69–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 115–215 

SMALL BUSINESS INVESTMENT OPPORTUNITY 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. 2333] 

The Committee on Small Business, to whom was referred the bill 

(H.R. 2333) to amend the Small Business Investment Act of 1958 

to increase the amount of leverage made available to small business investment companies, having considered the same, report favorably thereon with an amendment and recommend that the bill 

as amended 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 ......................................................................................... 3 

VI. Section-by-Section Analysis of H.R. 2333 .................................................. 6 

VII. Unfunded Mandates .................................................................................... 6 

VIII. New Budget Authority, Entitlement Authority and Tax Expenditures 6 

IX. Oversight Findings ...................................................................................... 6 

X. Statement of Constitutional Authority ...................................................... 6 

XI. Congressional Accountability Act .............................................................. 7 

XII. Federal Advisory Committee Statement ................................................... 7 

XIII. Statement of No Earmarks ........................................................................ 7 

XIV. Statement of Duplication of Federal Programs ........................................ 7 

XV. Disclosure of Directed Rule Makings ........................................................ 7 

XVI. Performance Goals and Objectives ............................................................ 7 

XVII. Changes in Existing Law Made by the Bill, as Reported ........................ 7 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

2 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Small Business Investment Opportunity Act of 

2017’’. 

SEC. 2. INDIVIDUAL SBIC LEVERAGE LIMIT INCREASE. 

Section 303(b)(2)(A)(ii) of the Small Business Investment Act of 1958 (15 U.S.C. 

683(b)(2)(A)(ii)) is amended by striking ‘‘$150,000,000’’ and inserting ‘‘$175,000,000’’. 

COST ESTIMATE OF THE CONGRESSIONAL BUDGET OFFICE

The cost estimate prepared by the Director of the Congressional 

Budget Office pursuant to 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 equity capital available 

to small businesses, H.R. 2333, the ‘‘Small Business Investment 

Opportunity Act of 2017,’’ amends the Small Business Investment 

Act of 1958 by increasing the Individual Leverage Limit from $150 

million to $175 million for those participating in the Small Business Investment Company (SBIC) program. 

II. BACKGROUND AND NEED FOR LEGISLATION

As the United States continues to see signs of an improved economy, the nation’s small businesses are still confronted with a challenging lending environment. To help address the many lending 

roadblocks that exist, the Small Business Administration (SBA) offers numerous programs to increase access to capital for small businesses. In particular, the Small Business Investment Company 

(SBIC) program, which utilizes a privately-owned and SBA-licensed 

model, focuses on increasing the availability of venture and private 

equity capital to small businesses. 

To utilize the SBIC program to its full potential, H.R. 2333 

amends the Small Business Investment Act of 1958 by increasing 

the Individual Leverage Limit from $150 million to $175 million. 

The Individual Leverage Limit stipulates how much capital can be 

deployed to a small business by an SBIC that has only one fund 

under management. It was last increased in 2009 with the limit increasing from $137 million to the present day limit of $150 million. 

Similar to legislation that was signed into law in 2015 that increased the leverage limit for an SBIC that manages multiple 

funds, H.R. 2333 will enhance the ability of a small business to expand and create jobs. 

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. 2333 be 

3 

favorably reported, as amended, to the House by a recorded vote 

of 21 yeas and 0 noes at 11:23 A.M. 

Amendment Number One, filed by Mr. Marshall of Kansas, 

makes a technical correction to the bill to reflect the correct section 

of the United States Code that is amended. The amendment was 

agreed to by a voice vote at 11:20 A.M. 

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. The Committee voted 21–0 to report H.R. 2333, as amended, to the House 

at 11:23 am. 

