Investing in Main Street Act of 2021
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- Crpt 117Hrpt140
Summary
House Report 117-140, from the Committee on Small Business, accompanying H.R. 4256, the Investing in Main Street Act of 2021, submitted October 12, 2021 in the 117th Congress, 1st Session. The Committee reports the bill favorably without amendment and recommends that it do pass, and states it ordered the bill reported by voice vote July 29, 2021. It states that the bill increases the share of capital and surplus a financial institution or savings association may invest in a Small Business Investment Company from 5 to 15 percent, subject to federal banking agency approval. Background sections state that H.R. 4256 was introduced June 30, 2021 by Rep. Judy Chu and Rep. Andrew Garbarino, and that it is identical to H.R. 116, which passed the House January 14, 2019 by a vote of 403-2. The contents list seventeen numbered sections, including a section-by-section analysis and committee votes.
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“Investing in Main Street Act of 2021.”
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117TH CONGRESS REPORT
" HOUSE OF REPRESENTATIVES !
1st Session 117–140
INVESTING IN MAIN STREET ACT OF 2021
OCTOBER 12, 2021.—Committed to the Committee of the Whole House on the State
of the Union and ordered to be printed
Ms. VELÁZQUEZ, from the Committee on Small Business,
submitted the following
R E P O R T
[To accompany H.R. 4256]
The Committee on Small Business, to whom was referred the bill
(H.R. 4256) to amend the Small Business Investment Act of 1958
to increase the amount that certain banks and savings associations
may invest in small business investment companies, subject to the
approval of the appropriate Federal banking agency, and for other
purposes, having considered the same, reports favorably thereon
without amendment and recommends that the bill do pass.
CONTENTS
Page
I. Purpose and Bill Summary ........................................................................ 1
II. Background and Need for Legislation ....................................................... 2
III. Hearings ....................................................................................................... 3
IV. Committee Consideration ........................................................................... 3
V. Committee Votes ......................................................................................... 3
VI. Section-by-Section Analysis for H.R. 4256 ................................................ 3
VII. Congressional Budget Cost Estimate ........................................................ 3
VIII. New Budget Authority, Entitlement Authority, and Tax Expenditures 4
IX. Committee Oversight Findings and Recommendations ........................... 4
X. Statement of General Performance Goals and Objectives ....................... 4
XI. Duplication of Federal Programs ............................................................... 4
XII. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits ..................................................................................................... 4
XIII. Federal Mandates Statement ..................................................................... 4
XIV. Federal Advisory Committee Statement ................................................... 5
XV. Applicability to Legislative Branch ........................................................... 5
XVI. Constitutional Authority Statement .......................................................... 5
XVII. Changes in Existing Law Made by the Bill, as Reported ........................ 5
I. PURPOSE AND BILL SUMMARY
The purpose of H.R. 4256, the ‘‘Investing in Main Street Act of
2021,’’ is to increase the amount of capital and surplus a financial
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29–006
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institution or savings association may invest in a Small Business
Investment Company (SBIC) licensed by the Small Business Ad-
ministration (SBA) from 5 to 15 percent with the goal to improve
access to investment capital for small businesses.
II. BACKGROUND AND NEED FOR LEGISLATION
H.R. 4256 was introduced by Rep. Judy Chu (D–CA) and Rep.
Andrew Garbarino (R–NY) on June 30, 2021. H.R. 4256 is identical
to H.R. 116, which was introduced in the 116th Congress. H.R. 116
was introduced on January 3, 2019, by Rep. Chu and Rep. Ralph
Norman (R–SC). H.R. 116 passed the House on January 14, 2019,
under Suspension of the Rules by a vote of 403–2 (Roll Call No.
30). H.R. 116 was received in the Senate and read twice and re-
ferred to the Committee on Small Business and Entrepreneurship
on January 15, 2019.
Authorized by the Small Business Investment Act of 1958, the
SBIC program provides access to low-cost, government-backed in-
vestment capital for small businesses, which strengthens local com-
munities and empowers American business owners to grow and
compete in the global economy. SBA licenses and regulates pri-
vately owned and managed investment funds that use their own
capital, plus SBA-guaranteed leverage, to make equity and debt in-
vestments in small businesses. Leveraged funds obtained under the
program generally carry rates lower than would otherwise be avail-
able from traditional lending sources. This enables SBIC funds to
make investments in greater amounts than would be possible sole-
ly with private funds. The size of an SBIC fund’s private capital
determines the amount of SBA funding for which the SBIC fund
is eligible. SBIC funds are generally eligible for up to two tiers of
leverage on their private capital, meaning an SBIC fund with $75
million in private capital could have a total fund size of up to $225
million, with up to $150 million of SBA leverage. Investors that
typically provide SBICs with private capital include public and pri-
vate pension funds, banks and other financial institutions, institu-
tional investors, and other high-net-worth individuals. SBIC funds
represent approximately $30 billion in investment capital, which
have helped create or sustain more than 9.5 million jobs since
1995.
