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[House Report 106-706]
[From the U.S. Government Publishing Office]

106th Congress                                            Rept. 106-706
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

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

 
                   NEW MARKETS INITIATIVE ACT OF 1999

                                _______
                                

                 June 28, 2000.--Ordered to be printed

                                _______
                                

   Mr. Leach, from the Committee on Banking and Financial Services, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2848]

  The Committee on Banking and Financial Services, to whom was 
referred the bill (H.R. 2848) to amend the Small Business 
Investment Act of 1958 and the Small Business Act to establish 
a New Markets Venture Capital Program, to establish an 
America's Private Investment Company Program, to amend the 
Internal Revenue Code of 1986 to establish a New Markets Tax 
Credit, and for other purposes, having considered the same, 
report favorably thereon with amendments and recommend that the 
bill as amended do pass.
  The amendments (stated in terms of the page and line numbers 
of the introduced bill) are as follows:
  Page 2, strike title III in the table of contents and insert 
the following:

            TITLE III--AMERICA'S PRIVATE INVESTMENT COMPANIES

Sec. 301. Short Title.
Sec. 302. Findings and purposes.
Sec. 303. Definitions.
Sec. 304. Authorization.
Sec. 305. Selection of APICs.
Sec. 306. Operations of APICs.
Sec. 307. Credit enhancement by the Federal Government.
Sec. 308. APIC requests for guarantee actions.
Sec. 309. Examination and monitoring of APICs.
Sec. 310. Penalties.
Sec. 311. Effective date.
Sec. 312. Sunset.

  Page 29, strike line 3 and all that follows through line 23 
on page 62 and insert the following:

           TITLE III--AMERICA'S PRIVATE INVESTMENT COMPANIES

SEC. 301. SHORT TITLE.

  This title may be cited as the ``America's Private Investment 
Companies Act''.

SEC. 302. FINDINGS AND PURPOSES.

  (a) Findings.--The Congress finds that--
          (1) people living in distressed areas, both urban and 
        rural, that are characterized by high levels of 
        joblessness, poverty, and low incomes have not 
        benefited adequately from the economic expansion 
        experienced by the Nation as a whole;
          (2) unequal access to economic opportunities 
        continues to make the social costs of joblessness and 
        poverty to our Nation very high; and
          (3) there are significant untapped markets in our 
        Nation, and many of these are in areas that are 
        underserved by institutions that can make equity and 
        credit investments.
  (b) Purposes.--The purposes of this title are to--
          (1) license private for profit community development 
        entities that will focus on making equity and credit 
        investments for large-scale business developments that 
        benefit low-income communities;
          (2) provide credit enhancement for those entities for 
        use in low-income communities; and
          (3) provide a vehicle under which the economic and 
        social returns on financial investments made pursuant 
        to this title may be available both to the investors in 
        these entities and to the residents of the low-income 
        communities.

SEC. 303. DEFINITIONS.

  As used in this title:
          (1) Administrator.--The term ``Administrator'' means 
        the Administrator of the Small Business Administration.
          (2) Agency.--The term ``agency'' has the meaning 
        given such term in section 551(1) of title 5, United 
        States Code.
          (3) APIC.--The term ``APIC'' means a business entity 
        that has been licensed under the terms of this title as 
        an America's Private Investment Company, and the 
        license of which has not been revoked.
          (4) Community development entity.--The term 
        ``community development entity'' means an entity the 
        primary mission of which is serving or providing 
        investment capital for low-income communities or low-
        income persons and which maintains accountability to 
        residents of low-income communities.
          (5) HUD.--The term ``HUD'' means the Secretary of 
        Housing and Urban Development or the Department of 
        Housing and Urban Development, as the context requires.
          (6) License.--The term ``license'' means a license 
        issued by HUD as provided in section 304.
          (7) Low-income community.--The term ``low-income 
        community'' means--
                  (A) a census tract or tracts that have--
                          (i) a poverty rate of 20 percent or 
                        greater, based on the most recent 
                        census data; or
                          (ii) a median family income that does 
                        not exceed 80 percent of the greater of 
                        (I) the median family income for the 
                        metropolitan area in which such census 
                        tract or tracts are located, or (II) 
                        the median family income for the State 
                        in which such census tract or tracts 
                        are located; or
                  (B) a property that was located on a military 
                installation that was closed or realigned 
                pursuant to title II of the Defense 
                Authorization Amendments and Base Closure and 
                Realignment Act (Public Law 100-526; 10 U.S.C. 
                2687 note), the Defense Base Closure and 
                Realignment Act of 1990 (part A of title XXIX 
                of Public Law 101-510; 10 U.S.C. 2687 note), 
                section 2687 of title 10, United States Code, 
                or any other similar law enacted after the date 
                of the enactment of this Act that provides for 
                closure or realignment of military 
                installations.
          (8) Low-income person.--The term ``low-income 
        person'' means a person who is a member of a low-income 
        family, as such term is defined in section 104 of the 
        Cranston-Gonzalez National Affordable Housing Act (42 
        U.S.C. 12704).
          (9) Private equity capital.--
                  (A) In general.--The term ``private equity 
                capital''--
                          (i) in the case of a corporate 
                        entity, the paid-in capital and paid-in 
                        surplus of the corporate entity;
                          (ii) in the case of a partnership 
                        entity, the contributed capital of the 
                        partners of the partnership entity;
                          (iii) in the case of a limited 
                        liability company entity, the equity 
                        investment of the members of the 
                        limited liability company entity; and
                          (iv) earnings from investments of the 
                        entity that are not distributed to 
                        investors and are available for 
                        reinvestment by the entity.
                  (B) Exclusions.--Such term does not include 
                any--
                          (i) funds borrowed by an entity from 
                        any source or obtained through the 
                        issuance of leverage; except that this 
                        clause may not be construed to exclude 
                        amounts evidenced by a legally binding 
                        and irrevocable investment commitment 
                        in the entity, or the use by an entity 
                        of a pledge of such investment 
                        commitment to obtain bridge financing 
                        from a private lender to fund the 
                        entity's activities on an interim 
                        basis; or
                          (ii) funds obtained directly or 
                        indirectly from any Federal, State, or 
                        local government or any government 
                        agency, except for--
                                  (I) funds invested by an 
                                employee welfare benefit plan 
                                or pension plan; and
                                  (II) credits against any 
                                Federal, State, or local taxes.
          (10) Qualified active business.--The term ``qualified 
        active business'' means a business or trade--
                  (A) that, at the time that an investment is 
                made in the business or trade, is deriving at 
                least 50 percent of its gross income from the 
                conduct of trade or business activities in low-
                income communities;
                  B) a substantial portion of the use of the 
                tangible property of which is used within low-
                income communities;
                  (C) a substantial portion of the services 
                that the employees of which perform are 
                performed in low-income communities; and
                  (D) less than 5 percent of the aggregate 
                unadjusted bases of the property of which is 
                attributable to certain financial property, as 
                the Secretary shall set forth in regulations, 
                or in collectibles, other than collectibles 
                held primarily for sale to customers.
          (11) Qualified debenture.--The term ``qualified 
        debenture'' means a debt instrument having terms that 
        meet the requirements established pursuant to section 
        306(c)(1).
          (12) Qualified low-income community investment.--The 
        term ``qualified low-income community investment'' mean 
        an equity investment in, or a loan to, a qualified 
        active business.
          (13) Secretary.--The term ``Secretary'' means the 
        Secretary of Housing and Urban Development, unless 
        otherwise specified in this title.

SEC. 304. AUTHORIZATION.

  (a) Licenses.--The Secretary is authorized to license 
community development entities as America's Private Investment 
Companies, in accordance with the terms of this title.
  (b) Regulations.--The Secretary shall regulate APICs for 
compliance with sound financial management practices, and the 
program and procedural goals of this title and other related 
Acts, and other purposes as required or authorized by this 
title, or determined by the Secretary. The Secretary shall 
issue such regulations as are necessary to carry out the 
licensing and regulatory and other duties under this title, and 
may issue notices and other guidance or directives as the 
Secretary determines are appropriate to carry out such duties.
  (c) Use of Credit Subsidy for Licenses.--
          (1) Number of licenses.--The number of APICs licensed 
        at any one time may not exceed--
                  (A) the number that may be supported by the 
                amount of budget authority appropriated in 
                accordance with section 504(b) of the Federal 
                Credit Reform Act of 1990 (2 U.S.C. 661c) for 
                the cost (as such term is defined in section 
                502 of such Act) of the subsidy and the 
                investment strategies of such APICs; or
                  (B) to the extent the limitation under 
                section 305(e)(1) applies, the number 
                authorized under such section.
          (2) Use of additional credit subsidy.--Subject to the 
        limitation under paragraph (1), the Secretary may use 
        any budget authority available after credit subsidy has 
        been allocated for the APICs initially licensed 
        pursuant to section 305 as follows:
                  (A) Additional licenses.--To license 
                additional APICs.
                  (B) Credit subsidy increases.--To increase 
                the credit subsidy allocated to an APIC as an 
                award for high performance under this title, 
                except that such increases may be made only in 
                accordance with the following requirements and 
                limitations:
                          (i) Timing.--An increase may only be 
                        provided for an APIC that has been 
                        licensed for a period of not less than 
                        2 years.
                          (ii) Competition.--An increase may 
                        only be provided for a fiscal year 
                        pursuant to a competition for such 
                        fiscal year among APICs eligible for, 
                        and requesting, such an increase. The 
                        competition shall be based upon 
                        criteria that the Secretary shall 
                        establish, which shall include the 
                        financial soundness and performance of 
                        the APICs, as measured by achievement 
                        of the public performance goals 
                        included in the APICs statements 
                        required under section 305(a)(6) and 
                        audits conducted under section 
                        309(b)(2). Among the criteria 
                        established by the Secretary to 
                        determine priority for selection under 
                        this section, the Secretary shall 
                        include making investments in and loans 
                        to qualified active businesses in urban 
                        or rural areas that have been 
                        designated under subchapter U of 
                        Chapter 1 of the Internal Revenue Code 
                        of 1986 as empowerment zones or 
                        enterprise communities.
  (d) Cooperation and Coordination.--
          (1) Program policies.--The Secretary is authorized to 
        coordinate and cooperate, through memoranda of 
        understanding, an APIC liaison committee, or otherwise, 
        with the Administrator, the Secretary of the Treasury, 
        and other agencies in the discretion of the Secretary, 
        on implementation of this title, including regulation, 
        examination, and monitoring of APICs under this title.
          (2) Financial soundness requirements.--The Secretary 
        shall consult with the Administrator and the Secretary 
        of the Treasury, and may consult with such other heads 
        of agencies as the Secretary may consider appropriate, 
        in establishing any regulations, requirements, 
        guidelines, or standards for financial soundness or 
        management practices of APICs or entities applying for 
        licensing as APICs. In implementing and monitoring 
        compliance with any such regulations, requirements, 
        guidelines, and standards, the Secretary shall enter 
        into such agreements and memoranda of understanding 
        with the Administrator and the Secretary of the 
        Treasury as may be appropriate to provide for such 
        officials to provide any assistance that may be agreed 
        to.
          (3) Operations.--The Secretary may carry out this 
        title--
                  (A) directly, through agreements with other 
                Federal entities under section 1535 of title 
                31, United States Code, or otherwise, or
                  (B) indirectly, under contracts or 
                agreements, as the Secretary shall determine.
  (e) Fees and Charges for Administrative Costs.--To the extent 
provided in appropriations Acts, the Secretary is authorized to 
impose fees and charges for application, review, licensing, and 
regulation, or other actions under this title, and to pay for 
the costs of such activities from the fees and charges 
collected.
  (f) Guarantee Fees.--The Secretary is authorized to set and 
collect fees for loan guarantee commitments and loan guarantees 
that the Secretary makes under this title.
  (g) Funding.--
          (1) Authorization of appropriations for loan 
        guarantee commitments.--For each of fiscal years 2000, 
        2001, 2002, 2003, and 2004, there is authorized to be 
        appropriated up to $36,000,000 for the cost (as such term 
        is defined in section 502(5) of the Federal Credit Reform 
        Act of 1990) of annual loan guarantee commitments under 
        this title. Amounts appropriated under this paragraph 
        shall remain available until expended.
          (2) Aggregate loan guarantee commitment limitation.--
        The Secretary may make commitments to guarantee loans 
        only to the extent that the total loan principal, any 
        part of which is guaranteed, will not exceed 
        $1,000,000,000, unless another such amount is specified 
        in appropriation Acts for any fiscal year.
          (3) Authorization of appropriations for 
        administrative expenses.--For each of the fiscal years 
        2000, 2001, 2002, 2003, and 2004, there is authorized 
        to be appropriated $1,000,000 for administrative 
        expenses for carrying out this title. The Secretary may 
        transfer amounts appropriated under this paragraph to 
        any appropriation account of HUD or another agency, to 
        carry out the program under this title. Any agency to 
        which the Secretary may transfer amounts under this 
        title is authorized to accept such transferred amounts 
        in any appropriation account of such agency.

SEC. 305. SELECTION OF APICS.