4 


Insert offset folio 5 here HR215.001

COMMITTEE ON SMALL BUSINESS 

TALLY SHEET 

DATE: 6115117 

BILL NUMBER: I!.R. 2333 

ROLLCALL: 

AMEND~UMBER: n M<..J 

VOTE: (AYE) (NO) 

MEMBER 

Mr. Chabot, Chairman 

Mr. King 

Mr. Luetkemeyer 

Mr. Brat 

Ms. Radewagen 

Mr. Knight 

Mr. Kelly 

Mr. Blum 

Mr. Comer 

Ms. Gonzalez-Colon 

Mr. Bacon 

Mr. Fitzpatrick 

Dr. Marshall 

Mr. Estes 

Ms. Velazquez, Ranking Member 

Mr. Evans 

Ms. Murphy 

Mr. Lawson, Jr. 

Ms. Clarke 

Ms.Chu 

Ms. Adams 

Mr. Espaillat 

Mr. Schneider 

VACANT 

TOTALS 

QUORUM:13 

PRESENT: 2.. \ 

\; \) \. C\ S C\XV'-.\'h'\_('U.d .. 1 .e-re~ 

AYE NO NOT VOTING 

v 

../ 

v 

v 

v 

v' 

v 

v 

v 

../ 

v 

v 

v 

v 

v 

v 

v 

/ 

./ 

v 

v 

On this vote there were 1..-\ ayes and _o..L....._ nos. 
5 


Insert offset folio 6 here HR215.002

COMMITTEE ON SMALL BUSINESS 

TALLY SHEET 

DATE: 6/15117 

BILL NUMBER: B.R. 2333 

ROLL CALL: VV AMEND~NUMBER: 

VOTE:~ (NO) 

MEMBER 

Mr. Chabot, Chairman 

Mr. King 

Mr. Luetkemeyer 

Mr. Brat 

Ms. Radewagen 

Mr. Knight 

Mr. Kelly 

Mr. Blum 

Mr. Comer 

Ms. Gonzalez-Colon 

Mr. Bacon 

Mr. Fitzpatrick 

Dr. Marshall 

Mr. Estes 

\ ( Mo..vs ho.JJ.) 

\\ '2.1) 

AYE 

Ms. Velazquez, Ranking Member 

Mr. Evans 

Ms. Murphy 

Mr. Lawson, Jr. 

Ms. Clarke 

Ms.Chu 

Ms. Adams 

Mr. Espaillat 

Mr. Schneider 

VACANT 

TOTALS 

NO 

QUORUM:l3 

PRESENT: ?...- \ 

NOT VOTING 

On this vote there were ___ ayes and ___ nos. 
6 

AMENDMENT TO H.R. 2333 

OFFERED BY MR. MARSHALL OF KANSAS

Page 1, line 8, strike ‘‘682’’ and insert ‘‘683’’. 

VI. SECTION-BY-SECTION ANALYSIS OF H.R. 2333 

Section 1. Short title 

This section designates the bill as the ‘‘Small Business Investment Opportunity Act of 2017.’’ 

Sec. 2. Individual SBIC leverage limit increase 

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. The current cap for an SBIC that manages just one company is capped at $150,000,000. This section amends 

§ 303(b)(2)(A)(iii) of the Small Business Investment Act of 1958, 15 

U.S.C. § 682(b)(2)(A)(ii), by increasing the Individual Leverage 

Limit to $175,000,000. While this provision comes at no cost to the 

taxpayer, increasing this limit will enhance the flow of capital to 

small businesses. 

VII. UNFUNDED MANDATES

H.R. 2333 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 § 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. 

2333 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. 2333 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, § 8, cl. 3 of the Constitution of the United 

States. 

7 

XI. CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 2333 does not relate to the terms and conditions of employment or access to public services or accommodations within the 

meaning of § 102(b)(3) of Pub. L. No. 104–1. 

XII. FEDERAL ADVISORY COMMITTEE ACT STATEMENT

H.R. 2333 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. 2333 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 rule XIII of the Rules of the House, 

no provision of H.R. 2333 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 § 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. 2333 does not direct any rule making. 

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. 2333 amends the Small Business Investment Act of 

1958 to increase the amount of leverage made available to 

small business investment companies. 

