section 36(g) requires the Administrator to select two 
participating state programs from each of the Small Business 
Administration's ten federal regions as those regions exist on 
the date of enactment of this Act. The Administrator shall 
consult with the Association and give the Association's 
recommendations substantial weight. The Administrator is 
required to complete the selection of the participating centers 
within 60 days after the regulations to implement the program 
have been promulgated.
    Section 36(h) ensures that no matching funds currently 
allocated to the operation of the SBDCs will be utilized to 
fund this new regulatory assistance program. In order to ensure 
proper funding, the Committee is authorizing a separate funding 
authorization for the program.
    Section 36(i) establishes the procedures for distributing 
grants among the selected state programs. The formula is based 
on the principle that a state which has a smaller population 
also will have, in absolute terms, fewer small businesses than 
a larger state. The formula therefore allocates funds according 
to the relative size of each state. The Committee believes that 
the minimum funds needed to initiate a state program will be 
$200,000. Because the Committee has authorized $5,000,000, it 
is making extra resources available to the larger states which 
will require more resources to initiate the project.
    Section 36(j) requires the Comptroller General of the 
United States to provide a report evaluating the effectiveness 
of the program three years after establishment. The report also 
should contain any suggested modifications to the program. 
Finally, the Comptroller General should provide its opinion 
concerning whether the program should be continued and expanded 
to include more SBDCs. The report shall be transmitted to the 
Committees on Small Business of the Senate and House of 
Representatives. The Committee expects that the program will be 
sufficiently successful to expand the program to other SBDCs.
    Section 36(k) limits the operation of the program only to 
the funds appropriated in advance for the program. Section 
36(j) provides an authorization of appropriations of $5,000,000 
for fiscal year 2006 and each year thereafter. Section 36(j) 
also prohibits the Administrator from using other funds, 
including other funds made available for the operation of 
SBDCs, to operate this program. The Committee authorized the 
additional appropriations because it determined that funding of 
the regulatory compliance program should not detract from the 
available funding for the delivery of other SBDC programs.

Section 5. Promulgation of regulations

    Section 5 authorizes the Administrator to promulgate 
regulations to implement this program no later than 180 days 
after the enactment of the Act. Such regulations only shall be 
promulgated after the public has been given an opportunity for 
notice and comment. The Committee believes that the 
Administrator can and should accomplish the issuance of 
regulations within the deadline set by statute. The Committee 
considers this Act to be some other law for purposes of 
Sec. 603 of Title 5 of the United States Code.
    The regulations shall include the priorities for the type 
of assistance to be provided, standards relating to the 
educational, technical, and support services to be provided by 
the Association to the participating centers, and standards for 
work plans that the participating centers will provide to the 
Administrator. The Committee believes that given the potential 
interest in the program by SBDCs, it is appropriate for the 
Administrator to have a set of standards by which it can 
determine which state programs shall be chosen. More 
importantly, the standards will provide an appropriate baseline 
for the Comptroller General's evaluation of the project.
    Section 5 also requires the Administrator to develop 
appropriate standards for ensuring the technical qualifications 
of experts to whom small businesses will be referred. The 
Committee does not intend that someone must have a college or 
advance degree to qualify. For example, a contractor licensed 
in a state with 20 years experience (who is a high-school 
graduate) may be as well-equipped to provide advice on 
compliance with OSHA construction standards as a professor of 
civil engineering. On the other hand, that same contractor 
might not be an appropriate individual to provide tax 
compliance advice. The Committee does not expect that this 
aspect of the Administrator's regulations shall be all 
encompassing, i.e., delineate every profession and the 
appropriate qualifications. However, the Committee does expect 
that the Administrator will recognize, as qualified, those 
individuals certified by nationally-recognized accrediting 
bodies (whose members must demonstrate substantial educational 
and practical experience), meet educational and work standards 
established by a federal agency, or are licensed to practice a 
particular profession or job pursuant to state law. The 
Committee expects that the regulations will provide the centers 
selected with enough information that they can determine 
whether the person providing the advice is competent in the 
field of regulation.

5.4  H.R. 527--Vocational and Technical Entrepreneurship Development 
        Act of 2005

                          Legislative History

2/2/2005: Referred to the House Committee on Small Business.
7/13/2005: Committee hearings held.
7/14/2005: Committee consideration and mark-up session held.
7/14/2005: Ordered to be reported (amended) by voice vote.
7/28/2005: Reported (amended) by the Committee on Small 
        Business. H. Rept. 109-207.
7/28/2005: Placed on the Union Calendar, Calendar No. 120.

                          Need For Legislation

    Many persons within the United States have technical and 
vocational skills and have the capability to sell their skills 
as business owners. However, these same individuals may not 
have the experience or training needed to start and operate a 
small business. As a result, these skilled individuals often 
work for other businesses, including many small businesses. 
While a certain amount of knowledge on business operations may 
be absorbed by luck, osmosis, or some combination thereof, 
fortuity should never be the basis of education. To ensure 
skilled craftspeople receive appropriate training for 
entrepreneurship, a more organized system is necessary.
    Historically, SBDCs provide services to any person seeking 
assistance. That resulted, quite logically, in entrepreneurs 
ready to start businesses or extant owners of small businesses. 
Seeking out and educating individuals that have the capacity to 
utilize their skills in starting a small business but who 
currently work for others, fell outside the remit of the 
typical SBDC. Certain centers, however, started to share their 
services and information to vocational students and ``future 
entrepreneurs'' while the students continued to learn and hone 
their skills. Instead of working for another business, these 
``graduates'' have the foundation to start their own 
businesses.
    SBDCs can provide an effective mechanism for dispensing 
information and advice on providing entrepreneurial education 
and curricula. Therefore, a program of additional grants for 
selected SBDCs to provide entrepreneurial training and 
educational materials is appropriate. A partnership model with 
secondary schools that provide vocational training, and 
postsecondary institutions, including vocational and technical 
schools (whether public or private) is the best mechanism for 
providing entrepreneurial education to future skilled craftsmen 
and women. The Committee expects that the best practices from 
the participants will be adopted by other SBDCs.

                      Section-by-Section Analysis


Section 1. Short title

    The section establishes the short title as the ``Vocational 
and Technical Entrepreneurship Development Act of 2005.''

Section 2. Vocational and Technical Entrepreneurship Development 
        Program

    This section amends the Small Business Act by adding a new 
Sec. 37 creating the vocational and technical entrepreneurship 
program.
    Subsection (a)(1) defines the term ``Association'' to mean 
the Association of Small Business Development Centers 
recognized under Sec. 21(a)(3)(A) of the Small Business Act, 15 
U.S.C. Sec. 648(a)(3)(A). The Association is the organization 
authorized by the Small Business Act to represent the 
collective interests of SBDCs. The Association also provides 
critical input and assistance to the Small Business 
Administration's statutory role as manager of the Small 
Business Development Center program.
    Subsection (a)(2) defines the term ``program'' to mean the 
program established pursuant to Sec. 37.
    Subsection (a)(3) defines the term ``small business 
development center'' as the centers established pursuant to 
Sec. 21 of the Small Business Act.
    Subsecton (a)(4) defines the term ``State small business 
development center.'' These are the SBDCs selected from each 
state to carry out the program on a statewide basis. In 
selecting the winning grantees, the Administrator must consult 
with the Association and give substantial weight to the 
recommendations of that organization in selecting the winners. 
Despite the consultation process, the Committee reiterates that 
the ultimate responsibility is to that of the Administrator 
based on the applications filed pursuant to subsection (d). 
Finally, the Committee finds that the consultation process set 
forth in this subsection does not create a federal advisory 
committee under the Federal Advisory Committee Act, 5 U.S.C. 
App. 2.
    Subsection (b) requires the Administrator to make grants to 
State SBDCs in order for them to provide educational materials 
and curriculum development to providers of vocational and 
technical education. While H.R. 527 authorizes the provision of 
educational materials to any provider of vocational and 
technical education, the Committee expects that winning 
grantees will focus their attention on secondary schools and 
postsecondary technical institutions rather than community 
colleges and universities that can provide entrepreneurial 
education through existing courses and programs.
    To achieve the objectives of the program and recognizing 
that the development and delivery of educational material is 
costly, subsection (c) provides that each grant will be at 
least $200,000. Although the Committee does not specify a 
maximum and recognizes that the provision of educational 
materials may be more costly in some states, the Committee 
intends that the maximum number of qualified State SBDC 
grantees should be able to utilize the additional funds 
provided in H.R. 527. To ensure that the winning applicants can 
commence the program without delay, subsection (c)(2) 
eliminates any requirement (normally mandated under the Small 
Business Development program) for matching funds.
    Subsection (d) requires the Administrator to design a grant 
application for State SBDCs seeking additional grant funds 
(beyond the allocations provided in Sec. 21 of the Small 
Business Act). The Committee would expect that the 
Administrator consult with the Association and seek notice and 
comment as required by its own regulations. The application 
form must contain information on the applicant's goals and 
objectives for providing educational assistance to secondary 
and postsecondary providers of vocational and technical 
assistance. The Committee expects that the Administrator will 
select the applicants with the best proposals for offering 
entrepreneurial education assistance to providers of vocational 
and technical education.
    To ensure that the Administrator and the Associate 
Administrator for Small Business Development Centers can manage 
the program, subsection (e) requires the recipients of funds to 
report on their usage. The requirement is in addition to any 
reports that are required by Sec. 21 of the Small Business Act 
or reports mandated by the Office of Management and Budget for 
federal grantees. The Committee intends that the report provide 
detailed information on the curriculum materials developed, 
their delivery to providers of vocational and technical 
education, and any recommendations on best practices developed 
with the grant funds.
    Section 21 of the Small Business Act authorizes the Small 
Business Administration to enter into grant and cooperative 
agreements with SBDCs. Subsection (f) simply extends that 
authority to the program established under H.R. 527. The 
Administrator has the authority to attach codicils to the 
existing agreements or enter into separate agreements under 
this subsection.
    Subsection (g) requires the Administrator to transmit a 
report to Congress, no later than March 31, 2008, that 
evaluates the program. The Committee took the approach of 
requiring the Administrator to submit a report rather than the 
Comptroller General, because of the Administrator's expertise 
in providing entrepreneurial assistance to small business 
owners. The Committee believes that the Administrator is better 
positioned to evaluate the adequacy of the materials and their 
utility better than the Comptroller General.
    The Association recognized by Sec. 21 of the Small Business 
Act provides a number of services to SBDCs. It frequently acts 
as a conduit to provide information to the Administrator and 
from the Administrator to the SBDCs. Given this role, the 
Committee determined that the Association should act as a 
clearinghouse and conduit of information to SBDCs. This role is 
particularly vital in disseminating best practices developed 
under the program established by H.R. 527 for offering 
entrepreneurial education materials to providers of vocational 
and technical education.
    Subsection (i) authorizes $7,000,000 be appropriated for 
each of the fiscal years 2006, 2007, and 2008. The funds to 
remain available until expended.
    The Committee was concerned that the establishment of this 
directed program, even with a separate authorization, might 
result in the Administrator diverting existing funds for the 
Small Business Development Center program to the program 
established in H.R. 527. To avoid this problem, the Committee 
provides in subsection (j) that no funds already committed 
elsewhere pursuant to the funding formula for the Small 
Business Development Center program in paragraph (4) of 
Sec. 21(a) of the Small Business Act shall be used to fund this 
program. In simple terms, if no dedicated appropriation is 
obtained for this program, the Administrator is prohibited from 
operating the program. Nothing in this prohibition is intended 
to interfere with any services that SBDC grantees provide to 
the populations described in this paragraph under their current 
grant agreements.

5.5  H.R. 682--The Regulatory Flexibility Improvements Act

                          Legislative History

2/9/2005: Referred to the Committee on the Judiciary, and in 
        addition to the Committee on Small Business, for a 
        period to be subsequently determined by the Speaker, in 
        each case for consideration of such provisions as fall 
        within the jurisdiction of the committee concerned.
2/9/2005: Referred to House Judiciary.
3/2/2005: Referred to the Subcommittee on Commercial and 
        Administrative Law.
7/20/2006: Subcommittee hearings held.
2/9/2005: Referred to House Small Business.
3/16/2005: Committee hearings held.

                          Need for Legislation

    The small business sector is critical to creating jobs in a 
dynamic economy. Regulations designed for application to large-
scale entities have been applied uniformly to small businesses 
and other small entities even though the problems sought to be 
solved by such regulations are not usually caused by these 
small businesses and other small entities. Uniform federal 
regulatory and reporting requirements in many instances have 
imposed on small businesses and other small entities 
unnecessary and disproportionately burdensome demands, 
including legal, accounting, and consulting costs.
    Since 1980, federal agencies have been required to 
recognize and take account of the differences in the scale and 
resources of regulated entities but have failed to do so. 
Alternative regulatory approaches that do not conflict with the 
stated objectives of the statutes the regulations seek to 
implement may be available and may minimize the significant 
economic impact of regulations on small businesses and other 
small entities. Federal agencies have failed to analyze and 
uncover less costly alternative regulatory approaches, despite 
the fact that the chapter 6 of title 5, United States Code 
(commonly known as the Regulatory Flexibility Act), requires 
them to do so.
    Federal agencies continue to interpret chapter 6 of title 
5, United States Code, in a manner that permits them to avoid 
their analytical responsibilities. The existing oversight of 
the compliance of federal agencies with the analytical 
requirements to assess regulatory impacts on small businesses 
and other small entities and obtain input from the Chief 
Counsel for the Office of Advocacy at the Small Business 
Administration (SBA) has not sufficiently modified the federal 
agency regulatory culture.
    Thus, significant changes are needed in the methods by 
which federal agencies develop and analyze regulations, receive 
input from affected entities, and develop regulatory 
alternatives that will lessen the burden or maximize the 
benefits of final rules to small businesses and other small 
entities. It is the intention of the Congress to amend chapter 
6 of title 5, United States Code, to ensure that all impacts, 
including foreseeable indirect effects, of proposed and final 
rules are considered by agencies during the rulemaking process 
and that the agencies assess a full range of alternatives that 
will limit adverse economic consequences or enhance economic 
benefits. Federal agencies should be capable of assessing the 
impact of proposed and final rules without delaying the 
regulatory process or impinging on the ability of federal 
agencies to fulfill their statutory mandates.

                      Section-by-Section Analysis


Section 1. Short title; table of contents

    This Act may be cited as the ``Regulatory Flexibility 
Improvements Act.''

Section 2. Findings

    This section presents the rationale for amending the 
Regulatory Flexibility Act (RFA) because of the failure of 
federal agencies to comply.

Section 3. Clarification and expansion of rules covered by the RFA

    This section amends the RFA to require agencies to assess 
reasonably foreseeable indirect effects on small entities.
    The section also requires that land management plans issued 
by the United States Forest Service and the United States 
Bureau of Land Management be subject to analysis under the RFA.
    This section mandates IRS compliance for interpretative 
rules without regard to whether the recordkeeping or reporting 
burden is imposed by the IRS or by Congress.
    A definition is added for the term ``not-for-profit'' 
organization. Native American tribal organizations are added to 
the definition of small entity.

Section 4. Requirements for providing more detailed analyses

    Section 4 amends the RFA to require a detailed statement 
rather than simply a statement.

Section 5. Repeal of procedure for waiver and delay

    This section eliminates the authority of an agency head to 
waive or delay compliance with the analytical requirements of 
the RFA.

Section 6. Procedures for gathering comments

    This provision extends the panel process established by the 
Small Business Regulatory Enforcement Fairness Act to all 
federal agencies for all significant rules. In addition, the 
section clarifies who may represent small entities on the 
panels and how they are selected.

Section 7. Periodic review of rules

    This provision amends the periodic review requirement by 
requiring agencies to develop new plans for periodic review, 
publishing the results of such reviews, and submitting them to 
Congress for appropriate oversight.

5.6  H.R. 1148--Insular Areas Small Business Development Act--Key 
        Elements Were Incorporated Into Public Law 109-59

                          Legislative History

3/8/2005: Introductory remarks on measure.
3/8/2005: Referred to the House Committee on Small Business.
8/10/2005: Modified provisions of H.R. 1148 were incorporated 
        in Title X (section 10203) of H.R. 3, which became 
        Public Law 109-59.

                          Need for Legislation

    Previously, only those zones in the insular areas or Alaska 
and Hawaii designated by the United States Department of 
Housing and Urban Development (HUD) as ``qualified census 
tracts,'' are recognized by the Small Business Administration 
(SBA) as HUBZones. Many additional zones particularly in the 
insular areas would also be designated HUBZones under the 
program's ``qualified `non-metropolitan county' '' criteria, as 
is the case in the 48 continental States, the District of 
Columbia, and the Commonwealth of Puerto Rico, if not for 
technical issues of implementation. A principal factor of 
eligibility under the ``qualified `non-metropolitan county' '' 
criteria is a high level of unemployment in a given county. In 
particular, the insular areas do not subdivide into counties, 
nor does the Bureau of Labor Statistics collect Local Area 
Unemployment Statistics for territories such as Guam. 
Therefore, firms located in a number of financially distressed 
areas in these jurisdictions are deprived of the opportunity to 
participate in the HUBZone program, as no alternative formula 
is used for the ``qualified `non-metropolitan county' '' 
criteria in the insular areas.
    The purpose of this legislation is to support economic 
self-sufficiency in the areas outside the continental United 
States by helping small businesses located in these 
jurisdictions to effectively compete for federal contract work. 
Over the past several years, the SBA's HUBZone program has been 
one of the most successful vehicles for directing federal 
contracts and subcontracting dollars to locally-owned small 
businesses. Universal HUBZone designation throughout the areas 
outside of the continental United States would provide 
incentives for federal agencies to utilize local firms in these 
remote areas. Considering the relative geographic isolation and 
unique economic challenges encountered in these areas, and the 
problems associated with implementing all provisions of the law 
in these distant areas, it makes sense to designate the 
entirety of these jurisdictions as HUBZones.

                      Section-by-Section Analysis


Section 10203. HUBZone program

    Section 3(p)(4)(B)(ii) of the Small Business Act is amended 
to enable all of Alaska, Hawaii, and the insular areas of the 
United States to be considered as a HUBZone by adding at the 
end ``or there is located a difficult development area, as 
designated by the Secretary of Housing and Urban Developing in 
accordance with section 42(d)(5)(C)(iii) of the Internal 
Revenue Code of 1986, within Alaska, Hawaii, or any territory 
or possession of the United States outside the 48 contiguous 
states.''

5.7  H.R. 2981--To Expand and Improve the Assistance Provided by Small 
        Business Development Centers to Indian Tribe Members, Native 
        Alaskans, and Native Hawaiians

                          Legislative History

6/17/2005: Introductory remarks on measure.
6/17/2005: Referred to the House Committee on Small Business.
7/13/2005: Committee Hearings Held.
7/14/2005: Committee consideration and mark-up session held.
7/14/2005: Ordered to be reported (amended) by voice vote.
7/28/2005: Reported (amended) by the Committee on Small 
        Business. H. Rept. 109-206.
7/28/2005: Placed on the Union Calendar, Calendar No. 119.

                          Need for Legislation

    It is estimated that approximately 60 percent of the Native 
American and Alaska Native population live on or adjacent to 
Federal Indian reservations and lands set aside pursuant to the 
Alaska Native Claims Settlement Act (43 U.S.C. Sec. Sec. 1610 
and 1615), which suffer from an average unemployment rate of 45 
percent. According to the 1997 Economic Census report (the data 
from the 2002 economic census will not be available until 
2006), Native Americans and Alaskan Natives owned over 197,000 
businesses, employing almost 300,000 people and generating over 
$34 billion in revenues. Five out of six Native American and 
Alaska Native businesses had no paid employees. The service 
industry accounted for 17 percent (40 percent of which were in 
business and personal services) of these businesses and 15.1 
percent of their total receipts. The next largest was the 
construction industry (13.9 percent and 15.7 percent 
respectively). The third largest was the retail trade industry 
(7.5 percent and 13.4 percent respectively).
    However, the number of Native American- and Alaska Native-
owned businesses grew 84 percent from 1992 to 1997, and their 
gross receipts grew by 179 percent. This is compared to all 
businesses which grew at a rate of 7 percent during the same 
time period, and total gross receipts grew 40 percent. The 
majority are located in 12 states: California (13.5 percent), 
Texas (8 percent), Oklahoma (7.7 percent), Florida (5.3 
percent), North Carolina (3.6 percent), New Mexico (3.4 
percent), Alaska (3.4 percent), New York (3.2 percent), 
Michigan (2.9 percent), Arizona (2.8 percent), Ohio (2.6 
percent), Pennsylvania (2.6 percent), and Washington (2.4 
percent).
    The Small Business Administration (SBA) oversees a number 
of mechanisms for delivering advice to small business owners. 
One of the most effective is the Small Business Development 
Center (SBDC) program. Operated in conjunction with colleges 
and universities, the SBDCs assist small businesses in solving 
problems concerning the operations, manufacturing, engineering, 
technology, exchange and development, personnel administration, 
marketing, sales, merchandising, finance, accounting, business 
strategy development and regulatory assistance. The SBDCs 
utilize the resources and the expertise of colleges and 
universities. In addition, the SBDCs also provide a focal point 
for information retrieval, coordination of federal and state 
government services, and referral to experts.
    SBDCs can provide an effective mechanism for assisting 
Native Americans in building and sustaining businesses in their 
communities. Unlike the SBDC's proven track record, the U.S. 
SBA's other program to assist Native Americans, the Tribal 
Business Information Centers, has had minimal success. In 
addition, no Administration since the program's inception has 
requested funding for the program. Minimal funding has been 
provided year-to-year from the SBA's salaries and expenses 
budget. Therefore, the Committee believes that a pilot program 
through an established and proven federal assistance program is 
a preferred strategy.

                      Section-by-Section Analysis


Section 1. Findings and purposes

    This section lists the finding of Congress and the purposes 
for H.R. 2981.

Section 2. Small Business Development Center assistance to Indian tribe 
        members, Alaska Natives, and Native Hawaiians

    This section establishes a program by adding a new 
paragraph (8) to Sec. 21(a) for additional grant funds to SBDC 
grantees for providing outreach services to startups and 
businesses owned by Indian tribe members, Alaska Natives, and 
Native Hawaiians. Paragraph (A) is designed to provide outreach 
to businesses on Indian lands. The Committee recognizes that 
Indian lands do not include lands set aside pursuant to the 
Alaska Native Claims Settlement Act, see Alaska v. Native 
Village of Venetie Tribal Government, 522 U.S. 520, 532 (1998). 
Since the Committee wants to serve Alaska Natives, the 
Committee expects that, should the SBDC grantee in Alaska will 
site service pursuant to this program by locating centers on or 
near those lands described in the Alaska Native Claims 
Settlement Act.
    Subparagraph (B) specifies the criterion for states in 
which grantees are eligible to apply. The Committee selected 
the one percent minimum to ensure that the limited funds are 
made available to those states with the largest populations of 
members of Indian Tribes, Alaskan Natives, and Native 
Hawaiians.
    Subparagraph (C) mandates that grant applications must be 
submitted in a form established by the Administrator. The 
Committee expects that the responsibility for developing the 
form will be delegated to the Associate Administrator for 
SBDCs. Any such form must contain the contents specified in 
this subparagraph including: the capability of the applicant to 
provide training and services to Indian tribe members, Alaska 
Natives, and Native Hawaiians; the sites at which the grantee 
will provide the services; the amount of grant funding 
requested; and the extent of consultation with local tribal 
councils. The Committee expects that the Administrator will 
select, after review and consultation with the Associate 
Administrator for SBDCs, those applicants that have the best 
plan for providing services to members of Indian tribes, Alaska 
Natives, and Native Hawaiians.
    Subparagraph (D) requires that the applicants and grantees 
must comply with all the provisions of Sec. 21 of the Small 
Business Act except the matching funds requirements of 
paragraph (4)(A) shall not apply. The Committee opted not to 
require matching because the ability to obtain additional non-
federal funds undermines the purpose of providing assistance to 
underserved Indian tribe members, Alaska Natives, and Native 
Hawaiians.
    To maximize the limited funds authorized by H.R. 2981, the 
Committee determined to limit the size of each grant to 
$300,000 in any one fiscal year. Discussions with SBDC grantees 
suggested that the limitation was adequate to provide the 
services set forth in Sec. 21. In fact, the Committee expects 
that some grants may be for less than the statutory maximum.
    Subparagraph (F) mandates that the Administrator shall 
write regulations governing the operation of the program 
established by H.R. 2981. Under the Administrative Procedure 
Act, the Administrator is not required to promulgate 
regulations pursuant to notice and comment because the Small 
Business Development Center program relates to a government 
grant. The Administrator, by regulation, waives the right to 
forgo notice and comment rulemaking. See 13 C.F.R. 
Sec. 101.108. This requirement is subject to change by 
administrative fiat. Given the fact that the program 
established by H.R. 2981 involves members of an underserved 
population, the Committee decided to mandate notice and comment 
so that the program and subsequent changes will have input from 
all affected parties, particularly those served by the winning 
grantees.
    Clause (i) of subparagraph (F) requires that the 
regulations include standards relating to the services provided 
by winning applicants. The Committee fully expects that the 
regulations will provide for the full panoply of services 
already mandated by Sec. 21. In addition, the rules also should 
contain specific outreach, consulting, and advisory services 
that will be of most utility to the populations to be served 
under the program. Clause (ii) of subparagraph (F) requires 
regulations governing any work plan for grants awarded under 
this paragraph. The Committee is of the opinion that the 
quality of the work plans will be of the key component by which 
the Administrator determines applicants to receive grants under 
this paragraph.
    Clause (i) of subparagraph (G) defines Indian lands in a 
fairly broad manner in order to offer the widest assistance to 
businesses owned by members of Indian tribes without regard to 
whether the business is located specifically on a reservation 
or an area that used to be a reservation but whose population 
is predominantly that of Indian tribe members. Section 1151 of 
title 18, United States Code defines Indian lands by reference 
to Indian reservations. Section 4 of the Indian Child Welfare 
Act, 25 U.S.C. Sec. 1903 defines the term Indian reservation. 
To incorporate those lands upon which a reservation has been 
disestablished or diminished but still includes a substantial 
Indian tribal population, the Committee also includes in the 
definition of Indian land, the definition of reservation set 
forth in 25 C.F.R. Sec. 151.2 and, in particular, subsection 
(f) (defining reservations to include lands formerly designated 
as reservations but no longer reserved).
    Clause (ii) of subparagraph (G) adopts the broadest 
definition of the term ``Indian tribe'' used by the Secretary 
of Interior.
    Clause (iii) of subparagraph (G) states that an ``Indian 
tribe member'' is the member of an Indian tribe. While this 
definition appears circular, it is used in the Indian Child 
Welfare Act and has a well-understood meaning under federal 
Indian law.
    Clause (iii) would incorporate Alaska Natives into its 
definition, but the Committee determined that a more 
appropriate definition of Alaska Native is the one used in 
Sec. 3(b) of the Alaska Native Claims Settlement Act, 43 U.S.C. 
Sec. 1602(b), and adopts that definition in clause (iv) of 
subparagraph (G).
    Clause (v) of subparagraph (G) defines the term ``Native 
Hawaiian by cross-reference to the definition established in 42 
U.S.C. Sec. 11711 but excludes from that definition specific 
requirements of genealogical evidence. Since the program is 
designed to provide grants to SBDCs rather than individuals, 
the Committee determined that it only need describe the target 
populations of the applicants seeking grants.
    Clause (vi) of subparagraph (G) defines the term ``tribal 
organization'' to have the meaning that term is given in 
section 4(l) of the Indian Self-Determination and Education Act 
Assistance Act, 25 U.S.C. Sec. 450b(l). Since one of the key 
elements of this program is input from members of Indian 
tribes, Alaska Natives (or their representative corporations 
should the SBDC grantee and the Administrator find that 
appropriate), and Native Hawaiians, the Committee determined 
that use of the definition of tribal organization was 
appropriate.
    Paragraph (H) authorizes $7 million for the program for 
each fiscal year, 2006, 2007, and 2008. The Committee believes 
that this represents sufficient funds to provide targeted grant 
assistance to SBDC grantees wishing to serve members of Indian 
tribes, Alaska Natives, and Native Hawaiians.
    The Committee was concerned that the establishment of this 
directed program, even with a separate authorization, might 
result in the Administrator diverting existing funds for the 
Small Business Development Center program to the program 
established in paragraph (8). To avoid this problem, the 
Committee provides in paragraph (I) that no funds already 
committed elsewhere pursuant to the funding formula for the 
Small Business Development Center program in paragraph (4) of 
Sec. 21(a) of the Small Business Act shall be used to fund this 
program. In simple terms, if no dedicated appropriation is 
obtained for this program, the Administrator is prohibited from 
operating the program. Nothing in this prohibition is intended 
to interfere with any services that SBDC grantees provide to 
the populations described in this paragraph under their current 
grant agreements.

Section 3. State consultation with local tribal organizations

    This section requires SBDCs participating in the grant 
program established under this paragraph to request the advice 
of local tribal organizations on how best to provide assistance 
to Indian tribe members, Alaska Natives, and Native Hawaiians 
and where to locate satellite centers to provide such 
assistance. Since tribal organizations will have a superior 
knowledge of the types of assistance that is required, the 
Committee believes such consultation will provide the maximum 
benefit to members of Indian tribes, Alaska Natives, and Native 
Hawaiians. Nothing in this legislation is intended to prevent 
either grant winners or the Administrator from also designating 
appropriate Native Alaska village or regional corporations or 
Native Hawaiian organization as additional consultative 
sources. The Committee expects that the applicants will supply 
information on the procedures for carrying out the tribal 
consultations mandated by this section. Since the consultation 
is between a private organization and a federal grantee, the 
Committee does not believe such consultation falls within the 
parameters of the Federal Advisory Committee Act.

5.8  H.R. 3207--Second-Stage Small Business Development Act of 2005

                          Legislative History

7/12/2005: Referred to the House Committee on Small Business.
7/13/2005: Committee hearings held.
7/14/2005: Committee consideration and mark-up session held.
7/14/2005: Ordered to be reported (amended) by voice vote.
7/28/2005: Reported (amended) by the Committee on Small 
        Business. H. Rept. 109-205.
7/28/2005: Placed on the Union Calendar, Calendar No. 118.

                          Need for Legislation

    Scholars classify various stages of small business 
development. For purposes of H.R. 3207, the four stages of 
small business are: new venture, expansion, 
professionalization, and consolidation. Y. Randle & E. 
Flamholtz, Growing Pains 32-43 (1990). The expansion phase is 
frequently referred to as ``second-stage entrepreneurship.'' 
Second-stage business concerns are growing rapidly and changing 
their focus from that of the founders to an identifiable 
culture apart from the founders. These second-stage concerns 
may be ready for even more rapid expansion, including the 
hiring of additional personnel. Given their readiness to grow, 
other scholars refer to them as entrepreneurial growth 
companies or gazelles. Gazelles are critical to the American 
economy. According to Dr. David Birch, gazelles represent about 
three to four percent of all American businesses but are 
responsible for the vast majority of new employment in the 
United States (gazelles created net employment of 4 million new 
jobs from 1990-94). Furthermore, gazelles typically are not 
found in high-tech industries but rather are spread throughout 
the American economy, including a surprising number in 
manufacturing.
    Despite the fact that such businesses have overcome 
significant problems associated with the start-up phase of 
business, they still face operational obstacles to maximize 
their potential. Absent taking the right steps with respect to 
the role of the founders, upgrades to accounting systems, and 
sales efforts, the gazelles could stumble. Other problems that 
gazelles may face are capital markets not designed to assist 
gazelles, the need for appropriate intellectual property 
protection, proper workforce education and investment in human 
capital, and development of market opportunities.
    The Small Business Administration (SBA) runs a number of 
programs in which small businesses can learn from other 
businesses. In the government procurement arena, a mentor-
protege program exists to help small businesses by linking them 
with large prime contractors. An extension of the program, 
BusinessLINC, was designed to facilitate meetings among various 
mentor-protege participants. While somewhat effective, the 
mentor-protege programs have a narrow remit. Learning from 
peers who have had or are having the same or similar 
experiences provides useful assistance to small business 
concerns.
    Small Business Development Centers (SBDCs) can provide an 
effective mechanism for arranging and helping facilitate peer-
to-peer learning among gazelles. The Committee believes that a 
pilot program to demonstrate the effectiveness of small 
business development center involvement is appropriate. The 
Committee fully expects that the best practices will be adopted 
by other small business development centers and the program may 
be made permanent.

                      Section-by-Section Analysis


Section 1. Short title

    The section establishes the short title as the ``Second-
Stage Small Business Development Act of 2005.''

Section 2. Purpose

    This section states the Congressional rationale for 
enactment of the program.

Section 3. Pilot program

    Subsection (a) mandates that the Administrator establish 
the program of peer learning opportunities through SBDCs.
    Subsection (b) requires that the Administrator to select 
eligible entities (SBDCs) that apply pursuant to the pilot 
program. Eligible entities are defined as those institutions or 
governmental organizations that currently receive funding 
pursuant to Sec. 21 of the Small Business Act. The term 
``eligible entities'' does not refer to the situs at which 
locations of services are delivered by entities that receive 
funds pursuant to Sec. 21 of the Small Business Act. Subsection 
(b) limits the pilot program to twenty grantees, two selected 
from each of the ten federal regions as delineated in paragraph 
(4). The Committee recognizes that some states may have more 
than one SBDC eligible to receive funding pursuant to the 
funding formula in Sec. 21 of the Small Business Act. For those 
states, the Committee intends that the Administrator select 
only one SBDC program from those states with more than one 
grantee under Sec. 21. Eligible grantees may submit an 
application to the Administrator with a plan for offering peer 
learning opportunities and a plan to ensure that these peer 
learning opportunities will become self-sustaining by the end 
of the pilot program. The Administrator is required to select 
the applicants with the best plans for providing the 
opportunities and ensuring that the peer learning opportunities 
shall be self-sustaining. Nothing in the bill restricts the 
Administrator from weighting the factors in favor of the self-
sustaining aspects or the quality of the peer learning 
opportunities. Paragraph (5) of subsection (b) requires the 
Administrator to consult with the Association recognized 
pursuant to Sec. 21(a)(3)(A) of the Small Business Act and give 
the Association's recommendations substantial weight. The 
Committee intends that the term ``substantial weight'' not give 
the Association controlling weight; rather the term 
``substantial'' is used in its administrative law context of 
more than a scintilla but less than a preponderance. It is not 
the Committee's intention that this consultation process not 
fall within the requirements of the Federal Advisory Committee 
Act. Paragraph (6) of subsection (b) requires completion of the 
selection process within 60 days after the regulations to 
implement the pilot program have been promulgated.
    Subsection (c) requires that a grantee selected in the 
pilot program to use the funds solely for purposes of 
conducting peer learning opportunities. Funds may not be used 
by the selected grantees for any other purpose, including 
provision of any other service mandated by Sec. 21 of the Small 
Business Act or the grantees contract or cooperative agreement 
with the SBA.
    Subsection (d) establishes the procedures for distributing 
grants among the selected state programs. The formula is based 
on the principle that a state, which has a smaller population, 
also will have, in absolute terms, fewer small businesses than 
a larger state. The formula, therefore, allocates funds 
according to the relative size of each state. The Committee 
believes that the minimum funds needed to initiate a state 
program will be $50,000 and grants the Administrator the 
authority to modify the grant size calculated by the formula in 
this subsection to ensure that each SBDC selected under the 
pilot program will receive a minimum of $50,000.
    Subsection (e) requires the applicants to satisfy the 
matching funds requirements of subparagraphs (A) and (B) of 
Sec. 21(a)(4) of the Small Business Act. The Committee decided 
that since these peer learning opportunities would be of 
sufficient value to the small business community, the selected 
programs should be able to obtain matching funds, including the 
payment of attendance fees by the participants. Furthermore, 
the matching requirement will expand the total resources 
devoted to the program. Subsection (e) provides an exception 
for lead centers located at community colleges, historically 
Black college, Hispanic-serving institutions, and minority 
institutions in meeting these matching requirements. Where the 
lead center in a state is housed in any of these centers, such 
center must only obtain only 50 percent of the matching fund 
requirements of subparagraphs (A) and (B) of Sec. 21(a)(4) of 
the Small Business Act. The matching funds requirement shall be 
calculated based on the amount of the grant made under this 
pilot program.
    Subsection (f) requires each SBDC selected to operate peer 
learning opportunities must provide a quarterly report to the 
Administrator with the information set forth in paragraphs (A)-
(C). Nothing in this requirement alters any other reporting 
requirement mandated by the Administrator. The Administrator, 
for the sake of reductions in paperwork burdens, may combine 
the report required by this subsection with other quarterly 
reports. Because the reports mandated by this subsection must 
be filed electronically, the Administrator should establish an 
overall electronic reporting system for SBDCs to the extent 
such a system has not been developed.
    The Association recognized by Sec. 21 of the Small Business 
Act provides a number of services to SBDCs. It frequently acts 
as a conduit to provide information to the Administrator and 
from the Administrator to the SBDCs. Given this role, the 
Committee determined that the Association should act as a 
clearinghouse and conduit of information to SBDCs under the 
terms set forth in subsection (g).
    The Committee believes that peer learning will be 
sufficiently valuable addition to the services provided by 
SBDCs that they would be able to recoup, after an initial 
period, the entire cost of providing this service. Thus, the 
Committee mandates in subsection (h) that the reports required 
by H.R. 3207 provide the Administrator with progress on making 
the peer learning opportunities self-sustaining. Such reports 
shall be filed on annual basis. To ensure that the 
Administrator has sufficient information to conduct audits and 
reviews of the program, subsection (h) also requires the 
grantees to submit, on an annual basis, descriptions of the 
peer learning opportunities and the number of ``second-stage'' 
small business concerns assisted by the pilot program. Finally, 
the Committee included a requirement that the grantees assess 
the economic impact of the program but delayed that requirement 
until one year after the program was established.
    Subsection (i) provides the same privacy protections to 
grantees in the pilot program that currently exist for SBDC 
clients pursuant to Sec. 21 as added by Division K of H.R. 
4818, the Consolidated Appropriations Act of 2005, Pub. L. No. 
108-447. This subsection prohibits the disclosure of client 
information (including the name, address, telephone and 
facsimile numbers, and e-mail address) of any concern or 
individual receiving assistance from a SBDC grantee or its 
subcontractors (who operate service centers that business 
owners can utilize to obtain advice) unless the Administrator 
is ordered to make such disclosure pursuant to a court order or 
civil or criminal enforcement action commenced by a federal or 
state agency. The Committee expects that SBDC grantees will 
only respond to formal agency requests, such as civil 
investigative demands, and subpoenas. The Committee also 
recognizes that the Administrator has significant management 
responsibilities to ensure that federal taxpayer dollars are 
wisely used by grantees and are in compliance with the law, 
regulations, and the cooperative agreements signed by SBDC 
grantees. Thus, the Committee authorizes the SBDC grantees to 
provide client names for the purposes of financial audits 
conducted by the Administrator or Inspector General and for 
client surveys to ensure that the SBDC grantees are satisfying 
certain aspects of their grant agreements. The Committee 
recognizes that client surveys may be misused and impose 
restrictions on their use. The Committee expects that the 
regulations promulgated pursuant to the amendments made to 
Sec. 21 pursuant to Pub. L. No. 108-447 shall apply to this 
pilot program, including the regulations about the use of 
client surveys.
    Subsection (j) requires the Comptroller General of the 
United States to provide a report evaluating the effectiveness 
of the program three years after establishment. The report also 
should contain any suggested modifications to the program. 
Finally, the Comptroller General should provide its opinion 
concerning whether the program should be continued and expanded 
to include more SBDCs on self-funding basis. The report shall 
be transmitted to the Committees on Small Business of the 
Senate and House of Representatives. The Committee expects that 
the program will be sufficiently successful to expand the 
program to other SBDCs without the need for additional federal 
funds.
    Subsection (k) provides for termination of the pilot 
program on September 30, 2009. The Committee decided not to 
provide for any authorization contingency if the program does 
not receive appropriations for the entire authorized length of 
the pilot program.

