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[House Report 115-216]
[From the U.S. Government Publishing Office]

115th Congress     }                                           {   Report
                         HOUSE OF REPRESENTATIVES
 1st Session       }                                           {  115-216

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                  INVESTING IN MAIN STREET ACT OF 2017

                                _______
                                

 July 12, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Chabot, from the Committee on Small Business, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2364]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 2364) 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, 
report favorably thereon without amendment and recommend that 
the bill do pass.

                                CONTENTS

                                                                   Page
   I.  Purpose of the Bill and Summary................................2
  II.  Background and the Need for Legislation........................2
 III.  Hearings.......................................................2
  IV.  Committee Consideration........................................2
   V. Committee Votes.................................................2
  VI.  Section-by-Section Analysis of H.R. 2364.......................4
 VII.  Unfunded Mandates..............................................4
VIII.  New Budget Authority, Entitlement Authority and Tax Expenditure4
  IX.  Oversight Findings.............................................4
   X.  Statement of Constitutional Authority..........................4
  XI.  Congressional Accountability Act...............................4
 XII.  Federal Advisory Committee Statement...........................5
XIII.  Statement of No Earmarks.......................................5
 XIV.  Statement of Duplication of Federal Programs...................5
  XV.  Disclosure of Directed Rule Makings............................5
 XVI.  Performance Goals and Objectives...............................5
XVII.  Changes in Existing Law Made by the Bill, as Reported..........5

            COST ESTIMATE OF THE CONGRESSIONAL BUDGET OFFICE

    The cost estimate prepared by the Director of the 
Congressional Budget Office pursuant to Sec. 402 of the 
Congressional Budget Act of 1974 was not submitted timely to 
the Committee.

                      I. Purpose and Bill Summary

    With the goal of growing the amount of capital available to 
small businesses within the Small Business Investment Company 
(SBIC) program at the Small Business Administration (SBA), H.R. 
2364, the ``Investing in Main Street Act of 2017,'' increases 
the amount of capital and surplus that a financial institution 
and federal savings association can invest in an SBIC from 5 
percent to 15 percent.

                II. Background and Need for Legislation

    With an ongoing economic recovery that is starting to show 
signs of improvement, small businesses around the nation 
continue to face obstacles when it comes to access to capital. 
To bridge the many financial challenges that exist, the SBA 
offers capital access programs to assist the nation's smallest 
firms. To help small businesses in obtaining venture capital 
and private equity, the SBA administers the SBIC program, which 
utilizes a privately-owned and SBA-licensed model.
    Currently, the Small Business Investment Act of 1958 limits 
the amount of capital and surplus that a financial institution 
or federal savings association may invest in an SBIC to 5 
percent.
    To enhance the SBIC program, H.R. 2364 increases the amount 
of capital and surplus that a financial institution and federal 
savings association can invest in an SBIC from 5 percent to 15 
percent. Further, H.R. 2364 requires financial institutions and 
federal savings associations to be approved by their federal 
regulator prior to investing more than 5 percent.
    Beyond increasing the percentage of an investment a bank 
can make into an SBIC, H.R. 2364 also brings into parity the 
Small Business Investment Act with the Office of the 
Comptroller of the Currency's national bank charter percentage 
requirements.

                             III. Hearings

    In the 114th Congress, issues related to SBICs were 
addressed at a hearing by the Subcommittee on Economic Growth, 
Tax and Capital Access of the Committee on Small Business 
entitled ``Improving Capital Access Programs within the SBA'' 
on May 19, 2015. As a result, no hearings have been held in the 
115th Congress.

                      IV. Committee Consideration

    The Committee on Small Business met in open session, with a 
quorum being present, on June 15, 2017, and ordered H.R. 2364 
be favorably reported to the House by a recorded vote of 21 
yeas and 0 noes at 11:29 A.M. No amendments were offered during 
consideration of H.R. 2364.

                           V. Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report the legislation and amendments 
thereto.

              VI. Section-by-Section Analysis of H.R. 2364

Section 1. Short title

    This section designates the bill as the ``Investing in Main 
Street Act of 2017.''