XVII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

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 (existing law proposed to be omitted is enclosed in black brackets, 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 

* * * * * * * 

8 

TITLE III—INVESTMENT DIVISION PROGRAMS 

PART A—SMALL BUSINESS INVESTMENT COMPANIES

* * * * * * * 

BORROWING POWER

SEC. 303. (a) Each small business investment company shall 

have authority to borrow money and to issue its securities, promissory notes, or other obligations under such general conditions and 

subject to such limitations and regulations as the Administration 

may prescribe. 

(b) To encourage the formation and growth of small business investment companies the Administration is authorized when authorized in appropriation Acts, to purchase, or to guarantee the timely 

payment of all principal and interest as scheduled on, debentures 

or participating securities issued by such companies. Such purchases or guarantees may be made by the Administration on such 

terms and conditions as it deems appropriate, pursuant to regulations issued by the Administration. The full faith and credit of the 

United States is pledged to the payment of all amounts which may 

be required to be paid under any guarantee under this subsection. 

Debentures purchased or guaranteed by the Administration under 

this subsection shall be subordinate to any other debenture bonds, 

promissory notes, or other debts and obligations of such companies, 

unless the Administration in its exercise of reasonable investment 

prudence and in considering the financial soundness of such company determines otherwise. Such debentures may be issued for a 

term of not to exceed fifteen years and shall bear interest at a rate 

not less than a rate determined by the Secretary of the Treasury 

taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities on 

such debentures, adjusted to the nearest one-eighth of 1 per centum, plus, for debentures obligated after September 30, 2001, an 

additional charge, in an amount established annually by the Administration, as necessary to reduce to zero the cost (as defined in 

section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 

661a)) to the Administration of purchasing and guaranteeing debentures under this Act, which amount may not exceed 1.38 percent per year, and which shall be paid to and retained by the Administration. The debentures or participating securities shall also 

contain such other terms as the Administration may fix, and shall 

be subject to the following restrictions and limitations: 

(1) The total amount of debentures and participating securities that may be guaranteed by the Administration and outstanding from a company licensed under section 301(c) of this 

Act shall not exceed 300 per centum of the private capital of 

such company: Provided, That nothing in this paragraph shall 

require any such company that on March 31, 1993, has outstanding debentures in excess of 300 per centum of its private 

capital to prepay such excess: And provided further, That any 

such company may apply for an additional debenture guarantee or participating security guarantee with the proceeds to 

be used solely to pay the amount due on such maturing debenVerDate Sep 11 2014 04:56 Jul 15, 2017 Jkt 069006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR215.XXX HR215
9 

ture, but the maturity of the new debenture or security shall 

be not later than September 30, 2002. 

(2) MAXIMUM LEVERAGE.— 

(A) IN GENERAL.—The maximum amount of outstanding 

leverage made available to any one company licensed 

under section 301(c) of this Act may not exceed the lesser 

of— 

(i) 300 percent of such company’s private capital; or 

(ii) ø$150,000,000¿ $175,000,000. 

(B) MULTIPLE LICENSES UNDER COMMON CONTROL.—The 

maximum amount of outstanding leverage made available 

to two or more companies licensed under section 301(c) of 

this Act that are commonly controlled (as determined by 

the Administrator) and not under capital impairment may 

not exceed $350,000,000. 

(C) INVESTMENTS IN LOW-INCOME GEOGRAPHIC AREAS.— 

(i) In calculating the outstanding leverage of a company for 

the purposes of subparagraph (A), the Administrator shall 

not include the amount of the cost basis of any equity investment made by the company in a smaller enterprise located in a low-income geographic area (as defined in section 351), to the extent that the total of such amounts does 

not exceed 50 percent of the company’s private capital. 

(ii) The maximum amount of outstanding leverage 

made available to— 

(I) any 1 company described in clause (iii) may 

not exceed the lesser of 300 percent of private capital of the company, or $175,000,000; and 

(II) 2 or more companies described in clause (iii) 

that are under common control (as determined by 

the Administrator) may not exceed $250,000,000. 

(iii) A company described in this clause is a company licensed under section 301(c) in the first fiscal 

year after the date of enactment of this clause or any 

fiscal year thereafter that certifies in writing that not 

less than 50 percent of the dollar amount of investments of that company shall be made in companies 

that are located in a low-income geographic area (as 

that term is defined in section 351). 