Section 4. Promulgation of regulations

    Section 4 authorizes the Administrator to promulgate 
regulations to implement this program no later than 180 days 
after the enactment of the Act. Such regulations only shall be 
promulgated after the public has been given an opportunity for 
notice and comment. The Committee believes that the 
Administrator can and should accomplish the issuance of 
regulations within the deadline set by statute. The Committee 
considers this Act to be some other law for purposes of section 
603 of Title 5 of the United States Code.
    The regulations shall include the standards relating to 
conduct of peer learning opportunities, the number of 
individuals that may participate in a group, determining 
whether or not a participant constitutes a competitor, various 
requirements for the facilitators of these peer learning 
opportunities, and requirements for transitioning these peer 
learning opportunities to full self-sustaining basis. The 
Committee expects that the regulations will lay out milestones 
and other requirements to ensure that this program will become 
self-funding once the pilot program's authority lapses.

Section 5. Definitions

    Paragraph (1) defines the term ``Administrator'' to be the 
Administrator of the SBA.
    Paragraph (2) defines the term ``peer learning 
opportunities'' as formally organized groups, overseen by 
professional facilitators, of presidents, owners, and chief 
executive officers of second-stage small business concerns. 
These groups meet regularly to discuss strategies and tactics 
and share ideas about operating their businesses. Meetings 
among business executives may lead to the perception of 
collusion in violation of the antitrust laws. While the 
Committee does not believe that second-stage entrepreneurs have 
sufficient market power to collude, the Committee took the 
safer approach by prohibiting peer learning among competitors. 
Thus, peer learning opportunities will be limited to non-
competitors. The Committee believes that valuable information, 
such as capital markets or handling certain workforce issues, 
will be shared among non-competitors. Furthermore, by 
eliminating competitors, members of the peer learning groups 
may be more willing to speak freely without concern about 
revealing important information to a competitor.
    Paragraph (3) establishes the criteria for determining 
whether a business concern qualifies as a second-stage 
entrepreneur and, thus, eligible for inclusion in the peer 
learning opportunities. Any small business that has survived 
the start-up, or new venture, phase may be considered a second-
stage business. However, the Committee's impetus for passing 
H.R. 3207 is to assist not all second-stage entrepreneurs but 
those that have shown the potential for accelerated growth, 
i.e., a gazelle. Additionally, the Committee wished to ensure 
maximum participation of women, service-disabled, and minority 
entrepreneurs who were in the ``gazelle'' category; as such, 
the legislation provides such ownership as meeting one of the 
three necessary requirements for qualification under clause 
(ii). Therefore, the Committee determined that parameters were 
necessary for circumscribing those second-stage entrepreneurs 
that are or have the potential for being gazelles. This 
paragraph establishes those standards and small business 
concerns must be both a small business as defined by the 
Administrator's regulations set forth in 13 C.F.R. Sec. 121.201 
and meet the criteria set forth in clauses (i) or (ii).
    Paragraph (4) defines a small business concern by cross-
reference to Sec. 3 of the Small Business Act. The Committee 
intends that the Administrator shall construe the terms in H.R. 
3207 and the Small Business Act in pari materia.
    Paragraph (5) defines the term ``state'' to include all the 
states, the District of Columbia and the territories of the 
United States Virgin Islands, Guam, the Commonwealth of Puerto 
Rico, and American Samoa. Puerto Rico, the Virgin Islands, and 
Guam all have SBDCs that receive funding pursuant to subsection 
(a)(4) of Sec. 21. Guam provides the services mandated by 
Sec. 21 to American Samoa.
    Paragraphs (6)-(9) set forth the definitions of those 
institutions of higher learning that are eligible for the 
reduced matching requirement pursuant to Sec. 3(e).

Section 6. Authorization of appropriations

    Section (6) limits the operation of the program only to the 
funds appropriated in advance for the program. The Committee 
provides an authorization of $1.5 million for each four fiscal 
years starting with the first fiscal year after enactment. 
Section (6) also prohibits the Administrator from using other 
funds, including other funds made available for the operation 
of SBDCs, to conduct this pilot program. The Committee 
authorized the additional appropriations because it determined 
that funding of the peer learning opportunities program should 
not detract from the available funding for the delivery of 
other services by SBDCs.

5.9  H.R. 6159--To Extend Temporarily Certain Authorities of the Small 
        Business Administration, Public Law 109-316

                          Legislative History

9/25/2006: Referred to the House Committee on Small Business.
9/26/2006: Mr. Manzullo moved to suspend the rules and pass the 
        bill.
9/26/2006: Considered under suspension of the rules.
9/26/2006: On motion to suspend the rules and pass the bill. 
        Agreed to by voice vote.
9/26/2006: Motion to reconsider laid on the table. Agreed to 
        without objection.
9/27/2006: Received in the Senate, read twice.
9/30/2006: Passed Senate without amendment by Unanimous 
        Consent.
9/30/2006: Message on Senate action sent to the House.
9/30/2006: Cleared for White House.
10/4/2006: Presented to President.
10/10/2006: Signed by President.
10/10/2006: Became Public Law No: 109-316.

                          Need for Legislation

    H.R. 6159 simply extends all the programs, including pilot 
programs, the authorities or provisions of the Small Business 
Act and the Small Business Investment Act until February 2, 
2007. The programs and authorities of the Small Business 
Administration (SBA) were set to expire on September 30, 2006.
    Many of the programs of the SBA do not operate under a 
direct appropriation. This includes the 7(a) general business 
loan guarantee program; the Certified Development Company (CDC) 
program; and the Small Business Investment Company (SBIC) 
program. H.R. 6159 made it absolutely certain that there is no 
legal ambiguity as to whether or not the federal government can 
continue to guarantee these critical loan and debenture 
programs during the time period covered by a Continuing 
Resolution.
    In addition, this bill extended the authority of the SBA to 
operate several smaller programs including grants to Small 
Business Development Centers (SBDCs) to participate in the 
Drug-Free Workplace program; sustainability funding for Women 
Business Centers (WBCs); the pre-disaster mitigation pilot 
program; the New Markets Venture Capital program; and 
BusinessLinc. It also extended SBA's co-sponsorship and gift 
authority, which enables the SBA to accept private donations to 
help put on events or print publications, thus saving the 
taxpayer precious dollars. Finally, H.R. 6159 also allowed the 
SBA's Advisory Committee on Veterans Business Affairs to 
continue to operate.

                      Section-by-Section Analysis


Section 1.--Temporary extension

    Any program, authority, or provision, including any pilot 
program, authorized under the Small Business Act or the Small 
Business Investment Act of 1958 as of September 30, 2006, that 
was scheduled to expire on or after September 30, 2006 and 
before February 2, 2007, remained authorized through February 
2, 2007, under the same terms and conditions in effect on 
September 30, 2006.
                              CHAPTER SIX

   SUMMARY OF OTHER LEGISLATIVE ACTIVITIES OF THE COMMITTEE ON SMALL 
                                BUSINESS

6.1  Committee Meetings
            6.1.1  organizational meetings
    On February 10, 2005 the Committee on Small Business held 
an organization meeting. The purpose of this meeting was 
threefold: (1) to consider and adopt the Committee rules for 
the 109th Congress, (2) to consider and adopt the Committee's 
oversight plan for the 109th Congress, and (3) approve the 
subcommittee assignments for Members of the Committee. The 
Committee rules, oversight plan, and organization of 
subcommittees were adopted by voice vote. The text of the 
Committee's oversight plan follows:
            6.1.2  oversight plan for the committee on small business 
                    109th congress

                     U.S. HOUSE OF REPRESENTATIVES

                      DONALD A. MANZULLO, CHAIRMAN

    Rule X, clause 2(d)(1), of the Rules of the House requires 
each standing Committee to adopt an oversight plan for the two-
year period of the Congress and to submit the plan to the 
Committees on Government Reform and House Administration not 
later than February 15 of the first session of the Congress.
    The oversight plan of the Committee on Small Business 
includes areas in which the Committee expects to conduct 
oversight activity during the 109th Congress. However, this 
plan does not preclude oversight or investigation of additional 
matters as the need arises.

             OVERSIGHT OF THE SMALL BUSINESS ADMINISTRATION

    The Committee will conduct hearings on all the major 
programs of the Small Business Administration (SBA) to 
determine their effectiveness and possible options for 
improvements, as a prelude to reauthorization of the entire SBA 
to be completed by September 30, 2006.
    The Committee will oversee the SBA's performance in 
carrying out its statutorily mandated roles, including its 
internal financial management, and will work to ensure that the 
SBA eliminates any improper payments and receives a green score 
card under the Administration's Programs Assessment Rating Tool 
(PART).
    The Committee will also monitor the reporting requirements 
on gifts, co-sponsorships and co-operative agreements received 
or entered into by the SBA with the private sector.

         FINANCIAL AND MANAGEMENT/TECHNICAL ASSISTANCE PROGRAMS

    The Committee will conduct hearings on the effectiveness 
and efficiency of the SBA's major programs. These include: 7(a) 
General Business Loan Program, the Certified Development 
Company Program, the Small Business Investment Company (SBIC) 
Program, the Microloan Program, the Disaster Loan Program, 
Small Business Development Centers (SBDCs), and New Markets 
Venture Capital Program. In particular, the Committee will 
closely examine the participating securities component of the 
SBIC program with the intention to move legislation to 
resuscitate the program (April 2005). In addition, the 
Committee will oversee the Office of Government Contracting to 
ensure that other Federal agencies meet the minimum threshold 
of various small business goals in Federal government 
procurement.
    The Committee will also examine on the ability of small 
businesses to gain access to capital, focusing particularly on 
interest rates and bank regulations.

                                ADVOCACY

    The Office of Advocacy was created to provide small 
business with an effective voice inside the Federal government. 
The Committee will conduct hearings on how to strengthen this 
voice and make sure that the Office of Advocacy continues to 
effectively represent the interests of small business. As part 
of this process, the Committee will also monitor the 
implementation of Executive Order 13272 regarding the ``Proper 
Consideration of Small Entities in Agency Rulemaking.'' (Spring 
2003)

                                VETERANS

    In the 106th Congress, Congress created a new office of 
Veterans Business Development at the SBA and the National 
Veterans Business Development Corporation to enhance and 
improve small business services to our nation's veterans. The 
Committee will continue to conduct hearings on the 
implementation of the Veterans Entrepreneurship and Small 
Business Development Act, including a review of the progress on 
achieving the service-disabled veterans goal in procurement and 
the implementation of Executive Order 13360 to ``Providing 
Opportunities for Service-Disabled Veteran Businesses to 
Increase their Federal Contracting and Subcontracting.'' (May 
2005)

                   TECHNOLOGY AND RESEARCH ASSISTANCE

               Small Business Innovation Research program

    The Small Business Innovation Research (SBIR) program aids 
small businesses in obtaining federal research and development 
funding for new technologies. In 2000, Congress reauthorized 
the SBIR program for eight years. The Committee will 
investigate the implementation of the changes to the SBIR 
program and, more particularly, the outreach effort of the SBIR 
program to make sure that all areas of the country benefit from 
the program and to insure that the program assists in the 
development of new research and development for small 
manufacturers critical to the defense industrial base.

           Small Business Technology Transfer (STTR) program

    Committee oversight will focus on the program's success at 
helping small business access technologies developed at federal 
laboratories and put that knowledge to work. In 2001, Congress 
reauthorized the STTR program for eight years. The Committee 
will monitor agency implementation of PL 107-50.

                          FEDERAL PROCUREMENT

    The Committee will examine needed changes in federal 
procurement. The Committee will continue to monitor and 
highlight the practice of creating bundled or consolidated 
mega-contracts that are too large for small business 
participation. Additionally, the implementation of 
Administration's strategy for increasing Federal-contracting 
opportunities for small business as released by the Office of 
Federal Procurement Policy at the Office of Management and 
Budget in October 2002 will be closely scrutinized.
    Because there is a direct correlation between the ability 
of an agency to achieve its goals and contract bundling, the 
success of Federal agencies in meeting all their small business 
goals will also be assessed. The Committee will also work to 
protect the integrity in calculating small business 
participation in Federal contracting by ensuring that big 
businesses are not credited as small businesses.
    The Committee recognizes that the Federal Procurement Data 
System (FPDS)--the existing system used by the SBA to evaluate 
small business participation in government contracts--is not 
capturing accurate information on small business achievement. 
The Committee will work to ensure that agencies, including the 
SBA, are held accountable for any false numbers being used to 
portray a positive small business environment in the federal 
marketplace.
    With the continued practice of contract bundling, more 
small businesses will become subcontractors. In light of this, 
the Committee will work to ensure fair treatment for 
subcontractors on Federal contracts.
    The Committee will also work to jump-start the women's 
contracting program to make sure the program is serving the 
needs of women-owned businesses.

                         GOVERNMENT COMPETITION

    The Committee will examine the extent to which the Federal 
government itself directly or indirectly competes with small 
business. Our focus will include activities in both government 
practices and in certain status given by the Federal government 
to non-governmental entities. (On-going)

                         REGULATORY FLEXIBILITY

    The Committee will continue its oversight of agency 
compliance with the Regulatory Flexibility Act, as amended by 
the Small Business Regulatory Enforcement Fairness Act. (On-
going)
    The Committee will oversee the implementation of the Truth 
in Regulating Act.

                                 SBREFA

    The Committee will be conducting oversight hearings on 
agency implementation of the Small Business Regulatory 
Enforcement Fairness Act (SBREFA), which was enacted during the 
104th Congress. The Committee will also examine the need to 
further amend and strengthen SBREFA. (April 2005)

                          PAPERWORK REDUCTION

    The Committee will hold hearings and work to strengthen the 
Paperwork Reduction Act. (2005)

                         GOVERNMENT REGULATION

    The Committee will continue to examine the regulatory 
activities of various Federal agencies and assess the impact of 
regulations on the small business community. (On-going)
    In addition, the Committee will work toward amending the 
Equal Access to Justice Act to enable small businesses to 
challenge unfair government actions against them (Summer 2005).

                                TAXATION

    The Committee will continue to conduct oversight hearings 
into ways to reduce the tax burden on small business. These 
hearings will include not only the monetary but also the 
paperwork burden of the Federal tax system and Federal 
enforcement efforts on small business. (On-going)

                                 ENERGY

    The Committee will conduct oversight hearings on the 
potential effects of any legislative changes in energy policy, 
including examining the possible effects of deregulation of 
electricity on small business. (Summer, 2005)

                 GOVERNMENT PERFORMANCE AND RESULTS ACT

    The Committee will continue consultations with the SBA 
regarding the preparation and implementation of strategic plans 
and performance plans as required by the Government Performance 
and Results Act.

                              EMPOWERMENT

    The Committee will conduct oversight hearings on 
regulations and licensing policies that impact small businesses 
located in high risk communities. The Committee will also 
examine the promotion of business growth and opportunities in 
economically depressed areas, and will examine programs 
targeted towards relief for low-income communities. The 
challenges facing minority-owned businesses will continue to be 
evaluated. (On-going)

                               WORKFORCE

    The Committee will examine issues related to the problems 
faced by small businesses in attracting and retaining a high 
quality workforce. Specifically, the Committee will investigate 
vocational education programs, worker retraining programs, and 
wage and benefit issues. (On-going)

                              HEALTH CARE

    The Committee will examine ways on how to improve access 
and increase affordability of high quality medical care for 
small business owners and their employees. (On-going)

                             PENSION REFORM

    The Committee will examine ways on how to enhance 
retirement security for small business owners and their 
employees. (On-going)

                       E-COMMERCE AND TECHNOLOGY

    The Committee will continue to conduct oversight hearings 
into ways to reduce the ``digital divide'' in order to promote 
business growth and opportunities in economically depressed 
areas. These hearings will also examine ways to help the 
average small businessperson exploit the vast potential of 
Internet commerce. (On-going)

                           TELECOMMUNICATIONS

    The Committee will examine the impact of Telecommunications 
Act of 1996 on small business. First, the Committee will 
investigate whether or not the broadest range of small 
businesses have benefited from more competition in the 
telecommunications market through lower prices and better 
service. Second, the Committee will investigate whether or not 
small business telecommunication companies have benefited from 
the Act. The Committee will explore alternatives to enhance the 
benefits of the changes in telecommunications technology for 
small business. (On-going)

                          INTERNATIONAL TRADE

    The Committee will continue to examine ways to expand 
export opportunities for small business. The Committee will 
conduct oversight hearings on Federal trade policy and export 
promotion programs to insure that they serve the needs of small 
business exporters. (On-going)

                             SELF-EMPLOYED

    The Committee will hold oversight hearings on how to reduce 
the regulatory and tax burden on the self-employed, 
particularly those in home-based businesses. (On-going)

                             MANUFACTURING

    The Committee is gravely concerned that nearly 3 million 
jobs have been lost in manufacturing over the past two years, 
much of which were in small manufacturing businesses. The 
Committee will continue to hold hearings to examine the causes 
of these problems and propose a series of recommendations for 
both legislative and administrative changes. (On-going)
    Specifically, the Committee will examine the costs of the 
loss of small manufacturers and suppliers critical to our 
national security and our defense industrial base (Spring 
2005).

                     AGRICULTURAL/RURAL/FARM ISSUES

    The Committee will examine ways to promote business growth 
and opportunities in rural areas. The Committee will hold 
oversight hearings on agricultural issues that impact small 
business. (On-going)
    The Committee will hold oversight hearings on the impact of 
Federal lands policy on small business. (On-going)

                     REVIEW OF SPECIFIC REGULATIONS

    Pursuant to Rule X, clause 2(d)(1)(B), the Committee on 
Small Business is required to submit to the Committee on 
Government Reform and the Committee on House Administration an 
oversight plan that ``reviews specific problems with Federal 
rules, regulations, statutes, and court decisions that are 
ambiguous, arbitrary, or nonsensical, or that impose severe 
financial burdens on individuals.'' The following is a summary 
of regulations that the Committee has so far identified for 
review but should not be interpreted as limiting the 
Committee's review of regulations issued by federal agencies 
that continue to impose unnecessary burdens on small business. 
In part, this review is based on the Committee's legislative 
jurisdiction to provide continuing oversight of the Regulatory 
Flexibility Act pursuant to Rule X, cl. 1(o)(1).

------------------------------------------------------------------------
                                               High regulatory reform
                  Agency                        priorities for small
                                                      business
------------------------------------------------------------------------
All.......................................  Small Business Liaisons
Commerce/BIS..............................  Revised ``Knowledge''
                                             Definition, Revision of
                                             ``Red Flags'' Guidance and
                                             Safe Harbor
DOT/FMCSA.................................  Hours of Service
DOT/RSPA..................................  Hazardous Materials Rules
                                             (HM-223)
EPA.......................................  ``Whole Effluent Toxicity''
                                             (WET) Methods
EPA.......................................  Chemical Inventory Update
                                             Rule
EPA.......................................  Hazardous Waste Rules Should
                                             Be Amended to Encourage
                                             Recycling
EPA.......................................  Lead Reporting Burdens Under
                                             the Toxic Release Inventory
                                             Program
EPA.......................................  Pretreatment Streamlining
                                             Rule Under the Clean Water
                                             Act
EPA.......................................  Provide More Flexibility in
                                             the Management of
                                             Wastewater Treatment Sludge
                                             to Encourage Recycling
EPA.......................................  Regulation of Air Toxics
                                             from Area Sources
EPA.......................................  Reporting and Paperwork
                                             Burden in the Toxic Release
                                             Inventory Program
EPA.......................................  Spill Prevention Control and
                                             Countermeasures (SPCC) Rule
EPA.......................................  Method of Detection Limit/
                                             Minimum Level (MDL/ML)
                                             Procedure under the Clean
                                             Water Act
EPA.......................................  Reportable Quantity (RQ)
                                             Threshold for Nitrogen
                                             Oxide and Dioxide at
                                             Combustion Sources
EPA.......................................  Deferral of Duplicative
                                             Federal Permitting
EPA.......................................  Reporting of Coincidental
                                             Manufactured Compounds
                                             under the Toxic Release
                                             Inventory Program
EPA.......................................  SARA Title III Reporting
                                             Requirements
FCC.......................................  ``Do Not Fax'' Rule
HHS.......................................  Privacy of Individually
                                             Identifiable Health
                                             Information
HHS/CMS...................................  HIPAA
HHS/FDA...................................  Use of Term ``Fresh'' for
                                             Baked Goods
Justice...................................  Administration of Federal
                                             Prison Industries (FPI)--
                                             Guidance
Labor.....................................  FMLA/Intermittent Leave
Labor.....................................  FMLA/Perfect Attendance
                                             Awards
Labor.....................................  FMLA/Request for Leave
Labor.....................................  FMLA/Serious Health
                                             Condition
Labor.....................................  FMLA/Health Care Provider
                                             Certification
Labor.....................................  FMLA/Penalty Provisions
Labor.....................................  FMLA/Substitution of Paid
                                             Leave
Labor.....................................  FMLA/Unable to Perform
Labor/MSHA................................  Diesel PM Exposure
Labor/OSHA................................  Hazard Communication
Labor/OSHA................................  Hexavalent Chromium
Labor/OSHA................................  Sling Standard
Labor/OSHA................................  Threshold Limit Values
OMB.......................................  Administration of Federal
                                             Prison Industries (FPI)--
                                             Guidance
Treasury/IRS..............................  ``Statutory Employees''--
                                             Bakery Drivers
Treasury/IRS..............................  Communications Distance
                                             Sensitivity
Treasury/IRS..............................  Election to Expense Certain
                                             Depreciable Business Assets
Treasury/IRS..............................  ``Statutory Employees''--
                                             Bakery Drivers
Treasury/IRS..............................  Bonus Depreciation
Treasury/IRS..............................  Mobile Machinery Exemption
USDA/FSIS.................................  Ready to Eat Meat
                                             Establishments to Control
                                             for Listeria Monocytogenes
USDA/RUS..................................  Guarantees for Bonds and
                                             Notes Issued for
                                             Electrification or
                                             Telephone Purposes
                                             (Proposal)
------------------------------------------------------------------------

                 REVIEW OF DUPLICATIVE FEDERAL PROGRAMS

    Pursuant to Rule X, clause 2(d)(1)(E), the Committee on 
Small Business is required to submit to the Committee on 
Government Reform and the Committee on House Administration an 
oversight plan that ``have a view toward insuring against 
duplication of Federal programs.'' The following is an example 
of Federal programs under the Committee's legislative 
jurisdiction that the Committee has so far identified for 
review but should not be considered as an exhaustive list. In 
part, this review is based on the Committee's legislative 
jurisdiction to authorize the programs of the SBA.
    While the Rural Business Investment (RBI) program, which 
was created as part of the Farm Security and Rural Investment 
Act of 2002 (P.L. 107-171) to help provide venture capital to 
small businesses in struggling rural areas, falls technically 
within the legislative jurisdiction of the Agriculture 
Committee and is technically housed at the U.S. Department of 
Agriculture (USDA), the program mirrors almost word for word 
sections of the Small Business Investment Act of 1958. The RBI 
program currently operates as a partnership between the USDA 
and the SBA and the USDA continues to rely upon the expertise 
of SBA personnel for advice and help on launching and operating 
the program.
    The RBI program is duplicative of both the SBIC program and 
the New Markets Venture Capital program (NMVC) since they both 
invest in low- to moderate-income (LMI) areas, including those 
located in rural America. The SBIC or the NMVC programs could 
have been augmented to accomplish the same goals as the RBI 
program and housed in the agency with the expertise in manage 
this type of program (i.e., the negative experience of the USDA 
in managing a similar initiative in the 1990's--the Alternative 
Agricultural Research and Commercialization Corporation or 
AARCC--should serve as a warning flag) without having to create 
a duplicative program at the USDA. However, to legislatively 
change the RBI program would require an action by the Committee 
on Agriculture.

6.2  Budget Views and Estimates

    Pursuant to Section 301(c) of the Congressional Budget Act 
of 1974, the Committee prepared and submitted to the Committee 
on the Budget its views and estimates on the fiscal year 2006 
and 2007 budgets with respect to matters under the Committee's 
jurisdiction.
            6.2.1  fiscal year 2006 budget proposal
    The views and estimates of the Committee on Small Business 
on the President's Fiscal Year 2006 budget proposal are 
outlined in the following paragraphs. In short, the President's 
proposal budget for the coming year sets forth a sound plan to 
help small employers continue to create jobs for Americans.
    The Committee again applauds the President for endorsing 
further tax relief proposals that benefit small businesses such 
as:
          (1) Making permanent the tax cuts previously passed 
        by Congress (85 percent of small businesses pay taxes 
        on an individual, not corporate, basis);
          (2) Killing the estate or ``death tax'' for good;
          (3) Providing a refundable tax credit for 
        contributions of small employers to employee Health 
        Savings Accounts (HSAs); and 4) Making permanent the 
        research and experimentation tax credit.
    We would further encourage the Budget Committee to add more 
targeted tax relief to small business owners in the budget 
resolution to include:
          (1) Increasing the business meal deduction;
          (2) Establishing a standard home office deduction; 
        and 3) Incorporating the deduction for the health 
        insurance costs of self-employed individuals into the 
        calculation of the self-employment tax.
    The President's FY '06 budget request for the Small 
Business Administration (SBA) of $592.9 million represents 
about a 2.8 percent decrease over last year's level of $610 
million. If Congressional earmarks are discounted, the SBA's FY 
'06 budget request is essentially flat. In this tight fiscal 
environment, where average non-defense, non-homeland security 
discretionary spending decreased by one percent, the 
President's FY '06 budget proposal for the SBA is generally 
sound and reasonable, with a few exceptions. It is important to 
also remember that the SBA leads by example on how to do more 
with less and is not the cause of the growing federal deficit. 
In FY '01, Congress appropriated $900 million for the SBA and 
four years later, Congress provided $610 million for the agency 
in FY '05. During this same time, SBA has served more small 
businesses than ever in its history.
    One major reason for the decrease in spending is due to the 
fact that Congress agreed with the Administration to eliminate 
the subsidy for the 7(a) business loan guarantee program of the 
SBA. In FY '05, this will save the taxpayer somewhere between 
$70 and $100 million by bringing the 7(a) program to a zero 
subsidy and requiring the users of the 7(a) program pay 
sufficient fees to cover the costs of the program. The fee 
increase has not dampened demand for 7(a) loans. The number of 
7(a) loans approved is currently 27 percent higher than during 
a comparable time in FY '04. There is still some concern about 
the subsidy rate calculation that was used to further increase 
fees on lenders in the 7(a) program in the President's FY '06 
budget request and the Committee will follow-up with the SBA to 
seek clarification. With this caveat, the Committee supports 
the President's FY '06 request for zero funding of the 7(a) 
program and a robust $16.5 billion program level.
    The Committee is pleased that the fees have gone down again 
in the 504 Certified Development Company (CDC) program and 
still remains at a zero subsidy rate. However, the Committee 
remains concerned that the overall program level request of 
$5.5 billion will not be sufficient to fulfill expected demand 
for the 504 program in FY '06 and supports a $6 billion program 
level.
    The Committee was disappointed to learn that while an 
adequate program authority level was requested for the Small 
Business Investment Company (SBIC) debenture program, the 
Administration effectively supports shutting down the 
participating securities portion of the SBIC program. The 
Committee believes that there can be a middle ground that still 
supports a zero subsidy for the program while making some 
structural changes to keep the program alive as a viable source 
of venture capital for small companies that most private 
venture firms simply disregard because of their size. The SBIC 
debenture program also cannot meet the need for ``patient'' 
capital required by budding entrepreneurs because the debt 
service associated with the debenture program drains precious 
capital from more critical investment needs.
    The Committee also remains concerned about the SBA's 
proposal to eliminate the Microloan program and the 
accompanying technical assistance. This program reaches various 
demographic groups that would otherwise not be served by the 
private sector and even the 7(a) loan program. Combined with 
the technical assistance, the Microloan program achieves a 
default rate of less than one percent. Unless the SBA devises 
some other means to reach this unique market, the Committee 
opposes eliminating of the Microloan program. However, the 
Committee supports the SBA's proposal to eliminate the Program 
for Investment in Microentrepreneurs (PRIME), which is 
duplicative of existing SBA efforts to reach disadvantaged 
entrepreneurs.
    Many of the previous line-items in the SBA budget were 
eliminated and folded into the overall increased request for 
the operating budget of the SBA (i.e., 7(j) and HUBZones into 
the Government Contracting and Business Development division; 
Native American Outreach into the Entrepreneurial Development 
division; SBA's contribution to the U.S. Export Assistance 
Center network into the Capital Access division; the Office of 
the Ombudsman; and the Advocacy database into the Office of 
Advocacy). In the President's FY '05 request, numerous line 
items were eliminated without increasing the overall operating 
budget of the SBA. This year's request fortunately avoids that 
mistake. However, the Committee still has concerns that these 
programs that were previously highlighted with a line item may 
still get lost in the shuffle. Thus, the Committee will work to 
insure that these programs get the full support from SBA that 
they deserve.
    While recognizing the tough budgetary times, the Committee 
believes that some of these programs at SBA deserve an 
inflationary increase after years of not receiving much if any 
increase at all. The Small Business Development Center (SBDC) 
program, the Women's Business Center (WBC) program, and the 
SCORE program are cases in point.
    Finally, the Committee supports the adequate funding levels 
for the disaster assistance programs at the SBA, the Office of 
Inspector General, and the overall salaries and expenses 
account of the SBA as contained in the President's FY '06 
budget request.
    In conclusion, the President's FY `06 budget request for 
small business can be supported, with some exceptions, both in 
terms of his tax relief proposals and the SBA budget.
            6.2.2  fiscal year 2007 budget proposal
    The views and estimates of the Committee on Small Business 
on the President's Fiscal Year 2007 budget proposal are 
outlined in the following paragraphs. In short, the President's 
proposed budget request for the coming year will help small 
employers grow our economy and create jobs.
    The Committee again applauds the President for endorsing 
further tax relief proposals that benefit small businesses such 
as:
          (1) Making permanent the tax cuts previously passed 
        by Congress, including estate or ``death'' tax repeal, 
        in which the average tax savings in 2005 was $3,235 per 
        small business;
          (2) Making contributions to Health Savings Accounts 
        (HSAs) tax deductible and increasing the amount that 
        can be set aside for HSAs;
          (3) Enacting an even higher and permanent small 
        business (Section 179) expensing limit by increasing 
        the deduction for qualifying property from $100,000 to 
        $200,000 and increasing the phase-out of the deduction 
        from $400,000 to $800,000 and indexing both levels for 
        inflation thereafter;
          (4) Making permanent the research and experimentation 
        tax credit;
          (5) Combining and making permanent the Work 
        Opportunity and Welfare to Work Tax Credit; and
          (6) Extending for one-year individual Alternative 
        Minimum Tax (AMT) relief.
    We would further encourage the Budget Committee to add more 
tax relief for small business owners in the budget resolution 
to include:
          (1) Increasing the business meal deduction;
          (2) Establishing a standard home office deduction;
          (3) Incorporating the deduction for the health 
        insurance costs of self-employed individuals into the 
        calculation of the self-employment tax; and
          (4) Permanently repealing individual AMT.
    These and other high priority consensus small business tax 
reforms are contained in the Small Employer Tax Relief Act of 
2005 (HR 3841). This legislation also includes the repeal of 
the Federal Unemployment Tax Act (FUTA) temporary surcharge of 
0.2 percent on employers. This ``temporary'' surcharge has been 
in place since 1976. Unfortunately, the President's FY '07 
revenue proposal includes yet another extension of this tax. 
Because the unemployment level has dropped to a low rate of 4.7 
percent and the unemployment trust fund has an adequate 
surplus, it is now time to finally let the ``temporary'' 
surcharge or tax expire.
    While there are many agencies, programs, and initiatives 
within the federal government that directly or indirectly 
benefit or assist small business, the House Small Business 
Committee has primary legislative responsibility for the Small 
Business Administration (SBA). The rest of this letter will 
focus on the President's FY '07 budget request for the SBA, 
which falls within the broader confines of the 370 Commerce and 
Housing Credit budget account.
    The President requests $624.2 million in spending for the 
SBA in FY '07. This is about 37 percent less than what was 
spent on the SBA in FY '01 while, during the same time, the SBA 
served more small businesses than ever in its history. The SBA 
certainly knows how to do more with less and it ought to be 
commended. While the Committee believes the President's FY '07 
budget proposal for the SBA is generally sound and reasonable, 
particularly in context of the overall 2007 budget request that 
cuts non-security discretionary spending to below last year's 
level, and should not be cut further, there are a few notable 
exceptions.
    First, the request contains a new proposal to increase fees 
on all small business loans of over $1 million guaranteed by 
the SBA over and above what is necessary to keep these programs 
operating at a zero subsidy rate. The Committee continues to 
support a zero subsidy rate (no taxpayer financing) for the 
7(a), the Certified Development Company (CDC) or 504, and the 
Small Business Investment Company (SBIC) programs. This 
proposed fee increase, however, would go beyond what is needed 
to cover the loan subsidy to apply to some of the 
administrative expenses associated with providing federal 
government guarantees on these loans. While relatively modest 
now, if approved, this $7 million fee increase would set a 
negative precedent for future budget requests. Subsequent 
budget proposals could continue to lower the dollar threshold 
until small business borrowers and/or lenders would eventually 
have to pay the entire administrative cost of issuing these 
loans. This has the potential of dampening demand for the 
various SBA loan guarantee programs.
    Plus, the proposal unfairly and disproportionately hits the 
SBIC program, with a higher fee of 0.64 percent, versus 0.04 
percent fee for the 7(a) program and a 0.11 percent fee for the 
504 program. It is also not clear who exactly will pay these 
new fees--small businesses, lenders (banks or individual SBICs) 
or a combination thereof because the proposal incorrectly gives 
too much discretion to the SBA Administrator to impose these 
fees.
    Second, the request proposes to amend the interest rate 
charged on SBA disaster loans. Current law provides a four 
percent interest rate to disaster loan borrowers who do not 
have credit elsewhere. Under this proposal, a disaster loan 
borrower would receive this rate for only the first five years 
of a disaster loan. After the fifth year, the interest rate 
would adjust to the Treasury bill rate, which has increased in 
recent months. The SBA estimates that $41 million can be raised 
from disaster loan borrowers with this policy change. However, 
the vast majority of SBA disaster loans have terms greater than 
five years. This proposal would undoubtedly add a great deal of 
uncertainty to disaster loan borrowers because they would not 
know exactly what they will pay over the lifetime of a loan at 
precisely the worst time, financially, in their life. The 
Committee strongly opposes this proposal to impose an 
adjustable interest rate on SBA disaster loans.
    Third, the Committee also remains concerned about the SBA's 
renewed effort to eliminate the $1 million loan subsidy for the 
Microloan program and the accompanying $13 million in technical 
assistance. This program reaches various demographic groups 
that would otherwise not be served by the private sector and 
even the SBA's 7(a) program. Combined with the technical 
assistance, the Microloan program achieves a default rate of 
less than one percent. Unless the SBA devises some other means 
to reach this unique market, which without the program would 
not have access to capital, the Committee will continue to 
oppose the elimination of the modest appropriation for the 
Microloan program.
    Finally, while recognizing the tough budgetary environment, 
the Committee believes that the programs at SBA deserve an 
inflationary increase after years of not receiving much, if 
any, increase at all. The Small Business Development Center 
(SBDC) program, the Women's Business Center (WBC) program, and 
the SCORE program, which serve their small business clients 
very well, are cases in point. This would require about an 
additional $4 million to the SBA's FY '07 budget request.
    In conclusion, the President's FY '07 budget request for 
small business can be supported, with the above exceptions 
noted, both in terms of his tax relief proposals and the SBA 
budget request.
                             CHAPTER SEVEN

   SUMMARY OF OVERSIGHT, INVESTIGATIONS AND OTHER ACTIVITIES OF THE 
           COMMITTEE ON SMALL BUSINESS AND ITS SUBCOMMITTEES

7.1  Summary of Committee Oversight Plan and Implementation
    Pursuant to Rule X, clause 2(d)(1), of the Rules of the 
House of Representatives, the Committee on Small Business 
adopted, on February 10, 2005, an oversight agenda for the 
109th Congress. (For a discussion of the Committee's 
consideration of the oversight agenda refer to section 6.1.1 of 
this report.) The House rule also requires that each Committee 
summarize its activities undertaken in furtherance of the 
oversight agenda as well as any additional oversight actions 
taken by the Committee.
    In the following portions of Chapter Seven, the provisions 
of the oversight agenda are addressed in the hearing summaries 
of the Committee and its subcommittees. A summary of each 
hearing conducted by the full Committee appears in section 7.2 
of this report and summaries of each subcommittee hearing 
appear in sections 7.3 through 7.6 of this report. An overview 
of the Committee's legislative activities appears in Chapter 
Five of this report.
7.2  Summaries of the Hearings Held by the Full Committee on Small 
        Business
            7.2.1  the president's fiscal year 2006 budget

                               Background

    On Thursday, February 10, 2005, the Committee on Small 
Business held a hearing that focused on the President's Fiscal 
Year 2006 Budget request, including the funding level for the 
Small Business Administration (SBA). The SBA provides a variety 
of services for small businesses--financial assistance, 
technical assistance, federal government contracting 
assistance, and disaster relief. The budget request was 
designed to help the SBA achieve the goals of improving 
delivery of its services to small business owners and 
prospective entrepreneurs.

                                Summary

    The participants in the one panel were: The Hon. Hector 
Barreto, Administrator United States Small Business 
Administration, Washington, DC; Mr. Tony Wilkinson, President/
CEO for the National Association of Government Guaranteed 
Lenders, Stillwater, OK; Mr. Donald Wilson, President, 
Association of Small Business Development Centers, Burke, VA; 
Mr. Christopher Crawford, Executive Director, National 
Association of Development Companies, McLean, VA; Mr. Stephen 
Vivian, Partner, Prism Capital, Chicago, IL; and Mr. Daniel 
Betancourt, President/CEO, Community First Fund, Harrisburg, 
PA.
    Administrator Barreto started his testimony by laying out 
the success of the SBA loan programs. For example, when the 
7(a) loan demand exceeded its budget authority, SBA and the 
Committee were able to come together with the lending industry 
partners to provide an additional $3 billion in lending for 
7(a) program all at no direct expense to the taxpayer. This 
allowed the SBA to lift the loan caps and guarantee a record 
$12.7 billion in small business loans in 2005. Furthermore, the 
SBA has continued to support the federal government's statutory 
commitment to provide a fair share of contracting dollars to 
small businesses and implementing a new policy to accurately 
monitor contracts when a small business is purchased or merged 
with a larger business. Consequently, the SBA requested for 
Fiscal Year 2006 a grand total $592.9 million and $16.5 billion 
in lending authority for the 7(a) loan program. According to 
the Administrator, this will ensure an active SBA that can 
effectively and efficiently meet the demands of its customers, 
America's entrepreneurs, while minimizing the cost to the 
taxpayer.
    Mr. Wilson encouraged the Committee to work towards 
increasing the SBDC line-item in the SBA budget for Fiscal Year 
2006 in order for them to hire more counselors for the SBDC 
program.
    Mr. Wilkinson stressed the need for the Committee to 
support a $17 billion 7(a) loan program authority level for FY 
2006 from the current $16 billion level to match the 
authorization amount set in the FY 2005 Omnibus Appropriation 
bill signed into law last December. Furthermore, Mr. Wilkinson 
encouraged the Committee to once again review the subsidy 
calculation for the 7(a) program to prevent fees from going 
even higher.
    Mr. Crawford stated the Fiscal Year 2006 budget authority 
level for the 504 program should be at $6.5 billion to meet the 
growth of the program. Since 1997, the 504 program has been at 
zero subsidy; therefore, there is no cost to the taxpayer. 
Furthermore, the 504 program needs to address the concern that 
the Sacramento Loan Processing Center may need to hire 
additional staff to keep up with the demand for 504 loans.
    Mr. Vivian testified that the Participating Securities 
component of the SBIC program should be continued because it 
serves overlooked industries and geographic regions of the 
country, such as small, Midwestern manufacturing businesses. 
However, the program must be restructured to stem losses the 
program has experienced.
    Finally, Mr. Betancourt stated that the funding for the SBA 
Microloan program should remain at $17 million, the PRIME 
program at $5 million, and the Women's Business Centers program 
at $16.5 million.
    In summary, the Committee took the Fiscal Year 2006 SBA 
budget increase requests under advisement and made its 
recommendation as part of its budget views and estimates letter 
to the Committee on the Budget on February 18, 2005. 
Furthermore, the Committee explored restructuring the 
Participating Securities program. For further information about 
this hearing, please refer to Committee publication #109-1.
            7.2.2  medical liability reform: stopping the skyrocketing 
                    price of healthcare

                               Background

    On February 17, 2005, the Committee held a hearing to look 
at the effect medical malpractice litigation has on health care 
costs. Small businesses cite the skyrocketing cost of health 
care insurance as the biggest cost to their business. The ever-
escalating cost of medical malpractice has a direct impact on 
the cost of health care in this country. Also, medical 
malpractice premiums have dramatically jumped in price, 
resulting in doctors leaving the practice or medicine.
    Thirty years ago, California passed comprehensive medical 
liability reform. According to the Department of Health and 
Human Services (HHS), states that have limited non-economic 
damages have seen premium increases by less than 20 percent. 
States without limits on non-economic damages have seen 
premiums increase on average of 45 percent. The President has 
proposed reforms in our medical liability law that would (1) 
improve the ability of patients to collect compensation for 
their economic losses; (2) ensure that recoveries of non-
economic damages would not exceed $250,000; and (3) limit 
punitive damages to $250,000. The House passed this proposal as 
part of the HEALTH Act of 2005 (H.R. 5) on July 28, 2005 by a 
vote of 230 to 194.