  (a) Eligible Applicants.--An entity shall be eligible to be 
selected for licensing under section 304 as an APIC only if the 
entity submits an application in compliance with the 
requirements established pursuant to subsection (b) and the 
entity meets or complies with the following requirements:
          (1) Organization.--The entity shall be a private, 
        for-profit entity that qualifies as a community 
        development entity for the purposes of the New Markets 
        Tax Credits, to the extent such credits are established 
        under Federal law.
          (2) Minimum private equity capital.--The amount of 
        private equity capital reasonably available to the 
        entity, as determined by the Secretary, at the time 
        that a license is approved may not be less than 
        $25,000,000.
          (3) Qualified management.--The management of the 
        entity shall, in the determination of the Secretary, 
        meet such standards as the Secretary shall establish to 
        ensure that the management of the APIC is qualified, 
        and has the financial expertise, knowledge, experience, 
        and capability necessary, to make investments for 
        community and economic development in low-income 
        communities.
          (4) Conflict of interest.--The entity shall 
        demonstrate that, in accordance with sound financial 
        management practices, the entity is structured to 
        preclude financial conflict of interest between the 
        APIC and a manager or investor.
          (5) Investment strategy.--The entity shall prepare 
        and submit to the Secretary an investment strategy that 
        includes benchmarks for evaluation of its progress, 
        that includes an analysis of existing locally owned 
        businesses in the communities in which the investments 
        under the strategy will be made, that prioritizes such 
        businesses for investment opportunities, and that 
        fulfills the specific public purpose goals of the 
        entity.
          (6) Statement of public purpose goals.--The entity 
        shall prepare and submit to the Secretary a statement 
        of the public purpose goals of the entity, which 
        shall--
                  (A) set forth goals that shall promote 
                community and economic development, which shall 
                include--
                          (i) making investments in low-income 
                        communities that further economic 
                        development objectives by targeting 
                        such investments in businesses or 
                        trades that comply with the 
                        requirements under subparagraphs (A) 
                        through (C) of section 303(10) relating 
                        to low-income communities in a manner 
                        that benefits low-income persons;
                          (ii) creating jobs in low-income 
                        communities for residents of such 
                        communities;
                          (iii) involving community-based 
                        organizations and residents in 
                        community development activities;
                          (iv) such other goals as the 
                        Secretary shall specify; and
                          (v) such elements as the entity may 
                        set forth to achieve specific public 
                        purpose goals;
                  (B) include such other elements as the 
                Secretary shall specify; and
                  (C) include proposed measurements and 
                strategies for meeting the goals.
          (7) Compliance with laws.--The entity shall agree to 
        comply with applicable laws, including Federal 
        executive orders, Office of Management and Budget 
        circulars, and requirements of the Department of the 
        Treasury, and such operating and regulatory 
        requirements as the Secretary may impose from time to 
        time.
          (8) Other.--The entity shall satisfy any other 
        application requirements that the Secretary may impose 
        by regulation or Federal Register notice.
  (b) Competitions.--The Secretary shall select eligible 
entities under subsection (a) to be licensed under section 304 
as APICs on the basis of competitions. The Secretary shall 
announce each such competition by causing a notice to be 
published in the Federal Register that invites applications for 
licenses and sets forth the requirements for application and 
such other terms of the competition not otherwise provided for, 
as determined by the Secretary.
  (c) Selection.--In competitions under subsection (b), the 
Secretary shall select eligible entities under subsection (a) 
for licensing as APICs on the basis of--
          (1) the extent to which the entity is expected to 
        achieve the goals of this title by meeting or exceeding 
        criteria established under subsection (d); and
          (2) to the extent practicable and subject to the 
        existence of approvable applications, ensuring 
        geographical diversity among the applicants selected 
        and diversity of APICs investment strategies, so that 
        urban and rural communities are both served, in the 
        determination of the Secretary, by the program under 
        this title.
  (d) Selection Criteria.--The Secretary shall establish 
selection criteria for competitions under subsection (b), which 
shall include the following criteria:
          (1) Capacity.--
                  (A) Management.--The extent to which the 
                entity's management has the quality, 
                experience, and expertise to make and manage 
                successful investments for community and 
                economic development in low-income communities.
                  (B) State and local cooperation.--The extent 
                to which the entity demonstrates a capacity to 
                cooperate with States or units of general local 
                government and with community-based 
                organizations and residents of low-income 
                communities.
          (2) Investment strategy.--The quality of the entity's 
        investment strategy submitted in accordance with 
        subsection (a)(5) and the extent to which the 
        investment strategy furthers the goals of this title 
        pursuant to paragraph (3) of this subsection.
          (3) Public purpose goals.--With respect to the 
        statement of public purpose goals of the entity 
        submitted in accordance with subsection (a)(6), and the 
        strategy and measurements included therein--
                  (A) the extent to which such goals promote 
                community and economic development;
                  (B) the extent to which such goals provide 
                for making qualified investments in low-income 
                communities that further economic development 
                objectives, such as--
                          (i) creating, within 2 years of the 
                        completion of the initial such 
                        investment, job opportunities, 
                        opportunities for ownership, and other 
                        economic opportunities within a low-
                        income community, both short-term and 
                        of a longer duration;
                          (ii) improving the economic vitality 
                        of a low-income community, including 
                        stimulating other business development;
                          (iii) bringing new income into a low-
                        income community and assisting in the 
                        revitalization of such community;
                          (iv) converting real property for the 
                        purpose of creating a site for business 
                        incubation and location, or business 
                        district revitalization;
                          (v) enhancing economic competition, 
                        including the advancement of 
                        technology;
                          (vi) rural development;
                          (vii) mitigating, rehabilitating, and 
                        reusing real property considered 
                        subject to the Solid Waste Disposal Act 
                        (42 U.S.C. 6901 et seq.; commonly 
                        referred to as the Resource 
                        Conservation and Recovery Act) or 
                        restoring coal mine-scarred land;
                          (viii) creation of local wealth 
                        through investments in employee stock 
                        ownership companies or resident-owned 
                        ventures; and
                          (ix) any other objective that the 
                        Secretary may establish to further the 
                        purposes of this title;
                  (C) the quality of jobs to be created for 
                residents of low-income communities, taking 
                into consideration such factors as the payment 
                of higher wages, job security, employment 
                benefits, opportunity for advancement, and 
                personal asset building;
                  (D) the extent to which achievement of such 
                goals will involve community-based 
                organizations and residents in community 
                development activities; and
                  (E) the extent to which the investments 
                referred to in subparagraph (B) are likely to 
                benefit existing small business in low-income 
                communities or will encourage the growth of 
                small business in such communities.
          (4) Other.--Any other criteria that the Secretary may 
        establish to carry out the purposes of this title.
  (e) First Year Requirements.--
          (1) Numerical limitation.--The number of APICs may 
        not, at any time during the 1-year period that begins 
        upon the Secretary awarding the first license for an 
        APIC under this title, exceed 15.
          (2) Limitation on allocation of available credit 
        subsidy.--Of the amount of budget authority initially 
        made available for allocation under this title for 
        APICs, the amount allocated for any single APIC may not 
        exceed 20 percent.
          (3) Native american private investment company.--
        Subject only to the absence of an approvable 
        application from an entity, during the 1-year period 
        referred to in paragraph (1), of the entities selected 
        and licensed by the Secretary as APICs, at least one 
        shall be an entity that has as its primary purpose the 
        making of qualified low-income community investments in 
        areas that are within Indian country (as such term is 
        defined in section 1151 of title 18, United States 
        Code) or within lands that have status as Hawaiian home 
        land under section 204 of the Hawaiian Homes Commission 
        Act, 1920 (42 Stat. 108) or are acquired pursuant to 
        such Act. The Secretary may establish specific 
        selection criteria for applicants under this paragraph.
  (f) Communications Between HUD and Applicants.--
          (1) In general.--The Secretary shall set forth in 
        regulations the procedures under which HUD and 
        applicants for APIC licenses, and others, may 
        communicate. Such regulations shall--
                  (A) specify by position the HUD officers and 
                employees who may communicate with such 
                applicants and others;
                  (B) permit HUD officers and employees to 
                request and discuss with the applicant and 
                others (such as banks or other credit or 
                business references, or potential investors, 
                that the applicant specifies in writing) any 
                more detailed information that may be desirable 
                to facilitate HUD's review of the applicant's 
                application;
                  (C) restrict HUD officers and employees from 
                revealing to any applicant--
                          (i) the fact or chances of award of a 
                        license to such applicant, unless there 
                        has been a public announcement of the 
                        results of the competition; and
                          (ii) any information with respect to 
                        any other applicant; and
                  (D) set forth requirements for making and 
                keeping records of any communications conducted 
                under this subsection, including requirements 
                for making such records available to the public 
                after the award of licenses under an initial or 
                subsequent notice, as appropriate, under 
                subsection (a).
          (2) Timing.--Regulations under this subsection may be 
        issued as interim rules for effect on or before the 
        date of publication of the first notice under 
        subsection (a), and shall apply only with respect to 
        applications under such notice. Regulations to 
        implement this subsection with respect to any notice 
        after the first such notice shall be subject to notice 
        and comment rulemaking.
          (3) Inapplicability of department of hud act 
        provision.--Section 12(e)(2) of the Department of 
        Housing and Urban Development Act (42 U.S.C. 
        3537a(e)(2)) is amended by inserting before the period 
        at the end the following: ``or any license provided 
        under the America's Private Investment Companies Act''.

SEC. 306. OPERATIONS OF APICS.

  (a) Powers and Authorities.--
          (1) In general.--An APIC shall have any powers or 
        authorities that--
                  (A) the APIC derives from the jurisdiction in 
                which it is organized, or that the APIC 
                otherwise has;
                  (B) may be conferred by a license under this 
                title; and
                  (C) the Secretary may prescribe by 
                regulation.
          (2) New market assistance.--Nothing in this title 
        shall preclude an APIC or its investors from receiving 
        an allocation of New Market Tax Credits (to the extent 
        such credits are established under Federal law) if the 
        APIC satisfies any applicable terms and conditions 
        under the Internal Revenue Code of 1986.
  (b) Investment Limitations.--
          (1) Qualified low-income community investments.--
        Substantially all investments that an APIC makes shall 
        be qualified low-income community investments if the 
        investments are financed with--
                  (A) amounts available from the proceeds of 
                the issuance of an APIC's qualified debenture 
                guaranteed under this title;
                  (B) proceeds of the sale of obligations 
                described under subsection (c)(3)(C)(iii); or
                  (C) the use of private equity capital, as 
                determined by the Secretary, in an amount 
                specified in the APIC's license.
          (2) Single business investments.--An APIC shall not, 
        as a matter of sound financial practice, invest in any 
        one business an amount that exceeds an amount equal to 
        35 percent of the sum of--
                  (A) the APIC's private equity capital; plus
                  (B) an amount equal to the percentage limit 
                that the Secretary determines that an APIC may 
                have outstanding at any one time, under 
                subsection (c)(2)(A).
  (c) Borrowing Powers; Qualified Debentures.--
          (1) Issuance.--An APIC may issue qualified 
        debentures. The Secretary shall, by regulation, specify 
        the terms and requirements for debentures to be 
        considered qualified debentures for purposes of this 
        title, except that the term to maturity of any 
        qualified debenture may not exceed 21 years and each 
        qualified debenture shall bear interest during all or 
        any part of that time period at a rate or rates 
        approved by the Secretary.
          (2) Leverage limits.--In general, as a matter of 
        sound financial management practices--
                  (A) the total amount of qualified debentures 
                that an APIC issues under this title that an 
                APIC may have outstanding at any one time shall 
                not exceed an amount equal to 200 percent of 
                the private equity capital of the APIC, as 
                determined by the Secretary; and
                  (B) an APIC shall not have more than 
                $300,000,000 in face value of qualified 
                debentures issued under this title outstanding 
                at any one time.
          (3) Repayment.--
                  (A) Condition of business wind-up.--An APIC 
                shall have repaid, or have otherwise been 
                relieved of indebtedness, with respect to any 
                interest or principal amounts of borrowings 
                under this subsection no less than 2 years 
                before the APIC may dissolve or otherwise 
                complete the wind-up of its business.
                  (B) Timing.--An APIC may repay any interest 
                or principal amounts of borrowings under this 
                subsection at any time: Provided, That the 
                repayment of such amounts shall not relieve an 
                APIC of any duty otherwise applicable to the 
                APIC under this title, unless the Secretary 
                orders such relief.
                  (C) Use of investment proceeds before 
                repayment.--Until an APIC has repaid all 
                interest and principal amounts on APIC 
                borrowings under this subsection, an APIC may 
                use the proceeds of investments, in accordance 
                with regulations issued by the Secretary, only 
                to--
                          (i) pay for proper costs and expenses 
                        the APIC incurs in connection with such 
                        investments;
                          (ii) pay for the reasonable 
                        administrative expenses of the APIC;
                          (iii) purchase Treasury securities;
                          (iv) repay interest and principal 
                        amounts on APIC borrowings under this 
                        subsection;
                          (v) make interest, dividend, or other 
                        distributions to or on behalf of an 
                        investor; or
                          (vi) undertake such other purposes as 
                        the Secretary may approve.
                  (D) Use of investment proceeds after 
                repayment.--After an APIC has repaid all 
                interest and principal amounts on APIC 
                borrowings under this subsection, and subject 
                to continuing compliance with subsection (a), 
                the APIC may use the proceeds from investments 
                to make interest, dividend, or other 
                distributions to or on behalf of investors in 
                the nature of returns on capital, or the 
                withdrawal of private equity capital, without 
                regard to subparagraph (C) but in conformity 
                with the APIC's investment strategy and 
                statement of public purpose goals.
  (d) Reuse of Qualified Debenture Proceeds.--An APIC may use 
the proceeds of sale of Treasury securities purchased under 
subsection (c)(3)(C)(iii) to make qualified low-income 
community investments, subject to the Secretary's approval. In 
making the request for the Secretary's approval, the APIC shall 
follow the procedures applicable to an APIC's request for HUD 
guarantee action, as the Secretary may modify such procedures 
for implementation of this subsection. Such procedures shall 
include the description and certifications that an APIC must 
include in all requests for guarantee action, and the 
environmental certification applicable to initial expenditures 
for a project or activity.
  (e) Antipirating.--Notwithstanding any other provision of 
law, an APIC may not use any private equity capital required to 
be contributed under this title, or the proceeds from the sale 
of any qualified debenture under this title, to make an 
investment, as determined by the Secretary, to assist directly 
in the relocation of any industrial or commercial plant, 
facility, or operation, from 1 area to another area, if the 
relocation is likely to result in a significant loss of 
employment in the labor market area from which the relocation 
occurs.
  (f) Exclusion of APIC From Definition of Debtor Under 
Bankruptcy Provisions.--Section 109(b)(2) of title 11, United 
States Code, is amended by inserting before ``credit union'' 
the following: ``America's Private Investment Company licensed 
under the America's Private Investment Companies Act,''.

SEC. 307. CREDIT ENHANCEMENT BY THE FEDERAL GOVERNMENT.

  (a) Issuance and Guarantee of Qualified Debentures.--
          (1) Authority.--To the extent consistent with the 
        Federal Credit Reform Act of 1990, the Secretary is 
        authorized to make commitments to guarantee and 
        guarantee the timely payment of all principal and 
        interest as scheduled on qualified debentures issued by 
        APICs. Such commitments and guarantees may only be made 
        in accordance with the terms and conditions established 
        under paragraph (2).
          (2) Terms and conditions.--The Secretary shall 
        establish such terms and conditions as the Secretary 
        determines to be appropriate for commitments and 
        guarantees under this subsection, including terms and 
        conditions relating to amounts, expiration, number, 
        priorities of repayment, security, collateral, 
        amortization, payment of interest (including the timing 
        thereof), and fees and charges. The terms and 
        conditions applicable to any particular commitment or 
        guarantee may be established in documents that the 
        Secretary approves for such commitment or guarantee.
          (3) Seniority.--Notwithstanding any other provision 
        of Federal law or any law or the constitution of any 
        State, qualified debentures guaranteed under this 
        subsection by the Secretary shall be senior to any 
        other debt obligation, equity contribution or earnings, 
        or the distribution of dividends, interest, or other 
        amounts, of an APIC.
  (b) Issuance of Trust Certificates.--The Secretary, or an 
agent or entity selected by the Secretary, is authorized to 
issue trust certificates representing ownership of all or a 
fractional part of guaranteed qualified debentures issued by 
APICs and held in trust.
  (c) Guarantee of Trust Certificates.--
          (1) In general.--The Secretary is authorized, upon 
        such terms and conditions as the Secretary determines 
        to be appropriate, to guarantee the timely payment of 
        the principal of and interest on trust certificates 
        issued by the Secretary, or an agent or other entity, 
        for purposes of this section. Such guarantee shall be 
        limited to the extent of principal and interest on the 
        guaranteed qualified debentures which compose the 
        trust.
          (2) Substitution option.--The Secretary shall have 
        the option to replace in the corpus of the trust any 
        prepaid or defaulted qualified debenture with a 
        debenture, another full faith and credit instrument, or 
        any obligations of the United States, that may 
        reasonably substitute for such prepaid or defaulted 
        qualified debenture.
          (3) Proportionate reduction option.--In the event 
        that the Secretary elects not to exercise the option 
        under paragraph (2), and a qualified debenture in such 
        trust is prepaid, or in the event of default of a 
        qualified debenture, the guarantee of timely payment of 
        principal and interest on the trust certificate shall 
        be reduced in proportion to the amount of principal and 
        interest that such prepaid qualified debenture 
        represents in the trust. Interest on prepaid or 
        defaulted qualified debentures shall accrue and be 
        guaranteed by the Secretary only through the date of 
        payment of the guarantee. During the term of a trust 
        certificate, it may be called for redemption due to 
        prepayment or default of all qualified debentures that 
        are in the corpus of the trust.
  (d) Full Faith and Credit Backing of Guarantees.--The full 
faith and credit of the United States is pledged to the timely 
payment of all amounts which may be required to be paid under 
any guarantee by the Secretary pursuant to this section.
  (e) Subrogation and Liens.--
          (1) Subrogation.--In the event the Secretary pays a 
        claim under a guarantee issued under this section, the 
        Secretary shall be subrogated fully to the rights 
        satisfied by such payment.
          (2) Priority of liens.--No State or local law, and no 
        Federal law, shall preclude or limit the exercise by the 
        Secretary of its ownership rights in the debentures in 
        the corpus of a trust under this section.
  (f) Registration.--
          (1) In general.--The Secretary shall provide for a 
        central registration of all trust certificates issued 
        pursuant to this section.
          (2) Agents.--The Secretary may contract with an agent 
        or agents to carry out on behalf of the Secretary the 
        pooling and the central registration functions of this 
        section notwithstanding any other provision of law, 
        including maintenance on behalf of and under the 
        direction of the Secretary, such commercial bank 
        accounts or investments in obligations of the United 
        States as may be necessary to facilitate trusts backed 
        by qualified debentures guaranteed under this title and 
        the issuance of trust certificates to facilitate 
        formation of the corpus of the trusts. The Secretary 
        may require such agent or agents to provide a fidelity 
        bond or insurance in such amounts as the Secretary 
        determines to be necessary to protect the interests of 
        the Government.
          (3) Form.--Book-entry or other electronic forms of 
        registration for trust certificates under this title 
        are authorized.
  (g) Timing of Issuance of Guarantees of Qualified Debentures 
and Trust Certificates.--The Secretary may, from time to time 
in the Secretary's discretion, exercise the authority to issue 
guarantees of qualified debentures under this title or trust 
certificates under this title.

SEC. 308. APIC REQUESTS FOR GUARANTEE ACTIONS.

