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104TH CONGRESS

1ST SESSION H. R. 1019

To assist in the development of microenterprises and microenterprise lending.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 23, 1995

Mrs. COLLINS of Illinois introduced the following bill; which was referred to

the Committee on Ways and Means and, in addition, to the Committee

on Banking and Financial Services, 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

A BILL

To assist in the development of microenterprises and

microenterprise lending.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Microenterprise Oppor5 tunity Expansion Act’’.

6 SEC. 2. PUBLIC ASSISTANCE PROVISIONS.

7 (a) BUSINESS ASSETS EXCLUDED FROM RESOURCES

8 AND INCOME.—

9 (1) AFDC.—
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1 (A) EXCLUSION FROM RESOURCES.—Sec2 tion 402(a)(7)(B) of the Social Security Act

3 (42 U.S.C. 602(a)(8)(A)) is amended—

4 (i) by striking ‘‘or’’ at the end of

5 clause (iii); and

6 (ii) by inserting before the semicolon

7 the following: ‘‘, or (v) any asset of the

8 family which is primarily used for business

9 purposes in a business owned, in whole or

10 in part, by an individual eligible for aid

11 under any State plan approved under this

12 part; and’’.

13 (B) EXCLUSION FROM INCOME.—Section

14 402(a)(8)(A) of such Act (42 U.S.C.

15 602(a)(8)(A)) is amended—

16 (i) by striking ‘‘and’’ at the end of

17 clause (vii); and

18 (ii) by inserting after clause (viii) the

19 following:

20 ‘‘(ix) shall disregard from the income of

21 any child, relative, or other individual specified

22 in clause (ii) any asset which is primarily used

23 for business purposes in a business owned, in

24 whole or in part, by an individual eligible for
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1 aid under any State plan approved under this

2 part; and’’.

3 (2) SSI.—

4 (A) EXCLUSION FROM INCOME.—Section

5 1612(b) of such Act (42 U.S.C. 1382a(b)) is

6 amended—

7 (i) by striking ‘‘and’’ at the end of

8 paragraph (17);

9 (ii) in paragraph (18), by striking the

10 period and inserting ‘‘; and’’; and

11 (iii) by adding at the end the follow12 ing:

13 ‘‘(19) any asset of such individual (or such

14 spouse) which is primarily used for business pur15 poses in a business owned, in whole or in part, by

16 an individual eligible for aid under any State plan

17 approved under part A of title IV.’’.

18 (B) EXCLUSION FROM RESOURCES.—Sec19 tion 1613(a) of such Act (42 U.S.C. 1382b(a))

20 is amended—

21 (i) by striking ‘‘and’’ at the end of

22 paragraph (9);

23 (ii) in paragraph (10), by striking the

24 period and inserting ‘‘; and’’; and
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1 (iii) by inserting after paragraph (10)

2 the following:

3 ‘‘(11) any asset of (including any amount re4 ceived as a loan by) such individual (or such spouse)

5 which is primarily used for business purposes in a

6 business owned, in whole or in part, by an individual

7 eligible for aid under any State plan approved under

8 part A of title IV.’’.

9 (b) PUBLIC ASSISTANCE BENEFITS EXTENDED FOR

10 PERSONS WITH INCOME FROM OR RESOURCES IN A

11 MICROENTERPRISE.—

12 (1) AFDC AND MEDICAID.—Section 402(a) of

13 such Act (42 U.S.C. 602(a)) is amended by inserting

14 after paragraph (28) the following:

15 ‘‘(29) notwithstanding paragraphs (7) and (8),

16 provide that, during the 2-year period beginning on

17 the first day any member of a family eligible for

18 benefits under the State plan sells any good or serv19 ice as part of operating a commercial enterprise with

20 5 or fewer employees, which is owned in whole or in

21 part by such family member, all income of such fam22 ily member attributable to the enterprise and all re23 sources in which such family member has a bene24 ficial interest used primarily in the enterprise shall
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1 be disregarded in determining the amount of aid to

2 which the family is entitled under the State plan;’’.

3 (2) SSI AND MEDICAID.—

4 (A) EXCLUSION FROM INCOME.—Section

5 1612(b) of such Act (42 U.S.C. 1382a(b)), as

6 amended by subsection (a)(2)(A) of this section,

7 is amended—

8 (i) by striking ‘‘and’’ at the end of

9 paragraph (18);

10 (ii) in paragraph (19), by striking the

11 period and inserting ‘‘; and’’; and

12 (iii) by adding at the end the follow13 ing:

14 ‘‘(20) during the 2-year period beginning on the

15 first day such individual (or such spouse) sells any

16 good or service as part of operating a commercial

17 enterprise with 5 or fewer employees, which is owned

18 in whole or in part by such individual (or such

19 spouse), all income of such individual (or such

20 spouse) attributable to the enterprise.’’.