(D) INVESTMENTS IN ENERGY SAVING SMALL BUSINESSES.— 

(i) IN GENERAL.—Subject to clause (ii), in calculating 

the outstanding leverage of a company for purposes of 

subparagraph (A), the Administrator shall exclude the 

amount of the cost basis of any Energy Saving qualified investment in a smaller enterprise made in the 

first fiscal year after the date of enactment of this subparagraph or any fiscal year thereafter by a company 

licensed in the applicable fiscal year. 

(ii) LIMITATIONS.— 

(I) AMOUNT OF EXCLUSION.—The amount excluded under clause (i) for a company shall not exceed 33 percent of the private capital of that company. 

10 

(II) MAXIMUM INVESTMENT.—A company shall 

not make an Energy Saving qualified investment 

in any one entity in an amount equal to more 

than 20 percent of the private capital of that company. 

(III) OTHER TERMS.—The exclusion of amounts 

under clause (i) shall be subject to such terms as 

the Administrator may impose to ensure that 

there is no cost (as that term is defined in section 

502 of the Federal Credit Reform Act of 1990 (2 

U.S.C. 661a)) with respect to purchasing or guaranteeing any debenture involved. 

(3) Subject to the foregoing dollar and percentage limits, a 

company licensed under section 301(c) of this Act may issue 

and have outstanding both guaranteed debentures and participating securities: Provided, That the total amount of participating securities outstanding shall not exceed 200 per centum 

of private capital. 

For purposes of this subsection, the term ‘‘venture capital’’ includes 

such common stock, preferred stock, or other financing with subordination or nonamortization characteristics as the Administration 

determines to be substantially similar to equity financing. 

(c) THIRD PARTY DEBT.—The Administrator— 

(1) shall not permit a licensee having outstanding leverage 

to incur third party debt that would create or contribute to an 

unreasonable risk of default or loss to the Federal Government; 

(2) shall permit such licensees to incur third party debt only 

on such terms and subject to such conditions as may be established by the Administrator, by regulation or otherwise. 

(d) INVESTMENTS IN SMALLER ENTERPRISES.—The Administrator 

shall require each licensee, as a condition of approval of an application for leverage, to certify in writing that not less than 25 percent 

of the aggregate dollar amount of financings of that licensee shall 

be provided to smaller enterprises. 

(e) CAPITAL IMPAIRMENT.—Before approving any application for 

leverage submitted by a licensee under this Act, the Administrator— 

(1) shall determine that the private capital of the licensee 

meets the requirements of section 302(a); and 

(2) shall determine, taking into account the nature of the assets of the licensee, the amount and terms of any third party 

debt owed by such licensee, and any other factors determined 

to be relevant by the Administrator, that the private capital of 

the licensee has not been impaired to such an extent that the 

issuance of additional leverage would create or otherwise contribute to an unreasonable risk of default or loss to the Federal 

Government. 

(f) REDEMPTION OR REPURCHASE OF PREFERRED STOCK.—Notwithstanding any other provision of law— 

(1) the Administrator may allow the issuer of any preferred 

stock sold to the Administration before November 1, 1989 to 

redeem or repurchase such stock, upon the payment to the Administration of an amount less than the par value of such 

stock, for a repurchase price determined by the Administrator 

after consideration of all relevant factors, including— 

11 

(A) the market value of the stock; 

(B) the value of benefits provided and anticipated to accrue to the issuer; 

(C) the amount of dividends paid, accrued, and anticipated; and 

(D) the estimate of the Administrator of any anticipated 

redemption; and 

(2) any moneys received by the Administration from the repurchase of preferred stock shall be available solely to provide 

debenture leverage to licensees having 50 percent or more in 

aggregate dollar amount of their financings invested in smaller 

enterprises. 