                                Summary

    The hearing was comprised of one panel of the following 
witnesses: Donald Palmisano, M.D., New Orleans, LA; Thomas F. 
Gleason, M.D., Morton Grove, IL; Chad Rubin, M.D., Columbia, 
SC; Ms. Hilda Heady, President, National Rural Health 
Association, Kansas City, MO; Mr. Lawrence E. Smarr, President, 
Physician Insurers Association of America, Rockville, MD; and 
Ms. Joanne Doroshow, Executive Director, Center for Justice and 
Democracy, New York, NY.
    Dr. Palmisano started the hearing discussions by stating 
that most physicians operate their practices as small 
businesses. Dr. Palmisano listed several state in a health care 
access ``crisis'' because of the rising cost of medical 
malpractice insurance. These ``crisis states'' are losing ob/
gyn's, neurosurgeons, and other obstetrics at an alarming rate 
and cannot recruit any new practitioners to the area because of 
rapidly rising malpractice insurance premiums.
    Dr. Gleason cited the current litigation climate of 
malpractice suits as the leading cause of the higher insurance 
rates. He states that doctors have to practice more defensive 
medicine, and are either no longer performing high-risk 
procedures or are retiring from practice altogether.
    Dr. Rubin testified on how increasing insurance premiums 
are affecting patient's access to care in South Carolina. Many 
areas have no ob/gyn coverage, and other physicians limit the 
scope of their practice so drastically as to necessitate the 
patient seeking care in other states.
    Ms. Heady testified to the crisis situation in health care 
access in rural and underserved areas. She cited an example of 
one doctor in rural Mississippi who pays $70,000 in malpractice 
premiums while his average yearly physician salary is only 
$72,000. Ms. Heady suggested that the medical, legal, 
insurance, and consumer interests all need to take 
responsibility for their part in this crisis.
    Mr. Smarr testified about the efforts among medical 
professionals to independently provide medical malpractice 
insurance for members of the medical community. Mr. Smarr 
believes that the source of crisis lies with rising liability 
cost, not with the insurance companies. The medical insurance 
liability agencies operate at a loss, and thus must continually 
increase premiums to offset expenses.
    Finally, as the minority's witness, Ms. Doroshow voiced 
objections to the President's medical malpractice reform 
proposals. Her main objections were against a ``cap'' on non-
economic losses in malpractice litigation. In addition, she 
believes the President's proposal would undermine an injured 
patient's right to a jury trial. She believes the insurance 
underwriting cycle is responsible for the increasing premium 
rates, not the legal system.
    In sum, the committee concluded that some reform to medical 
liability laws is needed in order to stem the flow of medical 
professionals, the vast majority of whom are small business 
owners, leaving their field of expertise, particularly in 
underserved areas of our nation. For further information, 
please refer to Committee publication #109-2.
            7.2.3  prescriptions for health care: solutions to the 
                    problem

                               Background

    On March 2, 2005 the Committee on Small Business held a 
hearing on health care solutions. This hearing served as a 
forum to discuss and promote innovative solutions to help small 
businesses meet their health care needs. Roughly 60 percent of 
the uninsured are small business owners, their employees, and 
their families. Small business owners face double-digit 
increases each year to their health care premiums, making it 
difficult to provide health care to their employees. The 
ability to offer health care to employees is a competitiveness 
issue for many small businesses as they seek to attract and 
retain the best employees to their business.
    Several of the ideas that were discussed in this hearing 
included: (1) enactment of Association Health Plans (AHPs); (2) 
support for expanding access to Health Savings Accounts (HSAs); 
and (3) various health care tax incentives, including the 
deduction of health insurance costs of the self-employed into 
the calculation of the self-employment tax.

                                Summary

    The hearing consisted of one panel: The Hon. Michael 
O'Grady, Assistant Secretary for Planning and Evaluation, 
United States Department of Health and Human Services, 
Washington, DC; Mr. Thomas Haynes, Executive Director, Coca-
Cola Bottlers' Association, Atlanta, GA; Ms. Holly Stephen 
Roberts, Madison Insurance Agency, Madison, IN; Robert Hughes, 
CPA, Hall & Hughes, LLP, Grapevine, TX; Ms. Karen Kerrigan, 
Chairwoman, Small Business & Entrepreneurship Council, 
Washington, DC; Mr. Scott Shalek, Owner, Shalek Financial 
Services, Ringwood, IL; and Maria Welch, Founder and CEO, 
Respira Medical, Inc., Baltimore, MD.
    Assistant Secretary O'Grady testified on the increasing 
problem faced by small businesses in terms of escalating 
healthcare costs and rising insurance premiums. Mr. O'Grady 
described a proposal by the Bush Administration to offer 
employers incentives to provide health savings accounts (HSAs) 
to their employees. Mr. O'Grady explained further that the 
Administration is pushing Congress to pass H.R. 525, which 
would create federal association health plans (AHPs) that 
allows small employers to band together to build purchasing 
power to offer their employees more affordable coverage.
    Mr. Haynes also testified in support of H.R. 525. Mr. 
Haynes explained that the Coca-Cola Bottlers' Association 
(CCBA) had administered two separate AHP plans: a fully-pooled 
program for small bottlers under 100 employees and another 
experience-rated program for those bottlers with over 100 
employees. Until recently, CCBA's AHP was able to significantly 
reduce the cost of insurance by combining over 60 small 
employers who participated in our fully pooled program with 
administrative costs of approximately seven percent. This fully 
pooled program for small employers (under 100 employees) was 
disbanded at the end of 2000 because of the overwhelming 
complexity of state small group reform laws and regulations. 
Since then, health insurance premiums for the smaller member 
bottlers have increased at about 20 percent to 25 percent 
annually.
    Mr. Roberts testified in favor of HSAs and spoke of his 
positive personal experience with them, particularly in 
contrast to the health insurance policy offered to him by a 
large employer.
    Mr. Hughes testified in strong opposition to current 
inequities in the tax code that against the self-employed. 
First, the current tax code requires the self-employed to pay 
the full 15.3 percent Social Security or FICA tax for their 
business. In addition, C-corporations receive a deduction for 
health insurance premiums and are not subject to FICA taxes for 
either the employee or the employer portion of the FICA tax. On 
the other hand, the self-employed do not receive a business 
deduction benefit for the same health insurance premiums, 
causing healthcare plans to become even more expensive for the 
self-employed. Mr. Hughes spoke in favor of the need to 
reintroduce and pass legislation to fix this problem.
    Ms. Kerrigan testified in support of all proposed solutions 
to help provide more affordable health care coverage for small 
businesses, including AHPs, HSAs, tax credits, and the FICA 
deduction for the self-employed.
    In addition to HSAs and Health Reimbursement Accounts 
(HRAs), Mr. Shalek testified regarding alternatives to high-
priced health insurance plans, including GAP plans, flexible-
spending accounts, and state-grants funded through state 
appropriations. Mr. Shalek further added that there is not a 
one-size-fit-all answer to providing cost-effective health 
care. Finally, Ms. Welch testified in favor of tax equity for 
the self-employed and AHPs.
    In sum, the committee concluded that there are a variety of 
legislative solutions that can help mitigate the rising cost of 
health care insurance premiums and encouraged Congress to act 
on them expeditiously. For more information, please refer to 
Committee publication #109-3.
            7.2.4  small business priorities for the 109th congress--h. 
                    res. 22

                               Background

    On March 8, 2005, the Committee on Small Business held a 
hearing on H. Res. 22. Over the years, various small businesses 
have approached Congress with issues that they believe are of 
great importance. It has been ten years since the last time 
small businesses gathered together on a nationwide basis to 
prioritize the top issues facing them as part of the 1995 White 
House Conference on Small Business. This resolution is needed 
to highlight the top tier policy issues that must be addressed 
by the House of Representatives in the 109th Congress--health 
care, tax relief, litigation reform, and regulatory/paperwork 
reduction. This is not to say that other small business issues 
are unimportant. However, this legislation is needed to help 
Congress prioritize the key issues that affect the largest 
number of small businesses in the United States.

                                Summary

    The Committee received the testimony of six witnesses on 
one panel: Mr. Jerry Pierce, Owner, Restaurant Equipment World, 
Orlando, FL; Mr. Giovanni Coratolo, Director, Small Business 
Policy, United States Chamber of Commerce, Washington, DC; Mr. 
Todd McCracken, President, National Small Business Association; 
Ms. Barbara Kasoff, Vice President, Women Impacting Public 
Policy, Oklahoma City, OK; Ms. Karen Kerrigan, President/CEO of 
the Small Business & Entrepreneurship Council, Washington, DC; 
and Ms. Sheila Brooks, President, SRB Productions, Washington, 
DC.
    Mssrs. Pierce and Coratolo, and Ms. Kerrigan testified as 
to the accuracy of H. Res. 22 in terms of the top nationwide 
issues facing the small business members as part of their 
respective organizations. They urged its adoption by the 
Committee. Each one of these associations recently surveyed 
their membership and the issues outlined in H. Res. 22--health 
care, tax relief, litigation reform, and regulatory/paperwork 
reduction--came back from their rank-and-file members as their 
top recommendations for change. Mr. McCracken disagreed with 
the concept of association health plans but agreed that health 
care, tax relief, and regulatory reform remained the top 
concerns of small business. He also added that small business 
access to capital was a top tier issue. Ms. Kasoff listed the 
priorities of women business owners: health care, energy, 
Social Security reform, tax reform, and tort reform. Finally, 
Ms. Brooks testified from her perspective of the importance of 
open access to procurement opportunities for small businesses 
and the efficacy of the 8(a) minority business development and 
set-aside program in particular.
    The hearing concluded that H. Res. 22 did have merit by 
focusing the attention of the top issues facing the vast 
majority of small business owners nationwide but could be 
improved to take into account some of the suggestions of the 
other witnesses dealing with access to capital, energy, and 
procurement. Eventually, the Committee passed H. Res. 22 by a 
unanimous voice vote, after further modifications to the 
resolution based on the input from the hearing, and before the 
full House of Representatives. For further information, please 
refer to Committee publication #109-4.
            7.2.5  the rfa at 25: needed improvements for small 
                    business regulatory relief

                               Background

    On Wednesday, March 16, 2005, the Committee on Small 
Business held a hearing to examine H.R. 682, the Regulatory 
Flexibility Improvements Act. The Regulatory Flexibility Act 
(RFA) requires federal agencies to examine the economic impact 
of their proposed and final rules on small entities. If they 
impact is significant on a substantial number of such 
businesses, the agency is required to assess less burdensome 
alternatives. When it was first enacted in 1980, the RFA had a 
number of pitfalls that detracted from full agency compliance. 
The RFA was amended in 1996 to address some of those pitfalls. 
While some problems were eliminated, such as boilerplate 
certification statements, agencies found new interpretations of 
the RFA to reduce its effectiveness. H.R. 682 was introduced to 
eliminate, to the extent possible in legislation, all of the 
interpretive legerdemain practiced by federal agencies in order 
to avoid their obligations under the RFA.

                                Summary

    The panelists were: The Hon. Thomas Sullivan, Chief Counsel 
for Advocacy, United States Small Business Administration, 
Washington, DC; Cecelia McCloy, President, Integrated Science 
Solutions, Inc, Walnut Creek, CA; Mr. Blair Haas, President, 
Bud Industries, Willoughby, OH; Mr. Jay Lancaster, President, 
B.E.S.T., Inc., Galena, MD; Marc Freedman, Esq., Director, 
Labor Policy, United States Chamber of Commerce, Washington, 
DC; and Jere Glover, Esq., Of Counsel, Brand Law Group, 
Washington, DC.
    All of the witnesses endorsed the need for strengthening 
the RFA. Increased regulatory burdens made it harder for small 
businesses to operate. The RFA, while not the silver bullet 
solution, was an important step in reducing regulatory burdens 
on small businesses.
    Mr. Sullivan noted that H.R. 682 was a comprehensive bill 
but believes that certain items within H.R. 682 are of higher 
priority. Mr. Sullivan cited the need to address indirect 
effects, improvements to the Sec. 610 review process, and 
agency response to advocacy comments. Mr. Sullivan suggested 
that H.R. 682 be amended in committee to incorporate responses 
to the Chief Counsel's comments on certifications, require 
panel reports be prepared by both the agency and the Chief 
Counsel, and require the Chief Counsel's consent to size 
standard modifications rather than have the Chief Counsel 
approve the size standards.
    Ms. McCloy testified about the failure of agencies to 
consider the indirect costs of their regulatory decisions. She 
cited to a recent rule by the General Services Administration 
(GSA) requiring a $2500 connection charge to the Federal 
Procurement Data System and found that the non-fee site was 
inadequate to obtain necessary information. Contrary to GSA's 
conclusion, the fee actually will have a serious impact on any 
business trying to obtain federal government contracts.
    Mr. Haas cited a number of regulatory matters that created 
difficulty for his small manufacturing company. There are: the 
complexity of calculating the alternative minimum tax; 
additional recordkeeping requirements associated with company-
sponsored individual retirement accounts; the disparate impact 
on small businesses of OSHA's method for determining its 
inspection schedule; exemptions under the Fair Labor Standards 
Act; and Superfund liability.
    Mr. Lancaster noted that when he started his construction 
business he only had to worry about construction. Now he pays 
someone in California to update him on regulatory changes and 
pays an accountant to deal with tax issues. Mr. Lancaster 
specifically cited problems associated with EPA regulations in 
which neither EPA nor the states assess the economic 
consequences of a regulatory action on small businesses.
    Mr. Freedman noted that the biggest problem with the RFA 
was the vagueness of the terminology. He strongly endorsed 
efforts in the bill to obtain definitions of two key terms 
``significant economic impact'' and ``substantial number of 
small entities.'' Mr. Freedman concluded that requiring the 
Chief Counsel to write regulations solves the problem 
concerning various interpretations of key portions of the RFA.
    Mr. Glover requested that the small business community 
support Advocacy having a line item in the President's budget. 
Mr. Glover then moved on to suggest that courts defer to 
Advocacy's interpretation of the RFA. Finally, Mr. Glover 
recommended that the RFA be amended to require agencies provide 
greater specificity and detail in their final certifications 
and regulatory flexibility analyses.
    The Committee concluded that changes to the RFA were 
necessary and worked with the Committee on the Judiciary to 
move the legislation. A hearing was held in the Committee on 
the Judiciary's Subcommittee on Commercial and Administrative 
Law in the spring of 2006.
    For further information, please refer to Committee 
publication #109-5.
            7.2.6  what has ex-im bank done for small business lately?

                               Background

    On Wednesday, April 6, 2005, the Committee held a hearing 
to determine if the Export Import Bank of the United States 
(Ex-Im) was meeting its obligations to support small 
businesses. Ex-Im's primary mission is to ``aid in financing 
and to facilitate exports of goods and services, . . . and in 
so doing to contribute to the employment of United States 
workers.'' In carrying out its mission, Congress directed Ex-Im 
to encourage participation of small business in international 
commerce as part of a broader federal government effort to 
protect the interests of small business. To ensure full 
participation by small businesses, Congress mandated that Ex-Im 
undertake the following:
          (1) Cooperate with Commerce Department and Small 
        Business Administration in order to make small 
        businesses aware of medium-term financing for exports;
          (2) Set rates, terms, and conditions of its loans for 
        its small business programs to be fully competitive 
        with those made by foreign countries;
          (3) Develop mechanisms to ensure fair consideration 
        is given to applications by small businesses;
          (4) Designate an officer answerable to the President 
        of Ex-Im whose responsibility is to address all Bank 
        matters concerning small businesses;
          (5) Have at least one Director of the Bank's Board be 
        from the small business community and represent the 
        interests of small business;
          (6) Appoint an advisory committee that shall have at 
        least three members who are representatives of the 
        small business community; and
          (7) Utilize not less than 20 percent of its annual 
        loan authority to finance exports of small businesses.

                                Summary

    The Committee heard from one panel of witnesses: The Hon. 
Phillip Merrill, President and Chairman, Export-Import Bank of 
the United States, Washington, DC; Mr. Michael Vaden, CEO, 
Rutland Plastics Technologies, Inc., Pineville, NC; and Ms. 
Victoria Hadfield, President, SEMI North America, Washington, 
DC.
    Chairman Merrill claimed throughout the hearing that Ex-Im 
was properly and adequately meeting its obligations to small 
business. His testimony was belied by the other witnesses and 
by questioning by Members of Congress. Mr. Vaden testified that 
his company, a small manufacturer in North Carolina, had been 
denied insurance coverage on a commercial claim from an 
unscrupulous dealer in China due to a highly restrictive and 
unfair interpretation of Ex-Im's export loan contract. Ms. 
Vaden testified in regards to the refusal, by Chairman Merrill, 
to allow a loan application to be taken to the Board of 
Directors regarding a $660 million dollar loan guarantee for 
semiconductor capital equipment to be sold into China.
    Testimony was also heard from Ex-Im officials regarding the 
lack of progress for the Ex-Im's ``Fast Track'' loan guarantee 
program and other small business initiatives to assist in the 
development of foreign dealer distribution networks. Both 
initiatives were approved by the Board of Directors of Ex-Im 
Bank but were never implemented in any meaningful way.
    Based on its investigation and hearing, the Committee 
determined that Ex-Im violated its statutory obligation to 
support American small business. Equally troubling is the 
Committee's conclusion that Ex-Im's current management 
structure violates various federal statutes by enabling the 
Chairman to control the Ex-Im Board's agenda and thus giving 
that person de facto control over approval applications that 
Ex-Im will approve.
    For further information about this hearing, please refer to 
committee publication #109-8.
            7.2.7  private equity for small firms: the importance of 
                    the participating securities program

                               Background

    On Wednesday, April 13, 2005, the Committee on Small 
Business held a hearing to examine the need the participating 
securities portion of the Small Business Investment Company 
(SBIC) program. For many years, the Small Business 
Administration licensed SBICs to issue long-term debt to 
entrepreneurial enterprises. This program was called the 
debenture SBIC program. Companies such as Dell, Federal 
Express, Callaway Golf, Nike, and Outback Steakhouse were 
beneficiaries of the debenture SBIC program. The structure of 
the debenture SBIC program does not accommodate the capital 
needs of startup small businesses. They require greater patient 
capital than the debenture program provides. In the early 
1990s, Congress created the participating security SBIC program 
to address the needs of startup small businesses. For the first 
seven years of the program, it was highly successful but, like 
the rest of the venture capital market, suffered losses during 
the ``dotcom'' bust in the stock market. Nevertheless, there 
remains a strong need for patient venture capital for startup 
small businesses. To avoid significant losses to the federal 
taxpayer, the Committee examined changes needed to satisfy the 
needs of small businesses while reducing the risk to the 
federal government.

                                Summary

    The panelists were: Mr. Jaime Guzman, Associate 
Administrator for Investment, United States Small Business 
Administration, Washington, DC; Colin Blaydon, Ph.D., Director, 
Center for Private Equity and Entrepreneurship, Tuck School of 
Business, Hanover, NH; Susan Preston, Esq., Of Counsel, Davis, 
Wright & Tremaine, Seattle, WA; Mr. Mark Redding, President/
CEO, Banner Service Corp., Carol Stream, IL; Redmond Clark, 
Ph.D., President, Metalforming Controls Corp., Cary, IL; and 
Mr. Daniel O'Connell, Director, Golder Center on Private 
Equity, University of Illinois, Champaign, IL.
    Mr. Guzman first noted that the participating security SBIC 
program had projected losses at the end of FY 2004 of $2.7 
billion. The number of participating security SBICs that failed 
to meet their obligations to the federal government rose to 29 
percent of those licensed prior to FY 2001. Mr. Guzman then 
delineated a number of flaws with the participating security 
program: SBA only receives funds if the SBIC is profitable; SBA 
defers interest on the money it borrows which cumulates to more 
than the original investment fund; and the profit share to the 
SBA is inadequate given the risk. Mr. Guzman concluded by 
noting that the SBA was implementing improved oversight of 
participating security SBICs and continued to support the 
debenture SBIC program.
    Dr. Blaydon started by noting that private equity capital 
markets are very inefficient. Dr. Blaydon went on to testify 
that private venture capital invests very little in seed 
capital for startups. Most venture capital is concentrated in a 
few geographic areas, especially Silicon Valley and the suburbs 
of Boston, MA. Finally, private venture capital rarely invests 
in any business other than software or biotechnology.
    Ms. Preston focused her testimony on so-called angel 
investing (friends or relatives of business owners seeking 
capital). Ms. Preston testified that in calendar year 2004, 
there were 48,000 angel investment deals with an average size 
investment of $500,000. Angel investors are very early stage 
investors willing to wait from 5 to 7 years for a return--a 
significantly longer period than most venture capital equity 
funds. Ms. Preston emphasized the need for such patient capital 
and that the participating security SBIC program provides 
another critical vehicle for patient capital.
    Mr. Redding related his story about the purchase of an 
office equipment manufacturer that would not have succeeded 
without the equity investment from a participating security 
SBIC. Mr. Redding noted that before contacting the SBIC 8 other 
venture firms turned down his requests for funding. Mr. Redding 
noted that Banner Service Corp. regrew its revenue, refocused 
its business, and hired new workers all because of the 
investment from a participating security SBIC.
    Dr. Clark concurred with Dr. Blaydon's conclusion about the 
lack of seed capital for startup businesses. He noted that 
while private venture capital investment increased 250 percent 
over the last decade, seed capital investment dropped by 75 
percent. Dr. Clark noted that his company and its business 
triumphs would not have occurred without the involvement of 
participating security SBICs. Dr. Clark concluded that the 
participating security SBIC program is vital to the continued 
development of small businesses in the American economy.
    Mr. O'Connell noted that private venture capital firms, 
including participating security SBICs continue to specialize 
in various product niches in which their partners feel 
comfortable. From Mr. O'Connell's experience, participating 
security SBICs tend to focus on geographic regions that they 
understand and those regions tend to be underrepresented by 
large venture capital or private equity funds. Mr. O'Connell 
suggested that if participating security SBICs are to make 
high-risk, low liquidity investments, the capital must be long-
term, patient, and tolerate risk.
    The hearing showed that private venture firms were not 
fulfilling the need for seed capital especially in areas 
outside of certain areas and the participating security SBIC 
was vital to the equity capital needs of small businesses.
    For further information about this hearing, please refer to 
committee publication #109-10.
            7.2.8  closing the tax gap and the impact on small business

                               Background

    On April 27, 2005, the Committee on Small Business held a 
hearing to examine the implications of the announcements by the 
Internal Revenue Service (IRS) that a greater emphasis will be 
placed on enforcement to close the so-called ``tax gap,'' i.e., 
the difference between what taxpayers owe and what they pay. 
Through its National Research Project, the IRS has attributed a 
good deal of the estimated $300 billion ``tax gap'' to small 
businesses and self-employed individuals. The hearing explored 
the specific activities the IRS intends to take to close the 
``tax gap'' and how these activities may impact the millions of 
small businesses and self-employed individuals in the United 
States.

                                Summary

    The hearing was comprised of two panels. The first panel 
consisted of: The Hon. Thomas M. Sullivan, Chief Counsel for 
Advocacy, United States Small Business Administration, 
Washington, DC; The Hon. Mark Everson, Commissioner, Internal 
Revenue, Washington, DC. The second panel included John 
Satagaj, Esq., President and General Counsel, Small Business 
Legislative Council, Washington, DC; Keith Hall, CPA, Partner, 
Hall and Hughes, Dallas, TX; Mr. Abraham Schneier, Principal, 
Abraham Schneier & Associates, Washington, DC; Leonard 
Steinberg, EA, CMC, The Steinberg Group, Somerville, NJ; and 
Ronald Hegt, CPA, Hays & Co., LLP, New York, NY.
    Chief Counsel Sullivan testified about the need to have a 
balanced approach to addressing the tax gap. In particular, he 
emphasized that much of the tax gap can be attributed to 
complexity in the tax code. He also testified that this 
complexity adds to the burdens placed on small businesses 
because it costs small firms more than two times the amount to 
comply with the tax code as compared to large firms. Rather 
than increasing IRS enforcement activities, the Chief Counsel 
testified that the best way to ensure small business compliance 
is to simplify the tax code, thereby removing the ambiguity 
taxpayers face when determining what to report, and to increase 
education and assistance programs aimed at informing small 
business owners what the IRS expects them to do when preparing 
their tax returns.
    Commissioner Everson testified that preliminary IRS 
estimates of the tax gap are approximately $300 billion on an 
annual basis. Of this amount, he testified that individual 
underreporting makes up about two-thirds of the overall gross 
tax gap. To address this issue, Mr. Everson testified that a 
greater emphasis must be placed on enforcement activities, 
particularly for self-employed individuals and other small 
businesses. According to Commissioner Everson, the IRS collects 
more than four dollars in direct revenue for every dollar 
invested in its total enforcement budget. In addition, he 
stated that enforcement efforts, such as audits, collection and 
criminal investigations, have a deterrent effect on those who 
might be tempted to skirt their tax obligations.
    Mr. Satagaj believes that the IRS needs to find the proper 
balance of enforcement and taxpayer education as it attempts to 
address the tax gap. According to Mr. Satagaj, no amount of 
enforcement will ever produce 100 percent compliance with the 
tax code, and over aggressive enforcement or unfair burdens 
placed on small businesses will stifle innovation and growth in 
the small business community.
    Mr. Hall said that the complexity of the tax code is 
particularly troublesome for the self-employed business owner 
and is a snare for unintentional noncompliance. Further, he 
testified that efforts to address the tax gap must focus on 
overall simplification, eliminating issues of inequity within 
the tax code, and enhancing taxpayer education and outreach.
    Mr. Schneier articulated that IRS efforts to decrease the 
tax gap must be measured against the costs imposed on small 
businesses. Mr. Schneier stated that too often the IRS uses a 
one size fits all approach to compliance activities that places 
an unfair burden on small business owners. Further, he 
testified that applying common sense rules to limit the burdens 
placed on small business owners is the only sensible way for 
the IRS to ensure increased compliance by this segment of 
taxpayers.
    Mr. Steinberg agreed that the tax gap is a multi-faceted 
problem, which is exacerbated by the complexity of the tax 
code. To ensure greater compliance by small business owners, 
Mr. Steinberg stated that the IRS must perform aggressive 
educational and outreach efforts that build a culture of 
compliance and help individuals understand the personal 
consequences of non-compliance.
    Finally, Mr. Hegt stated that the IRS could help taxpayers 
and its own enforcement efforts through administrative 
simplification. He also emphasized that the IRS should leverage 
external stakeholders, such as the AICPA, to achieve a more 
highly compliant taxpayer population.
    In sum, the committee concluded that a more balanced 
approach, which respects the interest of small business, needs 
to be implemented by the IRS in order to close the ``tax gap.''
    For more information about this hearing, please refer to 
Committee publication #109-13.
            7.2.9  anticompetitive threats from public utilities: are 
                    small businesses losing out?

                               Background

    On Wednesday, May 4, 2005, the Committee on Small Business 
held a hearing that focused on growing competition from service 
companies owned and controlled by Investor Owned Utilities and 
some Municipal Owned Utilities. The utility companies in most 
every state have their rates fixed by public utility rate 
commissions and they are essentially guaranteed a profit each 
year. Their costs are a public record and their rates are fixed 
with a reasonable profit in mind. Increasingly, the utility 
companies are creating subsidiaries and affiliate companies 
that provide other kinds of services apart from the basic power 
supply delivery such as plumbing services, electrical services, 
home remodeling and subscription service contracts, appliance 
sales and rentals. The Committee is concerned that these new 
companies enjoy unique advantages because of their special 
status as instruments of a public utility. While direct subsidy 
from ratepayers is prohibited, there are many ways that these 
new entrants could get an unfair advantage.

                                Summary

    The one panel consisted of the following witnesses: Mr. 
Mike Martin, President, F.K. Everest, Inc., Fairmont, WV; Mr. 
Brian Harvey, President, H & C Heating and Cooling, Laurel, MD; 
Mr. Hugh Kelleher, Executive Director, Plumbing-Heating-Cooling 
Contractors Association of Greater Boston, Danvers, MA; Adam 
Peters, Esq., Research Fellow and Regulatory Counsel, The 
Progress & Freedom Foundation, Washington, DC; and Ms. Lynn 
Hargis, Public Citizen, Washington, DC.
    Mr. Martin started his testimony by laying out the ways by 
which public utilities use the same equipment and logos for 
their unregulated subsidiaries. Thus, the unregulated 
subsidiary has in essence subsidized equipment and adverting 
expensed, which undercuts private small business in that 
particular industry. For example, the unregulated electric 
utility subsidiary, using the same equipment or manpower 
provided from its utility operations, is billed only the 
incremental cost for rental of equipment instead of the fair 
market price. This constitutes a major unfair advantage for the 
utility's unregulated venture. Utilities argue that such 
billing at an incremental cost rate is not cross-subsidization 
because they bill for all costs incurred for the additional use 
of the manpower or equipment by the non-regulated entity.
    Mr. Harvey stated that his company H & C Heating and 
Cooling, was greatly harmed by BGE Home, which is a unregulated 
subsidiary of Baltimore Gas and Electric's (BGE), which focuses 
on the air conditioning contracting field. BGE Home used BGE 
trucks, trucks that were paid for with ratepayers' money. These 
trucks that were originally purchased by Baltimore Gas and 
Electric to provide the Maryland ratepayers with gas and 
electric service were now being used by BGE Home to install 
heating and air conditioning systems.
    Mr. Kelleher position reinforced the idea that public 
utilities use regulated business to unfairly enter new markets. 
For example KeySpan, which is based in New York, has for years 
been authorized by the energy regulatory agency in 
Massachusetts to include in its rate structure a ``promotional 
budget'' line item, which costs natural gas customers millions 
of dollars each year. The revenue generated by the 
``promotional budget'' were used to promote KeySpan's 
unregulated affiliated businesses, which included a large 
heating and air conditioning company that competes directly 
against the small mom-and-pop contractors.
    Furthermore, Ms. Hargis argues that public utilities cross-
subsidize non-regulated subsidiaries that have more risk than 
the utility business. Therefore, this cross-subsidization of 
affiliates by utilities results in great potential harm to 
electric and natural gas consumers, who have to pay for such 
subsidies and for lower credit ratings from non-utility 
business failures, through higher utility bills. Such cross-
subsidization also may provide an unfair business advantage to 
utility owners of such non-regulated businesses over non-
regulated competitors, particularly small businesses. 
Therefore, Ms. Hargis argues for strict federal enforcement pf 
the Public Utility Holding Company Act of 1935 that effectively 
ended such affiliate cross-subsidization and other abuses by 
confining utility owners to the utility business.
    Finally, Mr. Peters stated that public utilities that 
create unregulated subsidiaries, such as broadband providers, 
may indeed use their regulated public utility business to 
unfairly compete with private concerns. However, Mr. Peters 
argues that public utilities can create new competition in the 
broadband field, especially in rural areas but public utilities 
need careful oversight by states to ensure a level playing 
field between these entities and small businesses.
    In summary, the Committee did find that there is a very 
real danger that some large public utilities use their 
regulated business and their market power to grow unregulated 
business subsidiaries to unfairly compete directly against 
small business. Continued House and Senate oversight is 
certainly necessary to help ensure that this issue is not 
overlooked by federal regulators.
    For further information, please refer to committee 
publication #109-15.
            7.2.10  small business access to health insurance: lessons 
                    from nebraska?

                               Background

    On Monday, June 6, 2005, the Committee on Small Business 
held a field hearing that focused on the affordability of 
health insurance for small business. Noting that 60 percent of 
the estimated 45 million Americans without health care 
insurance either own or work for a small business, this hearing 
brought in lessons from the heartland of America directly to 
Washington's doors through a field hearing in Lincoln, 
Nebraska.

                                Summary

    The hearing was divided into two panels. The first panel 
was comprised of: Mr. Charlie Janssen, Chairman and CEO, RTG 
Medical Co., Fremont, NE; Mr. Bob Lanik, President, St. 
Elizabeth's Hospital System, Lincoln, NE; and Ms. Peggy Green, 
President/CEO, Green Furnance and Plumbing, Lincoln, NE. The 
participants in the second panel were: Mr. Robert Moline, 
President/CEO, HomeServices of Nebraska, Lincoln, NE; Ms. Debi 
Durham, President, Siouxland Chamber of Commerce, Sioux, City, 
IA; and Mr. John Miller, President, Oxbow Hay Company, Murdock, 
NE.
    Mr. Janssen's primary concern for small business is 
affordable heath care for it employees. Furthermore, the issue 
of affordable health care limits the pool of workers and 
discourages the creation of small businesses. He suggested that 
the federal government should provide tax relief for small 
business, such as expanding the tax advantage status of health 
savings accounts.
    Mr. Lanik then stated that health care costs are increasing 
due to the following factors: labor, supplies, pharmaceuticals, 
technology, regulation, defensive medicine, and cost shifting 
by insurance companies which directly impact the premiums paid 
by employers. For instance, the primary expense for hospital is 
wages for its employees, which comprise 42 percent. The 
American Hospital Association states that there is an 8.1 
percent vacancy rate for registered nurses. This shortage has 
forces hospitals to provide higher wages.
    Ms. Green started gave a first-hand account of the health 
care crisis by explaining the background in which her company, 
Green's Plumbing, Heating, Cooling, and Remodeling, once 
offered family medical insurance but because of increased 
insurance premiums, currently provides only single employee 
insurance coverage. She testified as to the potential value of 
association health plans (AHPs), which would enable her to fund 
other employee benefits.
    Mr. Moline also agreed with Ms. Green's suggestion to 
create AHPs, which would provide small businesses and the self-
employed access to the same health benefits that labor unions 
and large corporations enjoy under federal law. For example, 
small business businesses could band together through their 
professional or trade organizations to either purchase coverage 
from established insurance companies or if they cover enough 
participates, they could self-insure.
    Ms. Durham further reinforced this point by testifying that 
the business that provides employee health insurance coverage 
enhances their recruiting efforts and maintains a more stable 
work force. She urged the Congress to allow for the creation of 
purchasing pools for small business to band together through 
AHPs as a purchasing block to lower premium cost.
    Finally, Mr. Miller's primary concern is that double-digit 
growth in health insurance premiums will force him to either 
eliminate health insurance coverage for his employees or force 
him to close his 40-employee business. He also suggested 
Congress look at various tax incentives, particularly those 
aimed to help the very smallest of companies purchase health 
care insurance.
    In summary, the Committee found that innovative legislative 
solutions--most particularly AHPs--are needed to address the 
need for affordable health care insurance for small business 
owners and employees in the heartland of America.
    For further information about this hearing, please refer to 
Committee publication #109-19.
            7.2.11  are skyrocketing medical liability premiums driving 
                    doctors away from underserved areas?

                               Background

    On Tuesday, June 14, 2005, the Small Business Committee 
held a hearing to exam the skyrocketing rates in medical 
liability premiums and its impact on doctors, particularly in 
underserved areas. The ever-escalating cost of medical 
malpractice insurance has a direct impact on the cost of health 
care in this country. Medical malpractice premiums have 
doubled, tripled and even quadrupled yearly. As a result, 
doctors are no longer practicing medicine; they are retiring. 
The remaining doctors practice defensive medicine.
    Thirty years ago, California passed comprehensive medical 
liability reform. According to the Department of Health and 
Human Services (HHS), states that have limited non-economic 
damages have seen premium increases by less then 20 percent. 
States without limits on non-economic damages have seen 
premiums increase on average of 45 percent. The purpose of the 
hearing was to examine the efficacy of enacting the medical 
liability reforms supported by the President. Major elements of 
this reform proposal include: improving the ability of patients 
to collect compensation for their economic losses; ensuring 
that recoveries of non-economic damages would not exceed 
$250,000; and limiting punitive damages to $250,000.

                                Summary

    The hearing was comprised of one panel of five witnesses: 
Delorise Brown, M.D., Cleveland Medical Center, Cleveland, OH; 
Larry S. Fields, President, American Academy of Family 
Physicians, Ashland, KY; Winston Price, M.D., President, 
National Medical Association, Brooklyn, NY; Elena Rios, M.D., 
President/CEO, National Hispanic Medical Association, 
Washington, DC; and Wilbur (Will) O. Colom, Esq., Senior 
Partner, The Colom Law Firm, Columbus, MS.
    Dr. Brown spoke of her practice of internal medicine in 
East Cleveland, Ohio. She explains that many of her patients 
are from underserved areas and that many of them live below the 
poverty line. She stated further that more and more, she is 
forced to practice defensive medicine and limit her patient 
load, which includes cutting back on ``high-risk'' patients and 
patients within nursing homes. Still, she has seen her medical 
liability insurance skyrocket from $5,266 in 2001 to over 
$100,000 in 2004.
    Dr. Fields is a family practitioner in rural, Eastern 
Kentucky. He explained that his malpractice carrier dropped his 
coverage after 22 years, even when they had never had to pay 
out any money in claims against him. He faced the possibility 
that he would have to close his practice and his 18,000 
patients would be forced to find a new doctor in the rural and 
underserved part of the state that he resides. He told of a 
colleague, Dr. Julie Wood, who after six years of practice in 
rural Missouri as an OB/GYN, her medical liability insurance 
increased from $19,000 to $71,000 in six years. She 
subsequently was forced to close her practice and move two 
hours away to a larger city where she is part of a large 
practice. Half of her practice was Medicaid patients.
    Dr. Price stated that many of his members work in poor and 
minority areas and cannot pay the escalating rates of medical 
liability insurance, which forces them to close their doors. 
When this happens, there are frequently no other doctors to 
take their place. He told of Dr. Ronald V. Myers who practiced 
medicine in the Mississippi Delta for close to two decades and 
who still made house calls. Dr. Myers had five clinics that he 
ran and he was forced to close all five when he had a dispute 
with his insurance provider. Dr. Myers never had a single 
malpractice suit filed against him.
    Dr. Rios focused on three major points regarding medical 
liability and its impact on Hispanics: (1) Hispanic physicians 
are unique to the medical delivery system and need to be 
protected from the malpractice crisis; (2) Hispanic patients 
suffer from increased disparities in health and require 
increased access to care; and (3) there is a need to increase 
research on Hispanics and disparities in health.
    Mr. Colom stated that limiting the rights of the 
underserved will not help America's small businesses thrive and 
will not help underserved communities get access to quality 
healthcare. He explained that in Mississippi, his home state 
recently adopted a $500,000 cap on non-economic damages in 
medical malpractice cases. His firm already has turned away 
many cases because expert and other expenses make the case 
economically unfeasible with such a cap. In his opinion, caps 
on non-economic damages--which are designed to compensate 
people for their injuries--hurt people who are not in the 
workforce, such as children and senior citizens, and those who 
do not have high lost wages or salary (economic loss).
    In sum, the Committee concluded that the medical liability 
insurance premiums are skyrocketing out of sight and something 
needs to be done before more doctors close their small business 
and retire, which disproportionately harms the underserved 
areas of our nation.
    For more information on this hearing, please refer to 
Committee publication #109-20.
            7.2.12  small business development centers: new offerings 
                    for a new economy

                               Background

    On Wednesday, July 13, 2005, the Committee on Small 
Business held a hearing to examine four bills that will 
authorize new services to be provided by grantees that operate 
small business development centers (SBDCs). Over 1,100 SBDCs 
operate throughout the United States, mostly co-located in an 
institution of higher education, to provide management and 
technical assistance and educational programs to prospective 
and existing small business concerns.
    Four bills were introduced in the House to authorize SBDCs 
to provide targeted assistance to small business owners and 
entrepreneurs interested in starting a business. H.R. 230, the 
National Small Business Regulatory Assistance Act, establishes 
a program to provide small business concerns regulatory 
compliance assistance by awarding competitive grants to 20 SBDC 
grantees (two in each of the ten federal regions). H.R. 527, 
the Vocational and Technical Entrepreneurship Development Act, 
creates a program to provide technical assistance to secondary, 
postsecondary vocational and technical schools for the 
development and implementation of curricula to teach 
entrepreneurship skills by awarding competitive grants to 
SBDCs. H.R. 2981 targets, through the use of competitive 
grants, the provision of additional managerial and technical 
assistance on Indian lands to small business concerns owned by 
Indian tribe members, Alaska Natives or Native Hawaiians. H.R. 
3207, the Second-Stage Small Business Development Act, 
establishes a pilot program for selected SBDC grantees in the 
ten federal regions to offer peer learning opportunities to 
those small business concerns, variously called second-stage 
small businesses or gazelles, that are poised to grow rapidly.