21 (B) EXCLUSION FROM RESOURCES.—Sec22 tion 1613(a) of such Act (42 U.S.C. 1382b(a)),

23 as amended by subsection (a)(2)(B) of this sec24 tion, is amended—
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1 (i) by striking ‘‘and’’ at the end of

2 paragraph (10);

3 (ii) in paragraph (11), by striking the

4 period and inserting ‘‘; and’’; and

5 (iii) by inserting after paragraph (11)

6 the following:

7 ‘‘(12) during the 2-year period beginning on the

8 first day such individual (or such spouse) sells any

9 good or service as part of operating a commercial

10 enterprise with 5 or fewer employees, which is owned

11 in whole or in part by such individual (or such

12 spouse), all resources of such individual (or such

13 spouse) that are used primarily in the enterprise.’’.

14 SEC. 3. UNEMPLOYMENT COMPENSATION FOR INDIVID15 UALS STARTING MICROENTERPRISES.

16 (a) STATE LAW REQUIREMENTS.—Subsection (a) of

17 section 3304 of the Internal Revenue Code of 1986 (relat18 ing to State law requirements) is amended by striking

19 ‘‘and’’ at the end of paragraph (17), by redesignating

20 paragraph (18) as paragraph (19), and by inserting after

21 paragraph (17) the following new paragraph:

22 ‘‘(18) compensation shall be payable to individ23 uals starting microenterprises as provided in section

24 3(b) of the Act for microenterprises; and’’.
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1 (b) PAYMENT OF COMPENSATION TO INDIVIDUALS

2 STARTING MICROENTERPRISES.—

3 (1) IN GENERAL.—For purposes of section

4 3304(a)(18) of the Internal Revenue Code of 1986,

5 a State law shall provide that—

6 (A) each individual who is an eligible indi7 vidual with respect to any benefit year shall be

8 entitled to receive regular or extended unem9 ployment compensation, as the case may be,

10 without regard to any State or Federal require11 ments relating to availability for work, active

12 search for work, or refusal to accept suitable

13 work, and

14 (B) such individual shall be considered to

15 be unemployed for purposes of the State and

16 Federal laws applicable to unemployment com17 pensation, as long as the individual is actively

18 involved in the ownership and operation of a

19 microenterprise or the preparation of a business

20 plan for the ownership and operation of a

21 microenterprise and is receiving guidance or

22 consultation in starting up or operating a

23 microenterprise from an experienced entre24 preneur or provider of technical business assist25 ance.
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1 (2) AUTHORIZATION FOR USING UNEMPLOY2 MENT FUNDS TO PROVIDE STARTUP ASSISTANCE.—

3 Nothing in section 3304(a)(4) or 3306(f) of the In4 ternal Revenue Code of 1986 or section 303(a)(5) of

5 the Social Security Act shall prevent amounts in a

6 State unemployment fund from being used to pro7 vide assistance to eligible individuals in starting

8 microenterprises. The amount of assistance so pro9 vided may be in the form of a lump sum and shall

10 be in lieu of the periodic payments of compensation

11 to which the individual would otherwise have been

12 entitled and shall not exceed the aggregate amount

13 of compensation to which the individual would other14 wise have been so entitled.

15 (3) DEFINITIONS.—For purposes of this sec16 tion—

17 (A) ELIGIBLE INDIVIDUAL.—The term ‘‘el18 igible individual’’ means, with respect to any

19 benefit year, an individual who—

20 (i) is eligible to receive regular or ex21 tended compensation under the State law

22 during such benefit year,

23 (ii) is starting a microenterprise in

24 which the individual will have an ownership

25 interest, and
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1 (iii) submits a request to the State

2 agency for compensation under this sub3 section.

4 (B) MICROENTERPRISE.—The term

5 ‘‘microenterprise’’ means any unincorporated

6 trade or business with 5 or fewer employees, 1

7 or more of whom own the enterprise.