(g) In order to encourage small business investment companies 

to provide equity capital to small businesses, the Administration is 

authorized to guarantee the payment of the redemption price and 

prioritized payments on participating securities issued by such 

companies which are licensed pursuant to section 301(c) of this Act, 

and a trust or a pool acting on behalf of the Administration is authorized to purchase such securities. Such guarantees and purchases shall be made on such terms and conditions as the Administration shall establish by regulation. For purposes of this section, 

(A) the term ‘‘participating securities’’ includes preferred stock, a 

preferred limited partnership interest or a similar instrument, including debentures under the terms of which interest is payable 

only to the extent of earnings and (B) the term ‘‘prioritized payments’’ includes dividends on stock, interest on qualifying debentures, or priority returns on preferred limited partnership interests 

which are paid only to the extent of earnings. Participating securities guaranteed under this subsection shall be subject to the following restrictions and limitations, in addition to such other restrictions and limitations as the Administration may determine: 

(1) Participating securities shall be redeemed not later than 

15 years after their date of issuance for an amount equal to 

100 per centum of the original issue price plus the amount of 

any accrued prioritized payment: Provided, That if, at the time 

the securities are redeemed, whether as scheduled or in advance, the issuing company (A) has not paid all accrued 

prioritized payments in full as provided in paragraph (2) below 

and (B) has not sold or otherwise disposed of all investments 

subject to profit distributions pursuant to paragraph (11), the 

company’s obligation to pay accrued and unpaid prioritized 

payments shall continue and payment shall be made from the 

realized gain, if any, on the disposition of such investments, 

but if on disposition there is no realized gain, the obligation to 

pay accrued and unpaid prioritized payments shall be extinguished: Provided further, That in the interim, the company 

shall not make any in-kind distributions of such investments 

unless it pays to the Administration such sums, up to the 

amount of the unrealized appreciation on such investments, as 

may be necessary to pay in full the accrued prioritized payments. 

(2) Prioritized payments on participating securities shall be 

preferred and cumulative and payable out of the retained earnings available for distribution, as defined by the Administration, of the issuing company at a rate determined by the SecVerDate Sep 11 2014 04:56 Jul 15, 2017 Jkt 069006 PO 00000 Frm 00011 Fmt 6659 Sfmt 6602 E:\HR\OC\HR215.XXX HR215
12 

retary of the Treasury taking into consideration the current average market yield on outstanding marketable obligations of 

the United States with remaining periods to maturity comparable to the average maturities on such securities, adjusted 

to the nearest one-eighth of 1 percent, plus, for participating 

securities obligated after September 30, 2001, an additional 

charge, in an amount established annually by the Administration, as necessary to reduce to zero the cost (as defined in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 

661a)) to the Administration of purchasing and guaranteeing 

participating securities under this Act, which amount may not 

exceed 1.46 percent per year, and which shall be paid to and 

retained by the Administration. 

(3) In the event of liquidation of the company, participating 

securities shall be senior in priority for all purposes to all other 

equity interests in the issuing company, whenever created. 

(4) Any company issuing a participating security under this 

Act shall commit to invest or shall invest an amount equal to 

the outstanding face value of such security solely in equity capital. As used in this subsection, ‘‘equity capital’’ means common 

or preferred stock or a similar instrument, including subordinated debt with equity features which is not amortized and 

which provides for interest payments from appropriate sources, 

as determined by the Administration. 

(5) The only debt (other than leverage obtained in accordance 

with this title) which any company issuing a participating security under this subsection may have outstanding shall be 

temporary debt in amounts limited to not more than 50 per 

centum of private capital. 

(6) The Administration may permit the proceeds of a participating security to be used to pay the principal amount due on 

outstanding debentures guaranteed by the Administration, if 

(A) the company has outstanding equity capital invested in an 

amount equal to the amount of the debentures being refinanced and (B) the Administration receives profit participation 

on such terms and conditions as it may determine, but not to 

exceed the per centums specified in paragraph (11). 