Currently, the Office of the Comptroller of the Currency’s (OCC)
regulations permit financial institutions and savings associations to
invest up to 15 percent (subject to OCC approval) of their capital
and surplus into qualified public welfare investments. An SBIC is
considered a public welfare investment,1 however, the Small Busi-
ness Investment Act of 1958 restricts these institutions from in-
vesting more than five percent of their capital and surplus in
SBICs.2 To harmonize the Small Business Investment Act of 1958
with the OCC’s public welfare investment regulations, the bill per-
mits financial institutions and savings associations to invest up to
15 percent of their capital and surplus in an SBIC, subject to the
approval of the appropriate federal regulator.
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1 12 CFR § 24.4(a).
2 15 U.S.C. § 682(b)(1), (2).
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3
III. HEARINGS
On May 19, 2015, the Subcommittee on Economic Growth, Tax,
and Capital Access held a hearing on improving SBA’s capital ac-
cess program, and more specifically there were discussions about
improvements that could be made to the SBIC program.3 On April
5, 2016, the Subcommittee on Economic Growth, Tax, and Capital
Access held a field hearing in Pasadena, California.4 During the
hearing, Ms. Jeri Harman testified in support of lifting the cap. On
September 26, 2019, the Committee held a management review
hearing on the SBIC program, with Mr. Joe Shepard, Associate Ad-
ministrator of Investment and Innovation, and a panel of private
sector SBIC program participants and stakeholders.5
IV. COMMITTEE CONSIDERATION
The Committee on Small Business met in open session, with a
quorum being present, on July 29, 2021 and ordered H.R. 4256 fa-
vorably reported to the House of Representatives. During the
markup, no amendments were offered.
V. COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of Representa-
tives requires the Committee to list the recorded votes on the mo-
tion to report legislation and amendments thereto. The Committee
approved by voice vote to favorably report H.R. 4256 to the House
at 10:19 AM.
VI. SECTION-BY-SECTION ANALYSIS FOR H.R. 4256
Section 1. Short title
This Act may be cited as the ‘‘Investing in Main Street Act of
2021.’’
Section 2. Investments in Small Business Investment Companies
This section increases the percent of capital and surplus a finan-
cial institution or federal savings institution may invest in an SBIC
from 5 to 15 percent, subject to the approval of the appropriate fed-
eral banking agency.
VII. CONGRESSIONAL BUDGET COST ESTIMATE
Pursuant to 3(c)(2) of rule XIII of the Rules of the House of Rep-
resentatives, the Committee adopts as its as its own the cost esti-
mate prepared by the Director of the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act of 1974.
The Committee has requested but not received from the Director
of the Congressional Budget Office a cost estimate for the Commit-
tee’s provisions.
3 Improving Capital Access Programs Within the SBA: Hearing Before the H. Comm. on Small
Business Subcomm. on Economic Growth, Tax, and Capital Access, 114th Cong. (2015) (state-
ment of Brett Palmer, President, Small Business Investor Alliance).
4 Field Hearing in Pasadena, CA: Bridging the Gap—Increasing Access to Venture Capital for
Small Businesses: Hearing Before the H. Comm. on Small Business Subcomm. on Economic
Growth, Tax, and Capital Access, 114th Cong. (2016) (statement of Jeri J. Harman, Managing
Partner & CEO, Avante Mezzanine Partners).
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5 SBA Management Review: Small Business Investment Company Program: Hearing Before
the H. Comm. on Small Business, 116th Cong. (2019).
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VIII. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX
EXPENDITURES
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the House
of Representatives and section 308(a) of the Congressional Budget
Act of 1974, the Committee provides the following opinion and esti-
mate with respect to new budget authority, entitlement authority,
and tax expenditures. While the Committee has not received an es-
timate of new budget authority contained in the cost estimate pre-
pared by the Director of the Congressional Budget Office pursuant
to Sec. 402 of the Congressional Budget Act of 1974, the Committee
does not believe that there will be any additional costs attributable
to this legislation. H.R. 4256 does not direct new spending, but in-
stead reallocates funding independently authorized and appro-
priated.
IX. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS
In accordance with clause 3(c)(1) of rule XIII and clause 2(b)(1)
of rule X of the Rules of the House of Representatives, the over-
sight findings and recommendations of the Committee on Small
Business with respect to the subject matter contained in H.R. 4256
are incorporated into the descriptive portions of this report.
X. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES
With respect to the requirements of clause 3(c)(4) of rule XIII of
the Rules of the House of Representatives, the performance goals
and objectives of H.R. 4256 is to increase the amount of capital and
surplus financial institutions and savings associations may invest
in an SBIC to improve access to investment capital for small busi-
nesses.
XI. DUPLICATION OF FEDERAL PROGRAMS
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the House
of Representatives, no provision of H.R. 4256 is known to be dupli-
cative of another Federal program, including any program that was
included in a report to Congress pursuant to section 21 of Public
Law 111–139 or the most recent Catalog of Federal Domestic As-
sistance.
XII. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND
LIMITED TARIFF BENEFITS
With respect to clause 9 of rule XXI of the Rules of the House
of Representatives, the Committee finds that the bill does not con-
tain any congressional earmarks, limited tax benefits, or limited
tariff benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI of
the Rules of the House of Representatives.