                                Summary

    The hearing was comprised of one panel, which included: Mr. 
Rich Gangi, President, American Trim, Durham, NY; Ms. Norma 
Naranjo, Owner, The Feasting Place, Fairview, NM; Mr. Christian 
Conroy, Associate State Director, Pennsylvania Small Business 
Development Center, Philadelphia, PA; Ms. Erica Kauten, State 
Director, Wisconsin Small Business Development Center, Madison, 
WI; and James Chrisman, Ph.D., Professor of Management, 
Mississippi State University, Mississippi State, Mississippi.
    Mr. Durham testified about the services that the New York 
SBDC provided to his business. While noting that he has 
substantial experience in dealing with inspectors from the New 
York Department of Environmental Management and the federal 
Occupational Safety and Health Administration (OSHA), many 
other businesses do not. Increased resources for regulatory 
assistance at SBDCs would prove invaluable in helping these 
businesses survive federal and state regulatory oversight. Mr. 
Durham concluded that H.R. 230 should be enacted into law.
    Ms. Naranjo started her testimony with a description of her 
business providing meals and demonstrations of Native American 
cooking. She then noted that her business would never have 
gotten off the ground without the assistance of the SBDC. 
However, she noted her good fortune in being located about five 
miles from a SBDC. Many Native Americans are very isolated from 
these types of resources and H.R. 2981 would go a long way in 
providing assistance to Native American business owners that 
are isolated from SBDCs. She concluded by urging Congress to 
enact H.R. 2981.
    Mr. Conroy noted that small businesses play a vital role in 
the American economy. Level funding of SBDCs has occurred and 
makes it difficult for SBDCs to offer new services. Mr. Conroy 
noted that one center operated at Kutztown University cannot 
meet the demand for its educational program services from 
graduates of technical schools and community colleges. 
Counselors at the University of Scranton SBDC are frequent 
speakers to graduates of technical colleges in the area about 
self-employment. According to Mr. Conroy, H.R. 527 would give 
the SBDCs sufficient additional resources to develop teaching 
curriculum that maximizes the limited resources available to 
SBDCs. Mr. Conroy urged favorable action on H.R. 527.
    Ms. Kauten began her testimony by revealing that most of 
the growth in the small business sector comes not from all 
small firms but only from a small percentage of companies 
commonly known as ``gazelles.'' Ms. Kauten noted that the 
Wisconsin SBDC worked closely with the Lowe Foundation on 
issues related to ``gazelles'' (second-stage small business 
concerns that have been in existence for a certain number of 
years and are primed to grow rapidly). Ms. Kauten related how 
learning from one's peers constituted an extremely effective 
mechanism for many of these ``gazelles.'' However, the 
Wisconsin SBDC did not have the resources to market or 
otherwise expand these peer learning opportunities. Ms. Kauten 
concluded by asking Congress to pass H.R. 3207.
    Dr. Chrisman, a noted expert on the economic return 
associated with investment in SBDCs, testified that his 
research reveals that the overall benefits of the SBDC program 
substantially outweigh the costs of the program. The benefits 
come from increases in employment and sales revenue that would 
not have occurred but for the timely intervention and advice 
received from a SBDC. Dr. Chrisman supported the various 
programs. He concluded by noting that SBDCs provide the 
following benefits: assist minorities and women-owned small 
businesses; give the appropriate mix of strategic, 
administrative, and operating assistance to small business 
concerns; and increase the survivability of small businesses.
    In sum, all the witnesses supported the enactment of the 
four bills being considered by the Committee. For further 
information, please refer to Committee publication #109-25.
            7.2.13  freedom of conscience for small pharmacies

                               Background

    On Monday, July 25, 2005, the Small Business Committee held 
a hearing on the implications of the emergency rule issued by 
Illinois Governor Rod Blagojevich last April to require 
pharmacies in Illinois that sell contraceptives to accept and 
fill prescriptions for all FDA approved contraceptives 
``without delay.'' Luke Vander Bleek, a pharmacy owner located 
in Morrison, Illinois, filed a lawsuit challenging the 
Governor's rule. Although he does fill prescriptions for 
traditional birth control, he is morally opposed to filling 
prescriptions for the morning-after pill because of his 
understanding of how the drug can affect an embryo.
    The purpose of the hearing was to explore the effects that 
``duty-to-fill'' legislation such as the Illinois rule will 
have on small pharmacies. The hearing also discussed 
alternatives to ensure that women have access to the medicine 
they desire while also preserving the beliefs of the 
pharmacist.

                                Summary

    The hearing consisted of one panel with five witnesses: 
Luke Vander Bleek, R.Ph., Morrison, IL; Ms. Shelia Nix, Senior 
Policy Advisor to the Governor of Illinois, The Hon. Rod 
Blagojevich, Springfield, IL; Mr. J. Michael Patton, M.S., CAE, 
Executive Director, Illinois Pharmacists Association, 
Springfield, IL; Linda Garrelts MacLean, R.Ph., CDE, Clinical 
Assistant Professor, Pharmacotherapy, Washington State 
University, Pullman, WA; and Ms. Megan Kelly, Geneva, IL.
    Mr. Vander Bleek explained his moral and professional 
reasons for opposing the Illinois rule. He also described the 
effects that this rule will have not only on his pharmacies but 
also on the surrounding communities and under served markets. 
Mr. Vander Bleek stated that he would be forced to close his 
pharmacies if the rule becomes permanent because he could not 
operate a business against his moral beliefs. If his pharmacies 
in rural Illinois are forced to close, residents in those towns 
will have to find another pharmacist in another town to fill 
their prescriptions. If a resident leaves his town to find 
another pharmacist, he may also purchase goods and services 
from other vendors in the neighboring community. This will 
cause the businesses located in the resident's community to 
suffer and eventually close as well.
    Ms. Nix stated that the Illinois Department of Financial 
and Professional Regulation received two complaints regarding 
pharmacists who refused to fill a prescription for emergency 
contraception, which prompted the Illinois rule. She testified 
that the rule applies only to those pharmacies who stock 
contraceptives, and the pharmacy must order the drug if it is 
not in stock. She also stated that although pharmacies are 
required to dispense emergency contraception, physicians are 
not required to prescribe it.
    Mr. Patton testified that the reference to ``health care 
personnel,'' as cited in the Illinois Health Right of 
Conscience Act, must be amended to specifically include 
``pharmacist'' to protect a conscientious objection. He also 
stated that many of the Illinois pharmacies do not stock 
emergency contraception simply because there is no demand for 
it. Mr. Patton testified that most of the pharmacies that do 
not carry emergency contraception have some method of referral 
for the drug. He also explained that individuals are testing 
select pharmacies to discern the willingness of a pharmacy to 
fill their prescription. This has caused concern and fear for 
many rural pharmacies because they believe they maybe targeted 
in this effort to coerce pharmacies into compliance; thereby 
creating the need for many pharmacies to carry emergency 
contraception in case they are tested.
    Ms. MacLean testified that the vast majority of pharmacists 
dispense the vast majority of prescriptions. Much of her 
testimony focused on alternative systems that could be 
developed that would balance a pharmacist's moral or religious 
objections and a patient's needs. One possible alternative 
would be to develop a list of pharmacies that will dispense the 
morning-after pill similar to the websites and organizations 
that allow patients to find a provider of emergency 
contraception. Ms. MacLean suggested granting pharmacists 
prescriptive authority for emergency contraceptives. In order 
to accommodate women in rural communities who do not have a 
choice of pharmacies, it may be the prescriber who chooses to 
dispense the product. Ms. MacLean stressed the importance of 
creating a system that would address any concerns a pharmacist 
may have before a pharmacist is presented with a prescription 
to which he or she objects.
    Ms. Kelly testified regarding her negative experience in a 
suburban community where the pharmacist objected to filling her 
prescription for emergency contraception. The pharmacist told 
her that she would have her prescription transferred to another 
pharmacy, which caused her to drive 20 minutes across town to 
have the prescription filled. Ms. Kelly testified that the drug 
store where her prescription was refused was in violation of 
the Illinois rule.
    In summary, the hearing exposed serious problems with the 
Illinois ``duty to fill'' rule. The Committee concluded that 
these concerns should be communicated with the state 
legislators as they consider making the rule permanent.
    For further information about this hearing, please refer to 
Committee publication #109-26.
            7.2.14  proposed legislative remedy for the participating 
                    securities program

                               Background

    On Wednesday, July 27, 2005, the Committee on Small 
Business conducted a hearing to explore legislation, H.R. 3429, 
amending the Small Business Investment Act of 1958 to establish 
a Small Business Investment Company (SBIC) Participating 
Debentures program to assist small businesses in gaining access 
to capital. The hearing examined structural flaws identified in 
the original Participating Securities program, including an 
estimated loss of over $2 billion since the inception of the 
program, and considered the framework and manner in which the 
revised participating debentures program would facilitate small 
business equity investment and operate within the overall 
venture capital marketplace. This hearing, in part, was a 
follow-up to a previous committee hearing held in April 2005, 
where the existing equity gap between angel investors and 
venture capitalists was identified.

                                Summary

    The hearing was comprised of one panel with two witnesses 
present: Mr. Jaime A. Guzman-Fournier, Associate Administrator 
for Investment, U.S. Small Business Administration and Lee 
Mercer; President; National Association of Small Business 
Investment Companies. The final witness, Josh Lerner, Ph.D., 
Jacob A. Schiff, Professor of Investment Banking, Harvard 
Business School, Cambridge, MA had his testimony read into the 
record.
    Mr. Mercer testified that the current Participating 
Security program did not meet the requirements of the Credit 
Reform Act, was structurally flawed, and placed significant 
risk of loss on the government. Mr. Mercer applauded the 
committee for taking steps to remedy the program by introducing 
HR 3429. He believes that the participating debentures 
legislation meets the requirements of credit reform and 
responsibly addresses the flaws found in the participating 
securities program.
    Mr. Guzman-Fournier also bore witness that the current 
Participating Securities program was riddled with serious 
flaws. He stated a willingness to work with this committee and 
industry to develop a workable solution, starting with HR 3429.
    Professor Lerner noted the need for risk capital, but was 
unsure of whether the participating securities or participating 
debentures program was the better option.
    Mssrs. Guzman-Fournier and Mercer agreed that the 
legislative proposal to create an SBIC Participating Debentures 
program to replace the current Participating Security program 
could prove to remedy the current program's structural problems 
and may very well stimulate equity investments in U.S. small 
businesses, particularly in regions underserved by other 
resources.
    Each testified to the need for a federal program that 
stimulates equity investment; however both witnesses also 
agreed that since the structure of the current program produced 
so much risk, careful consideration of all aspects of the 
proposed program is warranted. Mr. Guzman-Fournier very 
specifically asked that all aspects of the new SBIC 
Participating Debentures program be examined, to include 
program structure, funding mechanism, distribution framework, 
and other features of the proposed participating debentures 
initiative, to ensure that the failures and losses of the 
current program are not repeated.
    The hearing concluded with witnesses essentially agreeing 
that small business investment is a valuable tool to strengthen 
the foundation of the economy and that a new SBIC Participating 
Debentures program could ensure that early stage small 
businesses across the country and across various industry 
sectors have access to much needed capital to ensure their 
place in and contributions to the economy. Witnesses expressed 
interest and commitment to collaboratively work with the 
Committee to address the proposed Participating Debentures 
program details and mechanics to ensure benefits to small 
business, investors, and the taxpayer.
    For further information about this hearing, please refer to 
Committee publication #109-27.
            7.2.15  reforming the tax code to assist small businesses

                               Background

    On Wednesday, September 21, 2005, the Committee on Small 
Business held a hearing to examine provisions of the current 
tax code that are detrimental to small businesses. The hearing 
focused on HR 3841, the Small Employer Tax Relief Act of 2005, 
authored by the Hon. Donald Manzullo, Chairman of the Committee 
on Small Business which provides several, targeted reforms to 
the current tax code for small businesses.

                                Summary

    The hearing was comprised of two panels. The first panel 
consisted of The Hon. Jeff Fortenberry, United States House of 
Representatives (R-NE). The second panel included The Hon. 
Thomas M. Sullivan, Chief Counsel for Advocacy, United States 
Small Business Administration, Washington, DC; Nina E. Olson, 
National Taxpayer Advocate, Internal Revenue Service, 
Washington, DC; Ms. Thala Rolnick, Senior Accountant, Price, 
Kong & Company, CPAs of Phoenix, AZ; Ms. Marilyn Landis, 
President, Basic Business Concepts, Pittsburgh, PA; Ms. Kristie 
Darien, Executive Director, Legislative Offices, National 
Association for the Self-Employed; and Mr. John Irons, 
Director--Tax and Budget Policy, Center for American Progress, 
Washington, DC.
    Representative Fortenberry talked about two legislative 
proposals he planned to introduce to assist small businesses. 
His first proposal would allow individuals to roll over 
portions of their retirement accounts into health savings 
accounts. His second legislation proposal would allow small 
business investors to take loans from traditional Individual 
Retirement Accounts. Congressman Fortenberry explained that 
these legislative proposals addressed two key areas of concern 
for small businesses: (1) providing increased access to 
insurance coverage and (2) gaining access to capital.
    Chief Counsel Tom Sullivan testified that decreasing the 
complexity of the tax code and lowering marginal tax rates are 
the best methods to drive entrepreneurship in our nation. Mr. 
Sullivan also testified that several of the provisions in HR 
3841 would materially assist the success of small businesses, 
particularly, the permanent extension of small business 
expensing under section 179, the deductibility of health 
insurance premiums for self employment taxes, and the temporary 
elimination of the alternative minimum tax for individuals.
    Taxpayer Advocate Olson testified that many common sense 
proposals can help lessen the regulatory burdens faced by small 
businesses through the tax code. She stressed that many of the 
provisions in HR 3841 would materially lessen the regulatory 
burdens on small businesses, including the elimination of the 
need for married co-owners of unincorporated businesses to file 
partnership returns and the liberalization of the election and 
revocation rules for S corporations. She also testified that 
one of the most serious problems facing small business 
taxpayers is the individual alternative minimum tax, and she 
encouraged Congress to repeal the individual AMT as soon as 
possible. Ms. Olson concluded her testimony by encouraging 
Congress to enact one time penalty abatement for taxpayers that 
historically have been in compliance but failed for whatever 
reason to meet their tax compliance obligations.
    Ms. Rolnick explained that small business taxpayers face 
new challenges from the IRS in the form of increased audits. In 
particular, she explained that the IRS has embarked on a 
nationwide program to audit the first and second tax years of S 
corporations. Ms. Rolnick testified further that this increased 
enforcement activity only adds to the overwhelming 
administrative burdens faced by small business taxpayers. Ms. 
Rolnick also emphasized the need for tax reform to stimulate 
and enhance small businesses, including the repeal of the 
individual and corporate alternative minimum tax.
    Ms. Landis complained that small business owners spend a 
disproportionate amount of time and money complying with the 
tax code. She explained that several of these inequities in the 
tax code were addressed by HR 3841, particularly, the 
deductibility of health insurance premiums for self employment 
taxes and changes that enable small business owners to place 
more funds in tax-deferred pension plans. Finally, to address 
inequities in the long term, Ms. Landis testified that the 
elimination and replacement of the income tax code with a 
national sales tax should be a legislative priority for 
Congress.
    Ms. Darien believes that the complexities and inequities in 
the tax code place a significant burden on self-employed 
individuals and micro-business owners. She explained that 
certain provisions in HR 3841 would materially lessen this 
burden, including the deductibility of health insurance 
premiums for self employment taxes and the allowance of an 
annual standard home office deduction of $2,500.
    Mr. Irons agreed that the goal of tax policy should be to 
get out of the way of private activity while still raising 
adequate revenues for government programs. He explained that 
three goals should drive tax reform: (1) simplicity, (2) 
fairness, and (3) economic growth. Mr. Irons testified that 
keeping a progressive rate structure and preserving incentives 
for taxpayers to add value to the economy can best meet these 
goals.
    In sum, the Committee concluded that further work needs to 
be done to amend the tax code to help small businesses, which 
can be accomplished by passing into law the provisions 
contained in Chairman Manzullo's small business tax relief and 
reform bill (HR 3841). For more information about this hearing, 
please refer to Committee publication #109-32.
            7.2.16  small business and hurricane katrina: rebuilding 
                    the economy

                               Background

    On Friday, October 7, 2005, the Committee on Small Business 
held a hearing to assess the needs of small businesses in the 
aftermath of Hurricanes Katrina and Rita. Early Monday, August 
29, 2005, Hurricane Katrina made landfall in the Gulf Coast 
region of Mississippi. The strength of the Hurricane devastated 
the Gulfport and Biloxi areas. The storm caused substantial 
breeches to levees protecting New Orleans. Nearly 80 percent of 
the city was flooded, forcing the greatest mass migration in 
this country since the dust storms of the Great Depression, and 
washing away thousands of small businesses that formed the 
backbone of the Louisiana and Mississippi's deltas economy. 
Making matters even worse was the landfall of Hurricane Rita in 
Southwest Louisiana and eastern Texas less than three weeks 
after Katrina. The Small Business Administration (SBA) issues 
physical disaster loans to homeowners and small businesses when 
structures are destroyed by a disaster. The SBA also offers 
small businesses economic injury disaster loans when their 
businesses are affected by a disaster but the structures 
themselves were not destroyed.

                                Summary

    The panelists were: The Hon. Hector V. Barreto, 
Administrator, United States Small Business Administration, 
Washington, DC; Mr. Ralph Brennan, Owner, Brennan Restaurant 
Group, New Orleans, LA; Ms. Rae Ann Ryan, President, Travel 
Affiliates, Gulfport, MS; Mr. Randy Perkins, Owner, Perkins 
Productions, Covington, LA; and Mr. Guy T. Williams, President, 
Gulf Coast Bank and Trust, New Orleans, LA.
    Administrator Barreto provided details on the SBA's 
response to Hurricanes Katrina and Rita by noting that the 
agency hired 2,000 temporary employees immediately after 
Katrina and rented an additional 40,000 square feet of office 
space in Fort Worth, TX. The Administrator noted that this was 
the most extensive disaster in SBA's history. The processing 
center was working 22 hours a day, received 61,000 applications 
for assistance in two weeks, and received over 700,000 requests 
for disaster loan information. Administrator Barreto also 
explained the SBA's new Gulf Opportunity Zone loan program 
proposal, which increases disaster loan size from $1.5 million 
to $10 million. The Administrator also noted that it was 
increasing the size of disaster mitigation loans, surety bonds, 
and authorizing deferment of principal and interest payments 
for 12 months on disaster loans.
    Mr. Brennan testified that two of his three restaurants 
were open but had limited staffs, needed to boil water, lacked 
natural gas supplies, and worked with the Louisiana Department 
of Health to modify regulations concerning restaurants. Mr. 
Brennan noted that his biggest problems were staffing the 
restaurants and finding adequate housing for his employees. 
Other problems cited by Mr. Brennan included difficulty dealing 
with insurance carriers and uncertainty over whether there will 
ever be an adequate customer base. He concluded that the entire 
Gulf region needed rebuilding to ensure the revival of the key 
tourism industry.
    Ms. Ryan testified that, five weeks after Katrina, Gulfport 
remained a highly troubled area. Many of the roads remained 
impassable, bridges were out, and there was a complete absence 
of telephone service which is vital to a travel agency 
business. She noted that while her business survived relatively 
unscathed, the same could not be said for many other businesses 
in the Mississippi Gulf Coast. Ms. Ryan also mentioned that 
infrastructure needs to be rebuilt quickly because without it 
the area's economy, heavily reliant on tourism, will not 
rebound. She concluded with support for increasing the size of 
SBA disaster loans.
    Mr. Perkins testified that he ran a video production 
company from his home in Covington, LA. His company provided 
services to filmmakers using New Orleans for their films. 
Absent a reconstructed New Orleans, his business could not 
survive. He then recounted his story of trying to obtain a 
small business loan from the SBA and the frustration that he 
faced. He concluded that time was critical in getting 
assistance and it was time that was running out.
    Mr. Williams began his testimony by relating the fact that 
more than 25 percent of his employees lost their homes in 
Katrina but the one bright spot was that the bank's main 
offices were not heavily damaged. Mr. Williams noted that small 
businesses were the fulcrum of the New Orleans economy and 
those businesses needed immediate help. Mr. Williams suggested 
that private banks be authorized to originate SBA disaster 
loans because the agency simply did not have the resources 
needed to respond to a disaster of this magnitude. He also 
suggested that various loan conditions be eased, including 
collateral requirements.
    In sum, the hearing demonstrated that SBA, like all federal 
agencies, needed better preparation and resources to respond to 
major catastrophic events.
    For more information about this hearing, refer to Committee 
publication #109-34.
            7.2.17  promoting private sector emergency preparedness

                               Background

    On Tuesday, November 1, 2005, the Committee on Small 
Business held a hearing that focused on the significance of 
emergency preparedness for the business community. Businesses 
today, both large and small, are increasingly connected to 
broader networks of economic activity, meaning greater 
potential for vulnerability resulting from disruptions in these 
networks. From the terrorist attacks of September 11, 2001 to 
the devastating hurricanes of the summer and fall of 2005, 
emergency preparedness has become an elevated priority for many 
sectors of society. For businesses, however, this priority has 
not resonated to a great extent. It is the position of many 
crisis management and emergency preparedness experts, as well 
as academics, that businesses are not taking the necessary 
measures that would substantially alleviate the costs that 
arise in the wake of an emergency. This hearing was held to 
provide a platform for this discussion.

                                Summary

    The panel of witnesses consisted of: Michael Czinkota, 
Ph.D., Associate Professor, McDonough School of Business, 
Georgetown University, Washington, DC; Gary Knight, Ph.D., 
Associate Professor of Marketing, College of Business, Florida 
State University, Tallahassee, FL; Neil Livingstone, Ph.D., 
Chief Executive Officer, GlobalOptions, Inc., Washington, DC; 
Mr. Barry Scanlon, Senior Vice President, Witt Associates, LLC, 
Washington, DC.
    Dr. Czinkota focused his testimony on business preparedness 
for the direct and indirect consequences of terrorism. Dr. 
Czinkota, along with Dr. Knight and others, conducted extensive 
research to get a sense of the top concerns in the business 
community. Energy costs, exchange rates, and terrorism, in this 
order, were issues at the top of the list. In addition, their 
research sought information about the measures being taken by 
these firms to deal with their concerns. Dr. Czinkota advocated 
for more public/private coordination in terms of education and 
training.
    Dr. Knight spoke to a broader perspective, conveying the 
implications of their research for all disasters. He also 
focused on the different challenges faced by small and medium 
enterprises (SMEs), in contrast to larger firms. He asserted 
that private consulting firms are well capable of providing 
proper counsel for SMEs in terms of disaster avoidance/
recovery, crisis management, etc., but SMEs will often find 
these firms' services cost prohibitive. He added that the 
public information and education that is offered by federal 
agencies has little to say regarding the business dimensions of 
emergency preparedness, and thus does not address some of the 
most important aspects of private sector emergency 
preparedness. Dr. Knight called for better marketing and 
expansion of the Small Business Administration (SBA) disaster 
loan program and more federal government engagement in 
strengthening the information and communication infrastructure 
through private sector research and development initiatives.
    Dr. Livingstone echoed the aforesaid witnesses by 
testifying that although businesses have an incentive to 
protect their assets and employees, small businesses often lack 
the resources to take the necessary preparedness measures to 
act on these incentives. He believes government has a role in 
bridging this gap but is falling short. The SBA's preparedness 
literature, for instance, is not very helpful for a small 
business in acquiring useful suggestions for disaster 
preparation, crisis management, and business continuity plans. 
Beyond his advocacy for public/private cooperation in compiling 
and disseminating information, Dr. Livingstone specified some 
cost-effective measures he believes are relevant for small 
businesses. He said that every firm should perform some kind of 
risk assessment and then develop plans consistent with the 
identified risks. Dr. Livingstone mentioned the Department of 
Homeland Security's www.ready.gov to be helpful in this regard. 
In addition, he suggested developing systems for contacting 
employees in the wake of a crisis, storing copies of all 
pertinent files offsite, purchasing a satellite phone, 
purchasing an electric generator, and developing survival kits. 
He provided examples of survival kits at the hearing for 
Members and staff to peruse.
    Mr. Scanlon outlined a broader level of engagement on the 
side of the federal government. First, he said that all 
disasters should be addressed together because from a 
business's perspective, the effects are generally the same. 
Second, the federal government should provide grants and other 
incentives to businesses to prepare more effectively for 
emergencies because the costs to society are so high when they 
do not. In Mr. Scanlon's opinion, small investments in targeted 
programs that encourage and facilitate business emergency 
preparedness can have a major impact. Third, he outlined an 
administrative restructuring that included adding economic and 
business recovery as a category in the federal government's 
Emergency Support Functions (ESF). Fourth, Mr. Scanlon said 
that the SBA disaster loan program should be strengthened and 
improved and included officially as part of the federal 
government's ESF.
    In sum, the Committee concluded that private sector 
emergency preparedness, particularly on the part of small 
businesses, is severely lacking and that lack of available 
resources is a major contributor to this deficiency.
    For further information about this hearing, please to 
Committee publication #109-35.
            7.2.18  building a wall between friends: passports to and 
                    from canada?

                               Background

    On Thursday, November 17, 2005, the Committee on Small 
Business held a hearing regarding the border-crossing plan 
entitled the Western Hemisphere Travel Initiative (WHTI). 
Specific focus was given to the impact of the WHTI on small 
businesses along the U.S.-Canadian border. Additionally, the 
impact upon supply chain management for small and medium 
manufacturers was detailed.
    As recommended by the 9/11 Commission, the federal 
government set national standards for the issuance of 
identification documents per the Intelligence Reform and 
Terrorism Prevention Act of 2004 (IRTPA). A provision of the 
IRTPA mandated the Secretaries of State and Homeland Security 
to implement a plan ``to require a passport or other document, 
or combination of documents . . . for all travel into the 
United States . . .'' The response to this mandate was the 
WHTI, announced in April 2005.
    WHTI will affect all U.S. citizens and certain foreign 
nationals, specifically, ``most Canadian citizens, citizens of 
the British Overseas Territory of Bermuda and Mexican 
citizens.'' Currently, the implementation of the Initiative is 
scheduled to begin on December 31, 2006, applying the 
requirements to all air and sea travel to or from Canada, 
Mexico, Central and South America, the Caribbean and Bermuda. 
The second phase of implementation is to be December 31, 2007, 
applying the requirements to all land border crossings as well 
as air and sea travel. Both the Department of State and 
Homeland Security (DHS) are working to create and determine 
acceptable alternative documents other than a passport.

                                Summary

    The witnesses present at this hearing included: The Hon. 
Louise Slaughter, United States House of Representatives (D-
NY); The Hon. John Engler, President/CEO, National Association 
of Manufacturers, Washington, DC; Mr. Ken Staub, Vice 
President, Riverside Service Corporation, Buffalo, NY; Mr. 
William Cook, Senior Manager, Worldwide Transport Design & 
Procurement, DaimlerChrysler Corp., Detroit, MI; Mr. H. Thomas 
Chestnut, CEO, AAA of Western and Central New York, 
Williamsville, NY; Janice L. Kephart, Esq., Former Counsel to 
the 9/11 Commission, Alexandria, VA; and Mr. Howard Zemsky, 
Managing Partner, Taurus Partners, LLC, Buffalo, NY.
    Representative Slaughter acknowledged the importance of 
this review process of the implementation of the WHTI and its 
potential economic affects on tourism and small businesses. She 
noted five recommendations necessary to consider when 
evaluating the proposal: DHS and State must conduct a complete 
economic analysis of the WHTI; DHS must expand existing pre-
enrollment programs like NEXUS, FAST and SENTRI; the Border 
Crossing Card (BCC) must be inexpensive, easy to obtain, and 
marketed across the United States, DHS and State should also 
consider additional alternative documents; Merge the two 
provisions for implementing sea/air and land crossings; and 
finally, form a Northern and Southern border strategy team to 
advise DHS and State on implementation.
    Governor Engler testified to the extreme detriment the WHTI 
will have on small and medium manufacturers in border towns and 
beyond unless a more simplified and uniform system be put in 
place. He noted the identification requirements should be more 
accommodating for frequent travelers crossing borders like that 
of airports, where it is clearly established what documentation 
airport security requires of travelers, and people can provide 
it.
    Mr. Staub indicated the costs of the current identification 
requirements could be quite significant, especially for small 
businesses, where the truck drivers themselves must shoulder 
the costs of documentation. He further urged State and DHS to 
consider the needs of frequent travelers, in the guise of 
tourists and commercial travelers, when developing alternative, 
acceptable substitutes to passports.
    Mr. Cook testified to the far-reaching affects of the 
proposed requirements in the WHTI on the supply chain in 
manufacturing, and all businesses. He drew on the Just-in-Time 
(JIT) manufacturing process employed at DaimlerChrysler, a 
management technique implemented to reduce waste and increase 
efficiency. Mr. Cook noted that such a philosophy would be even 
more difficult were the stringent requirements of the WHTI 
imposed on the supply chain. DaimlerChrysler alone is 
responsible for over 700 truckloads and 50 railcars of 
production material per day between Windsor, Ontario and 
Detroit. He testified that programs that establish 
relationships for consistent and predictable customs processes 
are imperative for an efficient and functional supply chain.
    Mr. Chestnut illustrated the importance of tourism on the 
US/Canadian border town economies and the ramifications 
strictly scrutinized identification processes would have on 
this industry. He emphasized the example of casual travel in 
the region by noting 12 to 18 percent of attendance at a home 
game of the NFL's Buffalo Bills, and 18 to 22 percent of fans 
of the National Hockey League's Buffalo Sabers, are Canadian. 
He urged the agencies to work with existing forms of 
identification that are identified by the REAL ID Act.
    Ms. Kephart stressed the importance of border security and 
the ongoing threat of future terrorist attacks so long as our 
borders remain unprotected. She testified that the WHTI is an 
essential step to fulfilling the first and foremost requirement 
of border security--to provide security at our borders against 
terrorist entry and embedding and cross-border terrorist travel 
traffic. Ms. Kephart noted that the WHTI allows for the 
creation of frequent traveler programs, similar to the ones in 
existence, and emphasized that these programs help facilitate 
commerce in the border towns and beyond.
    Mr. Zemsky sought to impress upon the Committee the 
seamless integration of the Canadian and US economies and 
compared the need for commercial crossing of the Niagara River 
to D.C. residents crossing the Potomac River to enter Virginia.
    In sum, the committee concluded that at a minimum, the 
Departments of State and DHS must conduct a proper regulatory 
flexibility economic analysis to determine the effect this 
proposal would have on small business and to propose a rule 
that would limit the negative impact upon small business.
    For further information on this hearing, refer to Committee 
publication #109-37.
            7.2.19  fiscal year '07 budget and reauthorization 
                    proposals of the sba

                               Background

    On Wednesday, March 15, 2006, the Committee on Small 
Business held a hearing on the President's proposed FY 2007 
budget as it affected small business. The Congressional Budget 
Act of 1974 requires the Committee to recommend budget levels 
and report legislative plans within the Committee's 
jurisdiction to the Committee on Budget.
    The hearing focused on whether the proposed budget 
adequately addressed the needs of small businesses of this 
nation. The Committee was interested in determining if the 
Administration's proposed budget adequately addressed the needs 
of the small business community, while taking into account real 
budgetary constraints. In addition, the Committee wanted to 
hear about any suggested legislative changes needed in the 
Small Business Act or Small Business Investment Act of 1958. 
Overall, the Committee was seeking views concerning the past 
performance of the Small Business Administration (SBA) and the 
its plans for future service to America's small business 
community.

                                Summary

    The hearing consisted of two panels. The first panel was 
The Hon. Hector Barreto, Administrator, United States Small 
Business Administration, Washington, DC. The second panel 
consisted of one private sector witness--Ms. Patricia Smith, 
Co-owner, PEMBA Lighting and Automation, New Orleans, LA.
    Administrator Barreto started off his testimony by noting 
that the primary goal of the FY 2007 budget was to continue 
efficient delivery of services to small businesses. Among the 
examples of this efficiency was the record growth in the small 
business loan program despite a 37 percent reduction in the 
SBA's budget since FY 2001. Other efficiencies cited by the 
Administrator include increased returns on liquidations of 
loans, office consolidations, and improved oversight functions. 
The Administrator also reviewed the response by the agency to 
Hurricane Katrina and detailed plans for increasing the 
disaster loan funds available without a concomitant rise in the 
subsidy rate for the program. The Administrator concluded that 
the budget was adequate for serving America's small businesses.
    Ms. Smith noted that her business prior to Hurricane 
Katrina was successful and growing. After Katrina, the building 
in which her business was located suffered severe flood damage 
and lacked electricity for a month. Communication services were 
disrupted for months. Ms. Smith then detailed the travails she 
faced in trying to obtain a disaster loan from the SBA which 
ultimately decided that she had insufficient collateral to 
obtain a loan. She ended her testimony with a request that the 
SBA provide assistance to the thousands of small businesses in 
the Gulf Coast region that need it.
    In sum, the Committee needed to further examine the 
resources and procedures used by the SBA in providing disaster 
assistance.
    For more information, refer to Committee publication #109-
43.
            7.2.20  hearing on irs latest enforcement: is the bulls-eye 
                    on small businesses?

                               Background

    On Wednesday, April 5, 2006, the Committee on Small 
Business held a hearing to examine the activities of the 
Internal Revenue Service (IRS) to close the so-called ``tax 
gap.'' Through its National Research Project, the IRS has 
attributed a good deal of the estimated $300 billion ``tax 
gap'' (i.e., the difference between what taxpayers owe and what 
they pay) to small businesses and self-employed individuals. 
This hearing explored the specific activities the IRS is taking 
to close the ``tax gap'' and how these activities impact the 
millions of small businesses and self-employed individuals in 
the United States. In addition, the Committee examined the 
impact on small businesses of the new proposals in the FY 2007 
budget to close the ``tax gap.''

                                Summary

    The hearing consisted of two witness panels. The first 
panel included: The Hon. Mark W. Everson, Commissioner, 
Internal Revenue Service, Washington, DC; and The Honorable 
Thomas Sullivan, Chief Counsel for Advocacy, United States 
Small Business Administration, Washington, DC. The second panel 
was comprised of: Mr. Kevin Brown, Commissioner, Small 
Business/Self-Employed Division, Internal Revenue Service, 
Washington, DC; Ms. Nina Olson, National Taxpayer Advocate, 
Washington, DC; John Satagaj, Esq., President and General 
Counsel, Small Business Legislative Council, Washington, DC; 
Keith Hall, CPA, Partner, Hall and Hughes, PLLC, Dallas, TX; 
Mr. Michael Fredrich, President, Manitowoc Custom Molding, LLC, 
Manitowoc, WI; and Max Sawicky, Ph.D., Economist, Economic 
Policy Institute, Washington, DC.
    Commissioner Everson testified that the best way to address 
the ``tax gap'' is to increase funding for IRS enforcement 
efforts and to enact the targeted ``tax gap'' proposals in the 
President's FY2007 budget request. Chief Counsel Sullivan 
testified that a balanced approach of service and enforcement 
is necessary to reduce the ``tax gap.'' He also stated that the 
information and withholding proposals in the FY2007 budget may 
result in many unintended consequences for small businesses.
    Mr. Brown testified that more must be done by the IRS to 
enforce compliance among small businesses while ensuring that a 
high level of service is provided. Ms. Olson testified that a 
balanced approach of education and enforcement is necessary to 
reduce the ``tax gap''. She also testified that one approach to 
greater compliance could be enactment of a voluntary 
withholding regime for payments made to independent 
contractors.
    Mr. Satagaj testified that the ``tax gap'' has not changed 
significantly over the past three decades. Further, he 
testified that the ``tax gap'' proposals in the FY2007 budget 
are unclear proposals targeted at small businesses. Mr. Hall 
testified that, short of major simplification of the tax code, 
IRS education efforts are the best way to obtain greater small 
business tax compliance. Mr. Fredrich testified that small 
businesses face a high burden as they attempt to comply with 
current federal, state, and local tax obligations. He further 
testified that enactment of new withholding proposals and/or 
greater IRS enforcement activities would only add to these 
burdens. Mr. Sawicky testified that part of the solution to 
reducing the ``tax gap'' is simplification of the current tax 
system.
    The Committee concluded that many of the current proposals 
to close the ``tax gap'' would have a detrimental effect on 
small businesses and that future proposals to close the ``tax 
gap'' must be examined closely.
    For further information on this hearing, refer to the 
Committee publication #109-46.
            7.2.21  cutting our trade deficit: can the u.s. muster its 
                    diverse trade promotion operations to make an 
                    impact?

                               Background

    On Wednesday, April 26, 2006, the Committee on Small 
Business held a hearing to examine U.S. trade promotion 
operations and the effectiveness of the Trade Promotion 
Coordinating Committee (TPCC), housed within the United States 
Department of Commerce. The purpose of this hearing was to 
conduct a general oversight on the effectiveness of the TPCC in 
discharging its legislated objectives with particular attention 
to:
          --Assessing the adequacy of the institutional 
        placement of the TPCC to insure its most efficient 
        operation;
          --Reviewing the adequacy of the assigned TPCC 
        authorities to achieve its objectives; and
          --Appraising the extent to which oversight activities 
        are carried out of the annual National Export Strategy 
        to facilitate small business trade expansion.