(7) For purposes of computing profit participation under 

paragraph (11), except as otherwise determined by the Administration, the management expenses of any company which 

issues participating securities shall not be greater than 2.5 per 

centum per annum of the combined capital of the company, 

plus $125,000 if the company’s combined capital is less than 

$20,000,000. For purposes of this paragraph, (A) the term 

‘‘combined capital’’ means the aggregate amount of private capital and outstanding leverage and (B) the term ‘‘management 

expenses’’ includes salaries, office expenses, travel, business 

development, office and equipment rental, bookkeeping and the 

development, investigation and monitoring of investments, but 

does not include the cost of services provided by specialized 

outside consultants, outside lawyers and outside auditors, who 

perform services not generally expected of a venture capital 

company nor does such term include the cost of services provided by any affiliate of the company which are not part of the 

13 

normal process of making and monitoring venture capital investments. 

(8) Notwithstanding paragraph (9), if a company is operating 

as a limited partnership or as a subchapter S corporation or 

an equivalent pass-through entity for tax purposes and if there 

are no accumulated and unpaid prioritized payments, the company may make annual distributions to the partners, shareholders, or members in amounts not greater than each partner’s, shareholder’s, or member’s maximum tax liability. For 

purposes of this paragraph, the term ‘‘maximum tax liability’’ 

means the amount of income allocated to each partner, shareholder, or member (including an allocation to the Administration as if it were a taxpayer) for Federal income tax purposes 

in the income tax return filed or to be filed by the company 

with respect to the fiscal year of the company immediately preceding such distribution, multiplied by the highest combined 

marginal Federal and State income tax rates for corporations 

or individuals, whichever is higher, on each type of income included in such return. For purposes of this paragraph, the 

term ‘‘State income tax’’ means the income tax of the State 

where the company’s principal place of business is located. A 

company may also elect to make a distribution under this 

paragraph at any time during any calendar quarter based on 

an estimate of the maximum tax liability. If a company makes 

1 or more interim distributions for a calendar year, and the aggregate amount of those distributions exceeds the maximum 

amount that the company could have distributed based on a 

single annual computation, any subsequent distribution by the 

company under this paragraph shall be reduced by an amount 

equal to the excess amount distributed. 

(9) After making any distributions as provided in paragraph 

(8), a company with participating securities outstanding may 

distribute the balance of income to its investors, specifically including the Administration, in the per centums specified in 

paragraph (11), if there are no accumulated and unpaid 

prioritized payments and if all amounts due the Administration pursuant to paragraph (11) have been paid in full, subject 

to the following conditions: 

(A) As of the date of the proposed distribution, if the 

amount of leverage outstanding is more than 200 per centum of the amount of private capital, any amounts distributed shall be made to private investors and to the Administration in the ratio of leverage to private capital. 

(B) As of the date of the proposed distribution, if the 

amount of leverage outstanding is more than 100 per centum but not more than 200 per centum of the amount of 

private capital, 50 per centum of any amounts distributed 

shall be made to the Administration and 50 per centum 

shall be made to the private investors. 

(C) If the amount of leverage outstanding is 100 per centum, or less, of the amount of private capital, the ratio 

shall be that for distribution of profits as provided in paragraph (11). 

(D) Any amounts received by the Administration under 

subparagraph (A) or (B) shall be applied first as profit parVerDate Sep 11 2014 04:56 Jul 15, 2017 Jkt 069006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR215.XXX HR215
14 

ticipation as provided in paragraph (11) and any remainder shall be applied as a prepayment of the principal 

amount of the participating securities or debentures. 

(10) After making any distributions pursuant to paragraph 

(8), a company with participating securities outstanding may 

return capital to its investors, specifically including the Administration, if there are no accumulated and unpaid prioritized 

payments and if all amounts due the Administration pursuant 

to paragraph (11) have been paid in full. Any distributions 

under this paragraph shall be made to private investors and 

to the Administration in the ratio of private capital to leverage 

as of the date of the proposed distribution: Provided, That if 

the amount of leverage outstanding is less than 50 per centum 

of the amount of private capital or $10,000,000, whichever is 

less, no distribution shall be required to be made to the Administration unless the Administration determines, on a case by 

case basis, to require distributions to the Administration to reduce the amount of outstanding leverage to an amount less 

than $10,000,000. 