8 (C) OTHER TERMS.—The terms ‘‘com9 pensation’’, ‘‘extended compensation’’, ‘‘regular

10 compensation’’, ‘‘benefit year’’, ‘‘State’’, and

11 ‘‘State law’’ have the respective meanings given

12 to such terms under section 205 of the Federal13 State Extended Unemployment Compensation

14 Act of 1970.

15 SEC. 4. TREATMENT OF MICROENTERPRISE LOANS AND

16 GRANTS BY INSURED DEPOSITORY INSTITU17 TIONS AS COMMUNITY REINVESTMENT.

18 Section 804 of the Community Reinvestment Act of

19 1977 (12 U.S.C. 2903) is amended by adding at the end

20 the following new subsections:

21 ‘‘(c) MICROENTERPRISE LOANS.—

22 ‘‘(1) TREATMENT OF LOANS AND GRANTS.—

23 The following amounts shall be treated as an invest24 ment in a regulated financial institution’s commu25 nity for purposes of subsection (a):
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1 ‘‘(A) The amount of any loan described in

2 paragraph (2)(A) made by the regulated finan3 cial institution directly to a microenterprise, if

4 the loan is made in accordance with the require5 ments of subsection (c).

6 ‘‘(B) The amount of any grant or donation

7 made by the regulated financial institution to

8 any microenterprise intermediary to meet oper9 ating costs of the intermediary, including the

10 costs associated with training, technical assist11 ance, and other support services provided by

12 the intermediary to microenterprises.

13 ‘‘(C) The amount of any regulated finan14 cial institution’s investment in a revolving fund

15 established by the institution for loans to

16 microenterprise intermediaries for lending to

17 microenterprises if—

18 ‘‘(i) the amount of the investment in

19 the revolving fund is equal to or greater

20 than the amount which is equal to 0.05

21 percent of the assets of the institution;

22 ‘‘(ii) the regulated financial institu23 tion—

24 ‘‘(I) makes grants or donations

25 described in subparagraph (B) to
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1 microenterprise intermediaries the

2 total amount of which equals or ex3 ceeds the amount which is equal to 15

4 percent of the amount required to be

5 invested in the revolving fund under

6 clause (i); or

7 ‘‘(II) provides financial services,

8 including the establishment and main9 tenance of a transaction account, for

10 a microenterprise (or any individual

11 who controls the microenterprise) who

12 receives a microenterprise loan from a

13 microenterprise intermediary, at pref14 erential or reduced rates which are

15 at least as favorable to the

16 microenterprise as the rates offered

17 for such services to the institution’s

18 most preferred commercial customers;

19 and

20 ‘‘(iii) loans from the revolving fund

21 may be made only to microenterprise

22 intermediaries who agree to use the pro23 ceeds of the loan to make microenterprise

24 loans in accordance with the requirements

25 of subsection (d).
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1 ‘‘(2) MICROENTERPRISE LOAN.—For purposes

2 of this subsection and subsection (d), the term

3 ‘microenterprise loan’—

4 ‘‘(A) means a loan—

5 ‘‘(i) to a commercial enterprise with 5

6 or fewer employees, 1 or more of whom

7 own the enterprise;

8 ‘‘(ii) in amounts not less than $100

9 and not more than $10,000;

10 ‘‘(iii) the interest rate on which is

11 comparable to the interest rate charged on

12 secured commercial loans offered by the

13 regulated financial institution to the insti14 tution’s most preferred commercial cus15 tomers;

16 ‘‘(iv) which—

17 ‘‘(I) is not secured by collateral;

18 or

19 ‘‘(II) is secured by collateral the

20 value of which, as a percentage of the

21 amount of the loan, is substantially

22 less than the percentage generally re23 quired by the institution for commer24 cial loans; and
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1 ‘‘(v) the terms of which may permit

2 the deferral of principal or interest pay3 ments otherwise due under such terms;

4 and

5 ‘‘(B) includes a loan to a microenterprise

6 intermediary the proceeds of which will be used

7 by the intermediary for making loans described

8 in subparagraph (A).

9 ‘‘(d) CRITERIA FOR MICROENTERPRISE LOANS.—

10 ‘‘(1) IN GENERAL.—A microenterprise loan

11 meets the requirements of this subsection if the loan

12 is made in accordance with the following criteria:

13 ‘‘(A) In considering any loan to a

14 microenterprise, the lender takes into account—

15 ‘‘(i) the creditworthiness of any per16 son who controls the microenterprise in

17 lieu of the creditworthiness of the enter18 prise;

19 ‘‘(ii) in the case of a microenterprise

20 which is a startup business, whether the

21 microenterprise is soundly conceived; and

22 ‘‘(iii) the need of the microenterprise

23 for expansion capital.