                                Summary

    The hearing was comprised of one panel: The Hon. John L. 
Mica, United States House of Representatives (R-FL); The Hon. 
Franklin L. Lavin, Under Secretary for International Trade, 
United States Department of Commerce, Washington, DC; Loren 
Yager, Ph.D., Director, International Affairs and Trade, 
Government Accountability Office, Washington, DC; Ms. Kathy M. 
Hill, President, State International Development Organizations, 
Washington, DC; the Hon. Amb. J. Anthony Holmes, President, 
American Foreign Service Association (AFSA), Washington, DC; 
James Morrison, Ph.D., President, Small Business Exporters 
Association, Washington, DC; and Mr. Robert E. Scott, Director 
of International Programs, Economic Policy Institute (EPI), 
Washington, DC.
    Representative Mica began by making reference to his 
private business experience in dealing with U.S. trade 
development and promotion assistance and labeled both national 
and international efforts as dysfunctional at the very best. He 
further observed that the TPCC had no teeth and in reviewing 
the National Export Strategy report it prepared, he found it to 
be just a compilation of a few things the 19 member 
organizations have going on, at the time. The document has no 
strategic business plan or plan to promote American business in 
a coordinated fashion.
    Undersecretary Lavin stated that the overriding priority 
for the Commerce Department and TPCC is simply reaching out to 
a wider community of American small and potential exporters 
through private partnership with United States firms in such 
industries as logistics and banking.
    Dr. Yager noted the TPCC strategies do not identify or 
measure progress toward member agency goals in relation to 
federal trade promotion priorities and agencies have not 
articulated measurable goals in support of these priorities. He 
observed that TPCC has little influence over agencies' 
allocation of resources to support TPCC goals or priorities. He 
questioned whether the TPCC, in its current structure, could 
achieve the fundamental objectives associated with defining 
goals and aligning resources and if the TPCC move within the 
Commerce Department will help it achieve those goals.
    Ms. Hill commented that ironically various state trade 
programs provide export promotion grants to small businesses 
that helps cover a lot of the program fees that are charged by 
federal programs. She endorsed the needed for greater 
coordination and a strengthened role for the White House in 
these coordination efforts.
    Ambassador Holmes recommended that the Administration and 
Congress work together to raise the priority of commercial 
diplomacy. Ambassador Holmes believes that a more unified, 
authoritative TPCC would be both desirable and logical.
    Dr. Morrison observed that the assigned TPCC 
responsibilities for trade coordination were not being matched 
by adequate authorities. The Office of International Trade at 
the Small Business Administration also needed reform and he 
endorsed reform legislation introduced by Chairman Manzullo, 
the Small Business Trade Promotion Enhancement Act of 2006, 
H.R. 5196.
    Mr. Scott questioned the assertion that simply approving 
free trade agreements will improve export performance. He 
recommended the value of the dollar be reduced, increases in 
non-defense research and development funding, and reduced 
health care costs for businesses.
    In conclusion, the Committee received expert testimony 
documenting the shortfalls in the operations of the TPCC and 
establishing the need for corrective legislation, such as that 
set forth in H.R. 5196.
    For further information about this hearing, refer to 
Committee publication #109-48.
            7.2.22  sarbanes-oxley section 404: what is the proper 
                    balance between investor protection and capital 
                    formation for smaller public companies

                               Background

    On Wednesday, May 3, 2006, the Small Business Committee 
held a hearing to review the impact of the Public Company 
Accounting Reform and Investor Protection Act of 2002, Pub. L. 
No. 107-204, commonly referred to as the Sarbanes-Oxley Act (or 
SOX), on small businesses. SOX was passed in July 2002 in 
response to several high profile large corporate scandals. 
Section 404 of SOX requires the management of all publicly-
traded companies to assess the strength of their companies' 
internal controls and also requires that each public company's 
external auditor attest to the accuracy of that assessment. In 
March 2005, the Securities and Exchange Commission (SEC) 
established the Advisory Committee on Smaller Public Companies 
(Advisory Committee) to examine the impact of SOX on smaller 
public companies and to make recommendations to the SEC. On 
April 23, 2006, the Advisory Committee recommended that the SEC 
implement full and partial exemptions from section 404 for 
certain small public companies. This hearing analyzed the 
recommendations of the Advisory Committee and explored 
generally the impact of section 404 on our nation's smaller 
public companies.

                                Summary

    The hearing consisted of one panel of six witnesses: 
Herbert S. Wander, Esq. Partner, Katten, Muchin, Chicago, IL 
and Chairman, SEC Advisory Committee on Smaller Public 
Companies; Mr. Bill Broderick, CFO, Analytical Graphics, Inc., 
Exton, PA; Mr. Keith Crandell, Managing Director, ARCH Venture 
Partners, Chicago, IL; Mr. Woodie Neiss, CFO, FLAVORx, Inc., 
Bethesda, MD; Mr. Mark A. Schroeder, President/CEO, German 
American Bancorp, Jasper, IN; and Mr. James Burns, President/
CEO, EntreMed, Inc., Rockville, MD.
    Mr. Wander testified that small public companies face 
tremendous burdens when attempting to comply with section 404 
of SOX. He further stated that, based on his work as Chairman 
of the Advisory Committee, a revised framework should be put in 
place for assessing whether small public companies have 
complied with section 404. Mr. Broderick testified that section 
404 disproportionately affects smaller companies and that 
smaller companies need a new system of scaled or proportional 
securities regulations that reflects the Advisory Committee's 
recommendations. Mr. Crandell testified that section 404 has 
stifled the emerging growth companies in our nation by draining 
capital and resources from these companies. Mr. Neiss testified 
that section 404 is a deterrent to smaller companies accessing 
the public markets and that section 404 should be scaled to the 
complexity of an organization. Mr. Schroeder testified that 
section 404 creates extremely onerous burdens on companies that 
must currently comply with the law. In addition, he testified 
that it is important for the SEC and PCAOB to scale regulations 
to address the disproportionate costs and burdens of section 
404 on small companies by adopting the Advisory Committee's 
recommendations. Mr. Burns testified that the implementation of 
section 404 has imposed tremendous costs on smaller companies 
and urged the SEC and PCAOB to adopt the reform framework in 
the Advisory Committee's recommendations.
    The Committee concluded that the recommendations made by 
the Advisory Committee would materially assist small public 
companies comply with section 404.
    For further information on this hearing, refer to the 
Committee publication #109-51.
            7.2.23  bridging the equity gap: examining the access to 
                    capital for entrepreneurs act of 2006

                               Background

    On Wednesday, May 10, 2006, the Committee on Small Business 
held a hearing to analyze H.R. 5198, the Access to Capital for 
Entrepreneurs Act of 2006. The bill provides a mechanism for 
our nation's small businesses to obtain equity funding by 
establishing a tax credit for angel investment in these 
businesses. Currently, more than 20 states have similar tax 
credit programs for investment in small businesses. The hearing 
examined the angel investor market and the effect H.R. 5198 
would have on this market. In addition, the hearing examined 
the success of state tax programs in generating additional 
equity funding for small businesses.

                                Summary

    The hearing consisted of one panel of witnesses: The Hon. 
Earl Pomeroy, United States House of Representatives (D-ND); 
Susan Preston, Esq., Partner, Davis Wright Tremaine LLP, 
Seattle, WA; Ian Sobieski, Ph.D., Founder & Managing Director, 
Band of Angels, Menlo Park, CA; Ms. Lorrie Keating-Heinemann, 
Secretary, Wisconsin Department of Financial Institutions, 
Madison, WI; Mr. Dan Loague, Executive Director, Capital 
Formation Institute, Reston, VA; Mr. Luis Villalobos, Founder 
and Board Member of Tech Coast Angels, Orange County, CA.
    Mr. Pomeroy testified that the tax incentive in H.R. 5198 
will address the equity funding gap for small companies by 
promoting greater investment in our nation's small businesses. 
Ms. Preston testified that H.R. 5198 is a simplistic, self-
executing federal income tax credit that will provide 
critically needed growth funds to young companies. Mr. Sobieski 
testified that, if enacted, H.R. 5198 would generate more angel 
investment into startup companies, generating more jobs and 
opportunities for small companies in the marketplace. Ms. 
Keating-Heinneman explained that, based on her experience in 
Wisconsin, tax credits are an important way to generate 
additional angel investment in new and emerging companies. Mr. 
Loague testified that H.R. 5198 would greatly expand seed stage 
capital for start-up and growing U.S. companies. Mr. Villalobos 
testified that it is important to narrowly tailor tax 
incentives for the angel marketplace and to also provide 
support to existing angel networks.
    The Committee concluded that the tax incentive in H.R. 5198 
would encourage angel investors to provide additional equity 
funding to our nation's small businesses.
    For further information on this hearing, refer to the 
Committee publication #109-52.
            7.2.24  contracting the internet: does icann create a 
                    barrier to small business?

                               Background

    On Wednesday, June 7, 2006, the Committee on Small Business 
held a hearing to explore and review the proposed settlement of 
private litigation between the Internet Corporation for 
Assigned Names and Numbers (ICANN) and VeriSign. While the 
agreement is between two private corporations, the aim of the 
hearing was to let all sides in this debate air their views and 
to examine the potential affect of this agreement on small 
businesses that have websites on the Internet.
    In 2004, VeriSign and ICANN entered litigation related to 
their mutual obligations under the terms of the current .com 
registry agreement. In 2005, a settlement between the two 
parties was negotiated. ICANN cannot execute the new .com 
registry agreement without the Commerce Department's prior 
approval. Any other agreements that are contained within the 
settlement of the litigation between VeriSign and ICANN are not 
the responsibility of the Department of Commerce and the 
Department has no legal authority to review those other 
sections.

                                Summary

    The hearing was comprised of one panel of six witnesses: 
Beckwith Burr, Esq., Partner, Wilmer Hale, Washington, DC; John 
Jeffrey, Esq., General Counsel & Secretary, ICANN, Marina Del 
Ray, CA; The Hon. Richard White, United States House of 
Representatives (Ret.), Member, VeriSign's Internet Advisory 
Board, Poulsbo, WA; Mr. W.G. Champion Mitchell, Chairman and 
CEO, Network Solutions LLC, Herndon, VA; Mr. Steven DelBianco, 
Executive Director, NetChoice, Washington, DC; and Mr. Craig 
Goren, CEO, Clarity Consulting, Chicago, IL.
    Ms. Burr summarized the Department of Commerce process that 
created ICANN and transfer of ``control'' of the Internet. Ms. 
Burr further described her role during the Clinton 
Administration when she was integral in the establishment of 
the Department of Commerce as the ``honest broker'' between 
ICANN and VeriSign.
    Mr. Jeffrey gave a history of the contract between ICANN 
and VeriSign as well as a brief summary of the October 25, 2005 
settlement between the two groups part of which the contract in 
question emerged. Former Representative White focused the 
discussion from a historical review to the present public issue 
of the renewed the agreement between ICANN and VeriSign and the 
suitability of that agreement for the continued good of the 
Internet and America's small businesses.
    Mr. Mitchell attempted to assign negative implications and 
antitrust concerns to the contract between ICANN and VeriSign. 
Mr. DelBianco pointed out the Network Solutions is not a small 
business and merely is attempting to disrupt a legitimate 
contract in an effort to maximize his own companies profit 
margins. Mr. Goren described the minimal impact to real small 
businesses and their effort to utilize the Internet as part of 
their business.
    In sum, the Committee concluded that that there was more to 
this settlement that originally thought and encouraged other 
committees of legislation jurisdiction to delve into this 
matter more.
    For more information about this hearing, please refer to 
Committee publication #109-55.
            7.2.25  the award of contracts by federal agencies to 
                    alaska native corporations

                               Background

    On Wednesday, June 21, 2006, the Committees on Government 
Reform and Small Business held a joint hearing to review the 
award of contracts by federal agencies to Alaska Native 
Corporations (ANCs) participating in the Small Business 
Administration's (SBA) 8(a) program. ANCs have been permitted 
since 1986 to participate in the SBA 8(a) program. Under the 
8(a) program, federal agencies are allowed to award contracts 
without competition to small businesses that are certified by 
the SBA as 8(a) firms. For most 8(a) firms, these sole-source 
awards are limited to $5 million for manufacturing and to $3 
million for other goods and services. Acquisitions above these 
thresholds must be competed among eligible 8(a) certified small 
businesses. These limitations do not apply to ANC firms 
participating in the 8(a) program. ANCs are subject to 
different requirements than other 8(a) firms in a number of 
different respects. For example, ANCs are not subject to the 
``affiliation rule'' which requires other 8(a) small businesses 
to count affiliates or subsidiaries of the business to 
determine whether the business concern is ``small.''

                                Summary

    The hearing was comprised of three panels. The first panel 
had one member, the Hon. Don Young (R-AK), Chairman of the 
Committee on Transportation and Infrastructure, United States 
House of Representatives. The second panel consisted of: Mr. 
David Cooper, Director, Acquisition and Sourcing Management, 
Government Accountability Office, Boston, MA; Mr. Calvin 
Jenkins, Deputy Associate Deputy Administrator, Office of 
Contracting and Business Development, United States Small 
Business Administration, Washington, DC; Mr. Frank Ramos, 
Director, Office of Small Business Programs, United States 
Department of Defense, The Pentagon, Arlington, VA; Ms. Melodee 
Stith, Associate Director, Acquisition and Financial 
Assistance, United States Department of the Interior, 
Washington, DC. The last panel had the following members: Mr. 
Harry Alford, President/CEO, National Black Chamber of 
Commerce, Washington, DC; Ms. Ann Sullivan, President, Madison 
Services Group, Inc., Washington, DC; Mr. Chris E. McNeil, Jr., 
President/CEO, Sealaska Corporation, Juneau, AK; Ms. Helvi 
Sandvik, President, NANA Development Corp., Anchorage, AK; Mr. 
Bart Garber, President, Tyonek Native Corporation, Tyonek, AK; 
Ms. Julie Kitka, President, Alaska Federation of Natives, 
Washington, DC; and Mr. Charles Totemoff, President/CEO, 
Chenega Corporation, Anchorage, AK.
    Representative Young expressed support for the award of 
contracts to ANCs and that they were doing right by the federal 
government, the U.S. taxpayers, and communities within Alaska 
that need economic support. Mr. Jenkins provided the history of 
the 8(a) program that was started in the 1960s to assist small 
business owners that were socially and economically 
disadvantaged and to provide economic benefits to their 
communities. While ANCs benefited from the 8(a) program in 
increasing federal contract dollars so did other small business 
groups. Mr. Cooper stated that in 2004, ANCs accounted for 
approximately 13 percent of the 8(a) federal contract dollars. 
The revenues from these contracts benefited villages in Alaska 
through such means as dividend payments, educational 
scholarships, assistance for the elderly, and cultural 
preservation. Mr. Ramos stated small businesses should be 
accorded every privilege that they are entitled to under the 
laws that Congress has passed. Ms. Stith expressed the opinion 
that the Department of Interior has a distinct interest in 
providing economic opportunities for Alaska natives in the form 
of federal contacts to ANCs.
    Mr. Alford expressed the view that ANCs that are not small 
businesses should not be in the 8(a) program. He doubted that 
the revenues generated by ANCs were ultimately finding their 
way back home to benefit Native Alaskans. Ms. Sullivan stated 
that the federal government had only awarded three percent of 
contracts to women-owned businesses rather than the required 
five percent. Further, the set-aside program for women-owned 
businesses had never been implemented, even though mandated by 
law. Mr. McNeil stated that Congress intended to benefit Native 
Alaskans no matter where they lived. Ms. Helvi stated that 
economic conditions in remote parts of Alaska were severe and 
that the NANA Corporation had distributed almost 100 percent of 
its profits to shareholders and had been successful in 
providing employment to its shareholders. Mr. Garber stated 
that the Tyonek Native Corporation had grown from three 
employees in 1995 to revenues of almost $50 million and profit 
before taxes of between $1.5 and $2 million. The corporation 
had about 300 employees located in seven states and it provided 
manufacturing, engineering, and aircraft maintenance services 
to the federal government. Mr. Totemoff was of the opinion that 
the present criticism of ANCs came from their success in 
obtaining federal contracts and in expertise that has been 
acquired. Ms. Kitka stated that the size of Alaska and the lack 
of infrastructure makes it hard to create sustainable 
economies.
    In sum, the Committee concluded that exemptions in the 8(a) 
program that allow ANC participation regardless of size 
provided unique challenges in addressing reforms that satisfy 
the small business community and also insured continued 
economic development for Native Alaskans.
    For further information on this hearing, refer to Committee 
publication #109-56.

7.2.26  failure to comply with the regulatory flexibility act: irs 
        endangering small businesses yet again

                               Background

    On Tuesday, July 25, 2006, the Small Business Committee 
held a hearing to examine proposed regulations released by the 
Internal Revenue Service (IRS) and the Department of Treasury 
(Treasury) that would change the rules governing taxation of 
escrow accounts, trusts, and other funds used during deferred 
exchanges of like-kind property under section 1031 of the 
Internal Revenue Code. Recognizing that these proposed 
regulations would affect small businesses in the qualified 
intermediary industry, the IRS and Treasury included an Initial 
Regulatory Flexibility Analysis (IRFA) under the Regulatory 
Flexibility Act (RFA) as part of the regulations. This hearing 
explored the adequacy of the IRFA and the effect of the 
proposed regulations on small qualified intermediaries.

                                Summary

    The hearing consisted of one panel of witnesses: Mr. Eric 
Solomon, Acting Deputy Assistant Secretary for Tax Policy and 
Deputy Assistant Secretary for Regulatory Affairs, Department 
of the Treasury, Washington, DC; The Hon. Donald Korb, Chief 
Counsel, Internal Revenue Service, Washington, DC; The 
Honorable Thomas M. Sullivan, Chief Counsel for Advocacy, 
United States Small Business Administration, Washington, DC; 
Mr. Louis Weller, Principal, National Director for Like-Kind 
Exchange Planning, Deloitte Tax LLP, San Francisco, CA; Mr. 
Michael Halloran, President/CEO, Nationwide Exchange Services, 
Cupertino, CA; and Mr. Howard Levine, Partner, Roberts & 
Holland LLP, Washington, DC.
    Mr. Solomon did not testify at the hearing. Mr. Korb 
testified that the IRFA in the proposed regulations was not 
sufficient and agreed that a revised IRFA should be completed 
by the IRS. Mr. Sullivan testified that the IRFA in the 
proposed regulations was not adequate because it fails to 
detail the complete economic impact on small businesses in the 
qualified intermediary industry. Mr. Weller testified that the 
proposed regulations favor large, qualified intermediaries 
owned by financial institutions. Mr. Halloran testified that 
the proposed regulations would have a detrimental effect on 
small businesses to the advantage of a few, large bank-owned 
qualified intermediaries. Mr. Levine testified that the 
proposed rules are valid from a substantive tax perspective.
    The Committee determined that the IRFA included in the 
proposed regulations did not meet the requirements of the RFA 
and should be revised by the IRS and Treasury.
    For further information on this hearing, refer to the 
Committee publication #109-62.

7.2.27  advancing security and commerce at our nation's ports: the 
        goals are not mutually exclusive

                               Background

    On Wednesday, September 27, 2006, the Committee on Small 
Business held a hearing to discuss the proposed Maritime 
Transportation Worker Security Credential (Maritime TWIC) rule 
and its affect on small business. In 2002, Congress passed the 
Maritime Transportation Security Act (MTSA) which mandated the 
Maritime TWIC for all workers employed in the maritime 
industry. The law, if properly implemented, will provide for an 
additional layer of safety and security while at the same time 
improve the flow of people and goods at our nation's ports. 
However, small businesses assert that the Maritime TWIC rule is 
not being properly implemented by the Transportation Security 
Administration (TSA) and the Untied States Coast Guard. They 
believe it creates unnecessary redundancies, is too costly, 
requires onerous recordkeeping requirements, will impede labor 
flows in the transportation sector, and is not in keeping with 
Department of Homeland Security Secretary (DHS) Chertoff's goal 
of a risk based strategy to secure our homeland.

                                Summary

    The hearing was comprised of one panel. Admiral Brian 
Salerno, Assistant Commandant for Inspection and Compliance, 
United States Coast Guard, Washington, DC; Mr. Steve Sadler, 
Director, Maritime and Surface Credentialing, Transportation 
Security Administration, United States Department of Homeland 
Security, Washington, DC; Mr. Philip L. Byrd, Sr., President/
CEO, Bulldog Hiway Express, Charleston, SC; Ms. Debbie 
Gosselin, President, Chesapeake Marine Tours, Annapolis, MD; 
Mr. George Leavell, Executive Vice President, Wepfer Marine, 
Inc., Memphis, TN; and Mr. Danny R. Schnautz, Operations 
Manager, Clark Freight Lines, Pasadena, TX.
    Mr. Sadler and Admiral Salerno discussed the joint 
rulemaking by the Coast Guard and TSA to implement the MTSA 
while strengthening security and facilitating commerce. Mr. 
Sadler discussed the feedback that TSA and the Coast Guard 
received from small businesses through comments addressed to 
the docket and through the four public meetings that were held. 
Admiral Salerno said that Coast Guard and TSA greatly value 
industry's input and that Coast Guard and TSA will continue to 
work closely with industry to provide a safe and secure 
maritime transportation system.
    Mr. Byrd described the detrimental effects of the proposed 
TWIC rule on his small trucking company and the minimal 
security benefits that will be provided through its 
implementation. Mr. Byrd discussed the unnecessary duplicative 
costs and requirements of the Hazardous Materials Endorsement 
(HAZMAT) and TWIC background checks. He discussed the TWIC's 
failure to preempt state and local transportation security 
background checks and programs. Mr. Byrd said that there was 
already a shortage of truck drivers and that the TWIC 
regulation would exacerbate this current labor shortage to a 
much greater degree.
    Ms. Gosselin outlined the costs that small companies such 
as hers are shouldering to secure the maritime sector. She 
stated that her small business has paid approximately $55,000 
over the past two years to implement the MTSA alone. Ms. 
Gosselin said that TWIC will not provide any additional 
security measures for small companies such as hers and that it 
will only increase her overall regulatory burden.
    Mr. Leavell discussed the importance of a good security 
program for barge operators around the country and the 
industry's willingness to work collaboratively with the DHS to 
facilitate safety and security in the transportation of 
maritime cargo. He discussed his grave concerns with the TWIC 
program outlining its detrimental effects on hiring new 
crewmembers. Mr. Leavell also discussed the importance of a 
risk based approach for any regulatory regime implemented in 
the maritime transportation security sector.
    Mr. Schnautz discussed the impact of the TWIC regulation on 
truckers who derive their earnings through the use of a single 
truck. He went on to describe the process and entities involved 
in moving a load at a port and the potential for supply chain 
disruption if the TWIC regulation is not properly promulgated.
    In sum, the Committee concluded that TSA and Coast Guard 
need to execute a comprehensive Economic Impact Analysis that 
contains a proper Final Regulatory Flexibility Analysis that 
adequately considers the adverse impact of the proposed 
regulations on small entities prior to the implementation of 
the final rule.
    For further information about this hearing, please refer to 
Committee publication #109-64.

7.2.28  fema's response to the rockford flood

                               Background

    On Tuesday, November 28, 2006, the Committee on Small 
Business held a field hearing the response by the Federal 
Emergency Management Agency (FEMA) to the Rockford flood that 
occurred on September 4, 2006. On that day, the City of 
Rockford, Illinois and parts of Winnebago County, Illinois were 
beset by catastrophic flash flooding. More than 700 homes and 
small businesses were damaged, initially displacing 1,400 
residents, many of which are poor and elderly. More than two 
months later, 213 damaged homes were still not repaired and 
recovery was well beyond the City's means. Illinois claimed 
that there was no individual assistance available for recovery 
and requested a federal declaration to help repair and rebuild 
the devastated areas. FEMA, State, and City officials conducted 
a joint preliminary damage assessment and City officials 
declared that FEMA rushed through the assessment and were not 
inclined to make a declaration from the outset. The Committee 
scheduled the hearing to investigate the process by which FEMA 
makes disaster declarations and determine whether declarations 
are made in an arbitrary manner.

                                Summary

    The hearing was comprised of one panel of official witness 
and an open microphone whereby affected residents were invited 
to tell their individual story. The official witness panel was 
comprised of the following witnesses: The Hon. Lawrence J. 
Morrissey, Mayor, City of Rockford, Rockford, IL; Ms. Jennifer 
Jaeger, Community Services Director, Human Services Department, 
City of Rockford, Rockford, IL; Mr. Dave Smith, Chief, Bureau 
of Planning, Illinois Emergency Management Agency, Springfield, 
IL; Major General John R. D'Araujo, Jr., Director, Recovery 
Division, Federal Emergency Management Agency, United States 
Department of Homeland Security, Washington, D.C.; and Mr. 
Edward Buikema, Director, Region V, Federal Emergency 
Management Agency, United States Department of Homeland 
Security, Chicago, IL.
    Mayor Morrissey discussed the events immediately preceding 
the Labor Day Flood. He described what the City and local 
community were doing to assist the affected individuals. Mayor 
Morrissey explained that despite all of the combined recovery 
assistance efforts, many of the affected individuals are still 
without safe and permanent housing. Mayor Morrissey went on to 
discuss the corrected facts contained in the appeal that 
justify a major disaster declaration.
    Ms. Jaeger discussed the role the Department of Human 
Service plays following a disaster. Ms. Jaeger described the 
personal contact her department had with the flood victims and 
the challenges the victims faced immediately following the 
flood. Ms. Jaeger went on to say that the damage was vastly 
underestimated by FEMA and that the recovery was well beyond 
the resources of the City and volunteers assisting in the 
recovery effort.
    Mr. Smith explained the Illinois Emergency Management 
Agency's (IEMA) responsibility in conducting a joint 
preliminary damage assessment of the flood affected areas with 
FEMA. Mr. Smith said that the State Disaster Relief Fund cannot 
be used to provide individual assistance.
    General D'Araujo summarized FEMA's emergency response 
process and provided an overview of FEMA's efforts in relation 
to the Labor Day Flood in Rockford. General D'Araujo said that 
FEMA would consider all of the information submitted by the 
Governor in the appeal but that FEMA must operate within the 
parameters imposed by the Stafford Act.
    In sum, the Committee concluded that FEMA's declaration 
process could be arbitrary and lacked transparency.
    For further information about this hearing, please refer to 
Committee publication #109-65.

7.3  Summaries of the Hearings Held by the Subcommittee on Workforce, 
        Empowerment and Government Programs

            7.3.1  removing obstacles to job creation: how can the 
                    federal government help small businesses revitalize 
                    the economy?

                               Background

    On April 21, 2005 the Subcommittee on Workforce, 
Empowerment, and Government Programs held a hearing on removing 
obstacles to job creation. Small businesses are the driving 
force behind our economy. They represent 99 percent of all 
employers; more than half of all U.S. employees work for small 
firms; and they generate between 60 and 80 percent of all new 
jobs America.
    Running a small business is not easy, and what Congress 
must do is relieve some of the burden that comes directly from 
Washington, DC. Unfortunately, Congress and the federal 
government have been fond of passing new laws and imposing 
mandates and regulations on business. Congress has been working 
in recent years to diminish that burden--legislation such as 
the Small Business Paperwork Relief Act, the Small Business 
Regulatory Enforcement Fairness Act, and more recently, the 
Jobs and Growth Tax Relief Reconciliation Act of 2003. However, 
even with the passage of these bills, federal regulatory, tax, 
and compliance burdens continue to be cited by many owners as 
the most significant problems facing their businesses. The 
Subcommittee aimed to examine what obstacles to job creation 
still remain, and explore policy options designed to alleviate 
them.

                                Summary

    The hearing was comprised of one panel: John McClelland, 
Ph.D., Vice President, Government Affairs, American Rental 
Association, Moline, IL; Mr. Richard Dean, Principal, 
Environmental Systems Assocs., Columbia, MD; Mr. David Pressly, 
President, Pressly Development Co., Inc., Statesville, NC; and, 
Mr. Donald Wilson, President, Association of Small Business 
Development Centers, Burke,VA.
    Dr. McClelland began the testimony highlighting three 
specific examples of barriers that impede the growth of the 
rental industry in the United States. First, he highlighted the 
high cost of health care. Large companies have the advantage of 
greater economies of scale, which lowers the costs associated 
with providing health insurance. Small employers simply cannot 
compete with large ones in this regard. Dr. McClelland 
suggested association health plans (AHPs) as a way to expand 
health coverage among small businesses. The second point he 
touched on was the abolishment of the federal estate or 
``death'' tax. This is particularly burdensome on a capital-
intensive industry such as the rental business. When owners 
pass away, heirs often must sell assets of the business simply 
to pay the tax. Finally, Dr. McClelland stated the American 
Rental Association supports caps for non-economic damages 
(except in particularly egregious cases) in liability cases.
    Mr. Dean, testifying on behalf of the Air Conditioning 
Contractors of American stated that the most pressing issue 
facing his industry is the lack of qualified technicians. Mr. 
Dean suggested that the federal government, through the 
Departments of Education and Labor, work with his industry to 
remove the negative stigma that training to be a heating, 
ventilating, and air conditioning (HVAC) technician seems to 
have acquired. He also believes that the Departments of Labor 
and Education could do a much better job of educating school 
guidance counselors on the benefits of becoming and HVAC 
technician. Finally, Mr. Dean suggested an additional 
government-sponsored program to train displaced workers from 
the manufacturing sector.
    Mr. Pressly, testifying on behalf of the National 
Association of Home Builders, stated that Environmental 
Protection Agency (EPA) regulations concerning stormwater 
runoff are particularly onerous on his industry. On average, 
EPA stormwater regulations add an additional six percent cost 
in developing land. The regulations require building managers 
to prepare a stormwater pollution prevention plan and file a 
notice of intent, and the EPA's guidance for preparing this 
document is over 40 pages long. To make matters worse, many 
states and local municipalities have similar regulations, 
requiring two or three permits to comply with essentially the 
same regulations from various jurisdictions.
    Mr. Wilson commented on the high regulatory burden, and 
despite the significant progress made by the Administration 
(most notably Dr. John Graham at the Office of Information and 
Regulatory Affairs and Tom Sullivan at the Small Business 
Administration's Office of Advocacy) and Congress, the Federal 
Register still contains about 70,000 pages each and every year. 
Mr. Wilson supports H.R. 230, the ``National Small Business 
Regulatory Assistance Act of 2005'' as a way to help ease this 
burden. Introduced by Representative John Sweeney of New York, 
H.R. 230 would establish a program to provide regulatory 
compliance assistance, through the nation's Small Business 
Development Centers (SBDCs), to small businesses. Mr. Wilson 
also testified that additionally funding for SBDCs would 
increase their ability to reach out to new and established 
businesses, and create new jobs.
    In summary, the Subcommittee concluded that much more work 
needed to be done to (1) amend or abolish unneeded or 
counterproductive regulations and taxes and (2) deal with the 
problem of lack of a qualified workforce, particularly among 
the small business trades. Also, some in the small business 
community believe that there needs to be a greater contribution 
to federal programs could help spur small business job 
creation.
    For further information about this roundtable, please refer 
to Committee publication #109-12.
            7.3.2  how are veteran-owned small business owners being 
                    served?

                               Background

    The Subcommittee on Workforce, Empowerment, and Government 
Programs of the Committee on Small Business and the 
Subcommittee on Economic Opportunity of the Committee on 
Veterans' Affairs held a joint hearing on Tuesday, May 24, 2005 
focusing on recent legislation enacted into law to assist 
veterans. In August 1999, the President signed into law the 
Veterans Entrepreneurship and Small Business Development Act, 
Pub. L. No. 106-50. This Act created the National Veterans 
Business Development Corporation (more commonly known as the 
``Veterans Corporation'') ``to assist veterans, including 
service-disabled veterans, with the formation and expansion of 
small business concerns by working with and organizing public 
and private resources.'' However, on September 30, 2005, 
federal funding for the Veterans Corporation ends and the 
corporation must become self-sustaining.
    Section 308 of the Veterans Benefits Act of 2003, Pub. L. 
No. 108-83, established a procurement program for small 
business concerns owned and controlled by service-disabled 
veterans. The procurement program permits federal agencies to 
sole source contracts and restrict competition to service-
disabled veterans. One of the reasons that the program was 
established was because buyers for federal agencies expressed 
the view that they needed a set-aside program to meet the three 
percent statutory contracting goal contained in the Small 
Business Act. As of the date of the hearing, no major 
department or agency of the federal government had met the 
goal.

                                Summary

    The hearing was comprised of one panel, as follows: Mr. 
Walter G. Blackwell, President/CEO, National Veterans Business 
Development Corporation, Washington, DC; Mr. Arthur Salus, 
President, Duluth Travel, Inc., Atlanta, GA; Mr. John K. Lopez, 
Chairman, Association for Service Disabled Veterans, 
Washington, DC; Mr. Frank M. Ramos, Director, Office of Small 
and Disadvantaged Business Utilization, United States 
Department of Defense, The Pentagon, Arlington, VA; Mr. Scott 
F. Denniston, Director, Office and Small and Disadvantaged 
Business Utilization, United States Department of Veterans 
Affairs, Washington, DC; Mr. Paul Murphy, President, Eagle Eye 
Publishers, Inc., Fairfax, VA; and Mr. Richard Weidman, 
Director, Government Relations, Vietnam Veterans of America, 
Silver Spring, MD.
    Mr. Blackwell stated that the Veterans Corporation was 
providing the services required by law, but that it could not 
continue to exist without federal funding. To sustain the 
corporation, he reported that requests for foundation grants in 
the amount of $30 million had been submitted and that $20 
million in grant applications were being prepared. To cut costs 
the overhead was being reduced.
    Mr. Salus was of the view that federal agencies were 
reluctant to contract with small business concerns, but favored 
large companies. He called upon Congress to ensure that the 
small business goals with respect to federal procurement be 
met.
    Mr. Lopez emphasized the frustration that service-disabled 
veterans were experiencing with respect to the federal 
agencies' failure to provide sole source opportunities and set 
aside contract opportunities for service-disabled veterans. The 
contracting initiatives for service-disabled veterans are moral 
and ethically commensurate with the sacrifice made for the 
country by service-disabled veterans.
    Mr. Ramos stated that there were 7,000 service-disabled 
firms listed in the Central Contractor Registry (CCR) database. 
He outlined a five-point program for increasing contacting 
opportunities for service-disabled veterans.
    Mr. Denniston stated that in FY 2004 1.25 percent of the 
Department of Veterans' Affairs total procurement dollars went 
to service-disabled veterans, and that this was unacceptable 
since it was below the 3 percent goal. He referred to a 
cooperative venture with the Defense Contract Management Agency 
(DCMA) to develop a model to increase contract opportunities 
for veterans.
    Mr. Murphy stated that federal agencies missed the 
statutory goal for service-disabled veterans by $8.5 billion. 
Five federal agencies accounted for 80 percent of the spending 
with service-disabled companies, i.e.: Departments of Defense, 
Veterans Affairs, and State; National Aeronautics and Space 
Administration (NASA) and General Services Administration 
(GSA).
    Mr. Weidman pointed out that the only option for a 
profoundly disabled veteran maybe self-employment. He suggested 
that there be a mechanism for reaching out to returning 
veterans to provide employment and entrepreneurial assistance.
    In summary, the Subcommittees concluded that while progress 
was being made to assist veteran-owned small business owners, 
much more work needed to be done, particularly to help service-
disabled veterans obtain federal contracts.
    For further information, please refer to Committee 
publication #109-17.
            7.3.3  union salting--organizing against small business

                               Background

    On Tuesday, June 21, 2005, the Subcommittee on Workforce, 
Empowerment, and Government Programs held a hearing on union 
``salting.'' The term ``salting'' is used for the act of 
deliberately inserting a union member into a non-union company 
(of which the vast majority are small businesses) with the goal 
of eventually unionizing that non-union company. This paid 
union organizer or ``salt'' aims to establish a wellspring of 
support for the union effort within the company. Fellow 
employees often do not know that their new co-worker is also a 
paid union organizer. In an effort to curb this practice, 
Representative Steve King of Iowa, a member of the Small 
Business Committee, introduced H.R. 1816 the Truth in 
Employment Act of 2005. This legislation, as well as the 
detrimental effects salting can have on small businesses, was 
discussed thoroughly at the hearing.

                                Summary

    The hearing consisted of two panels. The first panel was 
comprised of The Hon. Steve King (R-IA). The second panel was 
made up of: Mr. Mark Mix, President, National Right to Work 
Committee, Springfield, VA; Mr. Ray Issac, Chief Operating 
Officer, Owner of Isaac Heating and Air Conditioning, Inc., 
Rochester, NY; Laurence J. Cohen, Esq., Sherman, Dunn, Cohen, 
Leifer, and Yellig, Washington, DC; Mr. Michael Aldi, Owner, 
Aldi Electric, Niskayuna, NY; Ms. Anita Drummond, Director of 
Legal and Regulatory Affairs, Associated Builders and 
Contractors, Arlington, VA; and Michael Avakian, Esq., General 
Counsel, Center on National Labor Policy, Inc., Springfield, 
VA.
    Representative King began the hearing defining salting as a 
union tactic designed to put unfair economic pressure on non-
union employers. H.R. 1816, the Truth in Employment Act of 
2005, provides an employer a level of reassurance that someone 
coming to work for them is truly motivated to be an employee, 
and not someone primarily seeking to destroy or work against 
the interests of the employer. Under this bill, if a job 
applicant's primary purpose in seeking a job is to further the 
interests of another, then they are not a bona fide applicant 
and it would not be an unfair labor practice for the employer 
not to hire them.
    Mr. Mix began his testimony examining the plight of 
employers faced with a salting campaign. Calling it a catch-22, 
Mr. Mix explained that if the employer hires the ``salt,'' 
union officials instigate a quick snap National Labor Relations 
Board representation election. If they fail at that, they begin 
to sabotage their employer's business and manufacture a 
blizzard of unfair labor practice charges to bury the employer 
with the legal fees until he signs over his employees. If the 
employer does not hire the union-planted applicants, the union 
plants go straight to unfair labor practice charges and again 
the employer is faced with huge legal fees. Mr. Mix expressed 
his unyielding support for H.R. 1816.
    Both Mr. Isaac, testifying on behalf of the Air 
Conditioning Contractors of America, and Mr. Aldi, speaking for 
himself and other businesses killed by the practice, told 
similar stories of salting abuse. Both encountered a campaign 
by the local union to put them out of business. Unfortunately, 
Mr. Aldi lost his business due the campaign against him. Both 
Mr. Isaac and Mr. Aldi expressed support for H.R. 1816.
    The dissenting view came from Mr. Cohen believes that H.R. 
1816 would deprive union organizers of the protection of the 
National Labor Relations Act (NLRA) and permit employers to 
engage in what has been deemed unlawful discrimination. Mr. 
Cohen maintained that salting is a legitimate organizing tool 
and that ``salts'' understand that when they apply for work 
that they will be expected to fulfill the employer's legitimate 
employment expectations.
    Ms. Drummond supported H.R. 1816 in her testimony. Going 
through the various court cases that have, in fact, legitimized 
salting as a legal recruitment tool, Ms. Drummond criticized 
the NLRB whom she believes has placed a heavy burden on 
contractors to defend even the most neutral hiring policies 
that union salts can routinely force contractors to spend 
thousands of dollars to defend completely innocent activity.
    As General Counsel for the Center on National Labor Policy, 
Inc., Mr. Avakian brought 30 years of experience in labor 
relations activity to the panel. Mr. Avakian surmised that 
federal labor law should attempt to ensure the identification 
and expression of employee rights while protecting the ability 
of labor organizations and employers to present their messages 
to employees. He states that salting is a process that serves 
no useful purpose. It promotes litigation and disharmony in the 
workplace. For these reasons, legislation, such as H.R. 1816, 
which places the focus on the process of employee 
organizational rights versus union agent access to gather the 
cloak of employee rights, should be enacted.
    In sum, the Subcommittee found deplorable acts of salting 
has cost many small business owners their livelihoods. H.R. 
1816 must be enacted in order to restore sanity and 
accountability in employer-employee relations.
    For further information about this hearing, please refer to 
Committee publication #109-21.
            7.3.4  how the clean air act affects auto repair

                               Background

    On Tuesday, June 28, 2005, the Workforce, Empowerment and 
Government Programs Subcommittee held a hearing on the effect 
of the Clean Air Act on the automobile repair industry. Passage 
of the Clean Air Act Amendments in 1990 inadvertently created 
hurdles for consumers by mandating that all vehicles 
manufactured after the 1994 model year utilize an on-board 
computer diagnostic system to monitor emissions. As a result, 
it is much more difficult for consumers and independent repair 
shops to get the information necessary for safe vehicle 
repairs. As cars have become more technologically advanced, the 
amount of information and expertise needed to diagnose and 
repair them has increased dramatically. Today, automobiles have 
numerous computer systems that control braking, ignition, 
security, steering, emissions, safety, and climate-control 
systems. This hearing focused on H.R. 2048, The Motor Vehicle's 
Owner Right to Repair bill introduced by the Chairman of the 
Committee on Energy and Commerce, the Hon. Joe Barton (R-TX). 
This bill would protect the rights of consumers to diagnose, 
service, and repair motor vehicles.