  (a) In General.--The Secretary may issue a guarantee under 
this title for a qualified debenture that an APIC intends to 
issue only pursuant to a request to the Secretary by the APIC 
for such guarantee that is made in accordance with regulations 
governing the content and procedures for such requests, that 
the Secretary shall prescribe. Such regulations shall provide 
that each such request shall include--
          (1) a description of the manner in which the APIC 
        intends to use the proceeds from the qualified 
        debenture;
          (2) a certification by the APIC that the APIC is in 
        substantial compliance with--
                  (A) this title and other applicable laws, 
                including any requirements established under 
                this title by the Secretary;
                  (B) all terms and conditions of its license, 
                any cease-and-desist order issued under section 
                310, and of any penalty or condition that may 
                have arisen from examination or monitoring by 
                the Secretary or otherwise, including the 
                satisfaction of any financial audit exception 
                that may have been outstanding; and
                  (C) all requirements relating to the 
                allocation and use of New Markets Tax Credits, 
                to the extent such credits are established 
                under Federal law; and
          (3) any other information or certification that the 
        Secretary considers appropriate.
  (b) Requests for Guarantee of Qualified Debentures That 
Include Funding for Initial Expenditure for a Project or 
Activity.--In addition to the description and certification 
that an APIC is required to supply in all requests for 
guarantee action under subsection (a), in the case of an APIC's 
request for a guarantee that includes a qualified debenture, 
the proceeds of which the APIC expects to be used as its 
initial expenditure for a project or activity in which the APIC 
intends to invest, and the expenditure for which would require 
an environmental assessment under the National Environmental 
Policy Act of 1969 and other related laws that further the 
purposes of such Act, such request for guarantee action shall 
include evidence satisfactory to the Secretary of the 
certification of the completion of environmental review of the 
project or activity required of the cognizant State or local 
government under subsection (c). If the environmental review 
responsibility for the project or activity has not been assumed 
by a State or local government under subsection (c), then the 
Secretary shall be responsible for carrying out the applicable 
responsibilities under the National Environmental Policy Act of 
1969 and other provisions of law that further the purposes of 
such Act that relate to the project or activity, and the 
Secretary shall execute such responsibilities before acting on 
the APIC's request for the guarantee that is covered by this 
subsection.
  (c) Responsibility for Environmental Reviews.--
          (1) Execution of responsibility by the secretary.--
        This subsection shall apply to guarantees by the 
        Secretary of qualified debentures under this title, the 
        proceeds of which would be used in connection with 
        qualified low-income community investments of APICs 
        under this title.
          (2) Assumption of responsibility by cognizant unit of 
        general government.--
                  (A) Guarantee of qualified debentures.--In 
                order to assure that the policies of the 
                National Environmental Policy Act of 1969 and 
                other provisions of law that further the 
                purposes of such Act (as specified in 
                regulations issued by the Secretary) are most 
                effectively implemented in connection with the 
                expenditure of funds under this title, and to 
                assure to the public undiminished protection of 
                the environment, the Secretary may, under such 
                regulations, in lieu of the environmental 
                protection procedures otherwise applicable, 
                provide for the guarantee of qualified 
                debentures, any part of the proceeds of which 
                are to fund particular qualified low-income 
                community investments of APICs under this 
                title, if a State or unit of general local 
                government, as designated by the Secretary in 
                accordance with regulations issued by the 
                Secretary, assumes all of the responsibilities 
                for environmental review, decisionmaking, and 
                action pursuant to the National Environmental 
                Policy Act of 1969 and such other provisions of 
                law that further such Act as the regulations of 
                the Secretary specify, that would otherwise 
                apply to the Secretary were the Secretary to 
                undertake the funding of such investments as a 
                Federal action.
                  (B) Implementation.--The Secretary shall 
                issue regulations to carry out this subsection 
                only after consultation with the Council on 
                Environmental Quality. Such regulations shall--
                          (i) specify any other provisions of 
                        law which further the purposes of the 
                        National Environmental Policy Act of 
                        1969 and to which the assumption of 
                        responsibility as provided in this 
                        subsection applies;
                          (ii) provide eligibility criteria and 
                        procedures for the designation of a 
                        State or unit of general local 
                        government to assume all of the 
                        responsibilities in this subsection;
                          (iii) specify the purposes for which 
                        funds may be committed without regard 
                        to the procedure established under 
                        paragraph (3);
                          (iv) provide for monitoring of the 
                        performance of environmental reviews 
                        under this subsection;
                          (v) in the discretion of the 
                        Secretary, provide for the provision or 
                        facilitation of training for such 
                        performance; and
                          (vi) subject to the discretion of the 
                        Secretary, provide for suspension or 
                        termination by the Secretary of the 
                        assumption under subparagraph (A).
                  (C) Responsibilities of states and units of 
                general local government.--The Secretary's duty 
                under subparagraph (B) shall not be construed 
                to limit any responsibility assumed by a State 
                or unit of general local government with 
                respect to any particular request for guarantee 
                under subparagraph (A), or the use of funds for 
                a qualified investment.
          (3) Procedure.--Subject to compliance by the APIC 
        with the requirements of this title, the Secretary 
        shall approve the request for guarantee of a qualified 
        debenture, any part of the proceeds of which is to fund 
        particular qualified low-income community investments 
        of an APIC under this title, that is subject to the 
        procedures authorized by this subsection only if, not 
        less than 15 days prior to such approval and prior to 
        any commitment of funds to such investment (except for 
        such purposes specified in the regulations issued under 
        paragraph (2)(B)), the APIC submits to the Secretary a 
        request for guarantee of a qualified debenture that is 
        accompanied by evidence of a certification of the State 
        or unit of general local government which meets the 
        requirements of paragraph (4). The approval by the 
        Secretary of any such certification shall be deemed to 
        satisfy the Secretary's responsibilities pursuant to 
        paragraph (1) under the National Environmental Policy Act 
        of 1969 and such other provisions of law as the regulations 
        of the Secretary specify insofar as those responsibilities 
        relate to the guarantees of qualified debentures, any 
        parts of the proceeds of which are to fund such investments, 
        which are covered by such certification.
          (4) Certification.--A certification under the 
        procedures authorized by this subsection shall--
                  (A) be in a form acceptable to the Secretary;
                  (B) be executed by the chief executive 
                officer or other officer of the State or unit 
                of general local government who qualifies under 
                regulations of the Secretary;
                  (C) specify that the State or unit of general 
                local government under this subsection has 
                fully carried out its responsibilities as 
                described under paragraph (2); and
                  (D) specify that the certifying officer--
                          (i) consents to assume the status of 
                        a responsible Federal official under 
                        the National Environmental Policy Act 
                        of 1969 and each provision of law 
                        specified in regulations issued by the 
                        Secretary insofar as the provisions of 
                        such Act or other such provision of law 
                        apply pursuant to paragraph (2); and
                          (ii) is authorized and consents on 
                        behalf of the State or unit of general 
                        local government and himself or herself 
                        to accept the jurisdiction of the 
                        Federal courts for the purpose of 
                        enforcement of the responsibilities as 
                        such an official.

SEC. 309. EXAMINATION AND MONITORING OF APICS.

  (a) In General.--The Secretary shall, under regulations, 
through audits, performance agreements, license conditions, or 
otherwise, examine and monitor the operations and activities of 
APICs for compliance with sound financial management practices, 
and for satisfaction of the program and procedural goals of 
this title and other related Acts. The Secretary may undertake 
any responsibility under this section in cooperation with an 
APIC liaison committee, or any agency that is a member of such 
a committee, or other agency.
  (b) Monitoring, Updating, and Program Review.--
          (1) Reporting and updating.--The Secretary shall 
        establish such annual or more frequent reporting 
        requirements for APICs, and such requirements for the 
        updating of the statement of public purpose goals, 
        investment strategy (including the benchmarks in such 
        strategy), and other documents that may have been used 
        in the license application process under this title, as 
        the Secretary determines necessary to assist the 
        Secretary in monitoring the compliance and performance 
        of APICs.
          (2) Annual audits.--The Secretary shall require each 
        APIC to have an independent audit conducted annually of 
        the operations of the APIC. The Secretary, in 
        consultation with the Administrator and the Secretary 
        of the Treasury, shall establish requirements and 
        standards for such audits, including requirements that 
        such audits be conducted in accordance with generally 
        accepted accounting principles, that the APIC submit 
        the results of the audit to Secretary, and that specify 
        the information to be submitted.
          (3) Examinations.--The Secretary shall, no less often 
        than once every 2 years, examine the operations and 
        portfolio of each APIC licensed under this title for 
        compliance with sound financial management practices, 
        and for compliance with this title.
          (4) Examination standards.--
                  (A) Sound financial management practices.--
                The Secretary shall examine each APIC to 
                ensure, as a matter of sound financial 
                management practices, substantial compliance 
                with this and other applicable laws, including 
                Federal executive orders, Department of 
                Treasury and Office of Management and Budget 
                guidance, circulars, and application and 
                licensing requirements on a continuing basis. 
                The Secretary may, by regulation, establish any 
                additional standards for sound financial 
                management practices, including standards that 
                address solvency and financial exposure.
                  (B) Performance and other examinations.--The 
                Secretary shall monitor each APIC's progress in 
                meeting the goals in the APIC's statement of 
                public purpose goals, executing the APIC's 
                investment strategy, and other matters.
  (c) Inspector General Responsibility.--In carrying out 
monitoring of HUD's responsibilities under this title and for 
purposes of ensuring that the program under this title is 
operated in accordance with sound financial management 
practices, the Inspector General of the Department of Housing 
and Urban Development shall consult with the Inspector General 
of the Department of the Treasury and the Inspector General of 
the Small Business Administration, as appropriate, and may 
enter into such agreements and memoranda of understanding as 
may be necessary to obtain the cooperation of the Inspectors 
General of the Department of the Treasury and the Small 
Business Administration in carrying out such function.
  (d) Annual Report By Secretary.--The Secretary shall submit a 
report to the Congress annually regarding the operations, 
activities, financial health, and achievements of the APIC 
program under this title. The report shall list each investment 
made by an APIC and include a summary of the examinations 
conducted under subsection (b)(3), the guarantee actions of 
HUD, and any regulatory or policy actions taken by HUD. The 
report shall distinguish recently licensed APICs from APICs 
that have held licenses for a longer period for purposes of 
indicating program activities and performance.
  (e) GAO Report.--
          (1) Requirement.--Not later than 2 years after the 
        date of the enactment of this Act, the Comptroller 
        General of the United States shall submit a report to 
        the Congress regarding the operation of the program 
        under this title for licensing and guarantees for 
        APICs.
          (2) Contents.--The report shall include--
                  (A) an analysis of the operations and 
                monitoring by HUD of the APIC program under 
                this title;
                  (B) the administrative and capacity needs of 
                HUD required to ensure the integrity of the 
                program;
                  (C) the extent and adequacy of any credit 
                subsidy appropriated for the program; and
                  (D) the management of financial risk and 
                liability of the Federal Government under the 
                program.

SEC. 310. PENALTIES.

  (a) Violations Subject to Penalty.--The Secretary may impose 
a penalty under this subsection on any APIC or manager of an 
APIC that, by any act, practice, or failure to act, engages in 
fraud, mismanagement, or noncompliance with this title, the 
regulations under this title, or a condition of the APIC's 
license under this title. The Secretary shall, by regulation, 
identify, by generic description of a role or responsibilities, 
any manager of an APIC that is subject to a penalty under this 
section.
  (b) Penalties Requiring Notice and an Opportunity to 
Respond.--If, after notice in writing to an APIC or the manager 
of an APIC that the APIC or manager has engaged in any action, 
practice, or failure to act that, under subsection (a), is 
subject to a penalty, and after an opportunity for the APIC or 
manager to respond to the notice, the Secretary determines that 
the APIC or manager engaged in such action or failure to act, 
the Secretary may, in addition to other penalties imposed--
          (1) assess a civil money penalty, except than any 
        civil money penalty under this subsection shall be in 
        an amount not exceeding $10,000;
          (2) issue an order to cease and desist with respect 
        to such action, practice, or failure to act of the APIC 
        or manager;
          (3) suspend, or condition the use of, the APIC's 
        license, including deferring, for the period of the 
        suspension, any commitment to guarantee any new 
        qualified debenture of the APIC, except that any 
        suspension or condition under this paragraph may not 
        exceed 90 days; and
          (4) impose any other penalty that the Secretary 
        determines to be less burdensome to the APIC than a 
        penalty under subsection (c).
  (c) Penalties Requiring Notice and Hearing.--If, after notice 
in writing to an APIC or the manager of an APIC that an APIC or 
manager has engaged in any action, practice, or failure to act 
that, under subsection (a), is subject to a penalty, and after 
an opportunity for administrative hearing, the Secretary 
determines that the APIC or manager engaged in such action or 
failure to act, the Secretary may--
          (1) assess a civil money penalty against the APIC or 
        a manager in any amount;
          (2) require the APIC to divest any interest in an 
        investment, on such terms and conditions as the 
        Secretary may impose; or
          (3) revoke the APIC's license.
  (d) Effective Date of Penalties.--
          (1) Prior notice requirement.--Except as provided in 
        paragraph (2) of this subsection, a penalty under 
        subsection (b) or (c) shall not be due and payable and 
        shall not otherwise take effect or be subject to 
        enforcement by an order of a court, before notice of 
        the penalty is published in the Federal Register.
          (2) Cease-and-desist orders and suspension or 
        conditioning of license.--In the case of a cease-and-
        desist order under subsection (b)(2) or the suspension 
        or conditioning of an APIC's license under subsection 
        (b)(3), the following procedures shall apply:
                  (A) Action without published notice.--The 
                Secretary may order an APIC or manager to cease 
                and desist from an action, practice, or failure 
                to act or may suspend or condition an APIC's 
                license, for not more than 45 days without 
                prior publication of notice in the Federal 
                Register, but such cease-and-desist order or 
                suspension or conditioning shall take effect 
                only after the Secretary has issued a written 
                notice (which may include a writing in 
                electronic form) of such action to the APIC. 
                Notwithstanding subsection (b), such written 
                notice shall be effective without regard to 
                whether the APIC has been accorded an 
                opportunity to respond. Upon such notice, such 
                cease-and-desist order or suspension or 
                conditioning shall be subject to enforcement by 
                an order of a court.
                  (B) Publication of notice of suspension or 
                conditioning of license.--Upon a suspension or 
                conditioning of a license taking effect 
                pursuant to subparagraph (A), the Secretary 
                shall promptly cause a notice of suspension or 
                conditioning of such license for a period of 
                not more than 90 days to be published in the 
                Federal Register. The Secretary shall provide 
                the APIC an opportunity to respond to such 
                notice. For purposes of the determining the 
                duration of the period of any suspension or 
                conditioning under this subparagraph, the first 
                day of such period shall be the day of issuance 
                of the written notice under this paragraph of 
                the suspension or conditioning.
                  (C) Revocation of license.--During the period 
                of the suspension or conditioning of an APIC's 
                license, the Secretary may take action under 
                subsection (c)(3) to revoke the license of the 
                APIC, in accordance with the procedures 
                applicable to such subsection. Notwithstanding 
                any other provision of this section, if the 
                Secretary takes such action, the Secretary may 
                extend the suspension or conditioning of the 
                APIC's license, for one or more periods of not 
                more than 90 days each, by causing notice of 
                such action to be published in the Federal 
                Register--
                          (i) for the first such extension, 
                        before the expiration of the period 
                        under subparagraph (B); and
                          (ii) for any subsequent extension, 
                        before the expiration of the preceding 
                        extension period under this 
                        subparagraph.
                (D) Term of effectiveness.--A cease-and-desist 
                order or the suspension or conditioning of an 
                APIC's license by the Secretary under this 
                paragraph shall remain in effect in accordance 
                with the terms of the order, suspension, or 
                conditioning until final adjudication in any 
                action undertaken to challenge the order, or 
                the suspension or conditioning, or the 
                revocation, of an APIC's license.

SEC. 311. EFFECTIVE DATE.

  (a) In General.--Except as provided in subsection (b), this 
title shall take effect upon the expiration of the 6-month 
period beginning on the date of the enactment of this Act.
  (b) Issuance of Regulations and Guidelines.--Any authority 
under this title of the Secretary, the Administrator, and the 
Secretary of the Treasury to issue regulations, standards, 
guidelines, or licensing requirements, and any authority of 
such officials to consult or enter into agreements or memoranda 
of understanding regarding such issuance, shall take effect on 
the date of the enactment of this Act.

SEC. 312. SUNSET.

  After the expiration of the 5-year period beginning upon the 
date that the Secretary awards the first license for an APIC 
under this title--
          (1) the Secretary may not license any APIC; and
          (2) no amount may be appropriated for the costs (as 
        such term is defined in section 502 of the Federal 
        Credit Reform Act of 1990 (2 U.S.C. 661c)) of any 
        guarantee under this title for any debenture issued by 
        an APIC.
This section may not be construed to prohibit, limit, or affect 
the award, allocation, or use of any budget authority for the 
costs of such guarantees that is appropriated before the 
expiration of such period.