24 ‘‘(B) The lender accepts as collateral for

25 the loan a security interest in any personal
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1 property of any person who controls the

2 microenterprise which consists of consumer or

3 household goods.

4 ‘‘(C) The lender does not require collateral

5 or a secured interest for more than 50 percent

6 of the face amount of the loan.

7 ‘‘(D) The loans are made in amounts not

8 less than $100 and not more than $10,000 to

9 persons who would not otherwise qualify for a

10 commercial loan.

11 ‘‘(E) The lender provides technical assist12 ance, training, and counseling in business prac13 tices, such as accounting, marketing, manage14 ment, sales, financial practices, and general

15 business practices, and closely monitors the

16 microenterprise during the period the loan is

17 outstanding, including the enterprise’s loan re18 payment performance.

19 ‘‘(2) LENDER DEFINED.—For purposes of

20 paragraph (1), the term ‘lender’ means—

21 ‘‘(A) in the case of a microenterprise loan

22 by a regulated financial institution to a

23 microenterprise, the regulated financial institu24 tion; and
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1 ‘‘(B) in the case of a microenterprise loan

2 by a microenterprise intermediary to a

3 microenterprise, the microenterprise inter4 mediary.’’.

5 SEC. 5. TREATMENT OF MICROENTERPRISE LOANS OF SAV6 INGS ASSOCIATIONS AS QUALIFIED THRIFT

7 INVESTMENTS.

8 (a) IN GENERAL.—Section 10(m)(4)(C)(ii) of the

9 Home Owners’ Loan Act (12 U.S.C. 1467a(m)(4)(C)(ii))

10 is amended by adding at the end the following new

11 subclause:

12 ‘‘(VII) The aggregate amount of

13 microenterprise loans held by the sav14 ings association.’’.

15 (b) MICROENTERPRISE LOAN DEFINED.—Section

16 10(m)(4) of the Home Owners’ Loan Act (12 U.S.C.

17 1467a(m)(4)) is amended by adding at the end the follow18 ing new subparagraph:

19 ‘‘(D) MICROENTERPRISE LOAN.—For pur20 poses of this paragraph, the term

21 ‘microenterprise loan’—

22 ‘‘(i) means a loan—

23 ‘‘(I) to a commercial enterprise

24 with 5 or fewer employees, 1 or more

25 of whom own the enterprise;
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1 ‘‘(II) in amounts not less than

2 $100 and not more than $10,000; and

3 ‘‘(III) the interest rate on which

4 is comparable to the interest rate

5 charged on secured commercial loans

6 offered by the savings association to

7 the association’s most preferred com8 mercial customers;

9 ‘‘(IV) which is not secured by

10 collateral or is secured by collateral

11 the value of which, as a percentage of

12 the amount of the loan, is substan13 tially less than the percentage gen14 erally required by the institution for

15 commercial loans; and

16 ‘‘(V) the terms of which may per17 mit the deferral of principal or inter18 est payments otherwise due under

19 such terms;

20 ‘‘(ii) includes a loan to a

21 microenterprise intermediary the proceeds

22 of which will be used by the intermediary

23 for making loans described in clause (i);

24 and

25 ‘‘(iii) does not include—
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1 ‘‘(I) any loan to a micro2 enterprise which does not meet the re3 quirements of paragraph (8); or

4 ‘‘(II) any loan to a micro5 enterprise intermediary which does

6 not agree to use the proceeds of the

7 loan to make microenterprise loans in

8 accordance with the requirements of

9 paragraph (8).’’.

10 (c) CRITERIA FOR MICROENTERPRISE LOANS.—Sec11 tion 10(m) of the Home Owners’ Loan Act (12 U.S.C.

12 1467a(m)) is amended by adding at the end the following

13 new paragraph:

14 ‘‘(8) CRITERIA FOR MICROENTERPRISE

15 LOANS.—

16 ‘‘(A) IN GENERAL.—A microenterprise

17 loan meets the requirements of this paragraph

18 only if the savings association makes the

19 microenterprise loan, or the microenterprise

20 intermediary which receives a loan from the as21 sociation, agrees to use the proceeds of the loan

22 to make microenterprise loans in accordance

23 with the following criteria:
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1 ‘‘(i) In considering any loan to a

2 microenterprise, the lender takes into ac3 count—

4 ‘‘(I) the creditworthiness of any

5 person who controls the

6 microenterprise in lieu of the credit7 worthiness of the enterprise;

8 ‘‘(II) in the case of a

9 microenterprise which is a startup

10 business, whether the microenterprise

11 is soundly conceived; and

12 ‘‘(III) the need of the

13 microenterprise for expansion capital.