XIII. FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal man-
dates prepared by the Director of the Congressional Budget Office
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pursuant to section 423 of the Unfunded Mandates Reform Act.
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XIV. FEDERAL ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b) of the
Federal Advisory Committee Act were created by this legislation.
XV. APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to the
terms and conditions of employment or access to public services or
accommodations within the meaning of section 102(b)(3) of the Con-
gressional Accountability Act.
XVI. CONSTITUTIONAL AUTHORITY STATEMENT
Pursuant to clause 7 of rule XII of the Rules of the House of Rep-
resentatives, the Committee finds the authority for this legislation
in Art. I, § 8, cl. 1 of the Constitution of the United States.
XVII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of the
House of Representatives, changes in existing law made by the bill,
as reported, as shown as follows: existing law proposed to be omit-
ted is enclosed in black brackets, new matter is printed in italic,
and existing law in which no change is proposed is shown in
roman:
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of the
House of Representatives, changes in existing law made by the bill,
as reported, are shown as follows (new matter is printed in italics
and existing law in which no change is proposed is shown in
roman):
SMALL BUSINESS INVESTMENT ACT OF 1958
* * * * * * *
TITLE III—INVESTMENT DIVISION PROGRAMS
PART A—SMALL BUSINESS INVESTMENT COMPANIES
* * * * * * *
CAPITAL REQUIREMENTS
SEC. 302.
(a) AMOUNT.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
private capital of each licensee shall be not less than—
(A) $5,000,000; or
(B) $10,000,000, with respect to each licensee authorized
or seeking authority to issue participating securities to be
purchased or guaranteed by the Administration under this
Act.
(2) EXCEPTION.—The Administrator may, in the discretion of
the Administrator and based on a showing of special cir-
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cumstances and good cause, permit the private capital of a li-
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censee authorized or seeking authorization to issue partici-
pating securities to be purchased or guaranteed by the Admin-
istration to be less than $10,000,000, but not less than
$5,000,000, if the Administrator determines that such action
would not create or otherwise contribute to an unreasonable
risk of default or loss to the Federal Government.
(3) ADEQUACY.—In addition to the requirements of para-
graph (1), the Administrator shall—
(A) determine whether the private capital of each li-
censee is adequate to assure a reasonable prospect that
the licensee will be operated soundly and profitably, and
managed actively and prudently in accordance with its ar-
ticles; and
(B) determine that the licensee will be able both prior to
licensing and prior to approving any request for financing,
to make periodic payments on any debt of the company
which is interest bearing and shall take into consideration
the income which the company anticipates on its con-
templated investments, the experience of the company’s
owners and managers, the history of the company as an
entity, if any, and the company’s financial resources.
(4) EXEMPTION FROM CAPITAL REQUIREMENTS.—The Adminis-
trator may, in the discretion of the Administrator, approve le-
verage for any licensee licensed under subsection (c) or (d) of
section 301 before the date of enactment of the Small Business
Program Improvement Act of 1996 that does not meet the cap-
ital requirements of paragraph (1), if—
(A) the licensee certifies in writing that not less 50 per-
cent of the aggregate dollar amount of its financings after
the date of enactment of the Small Business Program Im-
provement Act of 1996 will be provided to smaller enter-
prises; and
(B) the Administrator determines that such action would
not create or otherwise contribute to an unreasonable risk
of default or loss to the United States Government.
(b) FINANCIAL INSTITUTION INVESTMENTS.—
(1) CERTAIN BANKS.—Notwithstanding the provisions of sec-
tion 6(a)(1) of the Bank Holding Company Act of 1956, any na-
tional bank, or any member bank of the Federal Reserve Sys-
tem or nonmember insured bank to the extent permitted under
applicable State law, may invest in any 1 or more small busi-
ness investment companies, or in any entity established to in-
vest solely in small business investment companies, except
that in no event shall the total amount of such investments of
any such bank exceed 5 percent of the capital and surplus of
the bank or, subject to the approval of the appropriate Federal
banking agency, 15 percent of such capital and surplus.
(2) CERTAIN SAVINGS ASSOCIATIONS.—Notwithstanding any
other provision of law, any Federal savings association may in-
vest in any one or more small business investment companies,
or in any entity established to invest solely in small business
investment companies, except that in no event may the total
amount of such investments by any such Federal savings asso-
ciation exceed 5 percent of the capital and surplus of the Fed-
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eral savings association or, subject to the approval of the appro-
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priate Federal banking agency, 15 percent of such capital and
surplus.
(3) APPROPRIATE FEDERAL BANKING AGENCY DEFINED.—For
purposes of this subsection, the term ‘‘appropriate Federal bank-
ing agency’’ has the meaning given that term under section 3
of the Federal Deposit Insurance Act.
(c) DIVERSIFICATION OF OWNERSHIP.—The Administrator shall
ensure that the management of each licensee licensed after the
date of enactment of the Small Business Program Improvement Act
of 1996 is sufficiently diversified from and unaffiliated with the
ownership of the licensee in a manner that ensures independence
and objectivity in the financial management and oversight of the
investments and operations of the licensee.
* * * * * * *
Æ
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