Section 2. Investment in Small Business Investment Companies

    Since 1958, the Small Business Investment Company (SBIC) 
program has operated a private-public partnership model, 
whereby a privately owned and Small Business Administration 
(SBA) licensed company supplies debt and equity capital to 
small businesses. The program successfully runs at a zero 
subsidy rate to the American taxpayer. This section amends 
Sec. 302(b) of the Small Business Investment Act by increasing 
the percentage a financial institution or federal savings 
association can invest in an SBIC. Currently, financial 
institutions and federal savings associations are limited to 
investing 5 percent of capital and surplus in an SBIC. This 
section increases the percentage to 15 percent and requires the 
financial institution or the federal savings association to be 
approved by their federal regulator prior to investing more 
than 5 percent.

                         VII. Unfunded Mandates

    H.R. 2364 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act, Pub. 
L. No. 104-4, and would impose no costs on state, local or 
tribal governments.

 VIII. New Budget Authority, Entitlement Authority and Tax Expenditures

    The Committee has not received an estimate of new budget 
authority contained in the cost estimate prepared by the 
Director of the Congressional Budget Office pursuant to 
Sec. 402 of the Congressional Budget Act of 1974. In compliance 
with clause 3(c)(2) of rule XIII of the Rules of the House, the 
Committee opines that H.R. 2364 will not establish any new 
budget or entitlement authority or create any tax expenditures.

                         IX. Oversight Findings

    In accordance with clause 2(b)(1) of rule X of the Rules of 
the House, the oversight findings and recommendations of the 
Committee on Small Business with respect to the subject matter 
contained in H.R. 2364 are incorporated into the descriptive 
portions of this report.

                X. Statement of Constitutional Authority

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
authority for this legislation in Art. I, Sec. 8 of the 
Constitution of the United States.

                  XI. Congressional Accountability Act

    H.R. 2364 does not relate to the terms and conditions of 
employment or access to public services or accommodations 
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.

             XII. Federal Advisory Committee Act Statement

    H.R. 2364 does not establish or authorize the establishment 
of any new advisory committees as that term is defined in the 
Federal Advisory Committee Act, 5 U.S.C. App. 2.

                     XIII. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 2364 does not 
contain any congressional earmarks, limited tax benefits or 
limited tariff benefits as defined in subsections (d), (e) or 
(f) of clause 9 of rule XXI of the Rules of the House.

           XIV. Statement of Duplication of Federal Programs

    Pursuant to clause 3(c) of the rule XIII of the Rules of 
the House, no provision of H.R. 2364 establishes or 
reauthorizes a program of the federal government known to be 
duplicative of another federal program, a program that was 
included in any report from the United States Government 
Accountability Office pursuant to Sec. 21 of Pub. L. No. 111-
139, or a program related to a program identified in the most 
recent catalog of federal domestic assistance.

                XV. Disclosure of Directed Rule Makings

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House, H.R. 2364 does not direct any rulemaking.

                 XVI. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House, the Committee establishes the following performance-
related goals and objectives in this legislation:

          H.R. 2364 amends the Small Business Investment Act of 
        1958 to increase the amount of capital and surplus 
        financial institutions and savings associations may 
        invest in an SBIC.

      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, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

SMALL BUSINESS INVESTMENT ACT OF 1958

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                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 circumstances and good cause, permit the 
        private capital of a licensee authorized or seeking 
        authorization to issue participating securities to be 
        purchased or guaranteed by the Administration 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 
        paragraph (1), the Administrator shall--
                  (A) determine whether the private capital of 
                each licensee 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 
                articles; 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 contemplated 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 
        Administrator may, in the discretion of the 
        Administrator, approve leverage 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 
        capital requirements of paragraph (1), if--
                  (A) the licensee certifies in writing that 
                not less 50 percent of the aggregate dollar 
                amount of its financings after the date of 
                enactment of the Small Business Program 
                Improvement Act of 1996 will be provided to 
                smaller enterprises; 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 
        section 6(a)(1) of the Bank Holding Company Act of 
        1956, any national bank, or any member bank of the 
        Federal Reserve System or nonmember insured bank to the 
        extent permitted under applicable State law, may invest 
        in any 1 or more small business investment companies, 
        or in any entity established to invest 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 invest 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 association exceed 5 percent of the capital and 
        surplus of the Federal savings association or, subject 
        to the approval of the appropriate 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 banking 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.

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