14 ‘‘(ii) The lender accepts as collateral

15 for the loan a security interest in any per16 sonal property of any person who controls

17 the microenterprise which consists of

18 consumer or household goods.

19 ‘‘(iii) The lender does not require col20 lateral or a secured interest for more than

21 50 percent of the face amount of the loan.

22 ‘‘(iv) The loans are made in amounts

23 not less than $100 and not more than

24 $10,000 to persons who would not other25 wise qualify for a commercial loan.
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1 ‘‘(v) The lender provides technical as2 sistance, training, and counseling in busi3 ness practices, such as accounting, market4 ing, management, financial practices, and

5 general business practices and sales, to the

6 microenterprise in connection with the loan

7 and closely monitors the microenterprise,

8 including the enterprise’s loan repayment

9 performance.

10 ‘‘(B) LENDER DEFINED.—For purposes of

11 subparagraph (A), the term ‘lender’ means—

12 ‘‘(i) in the case of a microenterprise

13 loan by a savings association to a

14 microenterprise, the savings association;

15 and

16 ‘‘(ii) in the case of a microenterprise

17 loan by a microenterprise intermediary to

18 a microenterprise, the microenterprise

19 intermediary.’’.

20 SEC. 6. USE OF CDBG ASSISTANCE FOR ADMINISTRATIVE

21 COSTS OF ENTITIES ASSISTING

22 MICROENTERPRISES.

23 Section 105(a)(23) of the Housing and Community

24 Development Act of 1974 (42 U.S.C. 5305(a)(23)) is

25 amended by adding at the end the following flush material:
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1 ‘‘assistance provided to such entities under this

2 paragraph may be used for reasonable administra3 tive and operating costs of such entities related to

4 facilitating economic development through activities

5 under subparagraphs (A) through (C);’’.

6 SEC. 7. ESTABLISHMENT OF MICROENTERPRISE DIVISION

7 IN EACH FEDERAL BANKING AGENCY.

8 (a) IN GENERAL.—Each Federal banking agency (as

9 defined in section 3(z) of the Federal Deposit Insurance

10 Act) shall establish a division to be known as the

11 ‘‘Microenterprise Technical and Operations Office’’ to pro12 mote microenterprises by offering technical assistance,

13 training, outreach, and other support to groups and indi14 viduals engaged in, or desiring to establish, a

15 microenterprise or an institution which offers credit or fi16 nancial services to microenterprises.

17 (b) DUTIES OF MICROENTERPRISE DIVISION.—The

18 Microenterprise Technical and Operations Office of each

19 Federal banking agency shall—

20 (1) facilitate the creation and financing of

21 microenterprises by—

22 (A) collecting information relating to

23 microenterprises, including the ownership char24 acteristics of microenterprises and the perform25 ance of microenterprises by industry;
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1 (B) providing such information without

2 charge to interested persons; and

3 (C) generally serving as a clearinghouse

4 for information relating to microenterprises;

5 and

6 (2) monitor and provide assistance to the

7 microenterprise divisions established pursuant to

8 section 34 of the Federal Deposit Insurance Act.

9 (a) MICROENTERPRISE DEFINED.—As used in this

10 section, the term ‘‘microenterprise’’ means any commer11 cial enterprise with 5 or fewer employees, 1 or more of

12 whom own the enterprise.

13 SEC. 8. STUDY.

14 (a) AVAILABILITY OF CREDIT FOR SMALL BUSI15 NESSES WHICH ARE LARGER THAN

16 MICROENTERPRISES.—The Financial Institutions Exam17 ination Council shall conduct a study before the end of

18 the 2-year period beginning on the date of the enactment

19 of this Act, based on the agency’s experience in admin20 istering the microenterprise loan provisions of this Act,

21 and the amendments made by this Act, on the best means

22 to make credit available for small businesses which—

23 (1) do not qualify for microenterprise loans or

24 need credit in larger amounts than is available

25 through microenterprise loans; and
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1 (2) need credit in smaller amounts than is gen2 erally available from financial institutions or the

3 Small Business Administration.

4 (b) RECOMMENDATIONS AND REPORT.—The Finan5 cial Institutions Examination Council shall submit a re6 port to the Congress before the end of the 2-year period

7 referred to in subsection (a) containing the findings and

8 conclusions of the agency in connection with the study

9 conducted pursuant to subsection (a) and such rec10 ommendations for legislative and administrative action as

11 the agency may determine to be appropriate.

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