                     Explanation of the Legislation

    H.R. 2848, the ``New Markets Initiative Act of 1999'' 
authorizes in Title III (entitled ``America's Private 
Investment Companies Act'') the Secretary of Housing and Urban 
Development (HUD) to license a number of privately managed, 
for-profit investment companies for purposes of making large-
scale, equity and debt investments in low-income urban and 
rural areas. Each America's Private Investment Company 
(``APIC'') must have a minimum of $25 million in private equity 
capital contributed by investors in order to be licensed by 
HUD. An APIC would be eligible to issue debentures, guaranteed 
by the government, for twice (200%) the amount of its total 
equity capital. The contributed equity and amounts raised 
through issuance of debentures are to be invested in businesses 
operating in low and moderate-income areas. The government-
guaranteed debt would be repaid first.
    The legislation provides that APIC licensees are to be 
chosen by HUD pursuant to a competition. The number of APICs 
licensed at any one time would depend upon the amount of budget 
authority available to support the total credit subsidy 
provided to the program, but would be limited in the first year 
to no more than fifteen. Of those APICs chosen in the first 
year, subject to the existence of an approvable application, at 
least one shall have as its primary mission objective business 
investment in Native American lands.
    HUD shall monitor each APIC as to its progress in meeting 
its stated public purpose goals. The Secretary may reward well-
performing APICs which exceed their public purpose investment 
goals by increasing the credit subsidy allocated to those 
APICs, to the extent there is credit subsidy still available. 
Such APICs must have been licensed for a minimum of two years. 
Any such increases are to be provided based on a competition of 
eligible APICs.
    The proposed credit subsidy for the program is $36 million 
each fiscal year for FY 2000 through FY 2004. HUD estimates 
this level will support $1 billion in investments. In addition, 
$1 million is authorized for each of these fiscal years (2000-
2004), for administrative expenses in connection with carrying 
out the provisions of the legislation.
    In addition to monitoring APICs' progress in meeting their 
public purpose goals, the Secretary of HUD shall, for purposes 
of managing the financial risk of the federal government, 
regulate APICs for financial soundness and ensure that each 
APIC is structured so as to operate based on sound management 
practices. The HUD Secretary shall consult with the Secretary 
of the Treasury for purposes of accomplishing these functions. 
The legislation requires each APIC to submit an annual 
independent audit to the Secretary detailing its investments. 
The legislation also requires the HUD Secretary to report 
annually to Congress on the status of the APIC program. In 
addition, the General Accounting Office is required to report 
on the APIC program two years after the date of enactment of 
the legislation.
    The effective date of the legislation, for licensing and 
other operations, is six months after the date of enactment. 
Authority to grant licenses shall sunset five years after the 
date that the Secretary awards the first license for an APIC 
under this Act.

                          Legislative History

    H.R. 2848, the ``New Markets Initiative Act of 1999'', was 
introduced by Representatives Watts, Talent, Leach and Baker at 
the request of the Administration on September 13, 1999, and 
contains the Administration's New Markets Initiative 
legislative program. H.R. 2764 was introduced by Ranking Member 
LaFalce on August 5, 1999 and contains the APIC portion of the 
Administration's legislative proposals. H.R. 2764 is 
substantively the same as Title III of H.R. 2848, both of which 
fall under the jurisdiction of the Committee.
    On November 10, 1999, the Subcommittee on Capital Markets, 
Securities, and GSEs held a hearing on capital formation in 
underserved areas. The hearing focused on the APIC proposal 
embodied in H.R. 2764 and on other ideas for promoting economic 
growth in these areas. The Committee held a markup of H.R. 2764 
and Title III of H.R. 2848 on April 12, 2000.
    During the markup, the Committee approved one amendment, by 
unanimous consent, which inserted in lieu the provisions of 
H.R. 2764 as marked up and ordered reported on April 12, 2000. 
With a quorum present, a motion to adopt H.R. 2848 and 
favorably report the bill, as amended, to the House was 
approved by voice vote.

                  Background and Need for Legislation

    In an era of unprecedented economic growth and prosperity, 
there remain many economically distressed communities, both 
rural and urban, where many people have not benefited to any 
great degree from the most recent economic expansion enjoyed by 
our Nation. In these communities, levels of unemployment, 
poverty, and other indicia of social distress, remain 
stubbornly high--yet untapped market opportunities exist to 
establish and expand businesses and to develop jobs and 
community assets.
    There is bipartisan consensus in Congress that the federal 
government can and should play a role in encouraging 
investments in these communities. For several years both 
Republicans and Democrats have proposed and supported granting 
tax and regulatory relief, including capital gains tax relief 
to businesses operating within distressed areas. Many of these 
proposals were part of H.R. 815, the ``American Community 
Renewal Act,'' introduced by Representatives Jim Talent and 
J.C. Watts, which would have designated a number of these areas 
as ``renewal communities'' eligible for such benefits. The 
House has already passed the tax provisions of H.R. 815, and 
this Committee has passed provisions relating to HUD property 
disposition within these communities as part of H.R. 1776, the 
``American Homeownership and Economic Opportunity Act of 
2000.''
    The Administration has also proposed a series of programs, 
collectively known as the ``New Markets Initiative,'' also 
intended to foster economic development in low-income 
communities. These proposals include tax credits for businesses 
in these areas (``New Markets Tax Credits''), a small business 
component (establishing a ``New Markets Venture Capital 
Program''), and the formation of a number of companies intended 
to make relatively large scale equity and credit investments in 
distressed areas--APICs. The FY 2000 VA/HUD Appropriations Act 
provided that $20 million in credit subsidy would be available 
for use by APICs for Fiscal Year 2000 if the program was 
authorized by June 30, 2000. If the program is not authorized 
by that date, the funding reverts to the Community Development 
Financial Institutions program administered by the Department 
of the Treasury.
    The APIC portion of the New Markets Initiative falls under 
the jurisdiction of this Committee. The proposal is closely 
related in concept to the Small Business Investment Companies 
(``SBIC'') program currently administered by the Small Business 
Administration (SBA), except that the SBIC program is limited 
in the size of projects it can serve and that SBICs invest in 
ventures only, not real estate. Community development 
organizations maintain that the infusion of additional amounts 
of equity capital is especially vital for enabling large-scale 
investments to occur in distressed areas. Importantly, these 
investments would be economically viable as freestanding 
business entities, providing a profitable return to investors. 
However, because the costs of establishing these businesses in 
some of these distressed areas are higher relative to other 
areas due to a variety of factors (remediation of environmental 
contamination, for example), the return on investors equity is 
not as high as demanded by these investors. APICs are intended 
to lessen the cost of capital so that these large-scale 
investments would be made.
    APICs are not intended to fund or subsidize the operations 
of businesses, that are not economically viable. On the 
contrary, the goal of these entities is to encourage the 
establishment of fundamentally sound businesses in certain 
locations. Possible uses for APICs' funds include the 
establishment of a new facility, such as a call center, data 
processing ``back office,'' or factory, by a large company (or 
a small company joint venturing with a large one). In addition, 
a mid-size manufacturing company seeking to increase production 
could use APIC investments for expansion of an existing 
facility, the upgrading of equipment or the hiring of new 
employees. Other uses could include expansion of the service 
area of a mid-size service company, such as a trucking company, 
building contractor, or home health care firm; development of a 
multi-tenant shopping center; or opening or expanding a large 
retail company in a new geographic area. Buyout of a company to 
be revitalized in its existing facility, acquisition of the 
property of a departing large company, and development of an 
incubator or industrial park, or investment in another fund 
that invests in businesses locating or expanding in targeted 
low-to-moderate income areas are all methods whereby an APIC 
could fulfill its public purpose investment role.
    By passing this APIC legislation, the hope and expectation 
of this Committee is that a bipartisan, comprehensive package 
of measures to help revitalize America's distressed urban and 
rural communities, which would include the best elements of the 
American Community Renewal Act and the New Markets Initiative, 
be enacted this year.

           Committee Actions Regarding Introduced Legislation

    The Committee adopted a Managers' Amendment during the 
markup of H.R. 2764, sponsored by Chairman Leach, Mr. Lazio, 
Ranking Member LaFalce, and Mr. Kanjorski, which made 
substantial changes to the original bill. H.R. 2764, as marked 
up by the Committee, was subsequently substituted for Title III 
of H.R. 2848, which was then reported by the Committee.
    In broad terms, the changes in the Managers' Amendment were 
meant to accomplish three major goals. The first of these goals 
was to minimize the potential for fraud and abuse and protect 
the American taxpayer from unnecessary exposure. Second, the 
Committee wanted to ensure that the statutory language clearly 
reflected Congressional intent, and provided adequate direction 
for the program so that it gives rise to types of investments 
in low-income communities that will truly improve the lives of 
our citizens. Finally, the Managers' Amendment contained 
provisions designed to address concerns with HUD's current 
capacity to administer the program, and to ensure HUD's sound 
management of the program established by the legislation.

Minimizing the potential for fraud and abuse

    The Managers' Amendment adopted by the Committee added 
certain defined terms to the legislation found in Section 303 
of H.R. 2848, ``Definitions,'' and further defined some 
existing terms of the bill. These additions and revisions make 
more specific and strengthen the language of the bill. The most 
important of these is a new definition for ``private equity 
capital''. A central feature of the APIC program is its 
reliance on market discipline. APIC investors and managers make 
investment decisions based on the ability of a business 
ultimately to succeed because the investor's equity is at-risk 
first if the business fails. The interests of the investor 
therefore coincide, with the interest of the taxpayer. The 
legislation as introduced, however, provided that ``equity'' 
was to be defined through guidelines issued by the HUD 
Secretary. The Committee felt that, at a minimum and as a 
matter of prudence, the legislation should include a statutory 
definition of equity that would prevent an overly expansive 
definition from allowing APIC investors to comply with the 
letter of the law without truly risking any of their own 
capital. In accomplishing this goal, the Committee looked to 
existing statutes, such as those governing SBA programs similar 
in concept to the APIC program, and worked through the 
specifics of the definition with HUD to ensure that it was not 
overly restrictive or that it conflicts with guidelines issued 
by the Department of the Treasury which would govern tax 
credits under the New Markets program.
    Additional changes were included in the Managers' Amendment 
to enhance the integrity of the program. For example, the 
Committee believed it was important to set forth more clearly 
in Section 307 of the bill the seniority of the federal 
government's position in relation to any other obligation the 
APIC may have. A change to require the HUD Secretary to make a 
determination, prior to the licensing of any APIC, that the 
management of the entity is clearly qualified was also made. 
Section 309, ``Examination and Monitoring of APICs'' has been 
revised to require that each APIC submit an annual independent 
audit detailing its investments to the Secretary. Changes were 
also made to Section 309 to require the HUD Secretary to report 
annually to Congress on APICs and their investments. Finally, 
in Section 310, ``Penalties'', the Committee strengthened the 
power and sanctions available to HUD so that the Department can more 
effectively avert any undue taxpayer losses.

Clearly stating congressional intent regarding APIC investments

    This Committee intends that an APIC licensed under the 
provisions of this legislation shall be in the business of 
making investments that benefit low-income people and 
communities, and that such an entity does not become an example 
of ``corporate welfare'' by making investments that would bring 
profits to its investors without the requisite social benefits 
accruing to distressed areas from these investments. The 
Committee is aware of well-intended programs once administered 
by HUD, such as the Urban Development Action Grants (UDAG) 
program, that spent government funds on projects that could 
easily have been financed through private sources, and which 
resulted in little or no additional benefit to distressed 
areas. The intent of the Committee is that APIC investments be 
made in communities where they are truly needed, and not in 
areas which technically may be within a low-income community 
but where incomes may in reality be much higher. Affluent 
sections can coexist within very distressed areas in census 
tracts that would meet the definitions for low- and moderate-
income areas eligible for APIC investments. However, a 
statutory requirement that HUD define all of these areas 
nationwide would have been overly burdensome and impractical in 
the Committee's view.
    For this reason, language added by the Managers' Amendment 
and appearing in Section 305(a)(6), ``Statement of Public 
Purpose Goals,'' refers to investments ``that further economic 
development objectives by targeting such investments in 
businesses that comply with the requirements [of this Act] * * 
* in a manner that benefits low-income persons.'' The Committee 
intends by addition of this language that APICs channel their 
activities toward truly meritorious investments without 
precisely delineating within individual census tracts where the 
businesses these APICs invest in must be located. The Committee 
does not intend that APICs meet compliance requirements under 
this legislation by primarily making investments in subareas of 
an otherwise qualifying low-income community that have resident 
incomes disproportionately higher, or that show patterns of 
displacement and more rapidly increasing property values, than 
those of the larger qualifying area. By the same token, in 
determining compliance with the ``qualified active business'' 
test for APIC investments, the term ``low-income community'' 
may be interpreted to include specific locations in an area 
with a very high population density that are located 
immediately adjacent to, but not within, a low-income 
community. Investments that qualify under this interpretation 
must primarily benefit low-income persons within the qualifying 
adjacent low-income community.
    The Committee notes that under Section 306(b), 
``Substantially all investments that an APIC makes shall be 
qualified low-income investments * * *'' Rather than 
establishing a specific percentage in the statute, the intent 
of the Committee is that the term ``substantially all'' in this 
context be read in accordance with and reflect existing 
Treasury guidelines and Internal Revenue Service regulations 
governing investments in low- and moderate-income areas, such 
as those existing for investments made in empowerment zones, 
for example. Similarly, under Section 142 of the IRS Code, 95% 
of proceeds raised under the provision must be used for the 
purposes specified. The intent of the Committee is that 
``substantially all'' in the context of APIC investments be 
read to mean this approximately 95% level that currently 
permeates the world of tax-exempt financing.
    In addition to providing additional guidance and 
Congressional direction as to where APIC investments should be 
made, the Committee was concerned with the legislative language 
governing selection of APICs. In the Committee's view, the 
selection process for licensing APICs as set forth in the 
original legislation did not provide enough direction to the 
Secretary, either as to the types of entities that should be 
chosen or the criteria that should be used in making these 
determinations.
    Regarding the types of entities that should be chosen as 
APICs, the Committee believed further specificity was required 
in the legislation to set forth examples of the underlying 
public purpose goals and nature of each APIC. Specifically, in 
Section 305, ``Selection of APICs'', the Committee believed a 
further delineation of the types of goals that licensed APICs 
can be expected to pursue was appropriate. Therefore, Section 
305(A)(6) now includes references to the following: creating 
jobs within two years of making an investment; enhancing 
economic competition, including the advancement of technology; 
promoting rural development; achieving certain environmental 
goals; and benefiting small business. By setting forth more 
clearly in statute the types of goals to be pursued and the 
activities in which these APICs are to be engaged, the 
Committee intends to provide additional guidance to the 
Secretary as to the types of APICs which should be considered 
favorably in the selection process.
    In terms of specific selection criteria, the Committee 
believes that the criteria as set forth in the original 
legislation served as minimum eligibility requirements rather 
than as true measures for selecting among various applicants. 
For example, the Secretary under the original legislation could 
determine whether an applicant had qualified management prior 
to licensing the applicant as an APIC. The Committee, however, 
intends that the statute reflect the Secretary's ability to 
make qualitative distinctions regarding management, allowing 
licensing of one APIC over another based on the existence of an 
exceptional management record and proven expertise in making 
investments benefiting low-income communities. In other words, 
the Committee believes the Secretary should choose among the 
applicants those APICs that meet not just the minimum statutory 
requirements, but whose investments are more likely to result 
in the most benefit to low- and moderate-income communities. 
With that in mind, the Managers' Amendment added language in 
Section 305(d) establishing selection criteria the Secretary 
shall use to determine which APICs are to be licensed. An APIC 
applicant will be chosen for licensing based on the extent such 
applicant is expected to achieve the goals of the legislation 
by meeting or exceeding the selection criteria established 
under this subsection, which may include additional criteria 
established by the Secretary.
    The Committee intends that rural and small communities not 
be unfairly or arbitrarily disadvantaged in the selection 
process. For this reason, Section 305(c)(2) was added by the 
Managers' Amendment to provide that when selecting APICs for 
licensing, the HUD Secretary to the extent practicable ensure 
geographical diversity and a mix of APICs so that both rural 
and urban communities may be served by this program. The 
Committee notes that in addition to large cities, there are 
also economically distressed areas in mid-sized and smaller 
metropolitan areas and non-metropolitan areas. Consideration of 
the needs of these communities should not be absent from APIC 
selection process. The intent of the Committee is that the Secretary 
strive for balance, fairness and diversity in the selection process.
    In adding legislative language regarding the selection 
process, the Committee attempted to avoid imposing requirements 
as to exactly how many of each type of APIC should be chosen in 
the selection process. In the Committee's view, imposing 
numerical requirements would not be the proper approach because 
neither Congress nor the Administration can know in advance 
exactly what entities will apply to be licensed. The Committee 
made one important exception to this approach regarding the 
selection process for Native Americans. By definition, most of 
the lands on reservations would qualify for investments by 
APICs, as would rural and other low-income communities. 
However, the Committee was concerned that the added complexity 
of investing on Native American lands, including dealing with 
the Bureau of Indian Affairs, unfamiliarity with the varied 
tribal laws, and what in too many cases amounts to a cultural 
discomfort on the part of much of the finance community in 
doing business on Indian lands, were factors making business 
investment in Native Americans lands qualitatively different, 
and much more difficult, than investments in other low-income 
rural or urban communities. The Committee was concerned that 
the available applicants would not include entities with the 
capacity, or which viewed as their mission, to invest 
specifically on Native American lands. For this reason, the 
Managers' Amendment included a requirement that of those APICs 
selected in the first year, one would be a Native American 
Private Investment Company. The Committee believes that this 
would encourage application by would-be APICs that would serve 
Native Americans. Any such applicant would still need to meet 
all of the requirements for licensing contained in this bill. 
Native Americans should not be unintentionally excluded from 
benefiting under this program.
    The Committee notes that under Section 305(b)(1) of the 
legislation, an APIC applicant must be a for-profit entity in 
order to be licensed as an APIC. The Committee notes that this 
is not intended to exclude for-profit entities controlled by 
non-profit organizations, such as through a subsidiary, 
partnership, or limited liability structure.
    Regarding the application of federal securities laws to 
APICs, and for that matter to New Market Venture Capital 
companies (``NVCCs'') created under other provisions of the 
Administration's New Markets Initiative, the Committee notes 
that nothing in this legislation alters or affects any Federal 
securities laws or regulations promulgated under the Federal 
securities laws. Further, federal securities laws continue to 
apply to NVCCs and APICs created under this legislation, to any 
securities issued by or on behalf of NVCCs or APICs, and to 
their distribution. NVCCs and APICs may seek to qualify for 
certain exclusions contained in the Investment Company Act. 
Notably, in order for NVCCs and APICs to qualify for the 
exclusion from regulation under the Investment Company Act 
provided by Section 3(c)(7) of the Act, they must make only a 
private offering of their securities and each of their 
investors must meet the definition of ``qualified purchaser'' 
in Section 2(a)(51) of the Investment Company Act of 1940, 15 
U.S.C. 80a-2(a) (51). The Committee expects that private 
offerings of NVCC and APIC securities (including those relying 
on the exclusion from regulation under the Act provided by 
Section 3(c)(1)) generally will entail an evaluation of whether 
the NVCC or APIC securities are suitable investments for the 
proposed investors.