(11)(A) A company which issues participating securities shall 

agree to allocate to the Administration a share of its profits determined by the relationship of its private capital to the 

amount of participating securities guaranteed by the Administration in accordance with the following: 

(i) If the total amount of participating securities is 100 

per centum of private capital or less, the company shall allocate to the Administration a per centum share computed 

as follows: the amount of participating securities divided 

by private capital times 9 per centum. 

(ii) If the total amount of participating securities is more 

than 100 per centum but not greater than 200 per centum 

of private capital, the company shall allocate to the Administration a per centum share computed as follows: 

(I) 9 per centum, plus 

(II) 3 per centum of the amount of participating securities minus private capital divided by private capital. 

(B) Notwithstanding any other provision of this paragraph— 

(i) in no event shall the total per centum required by 

this paragraph exceed 12 per centum, unless required pursuant to the provisions of (ii) below, 

(ii) if, on the date the participating securities are marketed, the interest rate on Treasury bonds with a maturity 

of 10 years is a rate other than 8 per centum, the Administration shall adjust the rate specified in paragraph (A) 

above, either higher or lower, by the same per centum by 

which the Treasury bond rate is higher or lower than 8 per 

centum, and 

(iii) this paragraph shall not be construed to create any 

ownership interest of the Administration in the company. 

(12) A company may elect to make an in-kind distribution of 

securities only if such securities are publicly traded and marketable. The company shall deposit the Administration’s share 

of such securities for disposition with a trustee designated by 

the Administration or, at its option and with the agreement of 

15 

the company, the Administration may direct the company to 

retain the Administration’s share. If the company retains the 

Administration’s share, it shall sell the Administration’s share 

and promptly remit the proceeds to the Administration. As 

used in this paragraph, the term ‘‘trustee’’ means a person who 

is knowledgeable about and proficient in the marketing of thinly traded securities. 

(h) The computation of amounts due the Administration under 

participating securities shall be subject to the following terms and 

conditions: 

(1) The formula in subsection (g)(11) shall be computed annually and the Administration shall receive distributions of its 

profit participation at the same time as other investors in the 

company. 

(2) The formula shall not be modified due to an increase in 

the private capital unless the increase is provided for in a proposed business plan submitted to and approved by the Administration. 

(3) After distributions have been made, the Administration’s 

share of such distributions shall not be recomputed or reduced. 

(4) If the company prepays or repays the participating securities, the Administration shall receive the requisite participation upon the distribution of profits due to any investments 

held by the company on the date of the repayment or prepayment. 

(5) If a company is licensed on or before March 31, 1993, it 

may elect to exclude from profit participation all investments 

held on that date and in such case the Administration shall determine the amount of the future expenses attributable to such 

prior investment: Provided, That if the company issues participating securities to refinance debentures as authorized in subsection (g)(6), it may not elect to exclude profits on existing investments under this paragraph. 

(i) LEVERAGE FEE.—With respect to leverage granted by the Administration to a licensee, the Administration shall collect from the 

licensee a nonrefundable fee in an amount equal to 3 percent of the 

face amount of leverage granted to the licensee in the following 

manner: 1 percent upon the date on which the Administration enters into any commitment for such leverage with the licensee, and 

the balance of 2 percent (or 3 percent if no commitment has been 

entered into by the Administration) on the date on which the leverage is drawn by the licensee. 

(j) CALCULATION OF SUBSIDY RATE.—All fees, interest, and profits 

received and retained by the Administration under this section 

shall be included in the calculations made by the Director of the 

Office of Management and Budget to offset the cost (as that term 

is defined in section 502 of the Federal Credit Reform Act of 1990) 

to the Administration of purchasing and guaranteeing debentures 

and participating securities under this Act. 

(k) ENERGY SAVING DEBENTURES.—In addition to any other authority under this Act, a small business investment company licensed in the first fiscal year after the date of enactment of this 

16 

subsection or any fiscal year thereafter may issue Energy Saving 

debentures. 

* * * * * * * 

Æ