                                Summary

    The hearing was comprised of two panels. The first panel 
consisted of The Hon. Joe Barton, Chairman, Committee on Energy 
and Commerce, United States House of Representatives. The 
second panel was: Mr. Dennis Houska, President, Houska 
Automotive Service, Fort Collins, CO; Mr. Fred Bordoff, Owner, 
New York Center for Automotive Technology, Long Island City, 
NY; Mr. Eddie Ehlert, Owner of MazdOnly, Chamblee, GA; Mr. 
Aaron Lowe, Vice President, Government Affairs, Automotive 
Aftermarket Industry Association, Bethesda, MD; Mr. John M. 
Cabaniss, Jr., Director, Environment and Energy, Association of 
International Automobile Manufacturers, Inc., Arlington, VA; 
and Ms. Kathleen Marvaso, Managing Director, Government 
Affairs, American Automobile Association, Washington, DC.
    Chairman Barton introduced the Motor Vehicle's Owner Right 
to Repair because he feels that consumers need to have choice 
in auto repair and that they should be able to choose where 
they have the vehicle repaired. According to Chairman Barton, 
the legislation has one main purpose: put vehicle owners in the 
driver's seat when it comes to choosing where to have their car 
repaired. It is not about gaining proprietary information or 
trade secrets, as some suggest.
    Mr. Houska testified for The Coalition for Auto Repair 
Equity (CARE). Mr. Houska runs a family automotive repair shop 
and he explains that he has a problem getting timely 
information to repair his customer's cars. He explains that 
there are many challenges to running his business but an 
unnecessary one is the problem of accessing all the information 
in all the model lines of all the different manufacturers. This 
challenge he explained can be overcome by the passage of the 
Motor Vehicle Owner's Right to Repair Act.
    Mr. Bordoff also represents the Service Station Dealers 
Association. He explains that because his facility is engaged 
to perform repairs for a major dealership in New York, he is 
granted some access to information that allows his shop to 
perform repairs but in general the average independent 
technician often cannot tend to a customer's repair needs. 
Manufacturers have two information systems, and for a fee, they 
will allow independent repair shops to access the technician 
information system. The other system is the dealer information 
system, which is not the same. According to Mr. Bordoff, the 
dealer system is much more informative and timely to use.
    Mr. Ehlert represented the Automotive Service Association 
and owns an independent auto repair shop. He explains that 
there is a viable industry solution already in place for 
service information. In September 2002, the ASA and the 
automakers were successful in signing a voluntary industry 
service information agreement that assures independent 
repairers the same service, tool, tool information and training 
provided franchised new car dealers, including both emissions 
and non-emissions information. He further states that of the 
451 million repairs in 2004, the National Automotive Service 
Task Force (NASTF) only had 48 complaints, less than a fraction 
of 1 percent of all repairs. Of these complaints, all were 
resolved in 2004.
    Mr. Lowe testified on behalf of the Automotive Aftermarket 
Industry Association. Mr. Lowe believes that passage of H.R. 
2048 is critical not only to the thousands of small businesses 
that comprise the automotive repair industry but also their 
customers who depend on local repair shops to keep their 
vehicle operating safely, cleanly and dependably. He further 
stated that the goal of the ``right to repair'' legislation is 
not to unfairly advantage independents over dealers, but to 
preserve competition and thus ensure that car owners continue 
to have a choice in where they bring their second largest 
investment for maintenance and repair.
    Mr. Cabaniss runs the National Auto Service Task Force for 
the Association of International Automobile Manufacturers, Inc. 
He says that automakers are doing all that they reasonably can 
to make the same service information, training materials, and 
factory tools available to independent shops as to dealers. All 
automakers have established service websites that contain 
service and training information, available 24 hours per day/7 
days per week.
    Ms. Kathleen Marvaso testified that AAA has a strong 
interest in Mr. Barton's legislation because it is necessary to 
ensure the safety of their members, and their access to high 
quality, convenient, and competitively priced auto repair. She 
stated that AAA strongly supports the ``Right to Repair'' bill 
for three important reasons: consumer choice, vehicle safety, 
and the right of car owners to access the data generated by 
their vehicle.
    In summary, the Subcommittee concluded that on balance, 
passage of H.R. 2048 is important for small independent 
automobile repair shops.
    For more information about this hearing, please refer to 
Committee publication #109-23.
            7.3.5  small business expensing--job growth through the tax 
                    code

                               Background

    On Tuesday, August 9, 2005, the Subcommittee on Workforce, 
Empowerment, and Government Programs held a field hearing in 
Fort Collins, Colorado on small business' use of the increased 
expensing limits contained in Section 179 of the Internal 
Revenue Code. Section 179 allows small businesses to expense 
the full value of their new capital equipment purchased in the 
year it is put into service. This results in higher demand, 
benefiting manufacturers and equipment sellers. It also means 
small business owners have extra money in their hands to hire 
more employees and put the new equipment to use immediately.
    Current law, as signed by President Bush in 2003, 
establishes the Section 179 expensing limits at $100,000 and an 
investment of $400,000. Unfortunately these limits will return 
to $25,000 and $200,000 respectively when the expensing limits 
expire in 2007. This increase in expensing limits provides two 
primary benefits: it reduces the high cost of the newest 
capital equipment and provides up-front additional cash flow to 
help finance the purchase.

                                Summary

    The hearing consisted on one panel: Mr. Jim Henderson, 
Regional Advocate, Office of Advocacy, United States Small 
Business Administration, Denver, CO; Ms. Linda Jones, Owner, 
Area Rent-Alls, Westminster, CO; Mr. Craig Hau, Commercial 
Broker, The Group, Inc., Fort Collins, CO; Mr. Ron 
Lautzenheuser, Owner, Big O Tires, Fort Collins, CO; and Mr. 
Rob Pehkonen, Owner, Appliance Solutions, Inc., Fort Collins, 
CO.
    Mr. Henderson began the hearing expressing the Office of 
Advocacy's strong support for extending the increased expensing 
limits beyond the mandated 2007 expiration date. He recounted a 
conversation he recently had with Mark Patterson, a tax 
accountant with the firm Stockman Kast Ryan and Company in 
Colorado Springs, when he was told that he has many clients 
that have taken advantage of increased expensing. Specifically, 
he cited a new medical clinic that started in 2003. The clinic 
used the higher expensing limits in Section 179, which 
increased its working capital allowing it to hire two key 
employees, and increased its chances of success because it was 
able to have the latest equipment and technology from the first 
day of operation.
    Ms. Jones, testifying on behalf of herself and the American 
Rental Association (ARA), echoed Mr. Henderson's support for 
extending the current expensing limits. She stated that 
approximately 90 percent of ARA's membership reinvests less 
than the $400,000 annually allowed under Section 179, thereby 
giving each of those small businesses the opportunity to fully 
utilize the provision. In 2003, Ms. Jones was able to use 
$57,000 of the allowable expensing for purchased equipment 
permitted within Section 179, which equaled a tax savings 
$7,360. That same year Ms. Jones incurred a 30 percent increase 
in health insurance premium rates. Tax savings meant that her 
employees maintained health coverage. In 2004, Ms. Jones was 
able to use $64,000 of the allowable Section 179 expensing. 
Again, these savings were immediately reinvested into her 
employees' healthcare benefits, and replacement equipment in my 
rental inventory.
    Mr. Hau explained that due to Section 179, one of his 
client partners was able to develop a parcel of land that they 
otherwise would not have been financially possible. 
Approximately $14 million worth of construction was completed 
on the land, providing construction jobs, and close to 100 new 
jobs in the building after it opens.
    Mr. Lautzenheiser credited Section 179 as a mitigating 
factor in his decision to open two new automotive centers in 
2003 and 2005. Additionally, Mr. Lautzenheiser credited Section 
179 for his decision to acquire new capital equipment for use 
in his existing centers in 2004 and 2005. The new equipment 
allows Mr. Lautzenheiser to produce a higher quality product or 
service, usually with less repair and maintenance cost. As with 
all previous witnesses, Mr. Lautzenheiser expressed strong 
support for extending the increased limits beyond 2007.
    Mr. Pehkonen echoed all of the previous testimony, citing 
the increased expensing limit as a major factor in his decision 
to open three new appliance stores in northern Colorado. These 
three new stores created 13 new jobs, with five more jobs on 
the way. Opening a new store costs roughly $150,000. The 
revision of the tax code allowed him to expense more of these 
expenses in the year he incurred them versus over the next five 
to 37 years under various depreciation schedules.
    In summary, the Subcommittee found that the many small 
businesses across the nation took advantage of the increased 
expensing limits contained in Section 179 of the Internal 
Revenue Code and support extending these limits past their 
current 2007 expiration date in order to provide a boost to the 
economy and provide more jobs in the thriving and dynamic small 
business sector.
    For further information about this hearing, please refer to 
Committee publication #109-29.
            7.3.6  freedom in the workplace--an examination of a 
                    national right to work law

                               Background

    On Thursday, September 8, 2005, the Subcommittee on 
Workforce, Empowerment and Government Programs convened a 
hearing to discuss the benefits of H.R. 500, the National Right 
to Work Act. Introduced by the Hon. Joe Wilson (R-SC), H.R. 500 
would repeal provisions in the National Labor Relations Act 
(NLRA) that authorize the firing of a worker for failure to pay 
fees to a union as a condition of employment. Forced unionism 
is an action, currently allowed by certain provisions of 
federal law, that require workingmen and women to pay union 
dues in order to keep their job, which many believe is 
unconstitutional.

                                Summary

    The hearing consisted of two panels. The Hon. Joe Wilson, 
United States House of Representatives (R-SC) participated in 
the first panel. The second panel was comprised of Mr. Mark 
Mix, President of the National Right to Work Committee, 
Springfield, VA; Charles Baird, Ph.D., Professor of Economics, 
California State University--East Bay, Hayward, CA; Fred 
Feinstein, Esq., Senior Fellow, University of Maryland School 
of Public Policy, College Park, MD; Mr. George Galley, Electro-
Mechanical Technician Colt Manufacturing, Manchester CT; Mr. 
Michael Butcher, Engineer, Boeing Corp., Issaquah, WA; Mr. John 
McNicholas, CEO, Penloyd LLC, Tulsa, OK; and Mr. George Leef, 
Executive Director, John William Pope Center for Higher 
Education Policy, Raleigh, NC.
    Representative Wilson began the hearing outlining the 
reasoning behind H.R. 500. Congressman Wilson believes 
compulsory unionism violates the fundamental principle of 
individual liberty. HR 500 simply repeals those sections of the 
NLRA and the Railway Labor Act that authorize the imposition of 
forced-dues contracts on working Americans.
    Mr. Mix expressed strong support for H.R. 500. Mr. Mix 
argued that ending compulsory unionism would be beneficial not 
only to our economy and individuals who do not want to join a 
union but are forced to, but also the rank-and-file union 
members themselves. With the end of compulsory unionism, it 
would create an environment where labor leaders would have to 
compete for membership, be held accountable for their 
decisions, and better represent the interests of its members.
    Dr. Baird testified that one of the common defenses for 
forced unionism (i.e., prevents ``free riders'') is false. Free 
riders are defined as individuals who choose not to pay union 
dues, yet would still reap the benefits of representation. The 
issue itself creates the problem of free riders because under 
the NLRA, a union cannot bargain just for its voluntary 
members, it must bargain for all workers in the bargaining 
unit. Individual workers are forbidden to represent themselves. 
Passing H.R. 500 would eliminate these problems.
    Mr. Galley is an electrician and was a member of the United 
Auto Workers from 1961 to 1985. He renounced his membership 
during a four-year strike of his place of employment that began 
in 1985. He continually refused to pay dues, was never informed 
of his Beck rights, and was fired because of his refusal to pay 
dues. Following seven years and a successful appeal later, Mr. 
Galley got his job back and is now a Beck objector. He still 
must pay 72 percent of his dues. He expressed strong support 
for H.R. 500.
    Mr. Butcher endured a process similar to Mr. Galley. When 
he was hired, he was not forced to join the Society of 
Professional Engineering Employees in Aerospace (SPEEA). Mr. 
Butcher testified that in August 2000, SPEEA aligned with the 
AFL-CIO and the chief negotiator stated that regardless of the 
wage and benefit package put together by Boeing, no agreement 
would be reached unless Boeing agreed to force all employees to 
pay union dues. He pursued his case under his Beck rights, but 
his case languished several years and due to immense paperwork 
and schemes put forward by the union. He gave up on the process 
and is now on the job as a religious objector.
    Mr. McNicholas invested in a fixture company in Tulsa 
Oklahoma in 2003. He stated that if Oklahoma were not a right 
to work state, he probably would not have invested in the 
company. Since 2003, 250 new jobs have been added to his 
growing company.
    While expressing his support for H.R. 500, Mr. Leef 
recounted the history of labor law in the United States, 
including the NLRA that he believes takes freedoms away from 
both workers and employers in order to assist union officials 
in organizing and maintaining their unions.
    Mr. Feinstein represented the only dissenting view on the 
panel, stating that nobody is ever forced to join a union. He 
also argued that unions are the ones under stress because they 
are forced to represent everyone, even if a worker does not 
vote for that union. He opposed H.R. 500 because he feels it 
would restrict unions from representing their membership in a 
manner they are accustomed to.
    In summary, the Committee found that although 79 percent of 
Americans support the establishment of a National Right to Work 
Act, passing the bill would be a difficult challenge. It 
appeared clear, however, that the passage of H.R. 500 would 
benefit the American economy, restore freedom of association 
among individual workers, and establish accountability for the 
nation's unions. For further information about this hearing, 
please refer to Committee publication #109-30.
            7.3.7  the small business innovation research program--
                    opening doors to new technology

                               Background

    On Tuesday, November 8, 2005, the Subcommittee on 
Workforce, Empowerment, and Government Programs held a hearing 
examining the Small Business Innovation Research (SBIR) 
program. Established in 1982, the SBIR program was established 
within the major federal research and development (R&D) 
agencies. The intent of this effort was to increase government 
funding of small, high technology companies for the performance 
of R&D with commercial potential. Federal departments with an 
R&D budget of $100 million or more are required to set aside 
2.5 percent of this amount to finance SBIR activity.
    From its inception, over $15.2 billion in awards have been 
made for more than 76,000 projects. The Small Business 
Administration (SBA) established broad policy and guidelines 
under which the current 12 individual Federal agency 
departments operate their SBIR programs.

                                Summary

    The hearing consisted of one panel of public sector 
witnesses: Mr. Calvin Jenkins, Acting Associate Deputy 
Administrator for Government Contracting and Business 
Development, United States Small Business Administration, 
Washington, DC; Mr. Frank Ramos, Director, Office of Small and 
Disadvantaged Business, United States Department of Defense, 
The Pentagon, Arlington, VA; James Decker, Ph.D., Principal 
Deputy Director, Office of Science, United States Department of 
Energy, Washington, DC; Norka Ruiz Bravo, Ph.D., Deputy 
Director, Extramural Research, National Institutes of Health, 
Bethesda, MD; Colien Hefferan, Ph.D., Cooperative State 
Research, Education & Extension Service, U.S. Department of 
Agriculture, Washington, DC; and Joseph Hennessey, Ph.D., 
Senior Advisor, Industrial Innovation Program, National Science 
Foundation, Arlington, VA.
    Mr. Jenkins began by providing the history and structural 
framework of the SBIR Program. He testified that while each 
participating agency is responsible for administering and 
management of its SBIR Program, each agency must provide a 
detailed annual report to the Small Business Administration 
containing complete records of their awards. Currently, the 
agencies evaluate over 30,000 proposals, and make over 6,000 
awards to about 3,000 small companies each year.
    Mr. Ramos stated that the broad mission of the DOD SBIR 
program is to advance technology development for the warfighter 
and the nation. The DOD represents over 50 percent of the total 
federal SBIR budget, which exceeds $2 billion. Mr. Ramos 
emphasized that many of their awardees are start-up firms, with 
39 percent of all awards going to first-time DOD contractors, 
and 19 percent of all awardees were minority or women-owned 
firms. Dr. Decker testified that the DOE provides over $100 
million each year to small businesses to small businesses to 
help entrepreneurs take their ideas from conception to reality. 
Of the Phase I, or initial awards, about 12 percent are awarded 
to socially and economically disadvantaged small businesses, 
and about of third are first-time awardees with DOE. In return, 
these companies have earned more than $3 billion in sales and 
additional development funding.
    Dr. Ruiz Bravo focused her testimony on two areas: (1) the 
role the SBIR program plays in the NIH research agenda and (2) 
several of the benefits of the program within NIH and the 
country. Through a competitive phased award system, the SBIR 
program supports a wide array of innovative biomedical and 
public health projects that are designed to encourage 
commercialization of promising technologies.
    Dr. Hefferan began her testimony with a brief overview of 
the USDA process for determining awards. She then focused her 
testimony on the USDA's post-award management. Most of the 
effort is directed toward Phase II projects that have 
demonstrated technical feasibility in their first phase, 
including a commercialization assistance program for first-time 
Phase II winners, and outreach and site visits to ensure the 
USDA and its small business partners work closely.
    Dr. Hennessey spent the majority of his allotted time to 
the NSF's Phase IIB Program by telling the story of Investics, 
a small company in Georgia. Investics developed software 
through the SBIR program that was later used by Bristol-Myers 
Squibb, a large pharmaceutical company to improve performance 
at a plant they were originally going to close.
    In sum, the Subcommittee found that the SBIR program is an 
integral part of each of these agencies R&D strategies, and 
that it is an excellent example of a highly successful federal 
initiative to encourage economic growth and innovation within 
the small business community by assisting in the funding of 
critical startup and development stages of a company.
    For further information about this hearing, refer to 
Committee publication #109-36.
            7.3.8  entrepreneurial development programs of the sba

                               Background

    On Thursday, March 2, 2006, the Subcommittee on Workforce, 
Empowerment, and Government Programs held an oversight hearing 
of the Small Business Administration's (SBA) entrepreneurial 
development programs. The purpose of this hearing was to 
conduct general oversight of the SBA entrepreneurial 
development programs, with particular emphasis on improvements 
made to the programs over the past two years. Additionally, 
because the SBA will need to be reauthorized before Fiscal Year 
2007 begins, the Subcommittee received testimony on legislative 
changes the witnesses would recommend being included in the SBA 
reauthorization legislation.

                                Summary

    The hearing consisted of one panel witnesses: Ms. Cheryl 
Mills, Associate Deputy Administrator of Entrepreneurial 
Development, United States Small Business Administration, 
Washington, DC; Mr. Donald Wilson, President, Association of 
Small Business Development Centers, Burke, VA; Ms. Amanda Zinn, 
President/CEO of ECubed (Essential Entrepreneurial Expertise), 
Owings Mills, MD; Mr. Jim Pyles, Chairman SCORE, Elkhart, IN; 
Ms. Elizabeth Maneval, Owner & Publisher of We Magazine, Inc., 
Lancaster, PA; and Carol Law, Ph.D, President of Drug Free 
Workplaces, Inc., Pensacola, FL.
    Ms. Mills outlined the responsibilities of the Office of 
Entrepreneurial Development (OED), which manages a distribution 
channel of service centers for small businesses through the 
country, including assistance in preparing business plans, loan 
applications', responding to procurement inquires, and 
providing export advice. OED serves these clients primarily 
through their three resource partners: Small Business 
Development Centers (SBDCs), Women's Business Centers (WBC), 
and SCORE.
    Mr. Wilson stated that SBDCs are the largest resource 
partners and are a network of state lead centers primarily 
located on university and community college campuses and local 
chambers of commerce. SBDCs served 707,000 clients in Fiscal 
Year 2005. Mr. Wilson stressed the vital role that SBDCs can 
play in disaster relief efforts.
    Ms. Zinn testified that there are 125 WBCs who provide 
long-term in-depth training and counseling to their clients and 
target socially and economically disadvantaged women. WBCs 
counseled and trained over 144,000 clients in Fiscal Year 2005.
    Mr. Pyles confirmed that since its inception in 1964, SCORE 
has helped more than seven million clients from idea to start 
up to success. SCORE relies on both public and private money to 
fund their services, which also include disaster relief 
efforts.
    Ms. Maneval focused her testimony on the SBAs Microloan 
program. Ms. Maneval expressed concerns regarding the 
Administrations plan to restructure the SBA loan programs by 
assimilating it into the existing 7(a) program.
    Dr. Law testified that the Paul D. Coverdell Drug-Free 
Workplace grants that were instituted in 1999 have helped 709 
small businesses implement a drug-free workplace program.
    In sum, the committee found that the OED is an integral 
part of the success for millions of American small business 
that have used its vast network of services and took into 
consideration the recommendations of these industry 
representatives during the development of the committee's SBA 
reauthorization proposal.
    For further information about this hearing, refer to 
Committee publication #109-40.
            7.3.9  health care proposals to help lower the cost to 
                    small business

                               Background

    On Thursday, April 27, 2006 the Subcommittee on Workforce, 
Empowerment, and Government Programs held a hearing examining 
various proposals aimed at lowering the cost of health care for 
small business employers and employees alike that would help 
lower the number of uninsured Americans.
    More than 45 million Americans are uninsured, with nearly 
60 percent of those employed by small businesses. In order to 
reduce the number of uninsured, Congress and the President have 
proposed a series of reforms designed to reduce health care 
costs, expand health care coverage, and improve the quality of 
care, specifically, the establishment of Association Health 
Plans (AHPs), the introduction of Health Savings Accounts 
(HSAs), and medical liability reform.
    Additionally, the Subcommittee examined the Health Care 
Choice Act of 2005, H.R. 2355, introduced by Representative 
John Shadegg (R-AZ). This bill would allow individuals to 
purchase health insurance coverage over state lines.

                                Summary

    The hearing consisted of two panels. Witnesses on the first 
panel were: the Hon. John Shadegg, United States House of 
Representatives (R-AZ); and Mr. Robert J. Carroll, Deputy 
Assistant Secretary for Tax Analysis, United States Department 
of Treasury, Washington, DC. Panel two consisted of: Mr. Ed 
Lawler, Realtor, ReMax Alliance, Fort Collins, CO; Mr. Cecil B. 
Wilson, M.D., Chair-Elect of the Board of Trustees, American 
Medical Association, Chicago, IL; Merrill Matthews, Ph.D., 
Director, Council for Affordable Health Insurance, Alexandria, 
VA; Mr. Paul Hense, President, Hense and Assocs., Grand Rapids, 
MI; and Mr. Dan Perrin, President, HSA Coalition, Washington, 
DC.
    Representative Shadegg began his testimony detailing the 
provisions of H.R. 2355. Under this legislation, consumers 
would no longer be limited to purchasing policies dictated by 
their state's regulations and mandated benefits. Instead, 
consumers could decide among a variety of insurance policies 
qualified in one state but offered for sale in multiple states. 
On average, Mr. Shadegg testified that should this bill become 
law, the cost of health insurance could drop as much as 12 
percent.
    Mr. Carroll outlined President Bush's Health Care 
Initiative. At the core of this initiative is a set of tax 
proposals that puts the health care consumer more in control of 
his or her health care and places health care purchased 
directly by individuals with high deductible plans on equal 
footing with employer-provided health insurance. The initiative 
also includes a refundable tax credit to cover the cost of high 
deductible health plan insurance premiums that is targeted to 
the lowest income Americans.
    Mr. Lawler testified that because the vast majority of real 
estate agents are independent contractors and therefore, must 
purchase their own health insurance. Mr. Lawler vigorously 
supports legislation that would create association health 
plans, or small business health plans.
    Dr. Wilson focused his testimony on the dire need for 
medical liability reform. He testified that the Department of 
Health and Human Services estimates that runaway medical 
liability costs, primarily physicians practicing defensive 
medicine (ordering tests and procedures that may not be 
necessary to protect themselves from liability down the road), 
adds $70 billion to $126 billion each year in extra medical 
costs. Dr. Wilson stated that 21 states are currently in 
crisis, with physicians leaving or limiting their practice to 
avoid high-risk procedures.
    Dr. Matthews testified in support of expanding health 
savings accounts (HSAs). He pointed out that roughly 3.2 
million Americans are now covered by HSAs and that 31 percent 
of those in the individual market purchasing HSAs were 
previously uninsured. In the small group market, one-third of 
the HSA plans where to previously uninsured companies. Dr. 
Matthews also expressed strong support for H.R. 2355.
    Mr. Hense centered his testimony in support of H.R. 4961, 
the Self Employed Health Care Affordability Act of 2006, 
legislation introduced by Representative Hart (R-PA) and 
Chairman Manzullo. The bill would not subject payments make to 
purchase health insurance to the 15.3 percent Social Security 
or Medicare tax.
    Mr. Perrin detailed several statistics showing the 
continued growth and popularity of HSAs. Perhaps the most 
telling argument presented is that HSAs not only offer a way 
out of the current health insurance problems, but they also 
give people the opportunity to build up funds during their 
working years.
    In sum, the Subcommittee found that by expanding the use 
and ease of HSAs, the establishing AHPs, reforming America's 
medical liability system, and passing reforms like H.R. 2355 
and H.R. 4961, Congress can make health care more affordable, 
more reliable, and easier to use for small business.
    For further information about this hearing, refer to 
Committee publication #109-49.
            7.3.10  immigrant employment verification and small 
                    business

                               Background

    On Tuesday, June 27, 2006, the Subcommittee on Workforce, 
Empowerment, and Government Programs held a hearing on the 
issue of immigrant employment verification. Because of the 
growing problem of illegal immigration, the House of 
Representatives passed H.R. 4437, the Border Protection, 
Antiterrorism, and Illegal Immigration Control Act in December 
2005. Additionally, the Senate passed S. 2611, the 
Comprehensive Immigration Reform Act of 2006 in May, 2006. Both 
bills make numerous significant changes to our immigration law 
and border security efforts. Contained in H.R. 4437 is a 
provision that would establish an employment eligibility 
verification system within 18 months that builds on the current 
voluntary pilot program, known as the Basic Pilot Program. The 
purpose of this hearing was to focus on those provisions 
establishing the employment eligibility verification system, 
specifically examining how these reforms would have affect our 
nation's small business community.

                                Summary

    The hearing consisted of two panels. The first panel 
consisted of: The Hon. Ken Calvert, United States House of 
Representatives (R-CA); Mr. Robert Divine, Acting Deputy 
Director, U.S. Citizenship and Immigration Services, Department 
of Homeland Security, Washington, DC. The second panel's 
members were: Mr. Jack Shandley, Senior Vice President, Swift & 
Co., Greeley, CO; Mr. Angelo Amador, Director, Immigration 
Policy, United States Chamber of Commerce, Washington, DC; Mr. 
Mark Krikorian, Executive Director, Center for Immigration 
Studies, Washington DC; Mr. Toby Malara, Government Affairs 
Counsel, American Staffing Association, Alexandria, VA; and 
Monte Lake, Esq., Partner, McGuiness, Norris, & Williams, LLP, 
Washington, DC.
    Congressman Calvert testified that businesses need to use 
this program in order to regain confidence in their workforce. 
Because most small business owners are not document experts, 
Representative Calvert proposed to make the Basic Pilot Program 
mandatory for all businesses but phased in over time.
    Mr. Divine stated that although neither H.R. 4437 nor S. 
2611 has yet become law, the USCIS is already planning for the 
expansion on the program, explaining that the President's 
Fiscal Year 2007 budget requests $110 million to expand and 
improve the Basic Pilot.
    Mr. Shandley stated that Swift and Co. supports balanced 
and comprehensive immigration reform and has voluntarily 
participated in the Basic Pilot since 1999. Although the 
program has been effective in helping maintain a legal 
workforce at Swift, Mr. Shandley suggested that significant 
policy tension exists between the Department of Homeland 
Security's Immigration and Customs Enforcement branch, which is 
charged with enforcing verification provisions, and the 
Department of Justice's Office of Special Counsel, which 
enforces anti-discrimination provisions. Mr. Shandley suggested 
that this dichotomy must be eliminated for this program to work 
correctly.
    Mr. Amador stated that the Chamber supports a new 
employment verification system, but only in the context of 
comprehensive immigration reform. Any verification system must 
be fast, accurate, and reliable in practical real-work 
conditions. Of the two versions, the Chamber supports the 
Senate bill, S. 2611 over the House bill, H.R. 4437.
    Mr. Krikorian expressed enthusiastic support for making the 
Basic Pilot Program mandatory. He testified that last year, 
approximately 56 million hiring decisions were made in the 
United States, an average of 200,000 per day. To put that in 
perspective, VISA processes 500 times that many credit card 
transactions each day. Mr. Krikorian stated that with adequate 
support from the Congress and the Executive Branch, there 
should be no reason this program would not work practically, 
accurately, and efficiently.
    Mr. Malara also stated the American Staffing Association 
supports Congressional efforts on comprehensive immigration 
reform. He also stated that two provisions are critical to the 
staffing industry's survival. First, staffing firms should have 
the flexibility in using any new electronic employment 
verification system. Second, Mr. Malara expressed concerns 
regarding provisions in the House bill that could force 
staffing firms to comply.
    Finally, Mr. Lake stated that American agriculture would 
support electronic verification of employment eligibility, as 
long as the process is simple, manageable, and provides clear-
cut compliance responsibilities.
    In summary, the Subcommittee found that the vast majority 
of American small businesses are in favor of implementing 
commonsense immigration reform, including implementation of a 
new employee verification system, as long as the process is 
free, easy to use, understand, phased-in over time, and 
provides quick, accurate results.
    For further information about this hearing, please refer to 
Committee publication #109-58.
            7.3.11  health care and small business: real options for 
                    colorado businesses

                               Background

    On Thursday, August 10, 2006, the Subcommittee on 
Workforce, Empowerment, and Government Programs held a field 
hearing in Loveland, Colorado examining various proposals aimed 
at lowering the cost of health care for small business 
employers and employees to reduce the number of uninsured 
Americans. The Honorable John Shadegg (R-AZ) joined the hearing 
with Subcommittee Chairman Marilyn Musgrave (R-CO).
    More than 45 million Americans are uninsured, with nearly 
60 percent of those employed by small businesses. In order to 
reduce the number of uninsured, Congress and the President have 
proposed a series of reforms designed to reduce health care 
costs, expand health care coverage, and improve the quality of 
care, specifically, the establishment of association health 
plans (AHPs), the introduction of health savings accounts 
(HSAs), medical liability reform, H.R. 2355, the Health Care 
Choice Act of 2005, and H.R. 4961, the Self-Employed Health 
Care Affordability Act of 2006.

                                Summary

    The hearing consisted of one panel: Mr. Matt Fries, 
President/CEO of Professional Document Management, Fort 
Collins, CO; Mr. Dale Roberts, Chairman, Loveland Chamber of 
Commerce, Loveland, CO; Ms. Chris Boesch, Exodus Moving and 
Storage, Fort Collins, CO; Mr. Fred Liske, General Manager, 
American Eagle Distributing Company, Loveland, CO; Mr. Mark 
Hillman, former Colorado State Senator, Burlington, CO; Jack 
Cletcher, M.D., Berthoud, CO; Ms. Deb Tamlin, Real Estate 
Broker, ZTI Group, Fort Collins, CO; Mr. Allen Jensen, Colorado 
Association of Health Underwriters, Englewood, CO; and, Ms. 
Gail Snyder, Agent, Snyder Insurance Agency, Loveland, CO.
    Nearly all of the witnesses expressed some manner of 
support for each of the topics on the agenda. Mr. Fries 
believes that allowing individuals shopping in a more 
competitive insurance market is the best way to contain costs 
and lower the number of uninsured. Mr. Roberts stated that the 
Loveland Chamber is currently trying to become a bona-fide 
association because, under Colorado law, they are allowed to 
participate in AHPs. Ms. Boesch stated that her moving company 
is unable to provide health insurance for their 60 employees 
because the quotes they have received for coverage are right 
around $50 per person per month. Ms. Boesch suggested 
abolishing insurance companies and instead, working directly 
with the hospitals and doctors as a way to lower costs. Mr. 
Liske had just renewed his policy for his 120 employees, and he 
saw a 9.7 percent increase over his 2002 health care 
expenditures. He stated that increasing the options for 
employers, such as in H.R. 2355, and the potential of larger 
pooling through association health plans, would be ``absolutely 
phenomenal for us.'' Mr. Hillman expressed sincere reservations 
about the federal government's ability to fix to the current 
problems in the health care marketplace because of the problem 
of mandated coverage. Mr. Hillman suggested allowing health 
insurance premiums to be fully tax deductible for everyone. Dr. 
Cletcher focused his testimony on the need for medical 
liability reform. Ms. Tamblin, speaking on behalf of the 
National Association of Realtors (NAR), stated that both she 
and the NAR are in strong support of AHPs. Mr. Jensen stated 
that he opposed the establishment of unregulated association 
health plans because these plans would have a pricing advantage 
over the fully insured small group markets already operating in 
the states, thus, creating a distorted playing field. Mr. 
Jensen did support, however, HSAs and medical liability reform. 
In rounding out the panel, Ms. Snyder expressed support for 
HSAs as she has seen numerous clients purchasing the qualifying 
high-deductible plans along with HSAs, with many employers 
providing this as a way of saving both themselves and their 
employees money.
    In sum, the Subcommittee found that by expanding the use 
and ease of HSAs, the establishing AHPs, reforming America's 
medical liability system, and passing reforms like H.R. 2355 
and H.R. 4961, Congress can make health care more affordable, 
more reliable, and easier to use for small business.
    For further information about this hearing, refer to 
Committee publication #109-63.

7.4  Summaries of the Hearings Held by the Subcommittee on Regulatory 
        Reform and Oversight

            7.4.1  the administration's program to reduce unnecessary 
                    regulatory burden on manufacturers--a promise to be 
                    kept

                               Background

    The Regulatory Reform and Oversight Subcommittee held a 
hearing on Thursday, April 28, 2005 that focused on the 
Administration's announced program to curb the regulatory 
burden on businesses, especially small businesses, in the 
manufacturing sector. The promise to help free manufacturers in 
the United States from the burden of needless regulations is 
much anticipated, and it is a promise that needs to be kept.
    In March of 2005, the Administration announced that federal 
agencies will take practical steps to reduce the cost burden on 
manufacturing firms operating in the United States by acting on 
76 public nominations to reform federal regulations. It was 
further announced that the Office of Management and Budget 
(OMB) directed agencies to take the most appropriate action to 
ease the excessive burden for the manufacturing industry while 
maintaining, health, safety, and environmental protections for 
the public. The hearing examined the Administration's 
commitment, both on the part of the OMB and the agencies, to 
reduce the regulatory burden on the manufacturing sector as 
promised.

                                Summary

    There was one panel comprised of: The Honorable John D. 
Graham, Ph.D., Administrator, Office of Information and 
Regulatory Affairs, Office of Management and Budget, 
Washington, DC; The Hon. Veronica Vargas Stidvent, Assistant 
Secretary for Policy, United States Department of Labor, 
Washington, DC; The Hon. Thomas M. Sullivan, Chief Counsel for 
Advocacy, United States Small Business Administration, 
Washington, DC; Ms. Stephanie Daigle, Acting Associate 
Administrator, Policy, Economics and Innovation, United States 
Environmental Protection Agency, Washington, DC; Mr. Howard 
Will, President, Caldwell Group, Inc., Rockford, IL; Mr. Drew 
Greenblatt, President, Owner, Marlin Steel Wire Products, 
Baltimore, MD; and Mr. Robert Schull, Director of Regulatory 
Policy, OMB Watch, Washington, DC.
    Dr. Graham announced that the Administration had reduced 
the growth of regulations by 70 percent, but since 1981 there 
were 115,000 new regulations adopted. He pointed out that the 
European Union was employing an aggressive campaign to reduce 
red tape and unnecessary laws. Reducing the regulatory burden 
on U.S. manufacturers was essential to maintaining 
competitiveness. Mr. Will pointed out that Associated Wire Rope 
Fabricators has the testing capability and technical expertise 
to develop industry wide standards for such items as web slings 
and that the American Society of Mechanical Engineers (ASME) is 
the recognized safety standard for slings. Despite this fact, 
the Occupational Safety and Health Administration (OSHA) 
standard was outmoded and had not been changed for 30 years. 
Ms. Stidvent expressed the view that advances in science and 
technology had made a number of agency regulations outdated. 
She underscored the approach taken by OSHA to reform 
regulations, provide compliance assistance, and to enforce 
regulations to maintain health standards and prevent accidents.
    Mr. Greenblatt stated that the cost per employee of 
regulations have a greater impact on small manufacturers as 
compared to large manufacturers. The cost for firms with fewer 
than 20 employees was $17,000 per employee as compared with 
$7,000 for manufacturers with more that 500 employees. Ms. 
Daigle pointed out that EPA had a new strategy to help small 
businesses by making regulations understandable and practical 
to implement. She provided an example of how the panel process 
under the Regulatory Flexibility Act (RFA) had resulted in the 
final rule being less burdensome to small businesses. Mr. 
Sullivan indicated that nearly 99 percent of all manufacturers 
were small businesses and that they were more innovative than 
large businesses, i.e., producing 13 to 14 more patents for 
each employee. He was in agreement that the U.S. must maintain 
its competitiveness and not burden small manufacturers with 
needless regulations. Mr. Schull was of the view that the 
emphasis should be on providing small manufacturers with 
compliance assistance rather than reducing the regulatory 
burden.
    In summary, the Subcommittee concluded that the 
Administration is to be commended for embarking on this 
regulatory reform initiative and encourages quicker progress on 
making these 76 regulatory changes become reality in the effort 
to help in the recovery of our nation's manufacturing sector.
    For further information, please refer to committee 
publication #109-14.
            7.4.2  anwr's benefits for small business

                               Background

    On Thursday, May 19, 2005, the Subcommittee on Regulatory 
Reform and Oversight held a hearing to discuss the benefits of 
drilling for oil and natural gas in Alaska's National Wildlife 
Reserve (ANWR). Congress set a very small part of ANWR, labeled 
as area ``1002,'' aside for natural energy exploration in the 
Alaska National Interest Claims Act of 1980. The subcommittee's 
hearing explored the various sectors of small business that 
would benefit from proceeding with drilling in area ``1002.''