Ensuring HUD's capacity to administer the APIC program

    The Committee was concerned with HUD's current capacity to 
administer the proposed APIC program. While the Committee notes 
that the Secretary has made great efforts to improve the 
management of HUD's programs, there are still many areas which 
require attention. Adding another program to those already 
administered by HUD, and especially one as complex in terms of 
the required financial expertise as the program envisioned by 
this legislation, called for careful, bipartisan consideration. 
An alternative approach, which was indeed debated during the 
Committee's markup of the legislation, was for the program to 
be administered by the Department of the Treasury rather than 
HUD. A crucial reason for having HUD administer the program, 
however, was the Department's experience in dealing with 
distressed areas and with complex, large-scale community 
development investments, in particular. In order to address the 
Committee's concerns regarding capacity and taxpayer 
safeguards, key changes to the original legislation were made 
by the Managers' Amendment regarding program administration.
    The Committee's goal was to ensure that HUD had the 
expertise and the time available to structure and administer 
this program properly, and that the program not be too complex 
to administer in the beginning stages so that HUD would be able 
to develop capacity. Therefore, the legislation as revised by 
the Committeee, now imposes a first year limit on the number of 
APICs of 15, with no one APIC receiving more than 20% of the 
available credit subsidy. This accomplishes two things--it 
keeps the number of APICs at a manageable level in the first 
year, to give HUD experience in working with this program, and 
it diversifies the government's risk by ensuring that no one 
APIC is too large. In addition, the Committee included a 
provision setting the effective date of the legislation at six 
months after enactment, so that HUD would have the time to 
develop adequate procedures in a deliberative fashion, working 
with the private sector as well as nonprofit and government 
entities important to community economic development.
    The Committee also strengthened financial soundness 
provisions by setting forth the HUD Secretary's duty to 
cooperate with Treasury in determining what procedures to 
follow to ensure competent management of APICs. Because the 
Committee wishes to approach conservatively those matters 
involving the federal government's financial exposure, 
particularly at the program's inception, the program feature 
allowing an increase in leverage for a class of APICs from 200% 
to 300% was also deleted.
    In order to ensure close oversight of the program, the 
Committee added a requirement for an Annual Report from the 
Secretary to Congress on the achievements of APICs, which would 
provide information on all APIC investments, the level of 
financial exposure, and other such matters. In addition, the 
legislation now requires a report by the General Accounting 
Office on the APIC program two years after enactment of the 
program. Finally, language granting the HUD Inspector General 
the authority to work with the Small Business Administration 
Inspector General in monitoring the APIC program at HUD was 
added in order to ensure that monitoring experience of these 
types of programs was available. The many changes made by the 
Committee to address the concerns with HUD's management of the 
program should give some assurance that this program will be 
structured and administered in a proper fashion, with the 
interests and protection of the taxpayer as priorities.

     Committee Consideration and Votes (Rule XI, Clause 2(l)(2)(B)

    The Committee met in open session to mark up H.R. 2848, 
``New Markets Initiative Act of 1999'' on April 12, 2000. The 
Committee considered H.R. 2848, as introduced, as the text for 
purposes of amendments.
    During the markup, the Committee approved one amendment, by 
unanimous consent, which inserted in lieu thereof the 
provisions of H.R. 2764 as amended and ordered reported by the 
Committee on April 12, 2000. With a quorum present, a motion to 
adopt H.R. 2848 and favorably report the bill, as amended, to 
the House was approved by voice vote.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings and recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI (and clause 4(c)(2) of rule X) of 
the Rules of the House of Representatives.

                        Constitutional Authority

    In compliance with clause 2(l)(4) of rule XI of the Rules 
of the House of Representatives, the constitutional authority 
for Congress to enact this legislation is derived from the 
general welfare clause (Article I, Sec. 8).

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of rule XI of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority for increased tax 
expenditures.

    Congressional Budget Office Costs Estimate and Unfunded Mandate 
                                Analysis

    The cost estimate pursuant to clause 3(c)(3) of rule XIII 
of the Rules of the House of Representatives and section 402 of 
the Congressional Budget Act of 1974 is attached herewith:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 26, 2000.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2848, the New 
Markets Initiative Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Mark Hadley 
and Lanette Keith (for federal costs), and Victoria Heid Hall 
(for the state and local impact).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 2848--New Markets Initiative Act of 1999

    Summary: H.R. 2848 would provide credit assistance and tax 
credits in exchange for private investments in certain 
communities. The bill would authorize appropriations for two 
federal loan guarantee programs: the America's Private 
Investment Companies (APIC) program within the Department of 
Housing and Urban Development (HUD) and a New Markets Venture 
Capital (NMVC) program within the Small Business Administration 
(SBA). In both cases, the federal government would guarantee 
loans made to venture-capital corporations that agree to 
operate in low-income or moderate-income communities. The NMVC 
investments would be targeted to small businesses and start-up 
companies. Other provisions would modify SBA's general business 
program by reducing fees for certain loan guarantees and 
increasing the limit on the portion of a loan that can be 
guaranteed by the government. Finally, the bill would establish 
a new tax credit for taxpayers who invest in qualified 
community development entities.
    Assuming appropriation of the necessary amounts, CBO 
estimates that implementing H.R. 2848 would cost $1.4 billion 
over the 2000-2005 period, including revenue losses from the 
new tax credits. The Joint Committee on Taxation (JCT) 
estimates that the revenue loss associated with this 
legislation would be $1,061 million over the 2000-2005 period 
and $1.781 million over the 2000-2010 period. CBO estimates 
that costs to be paid from appropriated funds would total $338 
million from 2000 through 2005. We also estimate that 
provisions modifying the terms of existing loans would increase 
direct spending by $45 million in 2000. Because H.R. 2848 would 
affect direct spending and receipts, pay-as-you-go procedures 
would apply.
    H.R. 2848 contains intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA), but CBO estimates that 
the cost of the mandates would not be significant. The 
legislation does not contain any new private-sector mandates.
    Estiamted cost to the Federal Government: The estimated 
budgetary impact of H.R. 2848 is shown in the following table. 
The costs of this legislation fall within budget functions 370 
(commerce and housing credit) and 450 (community development).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2000     2001     2002     2003     2004     2005
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Authorization Level.......................................       17       86       85       78       79       43
Estimated Outlays.........................................        1       42       68       75       78       74

                                           CHANGES IN DIRECT SPENDING

Estiamted Budget Authority................................       45        0        0        0        0        0
Estimated Outlays.........................................       45        0        0        0        0        0

                                               CHANGES IN REVENUES

Estimated Revenues........................................       -5      -30     -119     -234     -322     -351
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes H.R. 2848 
will be enacted in fiscal year 2000 and that the amounts 
authorized will be appropriated for each year. CBO expects 
outlays to follow trends for similar programs.
    The majority of the discretionary costs associated with 
this bill would result from implementing the APIC and NMVC 
programs. For each year over the 2000-2004 period, the bill 
would authorize the appropriation of $36 million to cover the 
subsidy costs of the APIC program and $1 million annually for 
related administrative expenses. The NMVC program would be 
authorized for six years (fiscal years 2000 through 2005), with 
appropriations limited to $30 million for technical assistance 
and such sums as necessary to subsidize and administer up to 
$100 million in NMVC loan guarantees. H.R. 2848 also would 
increase the cost of guaranteeing new business loans by an 
average of $35 million a year, assuming the program is extended 
beyond 2000. The estimated increase in direct spending reflects 
the cost of modifying the fees paid on outstanding general 
business loan guarantees made by SBA. Finally, JCT estimates 
that the new tax credit for qualified community 
developmententities would reduce revenues by $1,061 million over the 
2000-2005 period and $1.781 million over the 2000-2010 period.

Spending subject to appropriation

    The majority of the discretionary costs associated with 
H.R. 2848 would be for credit subsidies. The Federal Credit 
Reform Act of 1990 requires appropriation of the subsidy costs 
and administrative costs for operating credit programs. The 
subsidy cost is the estimated long-term cost to the government 
of a direct loan or loan guarantee, calculated on a net present 
value basis, excluding administrative costs. In fiscal year 
2000, the Congress appropriated a total of $35 million for 
subsidy and other costs related to the proposed APIC and NMVC 
programs.
    America's Private Investment Companies. CBO estimates that 
H.R. 2848 would authorize an additional $17 million for APIC 
activities in fiscal year 2000 and $38 million a year over the 
2001-2004 period. (The current appropriation for 2000 is $20 
million.) This annual sum includes the $36 million specified in 
the bill for subsidy costs and an estimated $2 million for 
administrative expenses. While the bill would authorize the 
appropriation of $1 million annually over the 2000-2004 period 
for administrative costs, CBO estimates this amount would not 
be sufficient to administer these loan guarantees after fiscal 
year 2000. Based on the operation of similar SBA programs, we 
estimate that about $2 million annually would be needed to 
administer the APIC loan guarantees over the 10-year term of 
the guarantees.
    New Markets Venture Capital program. CBO estimates that 
H.R. 2848 would authorize the appropriation of an additional 
$40 million over the 2001-2005 period for the NMVC program. 
This cost reflects the difference between the total amounts 
authorized in the bill and the $15 million appropriated for the 
current year. Specifically, H.R. 2848 would authorize the 
appropriation of up to $30 million over the 2000-2005 period 
for technical assistance, which is $21 million more than has 
been appropriated for fiscal year 2000. Likewise, CBO estimates 
that it would cost about $20 million to subsidize $100 million 
in NMVC loan guarantees, which is $14 million more than was 
appropriated for NMVC subsidies in fiscal year 2000. Finally, 
experience with other SBA programs suggests that it would cost 
an average of about $1 million a year to administer the 
program, net of any examination fees paid by borrowers.
    CBO estimates, that the subsidy cost of the NMVC program 
would be about 20 percent of the amount guaranteed. We based 
this estimate on defaults and recoveries for similar SBA 
programs and on information regarding the likely terms and 
conditions of the guarantees. Experience with other programs 
suggests that NMVC borrowers would default on about 45 percent 
of guaranteed loans. In the event of a default, CBO expects 
that the agency would liquidate the NMVC investments and that 
recoveries would average about 50 percent of the loan balance 
three years after default. Information from the Office of 
Management and Budget (OMB) suggests that SBA would allow 
borrowers a grace period of five years during which they would 
not pay interest; instead, such interest would be added to the 
outstanding debt. Because H.R. 2848 would authorize SBA to 
guarantee up to $100 million of loans, we estimate that this 
program would require the appropriation of about $20 million 
for credit subsidies.
    SBA's general business loan guarantee program. CBO 
estimates that provisions modifying certain aspects of SBA's 
existing general business program would increase the subsidy 
rate for those guaranteed loans by between 0.25 percent and 0.5 
percent. Under H.R. 2848, certain borrowers would pay a smaller 
up-front fee for guaranteed loans (reduced from 3 percent to 2 
percent); some would pay lower annual fees on guaranteed loans 
(reduced from 0.5 percent to 0.3 percent); and some would be 
eligible to have the federal government guarantee a higher 
portion of the loan (up to 80 percent from the current limit of 
75 percent).
    Assuming that the general business program is extended 
beyond 2000 at the $10 billion loan level specified in the 
fiscal year 2000 appropriation act, CBO estimates that those 
modifications would require the appropriation of an additional 
$35 million a year. The modifications also would affect the 
subsidy cost of any loans guaranteed in the months remaining in 
fiscal year 2000 after enactment of the bill, but we assume 
that any increase in the subsidy cost of new commitments in 
fiscal year 2000 would lead to a reduction in the volume of 
loan obligations rather than additional appropriations.

Direct spending

    In addition to its effects on future discretionary 
spending, CBO estimates that reducing the annual fee on loans 
guaranteed under SBA's general business program would increase 
direct spending by a total of $45 million in 2000. H.R. 2848 
would reduce the annual fee on guaranteed loans from 0.5 
percent to 0.3 percent of the outstanding balance on loans that 
were originally for $150,000 or less. This change would modify 
the expected cost of the guarantees SBA has provided for 
existing loans under the general business program. According to 
OMB's Circular A-11, Preparation and Submission of Budget 
Estimates, ``If the modification is mandated in legislation, 
the legislation itself provides the budget authority to incur 
the subsidy cost obligation (whether explicitly stated or 
not).'' CBO estimates that this provision would increase the 
subsidy rate by an average of about 1 percent on $4.5 billion 
of outstanding loans at the end of 2000.

Revenues

    H.R. 2848 would establish a new tax credit for up to 6 
percent of the amount taxpayers invest in a qualified community 
development entity. The Joint Committee on Taxation expects 
that these provisions would result in an increase in tax-exempt 
financing and a subsequent loss of federal revenue. JCT 
estimates that the revenue loss would be $1,061 million over 
the 2000-2005 period and $1,781 million over the 2000-2010 
period.
    This bill also would provide for civil penalties against 
APICs that fail to comply with regulations that would be 
established under H.R. 2848. Payments of these civil penalties 
would be recorded as governmental receipts to the Treasury. CBO 
expects that any increase in penalty collections as a result of 
this provision would not be significant.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays and governmental receipts that are subject 
to pay-as-you-go procedures are shown in the following table. 
For the purposes of enforcing pay-as-you-go procedures, only 
the effects in the current year, the budget year, and the 
succeeding four years are counted.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       By fiscal year in millions of dollars--
                                                            --------------------------------------------------------------------------------------------
                                                              2000   2001     2002     2003     2004     2005     2006     2007     2008    2009    2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays.........................................     45       0        0        0        0        0        0        0        0       0      0
Changes in receipts........................................     -5     -30     -119     -234     -322     -351     -331     -240     -122     -31      4
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Estimated impact on state, local, and tribal governments: 
Title I would preempt state laws by prohibiting states from 
limiting SBA's ability to exercise its ownership rights in 
certain debentures issued by a New Markets Venture Capital 
company. Title III would preempt state laws with regard to the 
seniority of debt issued by APICs. Such preemptions of state 
law are intergovernmental mandates as defined in UMRA, but CBO 
estimates that these mandates would impose no significant costs 
on state, local, or tribal governments.
    Title III also provides that state and local governments 
may choose to assume responsibility for environmental reviews 
needed for certain projects and activities financed by an APIC. 
Any costs to carry out such environmental reviews would be 
incurred voluntarily.
    Estimated impact on the private sector: H.R. 2848 contains 
no new private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal Costs: Mark Hadley and 
Lanette Keith; Impact on State, Local, and Tribal Governments: 
Victoria Heid Hall; Impact on the Private Sector: Patrice 
Gordon.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

               Congressional Budget Office Costs Estimate

    The cost estimate pursuant to Clause 2(l)(3)(C) of rule XI, 
of the Rules of the House of Representatives and Section 403 of 
the Congressional Budget Act of 1974 has been requested, but 
had not been prepared as of the filing of Part I of this 
report. The estimate will be included in Part II of this report 
to be filed at a future date.

                      Advisory Committee Statement

    No advisory committees within the meaning of Section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                    Congressional Accountability Act

    The reporting requirement under Section 102(b)(3) of the 
Congressional Accountability Act (P.L. 104-1) is inapplicable 
because this legislation does not relate to terms and 
conditions of employment or access to public services or 
accommodations.

               Section-By-Section of Committee Amendment

Section 301. Short title

    The act may be cited as the America's Private Investment 
Companies Act.

Section 302. Findings and purpose

    Section 302 finds that: (1) people living in distressed 
areas, both urban and rural, characterized by high levels of 
joblessness, poverty, and low incomes, have not adequately 
benefited from economic expansion experienced by the Nation as 
a whole; (2) the costs of joblessness and poverty to our Nation 
are very high; and (3) there are significant untapped markets 
in our Nation, and many of these are in areas that are 
underserved by institutions that can make equity and credit 
investments.
    Purposes of this title are to: (1) license private for-
profit community development entities that will focus on making 
equity and credit investments for large-scale business 
developments that benefit low-income communities; (2) provide 
credit enhancement for those entities for use in low-income 
communities; and (3) provide a vehicle under which the economic 
and social returns on financial investments made pursuant to 
this Act may be available both to the investors in these 
entities and to the residents of the low-income communities.

Section 303. Definitions

    Defines terms used in legislation, including 
``Administrator'', ``agency'', ``APIC'', ``community 
development entity'', ``HUD'', ``license'', ``low-income 
community'', ``low-income person'', ``private equity capital'', 
``qualified active business'', ``qualified debenture'', 
``qualified low-income community investment'', and 
``Secretary''.

Section 304. Authorization

    Authorizes the Secretary of HUD to license and regulate 
America's Private Investment Companies (``APICs''). The number 
of APICs licensed at any one time would depend upon the amount 
of budget authority available to support the total credit 
subsidy provided to the APICs, subject to a first year 
limitation of 15 APICs. After the initial appropriation, the 
Secretary is authorized to license and allocate credit subsidy 
to additional APICs, or, as provided, increase the credit 
subsidy allocated to an APIC as reward for high performance. 
Any such credit subsidy increase shall be provided only to an 
APIC that has been licensed for not less than two years, and 
pursuant to a competition among eligible APICs. The Secretary 
shall establish criteria for selecting among APICs eligible for 
a credit subsidy increase, which criteria shall include such 
factors as the financial soundness and performance of the APICs 
as measured by achievement of the public performance goals 
required under the Act.
    Requires that the HUD Secretary consult with the 
Administrator of the Small Business Administration and the 
Secretary of the Treasury in establishing regulations, 
requirements or procedures regarding the financial soundness 
and management of APICs. Authorizes budget authority of $36 
million in credit subsidy for Fiscal Year 2000 to guarantee an 
estimated $1 billion in debt. An additional $36 million would 
be authorized to be appropriated for each of Fiscal Years 2001-
2003, with an additional $1 million authorized for the 
administrative expenses incurred in carrying out the Act for FY 
2000-FY 2003. Requires APICs to be regulated by HUD in 
cooperation with SBA and the Department of the Treasury. The 
Secretary is authorized to impose fees and charges for the 
operation of APICs.

Section 305. Selection of APICs

    Establishes procedures for selection of APICs, sets forth 
minimum eligibility requirements, and sets forth selection 
criteria to be used by the Secretary in selecting among 
applicants for licensing as APICs. An entity applying for an 
APIC license must: (1) be a private, for-profit entity that 
qualifies as a ``community development entity'' as defined in 
the legislation; (2) have a minimum private equity capital of 
$25 million; (3) have qualified financial management, with 
experience in direct equity investment and portfolio management 
and expertise in community development settings, as determined 
by the Secretary; (4) be structured to preclude financial 
conflict of interests between the APIC and its managers or 
investors; (5) submit an investment strategy with evaluation 
benchmarks; (6) submit a statement of public purpose goals, 
examples of which are delineated in the statute; (7) agree to 
comply with other federal requirements imposed from time to 
time (i.e., Executive Orders or OMB circulars); and (8) satisfy 
any other application criteria that the Secretary may impose by 
regulation or notice.
    The Secretary shall select eligible entities for licensing 
based on a competition. Selections shall be made on the basis 
of the extent to which the entity is expected to meet or exceed 
the selection criteria set forth in the legislation. Selection 
criteria include factors such as the APICs capacity, investment 
strategy, public purpose goals, and other criteria the 
Secretary may establish to carry out the purposes of this Act. 
To the extent practicable, in selecting APICs the Secretary 
shallstrive for geographic diversity and a diversity of the 
types of APICs chosen so that both rural and urban communities are 
served by the program. Of those APICs selected in the first year, at 
least one must be devoted primarily to making investments on Native 
American lands.

Section 306. Operations of APICs

    Sets forth requirements for the operation of APICs. 
Requires that substantially all APIC investments that use 
government-guaranteed proceeds be in qualified low- to 
moderate-income (LMI) areas, and prohibits an APIC from having 
an investment in any one business that would amount to more 
than 35% of the APIC's equity capital plus the limit of 
outstanding debt allowable (the leverage limit) under Section 
306(c)(2) of this title.
    Provides that an APIC may issue debentures guaranteed by 
the Secretary pursuant to the provisions of the Act. The total 
amount of debentures that an APIC may have outstanding at any 
one time shall not exceed 200% of the equity capital of the 
APIC. An APIC may not have more than $300 million in face value 
of debentures issued at any one time. Sets forth requirements 
for repayment by APIC of debt.
    Includes an ``anti-pirating'' provision prohibiting APICs 
from using funds to make an investment that would assist 
directly in the relocation of any industrial or commercial 
plant, facility or operation from one area to another if such 
relocation would result in a significant loss of employment in 
the labor area from which the relocation occurs. Also provides 
for reuse of debenture proceeds of sale of Treasury securities 
and excludes APIC from the definition of debtor under 
bankruptcy provisions.

Section 307. Credit enhancement by the Federal Government

    Authorizes HUD to make commitments to guarantee the timely 
payment of all principal and interest on qualified debentures 
issued by the APICs. The qualified debentures guaranteed by HUD 
would be senior to any other debt or equity. The qualified 
debentures could be issued by APICs for up to 21 years and 
could be pooled and sold.

Section 308. APIC requests for guarantee actions

    Sets forth procedures for APICs to request loan guarantees 
from HUD, which shall include a description of the manner in 
which the APIC intends to use the proceeds from such debentures 
and a certification from the APIC that it is in substantial 
compliance with: (1) the terms of this Act and applicable laws; 
(2) the terms and conditions of its license; (3) requirements 
relating to the allocation and use of New Market Tax Credits. 
The APIC must also provide any other requirements established 
by the Secretary. Sets forth procedures for compliance with 
provisions of the National Environmental Policy Act of 1969 
regarding environmental reviews.

Section 309. Examination and monitoring of APICs

    Requires that the Secretary examine and monitor the 
activities of APICs for compliance with sound financial 
management practices and for satisfaction of program goals. 
Requires the Secretary to establish annual or more frequent 
reporting requirements for APICs. Requires that each APIC have 
an independent annual audit conducted annually. The Secretary, 
in consultation with the Administrator of the SBA and the 
Secretary of the Treasury, shall establish requirements and 
standards for such audits. Not less than every two years, the 
Secretary shall examine the operations and portfolio of each 
APIC to assure compliance with sound financial management 
practices.
    Provides that in carrying out its monitoring of HUD's 
responsibilities under this Act, the Inspector General of HUD 
shall consult, as appropriate, with the Inspectors General of 
the Department of the Treasury or the Small Business 
Administration, and may enter into memoranda of understanding 
as may be necessary to carry out this function. Requires the 
Secretary to report to Congress annually regarding the 
operations, activities, financial health and achievements of 
APICs, listing each investment made by each APIC. Requires the 
General Accounting Office, not later than two years after the 
date of enactment of the Act, to submit a report to Congress 
regarding the operation of the APIC program.

Section 310. Penalties

    Authorizes the Secretary to impose penalties on any APIC 
that commits an act of fraud, mismanagement or noncompliance 
with regulations. Penalties include civil monetary penalties 
not to exceed $10,000, cease-and-desist orders, suspension or 
revocation of an APIC's license for very serious infractions, 
or other penalties that the Secretary determines to be less 
burdensome than the aforementioned penalties.

Section 311. Effective date

    Provides that the Act shall take effect six months after 
the date of enactment. Authority of the Secretary to issue 
regulations, standards, guidelines or licensing requirements, 
and the authority of any official to enter into agreements or 
memoranda of understanding regarding such issuances, shall take 
effect upon enactment of the legislation.

Section 312. Sunset

    Provides that the Secretary may not license any APIC, nor 
provide credit subsidy for any APIC, after the expiration of 
the five-year period beginning upon the date the Secretary 
awards the first APIC license. The section does not affect any 
license or credit subsidy provided for an APIC before the 
expiration of such period.

         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, existing law in which no change is 
proposed is shown in roman):

                 SMALL BUSINESS INVESTMENT ACT OF 1958

       TITLE I--SHORT TITLE, STATEMENT OF POLICY, AND DEFINITIONS

           *       *       *       *       *       *       *

 TITLE III--[SMALL BUSINESS INVESTMENT COMPANIES] INVESTMENT DIVISION 
                                PROGRAMS

              Part A--Small Business Investment Companies

          organization of small business investment companies

  Sec. 301.  * * *

           *       *       *       *       *       *       *

              Part B--New Markets Venture Capital Program

SEC. 350. DEFINITIONS.

  In this part--
          (1) the term ``New Markets Venture Capital company'' 
        means a company that--
                  (A) has been approved by the Administration 
                under section 353(e) to operate under the New 
                Markets Venture Capital Program; and
                  (B) has entered into a participation 
                agreement with the Administration; and
          (2) the term ``low- or moderate-income geographic 
        area'' means--
                  (A) a census tract, or the equivalent county 
                division as defined by the Bureau of the Census 
                for purposes of defining poverty areas, in 
                which--
                          (i) the poverty rate is not less than 
                        20 percent; or
                          (ii) in the case of a census tract or 
                        division located within a metropolitan 
                        area, the median family income for such 
                        tract or division does not exceed the 
                        greater of 80 percent of the statewide 
                        median family income or 80 percent of 
                        the metropolitan-area median family 
                        income: or
                          (iii) in the case of a census tract 
                        or division not located within a 
                        metropolitan area, the median family 
                        income for such tract or division does 
                        not exceed 80 percent of the statewide 
                        median family income; and
                  (B) any area located within--
                          (i) a HUBZone (as defined in section 
                        126.103 of title 13, Code of Federal 
                        Regulations);
                          (ii) an Urban Empowerment Zone or an 
                        Urban Enterprise Community, as 
                        designated by the Secretary of the 
                        Department of Housing and Urban 
                        Development; or
                          (iii) a rural Empowerment Zone or a 
                        Rural Enterprise Community, as 
                        designated by the Secretary of the 
                        Department of Agriculture; and
          (3) the term ``participation agreement'' means an 
        agreement between the Administration and a New Markets 
        Venture Capital company--
                  (A) detailing the company's operating plan 
                and investment criteria; and
                  (B) requiring that investments be made in 
                smaller enterprises at least 60 percent of 
                which are located in low- or moderate-income 
                geographic areas.

SEC. 351. PURPOSES.

  The purposes of the New Markets Venture Capital Program are--
          (1) to encourage venture capital investment in 
        smaller enterprises located in urban and rural areas; 
        and
          (2) to establish a venture capital program to be 
        administered by the Small Business Administration--
                  (A) to enter into a participation agreement 
                with New Markets Venture Capital companies;
                  (B) to guarantee debentures of New Markets 
                Venture Capital companies to enable each such 
                company to make venture capital investments in 
                smaller enterprises in urban and rural areas; 
                and
                  (C) to make grants to New Markets Venture 
                Capital companies for the purpose of providing 
                marketing, management, and technical assistance 
                to smaller enterprises financed, or expected to 
                be financed, by such company.

SEC. 352. ESTABLISHMENT OF PROGRAM.

  The Administration shall establish a New Markets Venture 
Capital Program, under which the Administration may--
          (1) enter into a participation agreement with each 
        New Markets Venture Capital company for the purposes 
        set forth in section 351;
          (2) guarantee debentures issued by each New Markets 
        Venture Capital company as provided in section 354; and
          (3) make grants to each New Markets Venture Capital 
        company as provided in section 355.

SEC. 353. SELECTION OF NEW MARKETS VENTURE CAPITAL COMPANIES.

  (a) Eligibility.--A company shall be eligible for 
participation in the New Markets Venture Capital Program if--
          (1) it is a newly formed for-profit entity or a newly 
        formed for-profit subsidiary of an existing entity; and
          (2) it has a management team with experience in 
        community development financing or venture capital 
        financing.
  (b) Application.--To participate in the New Markets Venture 
Capital Program, an eligible company shall submit an 
application to the Administration that includes--
          (1) a business plan describing how the company 
        intends to make successful venture capital investments 
        in low- or moderate-income geographic areas;
          (2) information regarding the qualifications of the 
        company's management;
          (3) a description of how the company intends to work 
        with community organizations;
          (4) a description of how the company will use the 
        grant funds provided under this part to provide 
        marketing, management, and technical assistance to 
        smaller enterprises;
          (5) a description of the criteria the company will 
        use to evaluate whether and to what extent it meets the 
        objectives of the program established under this part;
          (6) information regarding the management and 
        financial strength of any parent firm, affiliated firm, 
        or any other firm essential to the success of the 
        company's business plan; and
          (7) such other information as the Administration may 
        require.
  (c) Conditional Approval.--
          (1) In general.--From among companies submitting 
        applications under subsection (b), the Administration 
        shall in accordance with this subsection conditionally 
        approve companies to participate in the New Markets 
        Venture Capital Program.
          (2) Selection criteria.--In selecting companies under 
        paragraph (1), the Administration shall consider the 
        following:
                  (A) The likelihood that the applicant will 
                meet the goals of its business plan.
                  (B) The experience and background of the 
                company's management team.
                  (C) The need for equity investments in the 
                areas in which the company intends to invest.
                  (D) The extent to which the company will 
                concentrate its activities on serving the areas 
                in which it intends to invest.
                  (E) The likelihood that the company will be 
                able to satisfy the conditions under subsection 
                (d).
                  (F) The extent to which the activities 
                proposed by the company will expand economic 
                opportunities in the areas in which the company 
                intends to invest.
                  (G) Any other factors deemed appropriate by 
                the Administration.
          (3) Nationwide distribution.--In selecting companies 
        under paragraph (1), the Administration shall ensure 
        that companies are chosen in such a way that 
        investments under the New Markets Venture Capital 
        Program will be made nationwide.
  (d) Conditions To Be Met for Final Approval.--The 
Administration shall give each conditionally approved company a 
period of time, not to exceed 24 months, to satisfy the 
following conditions:
          (1) Capital requirement.--Each conditionally approved 
        company must raise not less than $5,000,000 of 
        contributed capital or binding capital commitments from 
        1 or more investors (other than an agency of the 
        Federal Government) who meet criteria established by 
        the Administration; and
          (2) Non-Administration resources for technical 
        assistance.--
                  (A) In general.--In order to provide 
                marketing, management, and technical 
                assistance, each conditionally approved company 
                must--
                          (i) have binding commitments (in cash 
                        or in-kind)--
                                  (I) from any sources other 
                                than the Administration that 
                                meet criteria established by 
                                the Administration:
                                  (II) payable or available 
                                over a multiyear period 
                                acceptable to the 
                                Administration (not to exceed 
                                10 years): and
                                  (III) in an amount equal to 
                                30 percent of the capital and 
                                commitments raised under 
                                subsection (d)(1); or
                          (ii) must have purchased an annuity--
                                  (I) from an insurance company 
                                acceptable to the 
                                Administration;
                                  (II) using funds (other than 
                                the funds raised to satisfy 
                                subsection (d)(1)) from any 
                                source other than the 
                                Administration; and
                                  (III) that yields cash 
                                payments over a multiyear 
                                period acceptable to the 
                                Administration (not to exceed 
                                10 years) in an amount equal to 
                                30 percent of the capital and 
                                commitments raised under 
                                subsection (d)(1); or
                          (iii) must have binding commitments 
                        (in cash or in-kind) of the type 
                        described in subsection (d)(2)(A)(i) 
                        and must have purchased an annuity of 
                        the type described in subsection 
                        (d)(2)(A)(ii), which in the aggregate 
                        make available, over a multiyear period 
                        acceptable to the Administration (not 
                        to exceed 10 years), an amount equal to 
                        30 percent of the capital and 
                        commitments raised under subsection 
                        (d)(1).
                  (B) Special rule.--On a showing of special 
                circumstances and good cause, the Administrator 
                may with respect to a particular company waive 
                the requirements of subsection (d)(2) if the 
                Administrator considers the company to have a 
                viable business plan that reasonably projects 
                the company's capacity to raise the amount (in 
                cash or in-kind) required under subsection 
                (d)(2)(A).
  (e) Final Approval.--The Administration shall grant to a 
conditionally approved company final approval to participate in 
the New Markets Venture Capital Program as a New Markets 
Venture Capital company after the company--
          (1) has satisfied the conditions under subsection 
        (d); and
          (2) has entered into a participation agreement with 
        the Administration.