                                Summary

    The hearing consisted of two panels. The lone witness on 
the first panel was: The Hon. Steve King (R-IA). The witnesses 
on the second panel were: Mr. Gerald Hood, Government Affairs 
Consultant, Arctic Power, Anchorage, AK; Ms. Karen Wright, 
President/CEO, Ariel Corp., Mt. Vernon, OH; Eban Goodstein, 
Ph.D., Professor of Economics, Lewis and Clark College, 
Portland, OR.
    Representative King spoke in support of drilling in ANWR, 
sighting how Iowa's ``Corn Belt'' is being strangled by rising 
fuel, oil, and natural gas prices. He went on to point out that 
drilling in Alaska will yield enough to supplant nearly 30 
years of imports from the Organization of the Petroleum 
Exporting Countries (OPEC). This drilling, he felt, would 
alleviate a good deal of the financial burden placed upon the 
nation's farmers, as well as create opportunity for our 
nation's manufacturers building and maintaining the critical 
pipeline.
    Mr. Hood represented the energy industry, as well as native 
Alaskans, and testified to the benefits of drilling in area 
1002 of ANWR for small businesses both in Alaska and throughout 
the nation. Mr. Hood testified that oil exploration and 
extraction in area 1002 of ANWR could create 735,000 jobs 
throughout the United States, according to a study conducted by 
the Wharton Econometrics Institute at the University of 
Pennsylvania. Ms. Wright testified that small manufacturers 
that supply the oil industry would benefit from the opening of 
ANWR--small business manufacturers who supply the energy 
industry with critical parts and services. Professor Goodstein 
opposed drilling in ANWR because the economics of drilling and 
the potential supply from ANWR would not outweigh the 
environmental costs.
    In summary, the members of the Subcommittee concluded that 
drilling in area 1002 of ANWR would have significant direct and 
indirect benefits for small businesses not only in Alaska but 
also in every state of the union.
    For any further information, please refer to Committee 
publication #109-16.
            7.4.3  veteran's access to capital

                               Background

    On Tuesday, June 21, 2005, the Small Business Subcommittee 
on Regulatory Reform and Oversight held a hearing to focus on 
the needs of veteran entrepreneurs, particularly those called 
up for service in the National Guard or Reserves. The 
subcommittee explored the primary barriers self-employed 
reservists face in maintaining financially solvent businesses 
back home during deployment and discussed what, if any, 
legislative changes may be made to ensure that these veterans 
have a business to come back to after their tour of duty.

                                Summary

    The hearing consisted of one panel with four witnesses: Mr. 
Bill Elmore, Associate Administrator for Veterans Business 
Development, United States Small Business Administration, 
Washington, DC; Mr. Donald Wilson, President, Association of 
Small Business Development Centers, Burke, VA; Ms. Patricia 
Kerr, Missouri State Veterans Ombudsman, Jefferson City, MO; 
Mr. Harry Alford, President/CEO, National Black Chamber of 
Commerce, Washington, DC.
    Mr. Elmore the programs the Small Business Administration 
presently has in place to assist those deployed overseas. He 
stated that there are several loan and assistance programs in 
place but they are not fully utilized.
    Mr. Wilson explained that the association recognizes that 
the Department of Defense relies more and more upon reservists 
and is concerned about addressing the needs of small business 
owners who also serve as soldiers upon their return home. 
Reserve call-ups have increased sharply since the terrorist 
attacks of September 11, 2001. One-third of the troops deployed 
in Iraq and Afghanistan in November 2004 were reservists.
    Ms. Kerr believes Congress needs to assist with federal 
funds for a Veterans Ombudsman in each state's veterans' 
commission with sufficient support staff to provide a single 
point of contact; eliminate federal business taxes for Global 
War veteran entrepreneurs during their mobilization and 
deployment; provide more federal support for community based 
organizations such as the St. Louis Veterans Business Resource 
Center; and keep deployments in the Army at a shorter duration, 
similar to the Marines, Air Force, and Navy.
    Finally, Mr. Alford elaborated on how, although, programs 
may be in place, they do not reach all those who need them. 
Many loyal and patriotic soldiers come back from deployment and 
have no idea of the resources available to them.
    In summary, the Subcommittee concluded that further 
legislation is needed to address the present and unique needs 
of these small business owners who also choose to serve our 
nation in times of need.
    For any further information on this hearing, please refer 
to Committee publication #109-22.
            7.4.4  entrepreneur soldiers empowerment act

                               Background

    On Thursday, September 29, 2005, the Subcommittee on 
Regulatory Reform and Oversight held a hearing to review the 
need for legislation to assist those in uniform, principally 
members of the National Guard and the Reserves, who were small 
business owners and who had been called to active duty. This 
was a follow-on hearing to the one held by the Subcommittee in 
June concerning veteran's access to capital and the challenge 
that members of the National Guard and Reserve face in keeping 
their businesses solvent when they are called to active duty. 
It is estimated that of the 860,000 reservist 18 percent are 
employed by small businesses and approximately 9 percent are 
self-employed.
    H.R. 3898, the Entrepreneur Soldiers Empowerment Act, was 
introduced by Subcommittee Chairman Todd Akin (R-MO) for the 
purpose of providing some solutions to this problem. H.R. 3898 
would establish a Veterans Outreach Centers in each regional 
office of the Small Business Administration (SBA) and establish 
Technical Mentoring Assistance Committees in each SBA regional 
districts.

                                Summary

    The hearing had one panel comprised of Mr. William Elmore, 
Associate Administrator, Veterans Business Development, United 
States Small Business Administration, Washington, DC; John 
Winkler, Ph.D., Deputy Assistant Secretary of Defense for 
Reserve Affairs, United States Department of Defense, The 
Pentagon, Arlington, VA; and. Douglas Holtz-Eakin, Ph.D., 
Director, Congressional Budget Office, Washington, DC.
    Mr. Elmore stated that the Small Business Administration 
(SBA) had opened four Veterans Business Outreach Centers in 
1999. The four centers are located in California, Florida, 
Texas, and New York. A fifth center was scheduled to be opened 
soon in Pennsylvania. It was SBA's position that opening new 
centers beyond these five would not be cost effective. Also, 
SBA did not support the provisions in H.R. 3898 that would 
establish technical and mentoring assistance committees that 
would recruit volunteers to be business mentors to veterans, 
preferring to work instead through existing SBA technical 
assistance partners such as Small Business Development Centers 
(SBDCs) and SCORE.
    Dr. Winkler stated that the Department of Defense (DOD) 
tries to mitigate the impact of call-ups on reservists by (1) 
using reservist only when needed, (2) limiting the period of 
call-ups to 24 consecutive months, and (3) providing as much 
advanced notice as possible. DOD is cooperating with SBA and 
developing a closer working relationship with SBA to determine 
what is needed to assist reservist that are small business 
owners and encounter business hardships when called to active 
duty.
    Dr. Holtz-Eakin stated that call-up of reservists do not 
have a significant impact on the economy generally but do have 
a material effect on those who are required to serve on active 
duty. There are 50,00 persons in the reserves that are self-
employed and 120,000 who are employed by small businesses. In 
the past four years, approximately 455,000 reservist have been 
mobilized and about 36 percent of the troops in Afghanistan and 
Iraq are reservist. Dr. Holtz-Eakin suggested that the economic 
hardship encountered by reservist when called to active duty 
might be compensated through tax credits, loans, or insurance.
    The Subcommittee concluded that SBA and the Defense 
Department needed to focus on providing some additional 
remedies to this growing problem, particularly as more and more 
Reservists and Guardsmen serve for longer tours of duty abroad.
    For further information on this hearing, refer to the 
Committee publication #109-33.
            7.4.5  the internet sales tax: headaches ahead for small 
                    business?

                               Background

    On Wednesday, February 8, 2006, the Subcommittee on 
Regulatory Reform and Oversight held a hearing that focused on 
recent federal and state efforts to impose a responsibility to 
collect state sales and use taxes on out-of-state Internet 
vendors.
    Currently, 45 states and the District of Columbia have a 
sales tax. Each of these states also has a use tax, which is a 
tax on use, storage, or consumption of a taxable item in which 
a sales tax was not collected. States claim a substantial loss 
of revenue ($4 billion to $20 billion annually, depending on 
the study) because use tax remittance is based on the honor 
system and many people do not comply with the law. States have 
been looking for ways to lay claim to this lost revenue for 
many years. In Quill v. North Dakota, the Supreme Court ruled 
in 1992 that a state could not impose the burden of use tax 
collection on businesses that do not have substantial presence 
in their state. In March 2000, 40 states began to work on the 
Streamlines Sales and Use Tax Agreement (SSUTA). The SSUTA 
seeks to make the task of paying state sales and use taxes 
across borders sufficiently easy enough to win the favor of 
Congress and the courts. The SSUTA is a voluntary system for 
businesses unless federal legislation is enacted. There are 
currently two Senate bills under consideration that are nearly 
identical in language. The bills differ only in how they 
determine the size of business that would be exempt from 
collecting this use tax.

                                Summary

    The hearing consisted of one panel comprised of the 
following five witnesses: Walter Hellerstein, Distinguished 
Professor of Law, University of Georgia, Athens, GA; Mr. Brian 
Bieron, Senior Director of Federal Government Relations, eBay, 
Inc., Washington, DC; Mr. Paul Misener, Vice President, Office 
of Global Public Policy, Amazon.com, Washington, DC; Mr. Ernest 
Perry, Owner, Perry's at Southpark, Charlotte, NC; and Mr. Rory 
Rawlings, Founder and Chief Tax Automation Officer, Avalara, 
Inc., Seattle, WA.
    Mr. Hellerstein gave a legal summary of state and federal 
taxation law. He discussed the roles that Congress and the 
courts play regarding this issue.
    Mr. Bieron stated that complying with the tax law for every 
local jurisdiction could be very challenging for small 
businesses and requires the use of a third party. Mr. Misener 
discussed the importance of companies operating on a level 
playing field. He stated that third party service providers 
could easily help small businesses comply with interstate sales 
tax law. He said that the Streamlined Sales and Use Tax Program 
(SSTP) has simplified sales tax law but the states still had 
quite a distance to go. Mr. Bieron and Mr. Misener both 
discussed the small business exception found in both Senate 
bills, S. 2152 and S. 2153. Although they differed wildly in 
their opinion of the size of business that should qualify for 
the small business exception, both were favorable to the 
language of Senator Byron Dorgan's bill, S. 2153.
    Mr. Perry talked about how the internet has helped to 
expand his retail business. Mr. Perry went on to discuss the 
danger of the SSTP for small businesses and the possibility 
that not all costs would be covered in the future.
    Mr. Rawlings discussed the ease of using a Certified 
Service Provider (CSP). He went on to say that CSPs assumed all 
liability and states paid for the cost of their service.
    In sum, the Subcommittee concluded that while there is 
disagreement on the benefits or detriments of the SSTP and the 
pending Senate legislation, there is agreement that more needs 
to be done to streamline the sales and use tax laws to reduce 
the regulatory compliance burden for small businesses.
    For further information about this hearing, refer to 
Committee publication #109-39.
            7.4.6  the state of small business security in a cyber 
                    economy

                               Background

    On March 16, 2006, the Subcommittee on Regulatory Reform 
and Oversight held a hearing that focused on the cyber threats 
that affect small business and the economy as a whole. There is 
a growing economic risk associated with information technology 
security lapses for the U.S. economy as small businesses become 
more dependent on emerging technologies. Criminals realize that 
small businesses do not employ adequate security measures and 
have shifted their focus to small and medium sized businesses. 
As this threat landscape has changed, small businesses have 
been slow to adapt to the changing environment. Because the 
Internet creates a complex web that connects critical 
infrastructure to home users to large businesses to the 
federal, state and local governments to small businesses, all 
stakeholders agree that more must be done to insure the 
security of this important medium. Industry and government have 
collaborated to form many public/private partnerships to train 
and increase awareness among businesses and consumers.

                                Summary

    There were two panels of witnesses that testified at the 
March 16, 2006 hearing. The first panel consisted of: Ms. Cita 
M. Furlani, Acting Director, Information Technology Laboratory, 
National Institute of Standards and Technology, United States 
Department of Commerce, Gaithersburg, MD; Ms. Lydia Parnes, 
Director of Bureau of Consumer Protection, Federal Trade 
Commission, Washington, DC; Mr. Larry D. Johnson, Special Agent 
in Charge, Criminal Investigative Division, United States 
Secret Service, Department of Treasury, Washington, DC; and Mr. 
Steven M. Martinez, Deputy Assistant Director, Cyber Division, 
Federal Bureau of Investigation, Washington DC. The second 
panel was comprised of: Mr. Ari Schwartz, Deputy Director, 
Center for Democracy and Technology, Washington, DC; Mr. 
Enrique Salem, Senior Vice President, Security Products & 
Solutions, Symantec Corporation, Cupertino, CA; Burton S. 
Kaliski, Jr., Ph.D., Vice President of Research, RSA Security, 
Bedford, MA; Mr. Roger Cochetti, Group Director--U.S. Public 
Policy, Computing Technology Industry Association, Arlington, 
VA; and Mr. Howard Schmidt, President/CEO, R & H Security 
Consulting LLC, Issaquah, WA.
    Both panels of witnesses agreed that the key to creating a 
more secure cyber environment was by educating and raising 
awareness among technology users. The government witnesses 
began by describing their agencies/departments roles in 
combating cyber crime. Ms. Furlani discussed the National 
Institute of Standards and Technology's role in setting cyber 
security standards and the various programs that are designed 
to educate Internet users. Ms. Furlani stated the importance of 
small businesses protecting their information technology (IT) 
infrastructure from not only an economic viewpoint but a 
national security perspective as well. Ms. Parnes focused her 
testimony on the Federal Trade Commission's efforts to foster a 
culture of security for Internet users through its OnGuard 
Online program and Safeguards Rule. She explained that by 
following best practices, businesses can keep consumers 
sensitive information safe. Mr. Johnson discussed the three 
statutes that authorize the Secret Service to investigate 
technology crimes. He discussed the Secret Service's 
collaborative efforts with the Computer Emergency Response Team 
located in Pittsburgh, PA at Carnegie Mellon University. Mr. 
Martinez discussed the importance of e-commerce in our society. 
He explained that small businesses are an important link in the 
security of the internet not only because they sell products 
online but because many small businesses provide support for 
the Internet and IT operations for large businesses. Mr. 
Martinez concluded by explaining the partnership building 
efforts the FBI is currently engaged in and the importance of 
education in combating cyber crime.
    The second panel focused their testimony on current cyber 
security threats and the industry oriented solutions that are 
available for small businesses with limited resources. Ari 
Schwartz described the Internet as a powerful force for good 
and that electronic criminal activity can undermine user 
confidence in the Internet, which can ultimately have a 
negative impact on the spread of democracy and capitalism. Mr. 
Salem discussed the findings in Symantec's latest Internet 
threat assessment. He spoke of how small businesses are the 
third most targeted group on the internet for criminal activity 
and how attacks are targeted to a greater degree. Mr. Kaliski 
discussed ways small businesses can protect themselves from 
attacks. Not all businesses need to employ the same level of 
security measures. Companies that hold a great deal of 
sensitive data should utilize greater security measures than 
those that do not handle as much sensitive information. Mr. 
Cochetti focused his testimony on the ability of Value-Added 
Resellers (VARs) to meet the security needs of small 
businesses. Finally, Mr. Schmidt described some of the steps 
that have been taken by the government and industry to create a 
more secure electronic infrastructure. He divided small 
businesses into three categories: (1) those that use their home 
system, (2) those with a dedicated computer system for their 
business, but limited staff to oversee it; and (3) those that 
have an IT department dedicated to maintaining the security of 
their information technology infrastructure.
    In sum, the Subcommittee concluded that the most important 
step in creating a secure cyber environment was raising the 
level of awareness among technology users. Furthermore, more 
focus was needed on the small business sector of our economy 
and that the Small Business Administration was not doing enough 
to aid small businesses in creating a secure cyber environment.
    For further information about this hearing, refer to 
Committee publication #109-44.
            7.4.7  the small business administration's procurement 
                    programs

                               Background

    On Thursday, March 30, 2006 the Subcommittee on Regulatory 
Reform and Oversight held a hearing to conduct oversight of 
Small Business Administration's (SBA's) procurement programs, 
with particular emphasis on improvements made to the programs 
over the past two years. The SBA is responsible for working 
with federal agencies in setting small business procurement 
goals for individual agencies and with assisting each agency in 
meeting these goals. The SBA is also tasked with providing 
procurement assistance to small businesses in order to maximize 
their participation in the federal marketplace. Federal 
agencies are responsible for setting-aside procurement 
opportunities to ensure that a fair share of their contracts is 
awarded to small firms and that contracting goals are achieved. 
In the past, small businesses have expressed concern that SBA 
and other federal agencies were providing neither sufficient 
nor effective procurement assistance. In addition, in 
preparation for reauthorizing certain SBA programs before the 
beginning of fiscal year 2007, the hearing served as a forum 
for proposed program changes that might be included in SBA 
reauthorization legislation.

                                Summary

    The hearing was comprised of one panel of six witnesses: 
Mr. Anthony Martoccia, Associate Deputy Administrator, Office 
of Government Contracting and Business Development, United 
States Small Business Administration, Washington, DC; Mr. 
Rafael Collado, Chairman & CEO, Phacil Inc., Camden, NJ; Mr. 
Kurt Heckman, President, Sycamore.US, Inc., Frederick, MD; Mr. 
John Lopez, Chairman, Association for Service Disabled 
Veterans, Washington, DC; Ms. Catherine Giordano, CEO, 
Knowledge Information Solutions, Inc., Virginia Beach, VA; and 
Ms. Christina Schneider, CFO, Purcell Contracting Corporation, 
Watertown, NY.
    Mr. Martoccia first discussed the President's Fiscal Year 
2007 budget request for the SBA. He was of the view that SBA 
has become more efficient through the use of technology and has 
been able to operate on a leaner budget while being able to 
offer more services with greater results. He noted that the 
amount of procurement dollars going to small businesses had 
significantly increased by $20 billion since FY 2000 and 
subcontracting opportunities going to small businesses also 
increased by $10 billion. In Fiscal Year 2004, small businesses 
received approximately $69 billion in prime contract awards or 
about 23 percent out of a total of $300 billion prime contract 
awards.
    Mr. Collado expressed concern over the lack of progress in 
the 8(a) and Historically Underutilized Business Zone (HUBZone) 
programs. He advocated Congress play an active role in seeing 
that small businesses deal with the federal procurement arena 
on a level playing field and are treated fairly in acquiring 
contracts in the federal marketplace.
    Mr. Heckman commented on the experience of his company that 
small businesses that are subcontractors do not get proper 
credit for their success. As a participant in the HUBZone 
program, Mr. Heckman stated that his company had grown three-
fold.
    Mr. Lopez was of the view that bureaucratic bungling had 
led to unsuccessful attainment of the three percent government-
wide procurement goal for service-disabled veteran-owned small 
businesses. The President's Executive Order No. 13360 calls for 
vigorous and immediate implementation of actions leading to 
meeting or exceeding the statutory goal. He advocated passage 
of H.R. 3082, The Veterans Owned Small Business Promotion Act, 
to clarify and strengthen the present law.
    Ms. Giordano recommended various improvements including 
implementation of the law providing for set-asides for women-
owned small businesses, clarification of the criteria for 8(a) 
certification, and a continuing Administration support for 
unbundling contracts.
    Ms. Schneider made various recommendations for changes in 
the HUBZone program, including limiting construction projects 
to within 150 miles of the HUBZone in which the HUBZone small 
business contractor is located. Also, she recommended a smaller 
price preference to HUBZone small businesses in bidding on 
construction projects.
    In sum, the subcommittee concluded that the SBA needed to 
improve the implementation of their procurement assistance 
programs.
    For further information about this hearing, please refer to 
Committee report #109-45.
            7.4.8  electronic medical records

                               Background

    On Thursday, April 6, 2006 the Subcommittee on Regulatory 
Reform and Oversight held a hearing on electronic medical 
records technology. The purpose of this hearing was to discuss 
the feasibility of the adoption of electronic medical records 
(EMR) technology by small medical practitioners. The 
subcommittee explored the challenges small healthcare clinics 
face in adopting such technology, including, but not limited 
to, economic costs in light of increasing liability costs and 
subsequent Medicare payment reductions. In addition, the 
Subcommittee wanted to determine the benefits of adopting this 
technology, such as paperwork reduction and the lessening of 
medical errors.

                                Summary

    The hearing was comprised of two panels of witnesses. The 
first panel was: Mr. Jack Price, Vice President, Services, 
HIMSS Analytics, Milford, DE; Christopher Normile, M.D., St. 
Charles, MO; and Ms. Joan Magruder, Vice President, Development 
and Planning, BJC Healthcare, St Louis, MO. The second panel 
consisted of The Hon. Phil Gingrey, United States House of 
Representatives (R-GA).
    Ms. Magruder began by describing what BJC is doing to help 
local healthcare facilities adopt EMR technology. She discussed 
the importance of a holistic approach to the adoption of this 
technology throughout the health care community, not only as a 
matter of aggregate cost savings but also to insure better 
health care for the consumer.
    Dr. Normile discussed his experiences in adopting EMR and 
the implications for his small two doctor practice. He 
discussed some of the hidden costs of adopting EMR technology, 
predominantly in the additional time necessary to run his 
practice that is not billable because it is not covered by 
insurance or Medicare payments. He explained that the economic 
costs of adoption have been steep totaling an initial payment 
of $50,000 and an additional $10,000 per year.
    Mr. Price discussed a survey he is conducting regarding the 
quality and cost of patient care. He found that only 26 percent 
of the facilities surveyed had an EMR system and the remaining 
facilities did not plan on purchasing an EMR system in the next 
two years. To explain why so few practices were adopting EMR 
technology while the benefits seemed obvious, Mr. Price stated 
that startup costs were high and because many physician 
practices do not have IT support staff, there can be tremendous 
fear in adopting new technology.
    Representative Gingrey talked about the adoption of health 
information technology (HIT) as a way to offset sky rocketing 
healthcare costs. According to a RAND study, if HIT is 
implemented correctly and widely adopted, the American 
healthcare system could save over $162 billion annually. He 
then stated that in order to realize these savings the 
government would need to incentivize physicians to adopt HIT 
because of the high initial cost of adoption. Representative 
Gingrey concluded by urging Congress to pass HR 4641, which 
would provide tax credits to medical care providers to adopt 
HIT.
    In sum, the subcommittee concluded that although the 
adoption of EMR could eventually result in healthcare savings 
for consumers, the initial adoption costs for small practices 
can currently be prohibitive for small healthcare practices. 
Because the economic benefits of adoption increase on an 
individual basis and society as a whole as more medical 
practitioners adopt EMR, there may be a role for government to 
play in helping practitioners adopt this technology.
    For further information about this hearing, please refer to 
Committee report #109-47.
            7.4.9  data protection regulations and small business

                               Background

    On Tuesday, May 23, 2006, the Subcommittee on Regulatory 
Reform and Oversight held a hearing on the regulatory burdens 
associated with state and federal data protection laws. As 
notices of data breaches pervade the media, states are quickly 
enacting data breach notification and data protection laws. As 
of May 23, 2006, 30 states had enacted various data breach 
notification laws to protect the interests of their 
constituents. While privacy and consumer groups applaud the 
efforts of the states, businesses are clamoring for uniformity 
and protection from burdensome regulation. Businesses asked 
Congress to preempt existing state law to create uniform 
standards for what is essentially a component of interstate 
commerce. Three major data security bills were introduced in 
the United States House of Representatives in the 109th 
Congress. As the House seeks to address the need for additional 
consumer data protection practices with the enactment of a 
singular data security law, the purpose of the hearing was to 
determine the effect, if any, data security regulation has on 
small business.

                                Summary

    The hearing was comprised of two panels. The first panel of 
witnesses was comprised of: Mr. Paul Kurtz, Executive Director, 
Cyber Security Industry Alliance, Arlington, VA; Lisa J. Sotto, 
Esq., Partner, Hunton & Williams LLP, New York, NY; and Mr. 
Mark MacCarthy, Senior Vice President, Public Policy, Visa USA, 
Inc., Washington, DC. The second panel was: Mr. Tomas M. 
Lenard, Vice President, Research, Progress & Freedom 
Foundation, Washington, DC; Mr. Steve DelBianco, Vice 
President, Public Policy, Association for Competitive 
Technology, Washington, DC; and Mr. Harry Dinham, President-
elect, National Association of Mortgage Brokers, McLean, VA.
    Mr. Kurtz discussed the additional challenges small 
businesses face because of increased cyber threats. He went on 
to recommend ways for the government to mitigate this amplified 
risk. His first recommendation was the enactment of a national 
data security bill that pre-empts state law. His second 
recommendation was an increased role for the Small Business 
Administration in cyber-security matters on behalf of small 
businesses.
    Ms. Sotto discussed the disparate nature of state 
notification laws, current information security laws that apply 
to businesses, and recommendations for a federal data breach 
and security law. She discussed the importance of enacting a 
federal law that preempts existing state law.
    Mr. MacCarthy discussed Visa's role in creating a more 
secure cyber environment through its participation in the 
payment card industry security standard. He explained Visa's 
zero liability policy and the many fraud protection procedures 
that Visa provides for its customers. He advocates a national 
data security standard that is risk based and that allows 
sufficient flexibility for the needs of small businesses.
    Dr. Lenard discussed the need to evaluate data security and 
data breach notification laws, like any other regulatory 
program, by weighing their intended benefits against their 
projected costs. He also said that in any form of breach 
notification regulation, the costs are likely to outweigh the 
benefits for consumers. He advocated a targeted approach to the 
notification requirement.
    Mr. DelBianco focused his testimony on the detrimental 
affects of regulation on small businesses. He stressed that new 
regulations should be flexible but at the same time provide 
best practice standards for small business.
    Mr. Dinham stated that identity theft is one of the fastest 
growing crimes in America and efforts to protect against this 
threat are necessary and commendable. He articulated the need 
for a national standard to protect interstate commerce. Mr. 
Dinham then focused on the credit freeze provision found in 
many state laws. He said that this was particularly onerous for 
mortgage brokers because it inhibits the access of consumers' 
credit reports in time sensitive transactions.
    In sum, the subcommittee concluded that data security 
legislation should be carefully crafted to minimize any adverse 
affects of the implementation by small businesses of new data 
security standards. Small businesses could be forced to cope 
with significant and increased costs that would be incurred to 
comply with proposed data security legislation. Imposition of 
these additional costs will place small businesses in a 
competitive disadvantage because their per unit cost of 
compliance will be greater than those for large business.
    For further information about this hearing, please refer to 
Committee publication #109-53.
            7.4.10  s corporations--their history and challenges

                               Background

    On Tuesday, June 27, 2006, the Subcommittee on Regulatory 
Reform and Oversight held a hearing to review the history of 
subchapter S corporations, their impact on the American 
economy, and the challenges they face in the 21st Century.
    The S corporation allows for limited liability and a single 
layer of taxation for small closely held businesses. Today, S 
corporations are the most popular corporate entity. The IRS 
estimates that there were 3.2 million S corporation owners in 
the United States in 2003. But while the S corporation 
community has grown and matured, the rules governing S 
corporations have remained largely the same. The number of 
shareholders is still limited, an S Corporation may have only a 
single class of stock, and the rules still limit who or what 
may own shares in an S corporation.

                                Summary

    The hearing consisted of one panel comprised of the 
following four witnesses: The Honorable Thomas M. Sullivan, 
Chief Counsel for Advocacy, United States Small Business 
Administration, Washington, DC; Donald C. Alexander, Esq. 
Partner, Akin, Gump, Strauss, Howard, & Feld, Washington, DC; 
James Redpath, CPA, Partner, HLB Tautges Redpath, Ltd., White 
Bear Lake, MN; and Gregory Porcaro, CPA, American Institute of 
Certified Public Accountants, Warwick, RI.
    Mr. Sullivan described the important role small business 
plays in the U.S. economy. Mr. Sullivan then said that S 
corporations are the cornerstone of the small business economy. 
The SBA Office of Advocacy supports legislation that will 
enhance the growth of S corporations. Mr. Sullivan is concerned 
about the close scrutiny of S corporations by the IRS that many 
small businesses claim is unfair. He stated that the IRS audits 
faced by S corporations can be incredibly burdensome and should 
only be done with great care.
    Mr. Alexander discussed the history of the subchapter S 
corporation and the reasoning behind their creation in 1958. He 
said that most of the changes to the S corporation have been 
positive, but a more recent focus to simplify the S corporation 
would entail the creation of a more ridged structure. Mr. 
Alexander said that S corporations are now competing against 
other more favorable entities like the Limited Liability 
Corporation (LLC). Newer entities like the LLC do not have many 
of the restrictions that limit the S corporation.
    Mr. Redpath expounded upon the outdated rules governing S 
corporations that are in great need to be updated. He discussed 
his experience in creating business entities and described how 
very few newly created business entities are S corporations. 
Mr. Redpath affirmed his support for H.R. 4421 and H.R. 2239, 
two S corporation reform bills that were authored by 
Representatives Clay Shaw (R-FL) and Jim Ramstad (R-MN) 
respectively, stating that they would help to put S 
corporations on a more even footing compared to other types of 
entities favored by small businesses.
    Mr. Porcoro described the importance of modernizing the 
rules that govern the S corporate structure. He made specific 
recommendations regarding needed statutory changes for 
subchapter S. Mr. Porcoro also expounded on the threats that 
are facing S corporations that were proposed by the Joint 
Committee on Taxation.
    In sum, the Subcommittee concluded that S corporations play 
a vital role in the growth and development of small business. 
Any adverse change in the rules governing the subchapter S 
corporation ultimately equates to an adverse effect on small 
business.
    For further information about this hearing, please refer to 
Committee publication #109-57.
            7.4.11  an update on administration action to reduce 
                    unnecessary regulatory burdens on america's small 
                    manufacturers

                               Background

    On July 13, 2006 the Subcommittee on Regulatory Reform and 
Oversight held a hearing on the Administration's promise to 
reduce regulatory burdens on America's manufacturers. This 
promise was made in 2004 when the Office of Management and 
Budget (OMB) asked for public nominations of regulatory reforms 
with particular emphasis on easing regulatory burden for small 
and medium enterprises in the manufacturing sector. Industry 
answered by delivering 189 nominations to the federal 
government for the reduction of unnecessary regulation through 
rulemaking. Ultimately, 76 nominations were selected to reform 
unnecessary regulatory burden. On April 28, 2005, this 
Subcommittee held its first hearing on this subject. Nearly 15 
months had passed since the initial hearing and the 
Subcommittee sought an update regarding the progress the 
Administration has made in implementing the 76 regulatory 
reform nominations.

                                Summary

    The hearing consisted of one panel comprised of the 
following five witnesses: The Hon. Veronica Vargas Stidvent, 
Assistant Secretary for Policy, United States Department of 
Labor, Washington, DC; Mr. Steve Aitken, Acting Administrator, 
Office of Information and Regulatory Affairs, Office of 
Management and Budget, Washington, DC; Mr. Richard D. Otis, 
Jr., Deputy Associate Administrator, Policy, Economics, and 
Innovation, United States Environmental Protection Agency, 
Washington, DC; Mr. Lawrence A. Fineran, Vice President Legal 
and Regulatory Reform Policy, National Association of 
Manufacturers, Washington, DC; and Mr. William Kovacs, Vice 
President, Environment, Technology, and Regulatory Affairs, 
United States Chamber of Commerce, Washington, DC.
    Mr. Aitken outlined the role the Office of Information and 
Regulatory Affairs (OIRA) plays in the regulatory reform 
process. He went on to say that the most recent information 
available states that 36 of the 76 nominations selected for 
reform have been completed. Mr. Aitken ended by saying that 
OIRA remains dedicated to seeing this process to a successful 
conclusion by the end of 2008.
    Mr. Otis stated that the Environmental Protection Agency 
(EPA) has made significant strides by completing more than half 
of their nominations for reform. He discussed the EPA's 
internal management and tracking system of the reform 
nominations and the EPA's commitment to completing their 42 
nominations selected for reform.
    Mr. Fineran discussed the National Association of 
Manufacturers' (NAM) initial hope in seeing a time table and 
action plan for the 2005 manufacturing nominations selected for 
reform. He stated that NAM entered this process with some 
skepticism based upon OIRA's track record surrounding the 
nominations solicited in 2002. But while NAM had hoped for 
accountability in the 2005 nominations they have been sorely 
disappointed with an opaque process.
    Ms. Stidvent discussed the Department of Labor's progress 
in reforming the 11 nominations assigned to them from OMB. She 
stated that the Department had fulfilled most of its 
obligations, most of the time by filing a report or doing a 
study.
    Mr. Kovacs discussed the importance of the regulatory laws 
Congress has passed and the efforts of the federal government 
in complying with those laws. He went on to say that there were 
major problems with the processes the federal government uses, 
principally a lack of transparency and accountability.
    In sum, the Subcommittee concluded that many of the 
nominations to reduce the regulatory burden on manufacturers 
have not been completed. The Office of Management and Budget 
must do more to insure transparency and do a better job of 
keeping the regulatory agencies accountable for agreed upon 
regulatory reform.
    For further information about this hearing, please refer to 
Committee report #109-60.

7.5  Summaries of Hearings Held by the Subcommittee on Tax, Finance and 
        Exports

            7.5.1  the estate tax and the alternative minimum tax-
                    inequity for america's small businesses

                               Background

    On Thursday, April 14, 2005, the Subcommittee on Tax, 
Finance, and Exports held a hearing on the subject of the 
estate tax and the Alternative Minimum Tax (AMT). The federal 
estate or ``death'' tax affects all Americans, especially 
small-business owners, who have consistently identified 
permanent repeal of the estate tax as one of their most 
pressing concerns. Working with President Bush in 2001, 
Congress enacted bipartisan legislation to provide immediate 
relief through rate reduction and an expanded exemption, with 
complete repeal occurring in 2010. Unfortunately, the bill's 
provisions expire in 2011, requiring Congress to pass 
additional legislation to make death tax elimination permanent.
    Similarly, the AMT is a complex provision in the tax code 
that requires taxpayers to calculate their taxes twice, and 
then pay the larger amount. Initially a method to ensure the 
wealthiest Americans paid their ``fair'' share of taxes, the 
combined effects of inflation and individual rate cuts has 
resulted in the AMT reaching into the checking and savings 
accounts of many middle-income taxpayers. The AMT also unfairly 
penalizes businesses that invest heavily in capital assets by 
significantly increasing the cost of capital and discourages 
investment in productivity-enhancing assets by negating many of 
the capital formation incentives provided under the ``regular'' 
tax system.

                                Summary

    The hearing was comprised of one panel: Mr. Jeff Vukelic, 
Executive Vice President, Try-It Distributing, Lancaster, NY; 
Mr. Thomas C. Pitrone, Principal, Integrity Group, Willoughby, 
OH; Paula Calimafde, Esq., Principal, Paley Rothman, Bethesda, 
MD; Ms. Jenell Ross, Dealer/Principal, Ross Motor Cars, 
Centerville, OH; Mr. Paul Zittel, VP, Linholm Dairy, LLC, Eden, 
NY; and Mr. William W. Beach, Director, Center for Data 
Analysis, Heritage Foundation, Washington, DC.
    Mr. Vukelic began the testimony by stating that because of 
uncertainty in the tax code, particularly within the estate tax 
statue, small businesses are forced to pay estate planners, 
lawyers, and accountants to navigate them through the 
uncertainties of the current tax structure. Permanent repeal of 
the estate tax would free up that time, money and energy. Both 
he and the National Beer Wholesalers Association supports full 
estate tax repeal.
    Mr. Pitrone, and estate tax practitioner, stated that for 
the vast majority of small businesses, the estate tax is a tax 
on capital. For the majority of small business owners, their 
major asset is their business, and it is hard to get cash out 
of a company. The estate tax often forces dependents to sell a 
portion or all of the business just to pay the tax bill.
    Ms. Calimafde was opposed to permanent repeal. Instead, she 
favored an increase in the exemption level to $3.5 million next 
year instead of 2009, as is the current law.
    Ms. Ross and her family became the principal owner of Ross 
Motor Cars following her father's death. Shortly thereafter, 
she was sent a tax bill for more than half the total value of 
the business. The shock of the bill was compounded by the fact 
that nearly 90 of the dealership's net worth was tied up in 
land, building, equipment, inventory and parts--assets that 
could not be easily liquidated without seriously damaging their 
ability to function. Both she and the AIADA support full repeal 
of the estate tax.
    Mr. Zittel testified that both he and the American Farm 
Bureau favor total repeal because roughly twice the number of 
farmers paid the federal estate tax in the late 1990's compared 
to other estates. Moreover, the average estate tax is also 
larger than the tax paid by most other estates, and because 
farms are capital-intensive businesses their assets cannot be 
easily converted to cash.
    Mr. Beach concentrated his testimony on the AMT, whose 
filers generally pay higher taxes than regular income tax 
filers. Another problem the AMT causes is that it is not 
indexed to inflation, unlike the regular tax brackets. This 
essentially raises the taxes each year on taxpayers who must 
pay the tax just from the effects of inflation. Yet another 
problem encountered by AMT filers is that tax payments to state 
and local governments are not deducted. Currently, 1.9 million 
Americans pay the AMT. If nothing is done to fix this problem, 
up to 6.4 million Americans will pay the AMT next year.
    In summary, the Subcommittee concluded that the vast 
majority of small business owners are in favor of permanent 
repeal of the estate tax and of significant reform to the AMT 
in order to bring certainty and fairness to the tax code.
    For further information about this hearing, please refer to 
Committee publication #109-11.
            7.5.2  does china enact barriers to free trade?

                               Background

    On Thursday, May 26, 2005, the Subcommittee on Rural 
Enterprises, Agriculture and Technology and the Subcommittee on 
Tax, Finance, and Exports held a joint oversight hearing on 
Chinese trade practices. Over the past two decades China has 
emerged as a strong international competitor in a wide range of 
products and has proven to be a critical market for U.S 
exports. China's emergence as a leading world economy has 
provided significant new opportunities for American exporters 
and U.S. exports to China have risen sharply in recent years.
    Unfortunately, there has been a downside to the 
unprecedented growth in China's economy as well. The deficit 
for trade in goods with China stands was $176 billion in 2004. 
Having increased rapidly in recent years, it now is the single 
largest bilateral deficit America has with any nation in the 
world. The purpose of this hearing was to examine whether or 
not China is playing fair with international trade laws and 
what remedies, if any, could be proffered to alleviate the 
trade deficit.

                                Summary

    The hearing consisted of two panels. The first panel was: 
Stephen Pinkos, Esq., Deputy Undersecretary for Intellectual 
Property and Deputy Director, United States Patent and 
Trademark Office, United States Department of Commerce, 
Alexandria, VA. The second panel was comprised of: Mr. Tom 
Goodpasture, President, Pride Manufacturing Co., Inc., Liberty, 
MO; Mr. Bruce Iglauer, President/CEO, Alligator Records, 
Chicago, IL; Mr. Al Lubrano, President, Technical Materials, 
Inc., Lincoln, RI; Mr. Dave Blackburn, President/CEO, Thomas G. 
Faria Corp., Uncasville, CT; and Mr. Thomas Stallings, owner of 
Funston Gin Co., Funston, GA.
    Mr. Pinkos' testimony focused on intellectual property (IP) 
protection. Mr. Pinkos began by stating that all U.S. 
companies, large and small, have a difficult time protecting 
their IP overseas, particularly in China. He stated that while 
the both the U.S. and China both have strong laws on IP 
protection, China does not enforce them as rigidly as we do in 
the United States. Some progress has been made in recent years, 
but China must do better to comply with trade agreements and 
with World Trade Organization (WTO) obligations.
    Mr. Goodpasture stated that in addition to sever IP 
protection concerns with China, his company faces an automatic 
35 percent cost differential versus Chinese firms due to the 
lack of enforcement of labor, environmental and safety laws. 
Mr. Goodpasture hypothesized that if the Chinese currency was 
correctly valued, China would no longer be a competitive in the 
world market of manufacturing.
    Mr. Iglauer recounted his problems with piracy of 
copyrighted materials; namely, music. In rough terms, he 
estimates that Alligator Records has lost 35 percent of its 
sales because of global physical piracy, Internet piracy, and 
illegal CD burning. Mr. Iglauer requested that the U.S. 
government to press China harder to strengthen their anti-
piracy enforcement regimes.
    Mr. Lubrano testified that many of his peers, customers, 
and supply chain companies have adopted one of two policies: 
either buy solely from Chinese manufacturers because of the 
lower cost, or pick up and shift their own production to China. 
Some of his customers have told him that they will only pay the 
``Chinese price,'' which puts unreachable demands on his 
company and his American suppliers. Mr. Lubrano stated that the 
U.S. government must continue to work with China to end the 
manipulation of their currency.
    To show the extent of Chinese piracy, Mr. Blackburn 
displayed photos of his product, and the Chinese counterfeit--
they appeared identical. Mr. Blackburn stated that the visual 
quality of Chinese counterfeits are so good that even he had 
trouble telling them apart from the real thing. However, when 
the item was tested, it was grossly inaccurate. Mr. Blackburn 
stressed not only the economic impact of this theft, but also 
the public safety aspect. His company is the sole supplier of 
every instrument panel installed in 100 percent of the combat 
ready Humvees now serving in Iraq and around the world.
    Although he touched less on IP protection, Mr. Stallings 
echoed much of what had previously been said. As a cotton 
grower, he is excited to see exports of cotton to China almost 
double. At the same time, however, he is concerned that the 
U.S. cotton growers' largest customers, U.S. textile 
manufacturers, are facing an uphill battle when trying to 
compete with Chinese imports of finished textile goods. He 
emphasized the cotton industries concerns over the Chinese 
government's use of tax rebates for exports, widespread use of 
subsidized or forgiven loans, and the continued existence of 
the undervalued Chinese currency as significant problems that 
must be addressed in order to ensure free and fair trade exists 
between our two nations.
    In summary, the subcommittees concluded that the U.S. 
government must continue to put pressure on China to let its' 
currency float, stop direct and indirect subsidization on its 
businesses, and enforce labor, safety, and environmental laws 
in accordance with WTO standards. Progress has been made in 
recent years, however, much still needs to be done in order to 
ensure free and fair trade between the U.S. and China. For 
further information about this hearing, please refer to 
Committee publication #109-18.
            7.5.3  examining the president's tax reform panel 
                    recommendations

                               Background

    On Wednesday, February 1, 2006, the Subcommittee on Tax, 
Finance and Exports and the Subcommittee on Rural Enterprises, 
Agriculture and Technology held a joint hearing to examine the 
President's Tax Reform Panel Recommendations. On January 7, 
2005, President George W. Bush established the Tax Advisory 
Panel on Federal Tax Reform (the Panel) via Executive Order. 
The Panel published its report on November 1, 2005.
    In general, the Panel offered two alternatives to the 
present tax code: (1) streamline the current income tax and (2) 
replace the tax code with a progressive tax on consumption. 
Both plans would require Congress to institute broad and 
sweeping statutory changes to current federal tax law. The 
purpose of the hearing was to discuss the recommendations of 
the Panel with a particular emphasis on small business 
concerns.