SEC. 354. DEBENTURES.

  (a) In General.--The Administration may, to the extent 
authorized in advance in appropriations Acts, guarantee the 
timely payment of principal and interest as scheduled on 
debentures issued by New Markets Venture Capital companies.
  (b) Terms and Conditions.--The Administration may make 
guarantees under this section on such terms and conditions as 
it deems appropriate, except that the term of any debenture 
guaranteed under this section shall not exceed 15 years.
  (c) Full Faith and Credit of the United States.--The full 
faith and credit of the United States shall be pledged to the 
payment of all amounts which may be required to be paid under 
any guarantee under this part.
  (d) Maximum Guarantee.--The Administration may provide 
guarantees under this section for the debentures issued by any 
New Markets Venture Capital company only to the extent that 
such guarantees do not exceed 150 percent of the contributed 
capital of the company, as determined by the Administration. 
Contributed capital shall include capital that is deemed to be 
Federal funds contributed by an investor other than an agency 
of the Federal Government.

SEC. 355. TECHNICAL ASSISTANCE GRANTS.

  (a) In General.--
          (1) Authority.--In accordance with this section, the 
        Administration may make grants to each New Markets 
        Venture Capital company to provide marketing, 
        management, and technical assistance for the benefit of 
        smaller enterprises financed, or expected to be 
        financed, by the company.
          (2) Terms.--Grants made under this subsection shall 
        be made over a multiyear period not to exceed 10 years, 
        under such other terms as the Administration may 
        require.
          (2) Grant amount.--
                  (A) In general.--The amount of a grant made 
                under this subsection to each New Markets 
                Venture Capital company shall be equal to the 
                amount resources raised by the company (in cash 
                or in-kind) under section 353(d)(2).
                  (B) Special rule.--Notwithstanding 
                subparagraph (A), the Administration may make a 
                grant under this section in an amount other 
                than that set forth in subparagraph (A), if the 
                Administration considers the grant to be in the 
                best interests of the New Markets Venture 
                Capital Program.
          (3) Pro rata reductions.--If the amount made 
        available to carry out this section is insufficient for 
        the Administration to provide grants in the amounts 
        provided for in subsection (a)(2), the Administration 
        shall make pro rata reductions in the amounts otherwise 
        payable to each New Markets Venture Capital company 
        under such subsection.
  (b) Supplemental Grants.--
          (1) In general.--The Administration may make 
        supplemental grants to any New Markets Venture Capital 
        company, containing such terms as the Administration 
        may require, to provide additional marketing, 
        management, and technical assistance for the benefit of 
        smaller enterprises financed, or expected to be 
        financed, by the New Markets Venture Capital company.
          (2) Matching requirement.--The Administration may 
        require, as a condition of any supplemental grant made 
        under this subsection, that the New Markets Venture 
        Capital company provide from resources (in cash or in-
        kind) other than those provided by the Administration 
        an amount equal to the amount of the supplemental 
        grant.

SEC. 356. ISSUANCE AND GUARANTEE OF TRUST CERTIFICATES.

  (a) Issuance.--The Administration may issue trust 
certificates representing ownership of all or a fractional part 
of debentures issued by New Markets Venture Capital companies 
and guaranteed by the Administration under this Act, if such 
certificates are based on and backed by a trust or pool 
approved by the Administration and composed solely of 
guaranteed debentures.
  (b) Guarantee.--
          (1) In general.--The Administration may, under such 
        terms and conditions as the Administration deems 
        appropriate, guarantee the timely payment of the 
        principal of and interest on trust certificates issued 
        by the Administration or its agent for purposes of this 
        section.
          (2) Limitation.--Guarantees under this subsection 
        shall be limited to the extent of principal and 
        interest on the guaranteed debentures which compose the 
        trust or pool.
          (3) Prepayment or default.--In the event that a 
        debenture in a trust or pool is prepaid, or in the 
        event of default of such a debenture, the guarantee of 
        timely payment of principal and interest on the trust 
        certificates shall be reduced in proportion to the 
        amount of principal and interest such prepaid debenture 
        represents in the trust or pool. Interest on prepaid or 
        defaulted debentures shall accrue and be guaranteed by 
        the Administration only through the date of payment of 
        the guarantee. At any time during its term, a trust 
        certificate may be called for redemption due to 
        prepayment or default of all debentures.
  (c) Full Faith and Credit of the United States.--The full 
faith and credit of the United States shall be pledged to the 
payment of all amounts which may be required to be paid under 
any guarantee of such trust certificates issued by the 
Administration or its agent under this section.
  (d) Fees.--The Administration shall not collect a fee for any 
guarantee under this section, but any agent of the 
Administration may collect a fee approved by the Administration 
for the functions described in subsection (f)(2) of this 
section.
  (e) Subrogation and Ownership Rights.--
          (1) Subrogation.--In the event the Administration 
        pays a claim under a guarantee issued under this 
        section, it shall be subrogated fully to the rights 
        satisfied by such payment.
          (2) Ownership rights.--No Federal, State, or local 
        law shall preclude or limit the exercise by the 
        Administration of its ownership rights in the 
        debentures residing in a trust or pool against which 
        trust certificates are issued under this section.
  (f) Management and Administration.--
          (1) Registration.--
                  (A) In general.--The Administration may 
                provide for a central registration of all trust 
                certificates issued under this section.
                  (B) Forms of registration.--Nothing in this 
                subsection shall prohibit the use of a book 
                entry or other electronic form of registration 
                for trust certificates.
          (2) Contracting of functions.--
                  (A) In general.--The Administrator may 
                contract with an agent or agents to carry out 
                on behalf of the Administration the pooling and 
                the central registration functions provided for 
                in this section including, notwithstanding any 
                other provision of law--
                          (i) maintenance on behalf of and 
                        under the direction of the 
                        Administration, such commercial bank 
                        accounts or investments in obligations 
                        of the United States as may be 
                        necessary to facilitate the creation of 
                        trusts or pools backed by debentures 
                        guaranteed under this Act; and
                          (ii) the issuance of trust 
                        certificates to facilitate the creation 
                        of such trusts or pools.
                  (B) Protection of the interests of the united 
                states.--Any agent performing functions on 
                behalf of the Administration under this 
                paragraph shall provide a fidelity bond or 
                insurance in such amounts as the Administration 
                determines to be necessary to fully protect the 
                interests of the United States.
          (3) Regulation of brokers and dealers.--The 
        Administrator may regulate brokers and dealers in trust 
        certificates sold under this section.

SEC. 357. FEES.

  Except as provided in section 356(d), the Administration may 
charge such fees as it deems appropriate with respect to any 
guarantee or grant issued under this part.

SEC. 358. BANK PARTICIPATION.

  (a) In General.--To the extent provided for in subsection 
(b), any national bank, any member bank of the Federal Reserve 
System, and any bank that is not a member of such system but 
which is insured to the extent permitted under applicable State 
law, may invest in any New Markets Venture Capital company, or 
in any entity established to invest solely in New Markets 
Venture Capital companies.
  (b) Limitation.--No bank described in subsection (a) may make 
investments described in such subsection that are greater than 
5 percent of the capital and surplus of the bank.

SEC. 359. FEDERAL FINANCING BANK.

  Section 318 shall not apply to any debenture issued by a New 
Markets Venture Capital company under this part.

SEC. 360. REPORTING REQUIREMENTS.

  Each New Markets Venture Capital company shall provide to the 
Administration such information as the Administration may 
require, including information on the measurement criteria that 
the New Markets Venture Capital company proposed in its program 
application.

SEC. 361. EXAMINATIONS.

  (a) In General.--Each New Markets Venture Capital company 
shall be subject to examinations made at the direction of the 
Investment Division of the Administration in accordance with 
this section.
  (b) Assistance of Private Sector Entities.--Examinations 
under this section may be conducted with the assistance of a 
private sector entity that has both the qualifications to 
conduct and expertise in conducting such examinations.
  (c) Costs.--
                  (A) In general.--The Administrator may assess 
                the cost of examinations under this section, 
                including compensation of the examiners, 
                against the company examined.
                  (B) Deposit of funds.--Funds collected under 
                this section shall be deposited in the account 
                for salaries and expenses of the 
                Administration.
                  (C) Authorization of appropriations.--Funds 
                deposited under subparagraph (B) are authorized 
                to be appropriated solely to cover the costs of 
                examinations and other program oversight 
                activities.

SEC. 362. INJUNCTIONS AND OTHER ORDERS.

  (a) In General.--Whenever, if the Administrator considers 
that a New Markets Venture Capital company, or any other 
person, has engaged or is about to engage in any acts or 
practices which constitute, or will constitute, a violation of 
any provision of this Act, of any rule or regulation under this 
Act, or of any order issued under this Act, the Administration 
may make application to the proper district court of the United 
States or to a United States court of any place subject to the 
jurisdiction of the United States for an order enjoining such 
acts or practices, or for an order enforcing compliance with 
such provision, rule, regulation, or order, and such courts 
shall have jurisdiction of such actions and, upon a showing by 
the Administration that such New Markets Venture Capital 
company or other person has engaged or is about to engage in 
any such acts or practices, a permanent or temporary 
injunction, restraining order, or other order, shall be granted 
without bond.
  (b) Seizing of Assets.--In any such proceeding the court, as 
a court of equity may, to the extent it deems necessary, take 
exclusive jurisdiction of the New Markets Venture Capital 
company and the assets thereof, wherever located. The court 
shall have jurisdiction in any such proceeding to appoint a 
trustee or receiver to hold or administer under the direction 
of the court the assets so possessed.
  (c) Administration as Trustee or Receiver.--
          (1) In general.--The Administration may act as 
        trustee or receiver under subsection (b) of a New 
        Markets Venture Capital company.
          (2) Appointment.--At the request by the 
        Administration, the court may appoint the 
        Administration to act as a trustee or receiver of a New 
        Markets Venture Capital company unless the court deems 
        such appointment inequitable or otherwise 
        inappropriate.

SEC. 363. UNLAWFUL ACTS AND OMISSIONS BY OFFICERS, DIRECTORS, 
                    EMPLOYEES, OR AGENTS; BREACH OF FIDUCIARY DUTY.

  (a) Parties Deemed To Commit a Violation.--Whenever an New 
Markets Venture Capital company violates any provision of this 
Act, or any regulation issued thereunder, by reason of its 
failure to comply with its terms or by reason of its engaging 
in any act or practice which constitutes or will constitute a 
violation thereof, such violation shall also be deemed to be a 
violation and an unlawful act committed by any person who, 
directly or indirectly, authorizes, orders, participates in, 
causes, brings about, counsels, aids, or abets in the 
commission of any acts, practices, or transactions which 
constitute or will constitute, in whole or in part, such 
violation.
  (b) Fiduciary Duties.--It shall be unlawful for any officer, 
director, employee, agent, or other participant in the 
management or conduct or the affairs of an New Markets Venture 
Capital company to engage in any act or practice, or to omit 
any act, in breach of his fiduciary duty as such officer, 
director, employee, agent, or participant if, as a result 
thereof, the New Markets Venture Capital company has suffered 
or is in imminent danger of suffering financial loss or other 
damage.
  (c) Unlawful Acts.--Except with the written consent of the 
Administration, it shall be unlawful--
          (1) for any person to take office as an officer, 
        director, or employee of an New Markets Venture Capital 
        company, or to become an agent or participant in the 
        conduct of the affairs or management of an New Markets 
        Venture Capital company, if the person--
                  (A) has been convicted of a felony, or any 
                other criminal offense involving dishonesty or 
                breach of trust, or
                  (B) the person has been found civilly liable 
                in damages, or has been permanently or 
                temporarily enjoined by order, judgment, or 
                decree of a court of competent jurisdiction, by 
                reason of any act or practice involving fraud, 
                or breach of trust; and
          (2) for any person continue to serve in any of the 
        capacities described in paragraph (1), if--
                  (A) the person is convicted of a felony, or 
                any other criminal offense involving dishonesty 
                or breach of trust, or
                  (B) the person found civilly liable in 
                damages, or is permanently or temporarily 
                enjoined by an order, judgment, or decree of a 
                court of competent jurisdiction, by reason of 
                any act or practice involving fraud or breach 
                of trust.
  (d) Removal or Suspension.--
          (1) In general.--As provided in section 313, the 
        Administration may remove or suspend any person upon 
        whom the Administration has served a notice under this 
        subsection.
          (2) Notice.--The Administration may serve upon any 
        person who is an officer, director, or employee of a 
        New Markets Venture Capital company, or an agent or 
        participant in the conduct of the affairs or management 
        of the company, a written notice of the 
        Administration's intention to remove or suspend such 
        person from the person's office or position, if in the 
        opinion of the Administration, such person--
                  (A) has willfully and knowingly committed any 
                substantial violation of--
                          (i) this Act,
                          (ii) any regulation issued under this 
                        Act, or
                          (iii) a cease-and-desist order which 
                        has become final, or
                  (B) has willfully and knowingly committed or 
                engaged in any act, omission, or practice which 
                constitutes a substantial breach of his 
                fiduciary duty, and that such violation or such 
                breach of fiduciary duty is one involving 
                personal dishonesty on the part of such person.

SEC. 364. REGULATIONS.

  The Administration is authorized to issue such regulations as 
it deems necessary to carry out the provisions of this part in 
accordance with its purposes.

SEC. 365. AUTHORIZATION OF APPROPRIATIONS.

  For fiscal years 2000 through 2005, the Administration is 
authorized to be appointed such subsidy budget authority as may 
be necessary to guarantee up to $100,000,000 of debentures, and 
up to $30,000,000 to make technical assistance grants, for the 
purposes of this part, to remain available until expended. This 
authority shall be in effect for the period commencing with 
fiscal year 2000 through fiscal year 2005.

           *       *       *       *       *       *       *

                              ----------                              

              SECTION 109 OF TITLE 11, UNITED STATES CODE

Sec. 109. Who may be a debtor

  (a)  * * *

           *       *       *       *       *       *       *

  (b) A person may be a debtor under chapter 7 of this title 
only if such person is not--
          (1) a railroad;
          (2) a domestic insurance company, bank, savings bank, 
        cooperative bank, savings and loan association, 
        building and loan association, homestead association, a 
        New Markets Venture Capital company as defined in 
        section 350 of the Small Business Investment Act of 
        1958, a small business investment company licensed by 
        the Small Business Administration under subsection (c) 
        or (d) of section 301 of the Small Business Investment 
        Act of 1958, America's Private Investment Company 
        licensed under the America's Private Investment 
        Companies Act, credit union, or industrial bank or 
        similar institution which is an insured bank as defined 
        in section 3(h) of the Federal Deposit Insurance Act; 
        or
          (3)  * * *

           *       *       *       *       *       *       *

                              ----------                              

                 SECTION 5 OF THE HOME OWNERS' LOAN ACT

SEC. 5. FEDERAL SAVINGS ASSOCIATIONS.

  (a)  * * *

           *       *       *       *       *       *       *

  (c) Loans and Investments.--To the extent specified in 
regulations of the Director, a Federal savings association may 
invest in, sell, or otherwise deal in the following loans and 
other investments:
          (1)  * * *

           *       *       *       *       *       *       *

          (4) Other loans and investments.--The following 
        additional loans and other investments to the extent 
        authorized below:
                  (A)  * * *

           *       *       *       *       *       *       *

                  (F) New markets venture capital companies.--A 
                Federal savings association may invest in 
                stock, obligations, or other securities of any 
                New Markets Venture Capital company as defined 
                in section 350 of the Small Business investment 
                Act of 1958, except that a Federal savings 
                association may not make any investment under 
                this subparagraph if its aggregate outstanding 
                investment under this subparagraph would exceed 
                5 percent of the capital and surplus of such 
                savings association.

           *       *       *       *       *       *       *

                              ----------                              

                  SECTION 7 OF THE SMALL BUSINESS ACT

  Sec. 7. (a) Loans to Small Business Concerns; Allowable 
Purposes; Qualified Business; Restrictions and Limitations.--
The Administration is empowered to the extent and in such 
amounts as provided in advance in appropriation Acts to make 
loans for plant acquisition, construction, conversion, or 
expansion, including the acquisition of land, material, 
supplies, equipment, and working capital, and to make loans to 
any qualified small business concern, including those owned by 
qualified Indian tribes, for purposes of this Act. Such 
financings may be made either directly or in cooperation with 
banks or other financial institutions through agreements to 
participate on an immediate or deferred (guaranteed) basis. 
These powers shall be subject, however, to the following 
restrictions, limitations, and provisions:
          (1)  * * *
          (2) Level of participation in guaranteed loans.--
                  (A) In general.--Except as provided in 
                subparagraph (B), in an agreement to 
                participate in a loan on a deferred basis under 
                this subsection (including a loan made under 
                the Preferred Lenders Program), such 
                participation by the Administration shall be 
                equal to--
                          (i) 75 percent of the balance of the 
                        financing outstanding at the time of 
                        disbursement of the loan, if such 
                        balance exceeds [$100,000] $150,000; or
                          (ii) 80 percent of the balance of the 
                        financing outstanding at the time of 
                        disbursement of the loan, if such 
                        balance is less than or equal to 
                        [$100,000] $150,000.

           *       *       *       *       *       *       *

          (18) Guarantee fees.--
                  (A)  * * *
                  (B) Exception for certain loans.--
                Notwithstanding subparagraph (A), if the total 
                deferred participation share of a loan 
                guaranteed under this subsection is less than 
                or equal to [$80,000] $120,000, the guarantee 
                fee collected under subparagraph (A) shall be 
                in an amount equal to 2 percent of the total 
                deferred participation share of the loan.

           *       *       *       *       *       *       *

          (23) Annual fee.--
                  (A) In general.--With respect to each loan 
                guaranteed under this subsection, the 
                Administration shall, in accordance with such 
                terms and procedures as the Administration 
                shall establish by regulation, assess and 
                collect an annual fee in an amount equal to 0.5 
                percent of the outstanding balance of the 
                deferred participation share of the loan[.], 
                except that with respect to each loan of less 
                than $150,000 guaranteed under this subsection, 
                the Administration shall assess and collect an 
                annual fee in an amount equal to 0.3 percent of 
                the outstanding balance of the deferred 
                participation share of the loan.

           *       *       *       *       *       *       *

                              ----------                              

   SECTION 12 OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ACT

      Sec. 12. (a)  * * *

           *       *       *       *       *       *       *

      (e) Definitions.--For purposes of this section:
          (1)  * * *
          (2) Assistance.--The term ``assistance'' means any 
        grant, loan, subsidy, guarantee, or other financial 
        assistance under a program administered by the 
        Secretary that provides by statute, regulation, or 
        otherwise for the competitive distribution of such 
        assistance. The term does not include any mortgage 
        insurance provided under a program administered by the 
        Secretary or any license provided under the America's 
        Private Investment Companies Act.

           *       *       *       *       *       *       *

                              ----------                              

                     INTERNAL REVENUE CODE OF 1986

                       Subtitle A--Income Taxes

           *       *       *       *       *       *       *

                 CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *

              Subchapter A--Determination of tax liability

           *       *       *       *       *       *       *

                      PART IV--CREDITS AGAINST TAX

           *       *       *       *       *       *       *

                  Subpart D--Business Related Credits

        Sec. 38. General business credit.
     * * * * * * *
        Sec. 45D. New markets tax credit.

           *       *       *       *       *       *       *

SEC. 38. GENERAL BUSINESS CREDIT.

  (a) * * *
  (b) Current Year Business Credit.--For purposes of this 
subpart, the amount of the current year business credit is the 
sum of the following credits determined for the taxable year:
          (1) * * *

           *       *       *       *       *       *       *

          (11) the employer social security credit determined 
        under section 45B(a), [plus]
          (12) the orphan drug credit determined under section 
        45C(a)[.], plus
          (13) the new markets tax credit determined under 
        section 45D(a).

           *       *       *       *       *       *       *

SEC. 39. CARRYBACK AND CARRYFORWARD OF UNUSED CREDITS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Transitional Rules.--
          (1) * * *

           *       *       *       *       *       *       *

          (9) No carryback of new markets tax credit before 
        january 1, 2000.--No portion of the unused business 
        credit for any taxable year which is attributable to 
        the credit under section 45D may be carried back to a 
        taxable year ending before January 1, 2000.

           *       *       *       *       *       *       *

SEC. 45D. NEW MARKETS TAX CREDIT.

  (a) Allowance of Credit.--
          (1) In general.--For purposes of section 38, in the 
        case of a taxpayer who holds a qualified equity 
        investment on a credit allowance date of such 
        investment which occurs during the taxable year, the 
        new markets tax credit determined under this section 
        for such taxable year is an amount equal to 6 percent 
        of the amount paid to the qualified community 
        development entity for such investment at its original 
        issue.
          (2) Credit allowance date.--The term ``credit 
        allowance date'' means, with respect to any qualified 
        equity investment--
                  (A) the date on which such investment is 
                initially made, and
                  (B) each of the 4 anniversary dates of such 
                date thereafter.
  (b) Qualified Equity Investment.--For purposes of this 
section--
          (1) In general.--The term ``qualified equity 
        investment'' means any equity investment in a qualified 
        community development entity if--
                  (A) such investment is acquired by the 
                taxpayer at its original issue (directly or 
                through an underwriter) solely in exchange for 
                cash,
                  (B) substantially all of such cash is used by 
                the qualified community development entity to 
                make qualified low-income community 
                investments, and
                  (C) such investment is designated for 
                purposes of this section by the qualified 
                community development entity.
        Such term shall not include any equity investment 
        issued by a qualified community development entity more 
        than 5 years after the date that such entity receives 
        an allocation under subsection (f). Any allocation not 
        used within such 5-year period may be reallocated by 
        the Secretary under subsection (f).
          (2) Limitation.--The maximum amount of equity 
        investments issued by a qualified community development 
        entity which may be designated under paragraph (1)(C) 
        by such entity shall not exceed the portion of the 
        limitation amount allocated under subsection (f) to 
        such entity.
          (3) Safe harbor for determining use of cash.--The 
        requirement of paragraph (1)(B) shall be treated as met 
        if at least 85 percent of the aggregate gross assets of 
        the qualified community development entity are invested 
        in qualified low-income community investments.
          (4) Treatment of subsequent purchasers.--The term 
        ``qualified equity investment'' includes any equity 
        investment which would (but for paragraph (1)(A)) be a 
        qualified equity investment in the hands of the 
        taxpayer if such investment was a qualified equity 
        investment in the hands of a prior holder.
          (5) Redemptions.--A rule similar to the rule of 
        section 1202(c)(3) shall apply for purposes of this 
        subsection.
          (6) Equity investment.--The term ``equity 
        investment'' means--
                  (A) any stock in a qualified community 
                development entity which is a corporation, and
                  (B) any capital interest in a qualified 
                community development entity which is a 
                partnership.
  (c) Qualified Community Development Entity.--For purposes of 
this section--
          (1) In general.--The term ``qualified community 
        development entity'' means any domestic corporation or 
        partnership if--
                  (A) the primary mission of the entity is 
                serving, or providing investment capital for, 
                low-income communities or low-income persons,
                  (B) the entity maintains accountability to 
                residents of low-income communities through 
                representation on governing or advisory boards 
                or otherwise, and
                  (C) the entity is certified by the Secretary 
                for purposes of this section as being a 
                qualified community development entity.
          (2) Special rules for certain organizations.--The 
        requirements of paragraph (1) shall be treated as met 
        by--
                  (A) any specialized small business investment 
                company (as defined in section 1044(c)(3)), and
                  (B) any community development financial 
                institution (as defined in section 103 of the 
                Community Development Banking and Financial 
                Institutions Act of 1994 (12 U.S.C. 4702)).
  (d) Qualified Low-Income Community Investments.--For purposes 
of this section--
          (1) In general.--The term ``qualified low-income 
        community investment'' means--
                  (A) any equity investment in, or loan to, any 
                qualified active low-income community business,
                  (B) the purchase from another community 
                development entity of any loan made by such 
                entity which is a qualified low-income 
                community investment if the amount received by 
                such other entity from such purchase is used by 
                such other entity to make qualified low-income 
                community investments,
                  (C) financial counseling and other services 
                specified in regulations prescribed by the 
                Secretary to businesses located in, and 
                residents of, low-income communities, and
                  (D) any equity investment in, or loan to, any 
                qualified community development entity if 
                substantially all of the investment or loan is 
                used by such entity to make qualified low-
                income community investments described in 
                subparagraphs (A), (B), and (C).
          (2) Qualified active low-income community business.--
                  (A) In general.--For purposes of paragraph 
                (1), the term ``qualified active low-income 
                community business'' means, with respect to any 
                taxable year, any corporation or partnership if 
                for such year--
                          (i) at least 50 percent of the total 
                        gross income of such entity is derived 
                        from the active conduct of a qualified 
                        business within any low-income 
                        community,
                          (ii) a substantial portion of the use 
                        of the tangible property of such entity 
                        (whether owned or leased) is within any 
                        low-income community,
                          (iii) a substantial portion of the 
                        services performed for such entity by 
                        its employees are performed in any low-
                        income community,
                          (iv) less than 5 percent of the 
                        average of the aggregate unadjusted 
                        bases of the property of such entity is 
                        attributable to collectibles (as 
                        defined in section 408(m)(2)) other 
                        than collectibles that are held 
                        primarily for sale to customers in the 
                        ordinary course of such business, and
                          (v) less than 5 percent of the 
                        average of the aggregate unadjusted 
                        bases of the property of such entity is 
                        attributable to nonqualified financial 
                        property (as defined in section 
                        1397B(e)).
                  (B) Proprietorship.--Such term shall include 
                any business carried on by an individual as a 
                proprietor if such business would meet the 
                requirements of subparagraph (A) were it 
                incorporated.
                  (C) Portions of business may be qualified 
                active low-income community business.--The term 
                ``qualified active low-income community 
                business'' includes any trades or businesses 
                which would qualify as a qualified active low-
                income community business if such trades or 
                businesses were separately incorporated.
          (3) Qualified business.--For purposes of this 
        subsection, the term ``qualified business'' has the 
        meaning given to such term by section 1397B(d); except 
        that--
                  (A) in lieu of applying paragraph (2)(B) 
                thereof, the rental to others of real property 
                located in any low-income community shall be 
                treated as a qualified business if there are 
                substantial improvements located on such 
                property,
                  (B) paragraph (3) thereof shall not apply, 
                and
                  (C) such term shall not include any business 
                if a significant portion of the equity 
                interests in such business are held by any 
                person who holds a significant portion of the 
                equity investments in the community development 
                entity.
  (e) Low-Income Community.--For purposes of this section--
          (1) In general.--The term ``low-income community'' 
        means any population census tract if--
                  (A) the poverty rate for such tract is at 
                least 20 percent, or
                  (B)(i) in the case of a tract not located 
                within a metropolitan area, the median family 
                income for such tract does not exceed 80 
                percent of statewide median family income, or
                  (ii) in the case of a tract located within a 
                metropolitan area, the median family income for 
                such tract does not exceed 80 percent of the 
                greater of statewide median family income or 
                the metropolitan area median family income.
          (2) Areas not within census tracts.--In the case of 
        an area which is not tracted for population census 
        tracts, the equivalent county divisions (as defined by 
        the Bureau of the Census for purposes of defining 
        poverty areas) shall be used for purposes of 
        determining poverty rates and median family income.
  (f) National Limitation on Amount of Investments 
Designated.--
          (1) In general.--There is a new markets tax credit 
        limitation of $1,200,000,000 for each of calendar years 
        2000 through 2004.
          (2) Allocation of limitation.--The limitation under 
        paragraph (1) shall be allocated by the Secretary among 
        qualified community development entities selected by 
        the Secretary. In making allocations under the 
        preceding sentence, the Secretary shall give priority 
        to entities with records of having successfully 
        provided capital or technical assistance to 
        disadvantaged businesses or communities.
          (3) Carryover of unused limitation.--If the new 
        markets tax credit limitation for any calendar year 
        exceeds the aggregate amount allocated under paragraph 
        (2) for such year, such limitation for the succeeding 
        calendar year shall be increased by the amount of such 
        excess.
  (g) Recapture of Credit In Certain Cases.--
          (1) In general.--If, at any time during the 5-year 
        period beginning on the date of the original issue of a 
        qualified equity investment in a qualified community 
        development entity, there is a recapture event with 
        respect to such investment, then the tax imposed by 
        this chapter for the taxable year in which such event 
        occurs shall be increased by the credit recapture 
        amount.
          (2) Credit recapture amount.--For purposes of 
        paragraph (1), the credit recapture amount is an amount 
        equal to the sum of--
                  (A) the aggregate decrease in the credits 
                allowed to the taxpayer under section 38 for 
                all prior taxable years which would have 
                resulted if no credit had been determined under 
                this section with respect to such investment, 
                plus
                  (B) interest at the overpayment rate 
                established under section 6621 on the amount 
                determined under subparagraph (A) for each 
                prior taxable year for the period beginning on 
                the due date for filing the return for the 
                prior taxable year involved.
        No deduction shall be allowed under this chapter for 
        interest described in subparagraph (B).
          (3) Recapture event.--For purposes of paragraph (1), 
        there is a recapture event with respect to an equity 
        investment in a qualified community development entity 
        if--
                  (A) such entity ceases to be a qualified 
                community development entity,
                  (B) the proceeds of the investment cease to 
                be used as required of subsection (b)(1)(B), or
                  (C) such investment is redeemed by such 
                entity.
          (4) Special rules.--
                  (A) Tax benefit rule.--The tax for the 
                taxable year shall be increased under paragraph 
                (1) only with respect to credits allowed by 
                reason of this section which were used to 
                reduce tax liability. In the case of credits 
                not so used to reduce tax liability, the 
                carryforwards and carrybacks under section 39 
                shall be appropriately adjusted.
                  (B) No credits against tax.--Any increase in 
                tax under this subsection shall not be treated 
                as a tax imposed by this chapter for purposes 
                of determining the amount of any credit under 
                this chapter or for purposes of section 55.
  (h) Basis Reduction.--The basis of any qualified equity 
investment shall be reduced by the amount of any credit 
determined under this section with respect to such investment.
  (i) Regulations.--The Secretary shall prescribe such 
regulations as may be appropriate to carry out this section, 
including regulations--
          (1) which limit the credit for investments which are 
        directly or indirectly subsidized by other Federal 
        benefits (including the credit under section 42 and the 
        exclusion from gross income under section 103),
          (2) which prevent the abuse of the provisions of this 
        section through the use of related parties,
          (3) which impose appropriate reporting requirements, 
        and
          (4) which apply the provisions of this section to 
        newly formed entities.

           *       *       *       *       *       *       *

              Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *

     PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS

           *       *       *       *       *       *       *

SEC. 196. DEDUCTION FOR CERTAIN UNUSED BUSINESS CREDITS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Qualified Business Credits.--For purposes of this 
section, the term ``qualified business credits'' means--
          (1) * * *

           *       *       *       *       *       *       *

          (7) the Indian employment credit determined under 
        section 45A(a), [and]
          (8) the employer Social Security credit determined 
        under section 45B(a)[.], and
          (9) the new markets tax credit determined under 
        section 45D(a).

           *       *       *       *       *       *       *

                                  
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