                                Summary

    The hearing was comprised of two panels of witnesses. The 
first panel consisted of: The Hon. John Breaux, United States 
Senate (Ret.), Vice-Chairman, President's Advisory Panel on 
Federal Tax Reform, Washington, DC; The Hon. Michael Castle, 
United States House of Representatives (R-DE); and The Hon. 
Scott Garrett, United States House of Representatives (R-NJ). 
The second panel consisted of Mr. Todd McCracken, President, 
National Small Business Association, Washington, DC; Daniel 
Mitchell, Ph.D., McKenna Senior Fellow in Political Economy, 
The Heritage Foundation, Washington, DC; Mr. David Burton, 
Americans for Fair Taxation, Lorton, VA; Mr. Jim Hausman, 
Hausman Metal Works and Roofing, Inc., St. Joseph, MO; Mr. Andy 
Loftis, Owner, Keller-Williams Realty, Athens, GA; and Leonard 
Burman, Ph.D., Senior Fellow, Urban Institute, Washington, DC.
    Senator Breaux described the challenges put before the 
Advisory Panel in attempting to formulate recommendations for 
simplifying the tax code. He further noted the general 
unanimity on the issue of tax reform among all taxpayers and 
politicians.
    Representative Castle remarked on the tremendous cost, 
especially to small businesses, of tax code compliance, 
indicating that for every $7 of federal income taxes, $1 is 
spent on complying with the tax system.
    Representative Garrett expressed his dismay that there were 
not more sweeping changes to the tax code proposed in the 
Panel's recommendations. He specifically noted that ideas such 
as the Fair Tax and the Flat Tax are concepts which should be 
considered before this Congress.
    Mr. McCracken supported some of the Panel's recommendations 
but advocated more sweeping reform--a national sales tax.
    Dr. Mitchell suggested that tax policy be based on some 
form of low single-rate consumption tax.
    Mr. Burton furthered the proposition of a national sales 
tax in the guise of the FairTax legislation, deeming it as 
extraordinarily pro-growth.
    Mr. Hausman spoke of his personal experience and grievances 
with the estate or ``death'' tax, arguing that it is a major 
detriment to small business and family farms continuing into 
the second generation.
    Mr. Loftis submitted that if one of the Panel's 
recommendations dealing with limiting the home mortgage 
deduction were enacted, it would be disastrous to the real 
estate industry.
    Dr. Burman supported the Panel's rejection of a national 
sales tax, or FairTax, pointing out that such a tax system 
would, among other things, undermine state tax systems.
    In conclusion, the Subcommittees recognized the 
contributions and the significance of the recommendations of 
the President's Advisory Panel on Federal Tax Reform, noting 
there is much to be done to help simplify the current tax code 
for small businesses.
    For further information about this hearing, refer to 
Committee publication #109-38.
            7.5.4  small business administration finance programs

                               Background

    On Thursday, March 9, 2006 the Subcommittee on Tax, Finance 
and Exports held an oversight hearing on the Small Business 
Administration's (SBA) finance programs in preparation for 
reauthorization.
    The hearing focused on the various changes made to the 
programs over the past two years. Additionally, because the SBA 
needed to be reauthorized before fiscal year 2007 begins, the 
hearing presented an opportunity for witnesses to provide any 
legislative suggestions to be included in the SBA 
reauthorization legislation. Furthermore, comments on President 
Bush's Fiscal Year 2007 budget request were discussed.

                                Summary

    The hearing was comprised of six witnesses on one panel: 
Mr. Michael Hager, Associate Deputy Administrator for Capital 
Access, United States Small Business Administration, 
Washington, DC; Mr. Lee Mercer, President, National Association 
of Small Business Investment Companies, Washington, DC; Mr. 
Anthony Wilkinson, President/CEO, National Association of 
Government Guaranteed Lenders, Stillwater, OK; Mr. Kurt 
Chilcott, Chairman of the Board, National Association of 
Development Companies, McLean, VA; Mrs. Lynn Schubert, 
President, Surety Association of America, Washington, DC; and 
Ms. Grace Y. Mayo, President/CEO, Telesis Community Credit 
Union, Northridge, CA.
    Mr. Hager described the continued growth in the SBA loan 
programs over the last two years, all accomplished at zero 
additional cost to subsidy rates to taxpayers. Mr. Mercer spoke 
of his dissatisfaction with the Administration's desire to 
eliminate the Participating Security component of the Small 
Business Investment Companies (SBIC) program. Mr. Wilkinson 
detailed a proposal to increase the maximum 7(a) loan size from 
$2 million up to $3 million and an increase in the maximum 
guaranty amount up to $2.25 million. Mr. Chilcott expressed 
concern over the authorization ceiling of the SBA budget for 
the 2007 fiscal year set at $7.5 billion. Mrs. Schubert sought 
to raise awareness of the SBA's surety bond program and spoke 
of its critical importance to small businesses. Ms. Mayo 
conveyed the support of credit unions to reduce fees for the 
7(a) lending program.
    In sum, the Subcommittee acknowledged the growth in the 
SBA's finance programs and took into consideration the 
recommendations of those industry representatives during the 
development of the Committee's SBA reauthorization proposal.
    For further information about this hearing, refer to 
Committee publication #109-41.
            7.5.5  the effects of the high cost of natural gas on small 
                    business and future energy technologies

                               Background

    On Wednesday, June 28, 2006, the Subcommittee on Tax, 
Finance and Exports held a hearing to examine the effects of 
the high cost of natural gas on small businesses and other 
future energy technologies. The hearing focused not only on the 
high cost of natural gas to small businesses and manufacturers 
but also illustrated the importance of natural gas to the 
research and development of alternative fuels, such as hydrogen 
fuel cells, which store hydrogen chemically separated from its 
existing forms using natural gas.

                                Summary

    The hearing was comprised of two panels. Panel one 
consisted of: Mr. James Kendell, Director, Natural Gas 
Division, Energy Information Administration, United States 
Department of Energy, Washington, DC; Mr. Walter Cruickshank, 
Deputy Director, Minerals Management Service, United States 
Department of the Interior, Washington, DC; and Mr. Thomas 
Lonnie, Assistant Director, Minerals Management Service, United 
States Department of the Interior, Washington, DC. Panel two 
consisted of Mr. Richard Goodstein, Washington Representative, 
Air Products and Chemicals, Inc., Allentown, PA; Mr. Jeff 
Uhlenburg, President, Donovan Heat Treating Company, 
Philadelphia, PA; Mr. Paul Wilkinson, Vice-President, Policy 
Analysis, American Gas Association, Washington, DC; and Mr. 
Lowell Ungar, Senior Analyst, Alliance to Save Energy, 
Washington, DC.
    Mr. Kendell discussed the major forces affecting current 
high natural gas prices and the outlook for 2007. Mr. 
Cruickshank spoke of off-shore production of natural gas and 
its expected continued growth in the Outer Continental Shelf. 
Mr. Lonnie testified about domestic production of natural gas 
on-shore and its increase over the past three years, focusing 
on expectations of increased demand through 2007.
    Mr. Goodstein detailed the promise of hydrogen as a fuel of 
the future, the importance of natural gas in pursuit of a 
hydrogen economy, and the challenges posed by high and volatile 
prices for natural gas. Mr. Uhlenburg shared his personal 
experiences as an owner of a small manufacturing company and 
the effects of the high cost of natural gas on his business. 
Mr. Wilkinson urged the ending of the absolute moratorium on 
off-shore drilling for natural gas as a solution to natural gas 
price volatility. Mr. Ungar advocated energy conservation and 
efficiency as the quickest, cheapest, and cleanest way to help 
small businesses manage natural gas prices.
    In sum, the Subcommittee concluded that more needed to be 
done to keep down the rising cost of natural gas by increasing 
production and conservation.
    For further information about this hearing, refer to 
Committee publication #109-59.
            7.5.6  chinese barriers to trade

                               Background

    On Thursday, July 20, 2006, the Subcommittees on Rural 
Enterprises, Agriculture and Technology Subcommittee and Tax, 
Finance and Exports held a joint hearing on Chinese barriers to 
trade. The hearing discussed the affect of unfair trade 
practices by China, specifically currency manipulation and 
theft of intellectual property rights, has on small businesses 
in the United States.

                                Summary

    There was one panel that consisted of: Mr. Tom Goodpasture, 
President, Pride Manufacturing Co., Inc, Liberty, MO; Mr. 
George E. Russell, Corporate Legal Administrator, Auto Meter 
Products, Inc., Sycamore, IL; Mr. Brian Duggan, Director of 
Trade and Commercial Policy, Motor & Equipment Manufacturers 
Association, Washington, DC; Tom Duesterberg, Ph.D., President/
CEO, Manufacturers Alliance/MAPI, Washington, DC; and Mr. James 
W. ``Will'' Coley, Savannah Warehouse Services, Garden City, 
GA.
    Mr. Goodpasture believes that the United States must find a 
way to make its relationship with China as non-adversarial as 
possible in order to not miss out on significant export 
opportunities. He stated that he believes China competes 
unfairly through currency manipulation and other strategies, 
but that China also offers tremendous market potential.
    Mr. Russell explained the problems his company faces in 
term of intellectual property theft from Taiwan and China. Auto 
Meter's products are used in automotive racing as well as in 
certain marine and other high performance applications. Auto 
Meter has spent well over a million dollars protecting itself 
against imports that infringe upon Auto Meter's trademark 
through the federal courts, Executive Branch agencies, and 
trade associations. Yet these products continue to enter the 
U.S. market, and every year Auto Meter loses tens of thousands 
of dollars in sales to these illegal products.
    Mr. Duggan explained the dangers posed by trafficking of 
counterfeit auto parts. He further stated that the damage done 
is disproportionately serious for small businesses because they 
can least afford the lost sales on a limited number of brands 
and product lines and have fewer if any resources to protect 
their trademarks and patents, especially in China.
    Dr. Duesterberg projected China will soon overtake the 
United States as the leading exporting nation for 
manufacturers, both low-value as well as high-tech products. He 
went on to detail the many reasons for this phenomenon, 
including an undervalued Chinese currency.
    Mr. Coley, representing the National Cotton Council, 
discussed his concerns with specific unfair Chinese trade 
practices in cotton. The primary objection has been China's 
allocation of a significant portion of the cotton Tariff Rate 
Quota (TRQ) to the ``processing trade.'' By allocating cotton 
quotas to the processing trade, China requires apparel made 
from U.S. cotton be re-exported. Thus, the processing trade 
category by China is not true market access as required by the 
terms of the United States-China World Trade Organization (WTO) 
accession agreement.
    In sum, the Subcommittees concluded that there are still a 
wide ranging set of Chinese trade barriers, which 
disproportionately impacts American small businesses, and 
encourages our government officials to press China for reform.
    For more information, refer to Committee publication #109-
61.

7.6  Summaries of the Hearings Held by the Subcommittee on Rural 
        Enterprises, Agriculture and Technology

            7.6.1  the high price of natural gas and its impact on 
                    small businesses: issues and short term solutions

                               Background

    On March 17, 2005, the Rural Enterprises, Agriculture, and 
Technology Subcommittee held a hearing on the high price of 
natural gas. The purpose of this hearing was to discuss the 
affect of rising natural gas prices on the 60 million homes, 
farms, businesses, and industries that are dependent on energy 
source. While supplies are abundant, America's access and 
distribution has been limited, causing prices to be two to 
three times above historic averages. Shortages began in mid-
2000 and, by some estimates, prices have increased over 80 
percent.
    In addition, natural gas accounts for more than 37 percent 
of industrial energy consumption. The federal government 
encouraged many industries to turn to natural gas to comply 
with clean air laws and pitched the energy as an inexpensive 
source of power, but now they are being squeezed by high costs. 
The manufacturing sector has been hard hit by the recession 
and, while it is slowly turning around, soaring energy prices 
threaten its recovery. High natural gas prices have even 
increased the cost of producing fertilizers, which is passed 
along to the farmer who relies on it for their crops.

                                Summary

    The first panel consisted of: The Hon. Lee Terry (R-NE). 
The second panel was comprised of seven witnesses: Mr. Charles 
Kruse, President, Missouri Farm Bureau Federation, Jefferson 
City, MO; Mr. Terry Hilgedick, Chairman, Missouri Corn 
Merchandising Council, Jefferson City, MO; Mr. J. Billy Pirkle, 
Managing Director, Environmental Health and Safety, Royster-
Clark, Inc., Norfolk, VA; Thomas J. Duesterberg, Ph.D., 
President/CEO, Manufacturers Alliance/MAPI, Washington, DC; Mr. 
Paul Cicio, Executive Director, Industrial Energy Consumers of 
America, Washington, DC; Mr. Peter Jones, President, Wexco 
Corp., Lynchburg, VA; and Mr. Ben Boyd, a farmer from Sylvania, 
GA.
    Representative Terry testified as to the benefits to small 
business owners in their need of natural gas and the increased 
usage of Liquefied Natural Gas (LNG). He and Representative 
Gene Green introduced legislation called the LNG Act (H.R. 
359), which would eliminate state and federal conflicts by 
explicitly giving the Federal Energy Regulatory Commission 
jurisdiction over the location, construction, expansion and 
operation of onshore LNG import terminals.
    Mssrs. Kruse, Pirkle, and Hilgedick focused the 
Subcommittee's attention as to the causes of the rising cost of 
natural gas and its affect on farmers. The American Farm Bureau 
estimated that increased energy input prices during the 2003 
and 2004 growing seasons cost U.S. agriculture over $6 billion 
in added expenses. Natural gas is especially important to 
agriculture because it is used to produce nitrogen fertilizers 
and farm chemicals as well as electricity for lighting, 
heating, irrigation, and grain drying.
    Dr. Duesterberg expressed support for building more LNG 
terminals to increase gas reserves domestically. While 
extending the Alaskan pipeline should be the goal to maximize 
natural resources, it is a longer-term solution. Manufacturers 
need effective short-term policy changes now so they will not 
continue to be hampered with rising natural gas prices while 
trying to fulfill increasing demand.
    Mr. Cicio stated that the United States is the only country 
not fully utilizing its supply of natural gas. One solution to 
rising natural gas prices is to increase U.S. supply, coupled 
with improved demand policies. One specific recommendation he 
had is for Congress to treat the energy and natural gas crisis 
with the same priority given to the agricultural market in 
limiting futures prices to reduce volatility.
    Mr. Jones pointed out the contradiction between the 
government's encouragement of the use of natural gas as the 
cleaner fuel alternative and at the same time, restricting 
access to domestic resources of natural gas. While the use of 
natural gas is a cleaner-fuel alternative, the depleting supply 
of natural gas will be a major factor in the manufacturing 
industry's ability to comply with environmental regulations.
    The last witness put a human face behind the statements and 
statistics cited by the previous witnesses. Mr. Boyd, a farmer 
from Georgia, calculated that because of higher natural gas 
prices, the price of his nitrogen fertilizer rose extra $54,000 
last year alone. Mr. Boyd testified to the crucial need for 
nitrogen fertilizer for small and large production farmers 
alike, and how increasing costs for natural gas are driving 
some small farmers off their farms.
    In summary, the Subcommittee concluded that the high price 
of natural gas would impose an unsustainable burden on 
America's farmers and manufacturers unless policies were 
enacted to increase supply and conservation. For further 
information, please refer to Committee publication #109-6.
            7.6.2  does china enact barriers to free trade?
    Please refer to the hearing summary set forth in part 
7.5.2, supra.
    For further information on this hearing, refer to Committee 
publication 109-18.
            7.6.3  different applications for genetically modified 
                    crops

                               Background

    On Wednesday, June 29, 2005, the Rural Enterprises, 
Agriculture and Technology Subcommittee held a hearing on 
genetically modified crops (GMOs). Farmers have always modified 
plants and animals to improve growth rates and yields, create 
varieties resistant to pests and diseases, and infuse special 
nutritional or handling characteristics. Now, using DNA 
techniques, scientists can genetically modify plants by 
selecting individual desirable traits. Currently, thirteen 
different plants are approved for commercial use in the United 
States and at least 60 percent of all U.S. foods contain some 
genetically engineered material.The growth of biotech has 
become pervasive within this country for several crops. In 
2004, 85 percent of the soybean acres were planted with biotech 
seeds, followed by 75 percent of cotton and half of all corn. 
The United States leads all other countries in the development 
of biotech crops with 59 percent of the global acreage. The use 
of genetically modified crops continues to grow and their 
different applications are growing fasters. This hearing 
explored the expanding GMO industry and all of its benefits.

                                Summary

    The hearing was comprised of one panel of five witnesses: 
Ms. Dawn W. Parks, Manager, Public, Industry and Government 
Affairs, ArborGen, Public, Industry, and Government Affairs 
Manager of Arborgen, Summerville, SC; Mr. Delan Perry, 
President, Hawaii Papaya Industry Association, Hilo, HI; Mr. 
Scott Deeter, President/CEO, Ventria Bioscience, Sacramento, 
CA; Mr. Samuel Huttenbauer, CEO, Agragen, Cincinnati, OH; and 
Mr. Thomas H. Dollar, II, President, Decatur Gin Co. and Dollar 
Farm Products, Bainbridge, GA.
    Ms. Parks explained that ArborGen uses breeding techniques, 
including biotechnology, to improve the sustainability of 
forestry. As the worldwide population increases, so does the 
demand for wood and paper products. Rather than expanding the 
forested acreage under management to meet the wood and paper 
requirements in the future, ArborGen develops faster-growing 
trees that will improve the productivity of plantations. 
ArborGen also develops trees with modified lignin. Lignin is a 
component of wood fibers that is removed during the pulping 
process to obtain the cellulose needed to make quality paper.
    Mr. Perrytold the ``Papaya Story.'' In 1992, a virus 
decimated Hawaii's papaya industry and the livelihood of those 
who farm that fruit. For decades, papayas have been grown in 
Hawaii. Papayas, in contrast with pineapples, are primarily 
grown on hundreds of family farms. There is no doubt that the 
transgenic papaya saved the papaya industry in Hawaii and now 
constitutes about 60 percent of all papayas grown in Hawaii. 
Currently, the transgenic papaya can be marketed to Canada and 
the mainland U.S.A. However, it cannot be marketed to Japan, 
which is a major market for the Hawaiian papaya.
    Mr. Deeter explained that his company is a plant-based 
pharmaceutical company that utilizes rice and barley as a 
``factory'' to make biological products. One product has been 
developed for children suffering from acute diarrhea. The World 
Health Organization (WHO) estimates that 1.9 million children 
under the age of five die annually because of diarrhea. To 
address this crisis, Ventria added Lactiva and Lysomin to an 
oral rehydration solution, which is a common first line therapy 
given to children suffering from diarrhea. Ventria is also 
exploring the use of Lactiva and Lysomin for the prevention of 
diarrhea in the military. During Operation Iraqi Freedom, 70 
percent of deployed troops suffered a diarrhea attack and 43 
percent reported decreased job performance as a result of this 
attack.
    Mr. Huttenbauer explained that Agragen is a biotech company 
working on the development of plant made pharmaceuticals 
(PMPs). Agragen was started three years ago with the express 
purpose of manufacturing pharmaceuticals utilizing the natural 
protein manufacturing capability of plants. The overall thrust 
of this technology is to insert genes into the plant to permit 
it to make and store the protein of interest in the seed, where 
it can be stored indefinitely until it is purified. Plant-made 
pharmaceuticals (PMPs) are the result of a breakthrough 
application of biotechnology to plants to enable them to 
produce therapeutic proteins that will be used by the medical 
community to combat life-threatening illnesses. In this 
process, plants themselves become ``factories'' that 
manufacture therapeutic proteins.
    Mr. Dollar spoke of how he now grows genetically modified 
cotton with the Roundup Ready and Bt genes. Roundup Ready 
cotton has been genetically enhanced to provide herbicide 
tolerance that allows Roundup herbicide to be applied directly 
over the top of the crop in the field. Only the weeds are 
killed while the cotton plants live. Because of this 
technology, Roundup has replaced the multiple herbicides that 
were previously used. The result is four to six total 
applications of pesticide on any given field, versus the 20 to 
25 applications required on other cotton. Farming with 
genetically modified crops has significant cost reductions.
    In summary, the Subcommittee concluded that GMOs offers 
promising benefits not just to small businesses but also for 
human health and safety.
    For more information about this hearing, please refer to 
Committee publication #109-24.
            7.6.4  the importance of the biotechnology industry and 
                    venture capital support in innovation

                               Background

    On Wednesday, July 27, 2005, the Rural Enterprises, 
Agriculture and Technology Subcommittee held a hearing on the 
importance of the biotechnology industry and venture capital 
(VC) support in innovation. The Small Business Administration 
(SBA) helps struggling small high-technology firms through the 
Small Business Innovation Research (SBIR) program, which 
allocates 2.5 percent of all federal research and development 
grants from 12 federal agencies to qualified small business 
applicants. The SBIR program allows for cutting-edge research 
that may not, in its earliest stages, attract funding from 
other sources. SBA eligibility regulations require that a small 
company must be at least 51 percent owned by one or more 
individuals. The SBA recently clarified the definition of 
``individuals'' to include only actual human beings, and 
excludes other forms of investment such as VC. This hearing 
examined this new SBA clarification and legislation that was 
written to attempt to address this issue (H.R. 2943, the Save 
America's Biotechnology Innovation Research Act (SABIR), 
authored by the Hon. Sam Graves (R-MO) who also is the Chairman 
of the Subcommittee on Rural Enterprises, Agriculture and 
Technology.

                                Summary

    The hearing consisted of one panel: Mr. Barry Michael, 
President, B.A. Michael Consulting, Clifton, VA; Mr. Douglas A. 
Doerfler, President/CEO, MaxCyte, Inc., Gaithersburg, Maryland; 
Jere W. Glover, Esq., Executive Director, Small Business 
Technology Council, Washington, DC; Mr. Daniel J. Broderick, 
Managing Director, Mason Wells, Milwaukee, WI; and Mr. Anthony 
P. Cruz, Senior Vice President, Finance & Administration, 
AviGenics, Inc., Athens, GA.
    Mr. Michael testified that from his personal experience, he 
was against expanding the SBIR program to include VC companies. 
He believed that allowing VC firms to invest in SBIR companies 
would divert needed money from truly needy companies.
    Douglas A. Doerfler spoke against a recent interpretation 
by the SBA regarding the eligibility requirements for the SBIR 
program that he claims has prevented the majority of BIO 
members from participating in the program. He believed that 
both SBIR and VC funding is necessary to support the lengthy 
and costly clinical development process for biotech products.
    Mr. Glover testified against H.R. 2943 because it would 
bring about a fundamental shift, in his view, of the SBIR 
program to potentially have large VC firms benefit from the 
SBIR program.
    Mr. Broderick testified on behalf of the National Venture 
Capital Association in support of HR 2943. He explained the 
role of VC firms in biotech companies. He stated that VC 
investors do not participate in setting the strategic direction 
of the biotech firm, and they take no role in making day-to-day 
decisions.
    Mr. Cruz testified that the SBIR program allows development 
of early-stage technologies that can lead to novel human drugs 
to fight diseases. SBIR funding combined with VC funding can 
lead to creation of new biotechnology clusters and high-
skilled, high-pay jobs within geographic areas not 
traditionally associated with the pharmaceutical or 
biotechnology industries.
    In sum, the Subcommittee concluded that the role of VC in 
biotech companies interested in participating in the SBIR 
program is complex and more work needs to be done prior to HR 
2943 becoming law because this is an issue that divides the 
small business high-tech community.
    For more information, please refer Committee publication 
#109-28.
            7.6.5  the need for improvements and more incentives in the 
                    endangered species act

                               Background

    On Thursday, September 15, 2005, the Rural Enterprises, 
Agriculture and Technology Subcommittee held a hearing on the 
need to improve the Endangered Species Act (ESA). The purpose 
of this hearing was to discuss the concerns of landowners as 
they struggle comply with provisions of the ESA. Since its 
enactment in 1972, the ESA has pitted private landowners 
against the federal government. If an endangered or threatened 
species is identified on their property, the landowner could 
lose all rights to their privately held lands. With farmers and 
ranchers owning and operating nearly 80 percent of the land on 
which these species dwell, incentives for landowners to 
participate in species protection will lead to much higher 
recovery rates of our endangered and threatened species. The 
hearing focused on H.R. 3300, the Endangered Species 
Improvement Act, which was introduced by the Hon. Sam Graves 
(R-MO) who also serves as the Chairman of the Rural 
Enterprises, Agriculture, and Technology Subcommittee. The bill 
would clarify the responsibilities of both the landowner and 
the government and allow for compensation of landowners.

                                Summary

    The hearing consisted of two panels. The Hon. Richard Pombo 
(R-CA), Chairman, Committee on Resources, United States House 
of Representatives testified on the first panel. The second 
panel was comprised of: Mr. Mike Wells, Deputy Director, 
Missouri Department of Natural Resources, Jefferson City, MO; 
Ms. Nancy Macan McNally, Executive Director, National 
Endangered Species Act Reform Coalition, Washington, DC; Mr. 
Bob Peterson, President, Ohio Farm Bureau Federation, Columbus, 
OH; Mr. Laurence Wiseman, President/CEO, American Forest 
Foundation, Washington, DC; and John Kostyack, Esq., Senior 
Counsel, National Wildlife Federation, Reston, VA.
    Chairman Pombo explained that he was moving a package of 
reform measures to add such incentive components to the current 
ESA. Research shows that the ESA has created perverse 
incentives that prompt landowners to actually destroy species 
habitat to rid their property of the liability that comes with 
endangered species. This package, entitled the Threatened and 
Endangered Species Recovery Act of 2005 (H.R. 3824) eventually 
passed the House on September 29, 2005 by a bipartisan vote of 
229 to 193, with 36 Democrats in support.
    Mr. Wells gave firsthand knowledge of the prescriptive 
mandates that the ESA can bring as it applied to the pallid 
sturgeon. In 2003, the Fish and Wildlife Service (FWS) mandated 
a summer low flow and a spring rise on the Missouri River even 
though scientists showed that this would produce minimal 
benefits for the species.
    Ms. McNally testified that a new approach is needed to 
change the focus of the debate from a clash over existing terms 
and programs to the development of new tools that improve the 
ESA. The ESA should also encourage recovery of listed species 
through voluntary species conservation efforts and the active 
involvement of States.
    Mr. Peterson testified that cooperation of private 
landowners is essential if the ESA is to succeed. Speaking on 
behalf of the American Farm Bureau, Mr. Peterson emphasized 
that many landowners would like to protect listed species, but 
the ESA, as currently written, makes that task difficult.
    Mr. Wiseman testified on behalf of forest landowners who 
have each pledged to practice environmentally sound, 
sustainable and productive forestry. Families are the 
``majority'' owners of our nation's forests--not the federal 
government, not the States, nor industry. According to Mr. 
Wiseman, more than $4 billion in applications for conservation 
incentives went unfunded last year, further complicating the 
problem.
    Finally, Mr. Kostyack testified that the ESA had been a 
success. The longer species enjoy the protection of the ESA, 
the more likely the condition of the species will stabilize or 
improve. While the National Wildlife Federation was supportive 
of adding incentives to the ESA, he offered suggestions to 
improve H.R. 3330.
    In sum, the Subcommittee concluded that the ESA was in 
fundamental need of reform and that efforts of Chairman Pombo 
and Subcommittee Chairman Graves, through his introduction of 
H.R. 3300, go a long way in that direction. Many of the key 
concepts and principles contained in H.R. 3300 were folded into 
Chairman Pombo's ESA reform bill (H.R. 3824), which passed the 
House on September 29, 2005.
    For more information, please refer to the Committee 
publication #109-31.
            7.6.6  examining the president's tax reform panel 
                    recommendations
    Please refer to the hearing summary set forth in part 
7.5.3, supra.
    For further information on this hearing, refer to Committee 
publication #109-38.
            7.6.7  the missouri river and its spring rise: science or 
                    science fiction

                               Background

    On Wednesday, March 15, 2006, the Rural Enterprises, 
Agriculture and Technology Subcommittee held a hearing to 
examine the effect of the mandated ``spring rise'' along the 
Missouri River and its impact on those who live along the river 
and on small businesses. The U.S. Fish and Wildlife Service 
(USFWS) mandated a ``spring rise and summer draw down'' in 
order to protect the endangered interior least tern, threatened 
piping plover and threatened pallid sturgeon. The USFWS has 
asserted that this will mimic the natural hydrology of the 
river and return it to its natural flow.
    Farmers and others who live along the river already face 
the prospect of natural floods and that risk only increases 
with an artificial spring rise. Additionally, many dispute the 
science used to formulate the spring rise. The Missouri 
Department of Natural Resources has itself called the science 
behind these assertions into question and suggested less 
draconian methods to preserve these threatened species.

                                Summary

    The hearing consisted of three panels. The first panel was: 
The Hon. James M. Talent, United States Senate (R-MO). The 
second panel was comprised of: Brig. Gen. Gregg F. Martin, 
Commander and Division Engineer, Northwestern Division, United 
States Army Corps of Engineers, Department of Army, Portland, 
OR; Mr. Mitch King, Regional Director, Mountain-Prairie Region, 
Fish and Wildlife Service, United States Department of the 
Interior, Lakewood, CO; and Mr. Mike Wells, Deputy Director, 
Missouri Department of Natural Resources, Jefferson City, MO. 
The third panel was comprised of: Mr. Charlie Kruse, President, 
Missouri Farm Bureau Federation, Jefferson City, MO; Mr. Steve 
Taylor, Chairman, Coalition to Protect the Missouri River, 
Jefferson City, MO; Mr. Tom Waters, Waters Farms, Orrick, MO; 
Ms. Lynn M. Muench, Vice President, The American Waterways 
Operators, St. Louis, MO; and Mr. David Sieck, Past President, 
Iowa Corn Growers Association, Johnston, IA.
    Senator Talent testified his complete opposition to the 
planned spring rises by the Fish and Wildlife Service. He said 
that that needs of Missourians should not place second fiddle 
to a fish.
    Brigadier General Martin explained that the Corps operates 
the Missouri River Mainstem Reservoir System as directed by the 
Congressionally authorized purposes of flood damage reduction, 
commercial navigation, hydropower, irrigation, recreation, 
water supply, water quality, and fish and wildlife. The 
Missouri River basin is currently experiencing an extended 
drought, and system storage is at unusually low levels and 
therefore the spring pulse has been rescinded.
    Mr. King explained the history of the river, saying that 
the construction of dams and the regulation of the river for 
flood control had altered the natural rhythms of the river, 
which have been the key contributing factors to the decline of 
the pallid sturgeon.
    Mr. Wells of the Missouri Department of Natural Resources 
testified that his department was extremely disappointed to see 
the federal government move forward with a man-made spring rise 
on the Missouri River that would intentionally increases the 
risk of flooding.
    Mr. Kruse of the Missouri Farm Bureau testified that there 
are many who do not believe the science behind the government's 
decision and are worried about the consequences on farmers and 
ranchers. This was amplified by Mr. Taylor of the Missouri Corn 
Growers when he reminded the Subcommittee that the U.S. 
Institute for Environmental Conflict Resolution discovered a 
lack of science regarding pallid sturgeon recovery and 
therefore the group could not make any informed 
recommendations.
    Mr. Waters believes that these man-made spring rises are in 
direct conflict with the Corps mission of flood control. 
Building on that theme, Ms. Muench testified barge owners 
oppose the spring rise because it will decrease the 
navigational reliability of the Missouri and Mississippi rivers 
and it will harm a key customer of the barge and towing 
industry--the Midwest farmer.
    Mr. Sieck of the Iowa Corn Growers explained that he was 
representing individual farmers who may be negatively impacted 
by the federal government's plan to implement a forced flooding 
of the Missouri River. Mr. Sieck reminded the Subcommittee that 
few years ago, there was discussion about the need for a spring 
rise for two birds, the piping plover and the least tern, but 
these populations have increased without a spring rise.
    In sum, the Subcommittee concluded that the federal 
government should not proceed with the spring rise of the 
Missouri River.
    For more information, refer to Committee publication #109-
42.
            7.6.8  the future of rural telecommunications: is universal 
                    service reform needed?

                               Background

    On Wednesday, May 3, 2006, the Subcommittee on Rural 
Enterprises, Agriculture and Technology held a hearing on the 
future of telecommunication services in rural America, with a 
particular focus on universal service.
    A decade after the passage of the Telecommunications Act of 
1996, the Universal Service Fund (USF) has experienced 
spiraling growth that threatens its long term sustainability 
and the continuity of rural service. Universal service has 
afforded rural America the same technology and service as urban 
centers. This hearing specifically looked at H.R. 5072, the 
Universal Service Reform Act of 2006 introduced by 
Representatives Lee Terry (R-NE) and Mr. Rick Boucher (D-VA).

                                Summary

    The hearing was comprised of two panels. The first panel 
consisted of: The Hon. Lee Terry, United States House of 
Representatives (R-NE). The second panel was comprised of Mr. 
Robert Williams, President, Oregon Farmers Mutual Telephone 
Company, Oregon, MO; Mr. Johnie Johnson, Chief Executive 
Officer/GM, Nex-Tech Wireless, Hays, KS; Mr. Raymond Henagan, 
CEO/Manager, Rock Port Telephone, Rock Port, MO; Mr. Don 
Schulte, Teacher, Pattonville High School, Maryland Heights, 
MO; Mr. Edward Merlis, Government and Regulatory Affairs, 
United States Telecom Association, Washington, DC; and Mr. Ed 
Black, President/CEO, Computer and Communications Industry 
Association, Washington, DC.
    Representative Terry described the importance of H.R. 5072 
because it would continue ensuring service to rural America 
while allowing for the spread of broadband in these same areas.
    Mr. Williams, on behalf of the Organization for the 
Promotion and Advancement of Small Telecommunications 
Companies, and Mr. Henagan, on behalf of the National 
Telecommunications Cooperative Association, testified in favor 
of the Terry/Boucher bill, particularly on the expansion of the 
pool of providers and services that pay into the fund. However, 
Mr. Williams disagreed with the cap on the USF because it will 
inhibit the bill's goal of 100 percent broadband deployment.
    Mr. Johnson testified on behalf of CTIA--The Wireless 
Association and the Rural Cellular Association that under the 
current system, rural wireless consumers who contribute to the 
fund are not seeing the benefits that they deserve. Any 
legislation drafted on this topic should rectify this problem.
    Mr. Schulte, speaking on behalf of the Missouri National 
Education Association, supports the E-Rate Fund within the 
current USF. He explained that his school district receives 
roughly $71,000 per year in E-Rate funds which helps to pay for 
various advanced technologies.
    Mr. Merliss of the US Telecom Association testified that 
current funding system for the USF is broken and needs to be 
fixed. Mr. Merliss supports the comprehensive approach in H.R. 
5072, as well as imposing greater accountability for use of the 
funds.
    Finally, Mr. Black, President/CEO of the Computer and 
Communications Industry Association, supports the Terry/Boucher 
bill, saying it is the most comprehensive bill designed at 
reforming the USF. He concluded that as the House moves forward 
in crafting Universal Service reform legislation, H.R. 5072 
should serve as the framework for more extensive reform.
    In sum, the Subcommittee concluded that H.R. 5072 merits 
the support of Congress. For further information about this 
hearing, refer to Committee publication #109-50.
            7.6.9  unlocking charitable giving

                               Background

    On Thursday, May 25, 2006, the Subcommittee on Rural 
Enterprises, Agriculture and Technology held a hearing on 
charitable giving. This hearing specifically looked at H.R. 
3908, the Charitable Giving Act of 2005 introduced by 
Representatives Roy Blunt (R-MO) and Harold Ford (D-KY). The 
bill would provide tax incentives and other measures to 
encourage charitable giving by individuals and corporations.

                                Summary

    The hearing was comprised of two panels. The first panel 
consisted of: The Hon. Roy Blunt, United States House of 
Representatives (R-MO). The second panel included Mr. Benny 
Lee, CEO, Top Innovations, Inc., Kansas City, MO; Mr. Michael 
W. Halterman, CEO, Catholic Charities of Kansas City, Kansas 
City, MO; Ms. Diana L. Aviv, President/CEO, Independent Sector, 
Washington, DC; and Ms. Paulette Maehara, President/CEO, 
Association of Fundraising Professionals, Washington, DC.
    Representative Blunt explained that three years ago, 
similar bills passed Congress by near unanimous votes in the 
House and the Senate on separate tracks. Unfortunately, these 
bills were not reconciled to be enacted. It was hoped that in 
this Congress, H.R. 3908 could cross the finish line.
    Mr. Lee testified that H.R. 3908 would be particularly 
helpful to the approximately 86 million Americans who file for 
the standard deduction on their federal income tax returns. 
While many of these 86 million non-itemizers donate to charity, 
Mr. Lee believes they should receive a deduction for their 
contributions.
    Mr. Halterman used research data from the United Way to 
show the Subcommittee that allowing taxpayers who do not 
itemize to deduct their charitable contributions under $250 
could raise an additional $1 billion for the non-profit sector.
    Ms. Aviv spoke favorably of the provision in H.R. 3908 to 
permit tax-free distributions from individual retirement 
accounts for charitable contributions, thus removing a barrier 
that prevents many older Americans from making substantial 
charitable gifts during their lifetime from retirement 
holdings.
    Ms. Maehara also testified in support of all the provisions 
of H.R. 3908 because it would create powerful new charitable 
giving incentives that would greatly assist the altruistic 
endeavors of charities throughout the country. He particularly 
focused on provisions dealing with the rollover of IRAs and the 
enhanced deductions for contributions of food inventories and 
books.
    In sum, the Subcommittee concluded that H.R. 3908 was an 
important piece of legislation to help all charities, 
particularly for smaller non-profits.
    For more information, refer to Committee publication #109-
54.
            7.6.10  chinese barriers to trade
    Please refer to the hearing summary set forth in part 
7.5.6, supra.
    For further information on this hearing, refer to Committee 
publication #109-61.

                                  
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